Exhibit 10.29
SECURITIES PURCHASE AGREEMENT
June 2, 2002
This Agreement sets forth the agreement of Frontline
Communications Corporation (the "Company") and Xxxxx Xxxxxxxxx, (the
"Purchaser") with respect to the purchase of the Notes (as hereinafter defined)
by the Purchaser and the issuance of the Warrants (as hereinafter defined) by
the Company to the Purchaser.
1. Purchase of Notes and Issuance of Warrants.
The Company hereby agrees to sell and issue to the Purchaser 8%
convertible promissory notes in the principal amount of $25,000 (the "Notes"),
in the form attached hereto as Exhibit A, and the Purchaser hereby agrees to
purchase from the Company the Notes for an aggregate purchase price of $25,000
on the date hereof (the "Closing Date").
In consideration of the Purchase of the Notes, on the Closing Date the
Company hereby agrees to issue to the Purchaser three-year warrants (the
"Warrants"), to purchase an aggregate of 125,000 shares of the Company's common
stock (the "Warrant Shares") at an exercise price of $ 0.10 per Share. The form
of Warrant is attached hereto as Exhibit B.
Payment for and Delivery of the Notes and Warrants.
Payment of the purchase price for the Notes by the Purchaser will be
made by wire transfer or certified check ,or such other means of payment as the
Company may agree to, by the Purchaser to the Company on the Closing Date.
Within ten (10) business days following receipt of payment for the full purchase
price of the Notes, the Company will issue and deliver the Notes and the
Warrants to the Purchaser at the address written in Section 5.1 of this
Agreement.
2. Restrictions on Transfer.
2.1 The Purchaser understands that the Notes, the shares of the
Company's common stock issuable upon conversion of the Notes (the "Conversion
Shares"), the Warrants and the Warrant Shares are "restricted securities" with
the meaning of Rule 144 promulgated under the Securities Act of 1933, as amended
(the "Act").
2.2 The Purchaser understands that the certificates representing the
Notes, Conversion Shares, the Warrants and the Warrant Shares may bear a
restrictive legend thereon substantially as follows:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR ANY OTHER APPLICABLE SECURITIES LAWS, AND ARE
RESTRICTED SECURITIES AS THAT TERM IS DEFINED UNDER RULE 144
PROMULGATED UNDER THE ACT. THESE SECURITIES MAY NOT BE SOLD,
PLEDGED, TRANSFERRED, DISTRIBUTED OR OTHERWISE DISPOSED OF IN
ANY MANNER UNLESS THEY ARE REGISTERED UNDER THE ACT AND ANY
APPLICABLE SECURITIES LAWS, OR UNLESS THE REQUEST FOR TRANSFER
IS ACCOMPANIED BY AN OPINION OF COUNSEL, REASONABLY
SATISFACTORY TO THE COMPANY, STATING THAT SUCH TRANSFER IS
EXEMPT FROM REGISTRATION UNDER THE ACT AND ANY OTHER
SECURITIES LAWS."
2.3 The Purchaser understands that the Company will direct the transfer
agent for the Company's common stock to place a stop transfer instruction
against the certificates representing the Conversion Shares and the Warrant
Shares, and will instruct the transfer agent to refuse to effect any transfer
thereof in the absence of a registration statement declared effective by the
Securities and Exchange Commission ("SEC") with respect to the Conversion Shares
or the Warrant Shares, as the case may be, or a favorable opinion of counsel,
satisfactory to the Company, that such transfer is exempt from registration
under the Act and any other applicable state securities laws ("Other Securities
Laws").
The Purchaser understands that the Purchaser will have no rights
whatsoever to request, and that the Company is under no obligation whatsoever to
furnish, a registration of the Notes, Conversion Shares, Warrants or Warrant
Shares under the Act or any Other Securities Laws.
3. Purchaser's Representations and Warranties.
In order to induce the Company to execute this Agreement and to
consummate the transactions set forth herein, the Purchaser hereby represents
and warrants with and covenants to the Company as follows:
3.1 The Purchaser acknowledges that representatives of the Purchaser
have received and reviewed copies of the Company's Form 10-KSB for the year
ended December 31, 2001 and the Purchaser or, if the Purchaser is not a natural
person, the Purchaser's representatives have had the opportunity to ask
questions of and receive answers from qualified representatives of the Company
concerning the business and financial condition of the Company and the terms and
conditions of this Agreement; and all of such questions have been answered to
the satisfaction of the Purchaser or Purchaser's representatives, as the case
may be.
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3.2 The Purchaser represents that it is a sophisticated investor
familiar with the type of risks inherent in the acquisition of securities such
as the Notes, Conversion Shares, Warrants and Warrant Shares and that, by reason
of the Purchaser's representatives' knowledge and experience in financial and
business matters in general, and investments of this type in particular, the
Purchaser, through its representatives, is capable of evaluating the merits and
risks of an investment in the Notes, Conversion Shares, Warrants and Warrant
Shares.
3.3 The Purchaser is able to bear the economic risk of an investment in
the Notes, Conversion Shares, Warrants and Warrant Shares, including, without
limiting the generality of the foregoing, the risk of losing part or all of the
Purchaser's investment in the Notes, Warrants and Warrant Shares and the
Purchaser's possible inability to sell or transfer the Notes, Conversion Shares,
Warrants and Warrant Shares for an indefinite period of time.
3.4 The Purchaser is acquiring the Notes and Warrants for its own
account and for the purpose of investment and not with a view to, or for resale
in connection with, any distribution within the meaning of the Act or any Other
Securities Laws, in violation of the Act.
3.5 The Purchaser acknowledges that the Notes, Conversion Shares,
Warrants and Warrant Shares have not been registered under the Act or any of the
Other Securities Laws, and may not be sold, transferred or otherwise disposed
of, except if an effective registration statement is then in effect or pursuant
to an exemption from registration under said Act and such Other Securities Laws.
3.6 The Purchaser is an "accredited investor" as that term is defined
in Rule 501(a) of Regulation D promulgated under the Act (a copy of which
definition is attached hereto as Exhibit C).
3.7 The Purchaser has all requisite power and authority to enter into
this Agreement and subscribe for the Notes and Warrants pursuant hereto.
3.8 This Agreement has been duly authorized, executed and delivered by
or on behalf of the Purchaser and constitutes the valid and binding obligation
of the Purchaser, enforceable against the Purchaser in accordance with its
terms.
3.9 The Purchaser acknowledges that the terms of the Notes and Warrants
are governed by the Note and Warrant Certificate, the forms of which are
attached as Exhibits A and B hereto.
3.10 The Purchaser acknowledges that the Company has relied on the
representations contained herein and that the statutory basis for exemption from
the requirements of Section 5 of the Act may not be present if, notwithstanding
such representations, the Purchaser were acquiring the Notes and Warrants for
resale or distribution upon the occurrence or non-occurrence of some
predetermined event.
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3.11 The Purchaser's residence or, if the Purchaser is not a natural
person, principal executive offices are located at the address set forth in
Section 5.1 of this Agreement.
3.12 The Purchaser hereby indemnifies the Company against any losses it
may incur as a result of any breaches by the Purchaser of any of the
representations of the Purchaser contained in this Section 3.
4. Company Representations and Warranties
In order to induce the Purchaser to execute this Agreement and to
consummate the transactions set forth herein, the Company hereby represents and
warrants with and covenants to the Purchaser as follows:
(i) The Company is a duly incorporated and validly existing
corporation in good standing under the laws of its jurisdiction of
incorporation.
(ii) The Company has the corporate power and authority to
enter into this Agreement and to consummate the transactions provided
for herein. This Agreement has been duly authorized, executed and
delivered by the Company.
5. Miscellaneous.
5.1 All communications hereunder will be in writing and, except as
otherwise provided, will be delivered at, or mailed by certified mail, return
receipt requested, or telegraphed to, the following addresses: if to the
Purchaser, addressed to: Xxxxx Xxxxxxxxx, Xxx Xxxx Xxxx Xxxxx, 0xx Xxxxx, Xxxxx
Xxxxx, XX 00000; if to the Company addressed to: Frontline Communications
Corporation., Xxx Xxxx Xxxx Xxxxx, XXX 0000, Xxxxx Xxxxx, Xxx Xxxx 00000,
Attention: Xx. Xxxxxxx X. Xxxx-Xxxxxxxx, Chief Executive Officer, with a copy to
Blank Rome Xxxxxx Xxxxxxxxxx, LLP, 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
00000, Attention: Ethan Seer, Esq.
5.2 This Agreement shall be deemed to have been made and delivered in
New York City and shall be governed as to validity, interpretation,
construction, effect and in all other respects by the internal laws of the State
of New York. The Purchaser and the Company (1) agrees that any legal suit,
action or proceeding arising out of or relating to this Agreement, shall be
instituted exclusively in New York State Supreme Court, County of New York, or
in the United States District Court for the Southern District of New York,
unless such court shall have refused such jurisdiction, (2) waives any objection
which the Purchaser or the Company may have now or hereafter to the venue of any
such suit, action or proceeding, and (3) irrevocably consents to the
jurisdiction of the New York State Supreme Court, County of New York, and the
United States District Court for the Southern District of New York in any such
suit, action or proceeding. The Purchaser and the Company further agrees to
accept and acknowledge service of any and all process which may be served in any
such suit, action or proceeding in the New York State Supreme Court, County of
New York, or in the United States District Court for the Southern District of
New York and agrees that service of process upon the Purchaser or the Company,
as the case may be, mailed by certified mail to the Purchaser's address or the
Company's address, as the case may be, set forth in Section 5.1 of this
Agreement shall be deemed in every respect effective service of process upon the
Purchaser or the Company, as the case may be, in any such suit, action or
proceeding.
5.3 Each party hereto agrees to use its reasonable best efforts to take
any action which may be necessary or appropriate or reasonably requested by the
other party hereto in order to effectuate or implement the provisions of this
Agreement.
5.4 The Purchaser's rights under this Agreement are not assignable,
except to a wholly-owned subsidiary or parent company of the Purchaser if the
Purchaser is a corporate entity.
5.5 The rights and obligations of the parties under this Agreement
shall bind and inure to the benefit of the parties and their respective
successors and permitted assigns.
5.6 This Agreement may be executed in separate counterparts, all of
which shall constitute one agreement.
5.7 All notices required or permitted to be given hereunder shall be
personally delivered, sent by courier service or mailed by certified or
registered mail, postage prepaid, to the respective parties at the addresses set
forth herein and shall be deemed given upon receipt.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
PURCHASER:
By: /s/
-----------------------------------------
Name: Xxxxx Xxxxxxxxx
Title:
COMPANY:
FRONTLINE COMMUNICATIONS CORP.
By: /s/
-----------------------------------------
Name: Xxxxxxx X. Xxxx-Xxxxxxxx
Title: Chief Executive Officer
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EXHIBIT A - FORM OF NOTE
EXHIBIT B - FORM OF WARRANT
EXHIBIT C
Accredited Investors
The term "accredited investor" refers to any person or entity
who comes within any of the following categories, or whom the Company reasonably
believes comes within any of the following categories, at the time of the sale
of the Notes or issuance of the Warrants, Conversion Shares or Warrant Shares to
such person or entity:
1. Any bank as defined in Section 3(a)(2) of the Securities
Act, or any savings and loan association or other institution as defined in
Section 3(a)(5)(A) of the Securities Act, whether acting in its individual or
fiduciary capacity; any broker or dealer registered pursuant to Section 15 of
the Securities Exchange Act of 1934; any insurance company as defined in Section
2(13) of the Securities Act; any investment company registered under the
Investment Company Act of 1940, or any business development company as defined
in Section 2(a)(48) of that act; any Small Business Investment Company licensed
by the U.S. Small Business Administration under Section 301(c) or (d) of the
Small Business Investment Act of 1958; any plan established and maintained by a
state, its political subdivisions, or any agency or instrumentality of a state
or its political subdivisions, for the benefit of its employees, if such plan
has total assets in excess of $5,000,000; any employee benefit plan within the
meaning of the Employee Retirement Income Security Act of 1974, if the
investment decision is made by a plan fiduciary, as defined in Section 3(21) of
such act, which is either a bank, savings and loan association, insurance
company, or registered investment adviser, or the employee benefit plan has
total assets in excess of $5,000,000 or, if a self-directed plan, investment
decisions are made solely by persons that are accredited investors;
2. Any private business development company as defined in
Section 202(a)(22) of the Investment Advisers Act of 1940;
3. Any organization described in Section 501(c)(3) of the
Internal Revenue Code, corporation, Massachusetts or similar business trust, or
partnership, not formed for the specific purpose of acquiring the securities
offered, with total assets in excess of $5,000,000;
4. Any director or executive officer of the Company;
5. Any natural person whose individual net worth, or joint net
worth with that person's spouse, at the time of his or her purchase exceeds
$1,000,000;
6. Any natural person who had individual income in excess of
$200,000 in each of the two most recent years or joint income with that person's
spouse in excess of $300,000 in each of those years, and has a reasonable
expectation of reaching the same income level in the current year;
7. Any trust, with total assets in excess of $5,000,000, not
formed for the specific purpose of acquiring the securities offered, whose
purchase is directed by a sophisticated person as described in Rule 506 of
Regulation D; and
8. Any entity in which all of the equity owners are accredited
investors.
