REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of March 25, 1999, (this
"Agreement"), is made by and between FRONTLINE COMMUNICATIONS CORPORATION, a
Delaware corporation (the "Company"), and the person named on the signature page
hereto (the "Buyer").
WITNESETH:
WHEREAS, upon the terms and subject to the conditions of the Stock Purchase
Agreement of even date herewith, between the Buyer and the Company (the "Stock
Purchase Agreement"), the Company has agreed to issue and sell to the Buyer
shares of Common Stock, $.01 par value (the "Common Stock"), of the Company; and
WHEREAS, to induce the Buyer to execute and deliver the Stock Purchase
Agreement, the Company has agreed to provide certain registration rights under
the Securities Act of 1933, as amended, and the rules and regulations
thereunder, or any similar successor statute (collectively, the "Securities
Act"), and applicable state securities laws with respect to the shares, the
shares underlying the Repricing Rights and the Warrant Shares;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Buyer hereby
agree as follows:
1. Definitions.
(a) As used in this Agreement, the following terms shall have the following
meanings:
(i) "Investor" means the Buyer.
(ii) "Register," "Registered," and "Registration" refer to a registration
effected by preparing and filing a Registration Statement or Statements in
compliance with the Securities Act and pursuant to Rule 415 under the Securities
Act or any successor rule providing for offering securities on a continuous
basis ("Rule 415"), and the declaration or ordering of effectiveness of such
Registration Statement by the United States Securities and Exchange Commission
(the "SEC").
(iii) "Registrable Securities" means the Common Stock purchased by the Buyer,
the Common Stock to be issued upon exercising the Repricing Rights and the
Warrants to be issued to the Buyer and finder by the Company, not to exceed
450,000.
(iv) "Registration Statement" means a registration statement of the Company
under the Securities Act.
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(b) Capitalized terms used herein and not otherwise defined herein shall have
the respective meanings set forth in the Stock Purchase Agreement.
2. Registration.
(a) Mandatory Registration. The Company shall prepare, and within sixty (60)
days after the Closing Date (as that term is defined in Section 8 of the Stock
Purchase Agreement) file a Registration Statement covering the Registrable
Securities. Such Registration Statement shall state that, in accordance with
Rule 416 and Rule 457 under the Securities Act it also covers such indeterminate
number of additional shares of Common Stock as may become issuable to prevent
dilution resulting from stock splits, stock dividends or similar event.
(b) Payments by the Company. The Company shall pay, within ten (10) business
days of receipt of written notice from the Buyer, a fee of 2% of the gross
purchase price of the Common Stock purchased by the Buyer, per each thirty day
period, on a pro rata basis, as long as the following obligations remain
unsatisfied:
(i) If the Registration Statement is not filed within sixty (60) calendar days
following the Closing Date, as that term is defined in the Stock Purchase
Agreement.
(ii) If the Registration Statement does not cover 450,000 shares of Common
Stock.
(iii) If the Registration Statement is not declared effective on or before the
one hundred twentieth (120th) calendar day after the Closing Date;
(iv) If the Company does not file any acceleration request within 5 business
days of receiving a "no review" from the SEC with regard to the
Registration Statement;
(v) If trading is suspended for more than 5 trading days due to the fault of
the Company.
(vi) If the Registration Statement cease to remain effective for more than 10
business days;
(vii) If the Company fails to deliver shares pursuant to the exercise of
Repricing Rights or a sale within seven (7) business days of the Company's
receipt of a facsimile notice in the form annexed hereto as Exhibit A (the
"Exercise Notice") and/or fails to make a cash payment within the time
periods set forth in the Stock Purchase Agreement or this Agreement, as
the case may be.
(c) Demand Redemption. In the event any default by the Company under the terms
of this Agreement is continuing for more than 180 calendar days, Investor may at
its sole option send written notice of a demand redemption to the Company. Upon
receipt of the written notice from the Investor, the Company shall within 10
business days make a cash payment to Investor equal to the intrinsic market
value of Investor's then outstanding Repricing Rights and Common Stock as of the
date that written notice is received by the Company. The cash payment to be made
by the Company upon receipt of written notice of the demand redemption, shall be
in addition to any remedies or liquidated damages to which the Investor is
entitled up to the date written notice of the demand redemption is received by
the Company.
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3. Obligations of the Company. In connection with the registration of the
Registrable Securities, the Company shall do each of the following.
(a) Prepare promptly, and file with the SEC as soon as possible after the
Closing Date, a Registration Statement with respect to not less than the number
of Registrable Securities and thereafter use its best efforts to cause the
Registration Statement relating to Registrable Securities to become effective
not later than five (5) days after the Company is notified by the SEC that the
Registration Statement may be declared effective and keep the Registration
Statement effective pursuant to Rule 415 at all times until the earliest of (i)
the date that is one (1) year after the Closing Date (ii) the date when the
Investors may sell all Registrable Securities under Rule 144 or (iii) the date
the Investors no longer own any of the Registrable Securities (the "Registration
Period"), which Registration Statement (including any amendments or supplements
thereto and prospectuses contained therein) shall not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading.
(b) Prepare and file with the SEC such amendments (including post-effective
amendments) and supplements to the Registration Statement and the prospectus
used in connection with the Registration Statement as may be necessary to keep
the Registration effective at all times during the Registration Period, and,
during the Registration Period, comply with the provisions of the Securities Act
with respect to the disposition of all Registrable Securities of the Company
covered by the Registration Statement.
(c) Furnish to each Investor whose Registrable Securities are included in the
Registration Statement and its legal counsel identified to the Company, (i)
promptly after the same is prepared and publicly distributed, filed with the
SEC, or received by the Company, one (1) copy of the Registration Statement,
each preliminary prospectus and prospectus, and each amendment or supplement
thereto, and (ii) such number of copies of a prospectus, including a preliminary
prospectus, and all amendments and supplements thereto and such other documents,
as such Investor may reasonably request in order to facilitate the disposition
of the Registrable Securities owned by such Investor;
(d) Use reasonable efforts to (i) register and qualify the Registrable
Securities covered by the Registration Statement under such other securities or
blue sky laws of such jurisdictions as the Investors who hold a majority in
interest of the Registrable Securities being offered reasonably request and in
which significant volumes of shares of Common Stock are traded, (ii) prepare and
file in those jurisdictions such amendments (including post-effective
amendments) and supplements to such registrations and qualifications as may be
necessary to maintain the effectiveness thereof at all times during the
Registration Period, (iii) take such other actions as may be necessary to
maintain such registrations and qualifications in effect at all times during the
Registration Period, and (iv) take all other actions reasonably necessary or
advisable to qualify the Registrable Securities for sale in such jurisdictions;
provided, however, that the Company shall not be required in connection
therewith or as a condition thereto to (A) qualify to do business in any
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jurisdiction where it would not otherwise be required to qualify but for this
Section 3(d), (B) subject itself to general taxation in any such jurisdiction,
(C) file a general consent to service of process in any such jurisdiction, (D)
provide any undertakings that cause more than nominal expense or burden to the
Company or (E) make any change in its certificate of incorporation or by-laws,
which in each case the Board of Directors of the Company determines to be
contrary to the best interests of the Company and its stockholders;
(e) As promptly as practicable after becoming aware of such event, notify each
Investor of the happening of any event of which the Company has knowledge, as a
result of which the prospectus included in the Registration Statement, as then
in effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, and use its best efforts promptly to prepare a supplement or
amendment to the Registration Statement or other appropriate filing with the SEC
to correct such untrue statement or omission, and deliver a number of copies of
such supplement or amendment to each Investor as such Investor may reasonably
request;
(f) As promptly as practicable after becoming aware of such event, notify each
Investor who holds Registrable Securities being sold of the issuance by the SEC
of any stop order or other suspension of the effectiveness of the Registration
Statement at the earliest possible time;
(g) Upon effectiveness of registration, and upon receipt of an Exercise Notice
in the form annexed hereto as Exhibit A, the Company shall (i) instruct the
transfer agent to remove all restrictive legends from the Regristrable
Securities; (ii) instruct the transfer agent to issue certificates in such
denominations or amounts as the case may be, as the Buyer may reasonably request
and registered in such names as the Buyer may request; and (iii) remove any stop
transfer order instructions.
(h) Take all other reasonable actions necessary to expedite and facilitate
disposition by the Investor of the Registrable Securities pursuant to the
Registration Statement.
4. Obligations of the Investors. In connection with the registration of the
Registrable Securities, the Investors shall have the following obligations:
(a) It shall be a condition precedent to the obligations of the Company to
complete the registration pursuant to this Agreement with respect to the
Registrable Securities of a particular Investor that such Investor shall furnish
to the Company such information regarding itself, the Registrable Securities
held by it, and the intended method of disposition of the Registrable Securities
held by it, as shall be reasonably required to effect the registration of such
Registrable Securities and shall execute such documents in connection with such
registration as the Company may reasonably request. At least five (5) days prior
to the first anticipated filing date of the Registration Statement, the Company
shall notify each Investor of the information the Company requires from each
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such Investor (the "Requested Information") if such Investor elects to have any
of such Investor's Registrable Securities included in the Registration
Statement. If at least two (2) business days prior to the filing date the
Company has not received the Requested Information from an Investor (a
"Non-Responsive Investor"), then the Company may file the Registration Statement
without including Registrable Securities of such Non-Responsive Investor.
Notwithstanding the foregoing, each Investor elects to have its securities
included in the Registration Statement to be filed by the Company within five
(5) days of the date hereof.
(b) Each Investor by such Investor's acceptance of the Registrable Securities
agrees to cooperate with the Company as reasonably requested by the Company in
connection with the preparation and filing of the Registration Statement
hereunder, unless such Investor has notified the Company in writing of such
Investor's election to exclude all of such Investor's Registrable Securities
from the Registration Statement; and
(c) Each Investor agrees that, upon receipt of any notice from the Company of
the happening of any event of the kind described in Section 3(e) or 3(f), above,
such Investor will immediately discontinue disposition of Registrable Securities
pursuant to the Registration Statement covering such Registrable Securities
until such Investor's receipt of the copies of the supplemented or amended
prospectus contemplated by Section 3(e) or 3(f) and, if so directed by the
Company, such Investor shall deliver to the Company (at the expense of the
Company) or destroy (and deliver to the Company a certificate of destruction)
all copies in such Investor's possession, of the prospectus covering such
Registrable Securities current at the time of receipt of such notice.
5. Expenses of Registration. All reasonable expenses, other than underwriting
discounts and commissions and other fees and expenses of investment bankers and
other than brokerage commissions, incurred in connection with registrations,
filings or qualifications pursuant to Section 3 shall be borne by the Company,
however; if Investor decides to retain Counsel, it shall do so at its own
expense.
6. Indemnification. In the event any Registrable Securities are included in a
Registration Statement under this Agreement:
(a) To the extent permitted by law, the Company will indemnify and hold harmless
each Investor who holds such Registrable Securities, the directors, if any, of
such Investor, the officers, if any, of such Investor, each person, if any, who
controls any Investor within the meaning of the Securities Act or the Exchange
Act (each, an "Indemnified Person"), against any losses, claims, damages,
liabilities or expenses (joint or several) incurred (collectively, "Claims") to
which any of them may become subject under the Securities Act, the Exchange Act
or otherwise, insofar as such Claims (or actions or proceedings, whether
commenced or threatened, in respect thereof) arise out of or are based upon any
untrue statement of a material fact contained in the Registration Statement,
prospectus, or any post-effective amendment thereof or the omission to state
therein a material fact required to be stated therein necessary to make the
statements therein, in light of the circumstances in which they were made, not
misleading Notwithstanding anything to the
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contrary contained herein, the indemnification agreement contained in this
Section 6(a) shall not be available to the extent such Claim is based on a
failure of the Investor to deliver or cause to be delivered the prospectus made
available by the Company; or apply to amounts paid in settlement of any Claim if
such settlement is effected without the the Company being a party thereto. Each
Investor will indemnify the Company and its officers, directors and agents
against any claims arising out of or based upon a claim which occurs in reliance
upon and in conformity with information furnished in writing to the Company, by
or on behalf of such Investor, expressly for use in connection with the
preparation of the Registration Statement, subject to such limitations and
conditions as are applicable to the Indemnification provided by the Company to
this Section 6. Such indemnity shall remain in full force and effect regardless
of any investigation made by or on behalf of the Indemnified Person.
(b) Promptly after receipt by an Indemnified Person or Indemnified Party under
this Section 6 of notice of the commencement of any action (including any
governmental action), such Indemnified Person or Indemnified Party shall, if a
Claim in respect thereof is to be made against any indemnifying party under this
Section 6, deliver to the indemnifying party a written notice of the
commencement thereof and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume control of the
defense thereof with counsel mutually satisfactory to the indemnifying party and
the Indemnified Person or the Indemnified Party, as the case may be provided,
however, that an Indemnified Person or Indemnified Party shall have the right to
retain its own counsel with the fees and expenses to be paid by the indemnifying
party, if, in the reasonable opinion of counsel retained by the indemnifying
party, the representation by such counsel of the Indemnified Person or
Indemnified Party and the indemnifying party would be inappropriate due to
actual or potential differing interests between such Indemnified Person or
Indemnified Party and any other party represented by such counsel in such
proceeding. In such event, the Company shall pay for only one separate legal
counsel for the Investors; such legal counsel shall be selected by the Investors
holding a majority in interest of the Registrable Securities included in the
Registration Statement to which the Claim relates. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall not relieve such indemnifying party of any
liability to the Indemnified Person or Indemnified Party under this Section 6,
except to the extent that the indemnifying party is prejudiced in its ability to
defend such action. The indemnification required by this Section 6 shall be made
by periodic payments of the amount thereof during the course of the
investigation or defense, as such expense, loss, damage or liability is incurred
and is due and payable.
8. Reports under Exchange Act. With a view to making available to the Investors
the benefits of Rule 144 promulgated under the Securities Act or any other
similar rule or regulation of the SEC that may at any time permit the Investors
to sell securities of the Company to the public without registration ("Rule
144"), the Company agrees to:
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(a) make and keep public information available, as those terms are understood
and defined in Rule 144;
(b) file with the SEC in a timely manner all reports and other documents
required of the Company under the Securities Act and the Exchange Act; and
(c) furnish to each Investor so long as such Investor owns Registrable
Securities, promptly upon request, (i) a written statement by the Company that
it has complied with the reporting requirements of Rule 144, the Securities Act
and the Exchange Act, (ii) a copy of the most recent annual or quarterly report
of the Company and such other reports and documents so filed by the Company and
(iii) such other information as may be reasonably requested to permit the
Investors to sell such securities pursuant to Rule 144 without registration.
10. Amendment of Registration Rights. Any provision of this Agreement may be
amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and Investors who hold an 80% in interest of the
Registrable Securities not resold to the public. Any amendment or waiver
effected in accordance with this Section 10 shall be binding upon each Investor
and the Company.
11. Miscellaneous.
(a) A person or entity is deemed to be a holder of Registrable Securities
whenever such person or entity owns of record such Registrable Securities. If
the Company receives conflicting instructions, notices or elections from two or
more persons or entities with respect to the same Registrable Securities, the
Company shall act upon the basis of instructions, notice or election received
from the registered owner of such Registrable Securities.
(b) Notices required or permitted to be given hereunder shall be in writing and
shall be deemed to be sufficiently given when personally delivered (by hand, by
courier, by telephone line facsimile transmission, receipt confirmed, or other
means) or sent by certified mail, return receipt requested, properly addressed
and with proper postage pre-paid (i) if to the Company, at Xxx Xxxx Xxxx Xxxxx,
0X Xxxxx, X. O. Box 1548, Pearl River, NY 10965with a copy to Xxxxxxx Xxxxxxxxx,
Esq., Xxxxxx Xxxxxxxxxx, The Chrysler Building, 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx,
XX 00000-0000; (ii) if to the Buyer, at the address set forth under its name in
the Stock Purchase Agreement, and (iii) if to any other Investor, at such
address as such Investor shall have provided in writing to the Company, or at
such other address as each such party furnishes by notice given in accordance
with this Section 11(b), and shall be effective, when personally delivered, upon
receipt and, when so sent by certified mail, four (4) calendar days after
deposit with the United states Postal Service.
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(c) Failure of any party to exercise any right or remedy under this Agreement or
otherwise, or delay by a party in exercising such right or remedy, shall not
operate as a waiver thereof.
(d) This Agreement shall be enforced, governed by and construed in accordance
with the laws of the State of Delaware applicable to agreements made and to be
performed entirely within such State. Each of the parties consents to the
jurisdiction of the federal courts whose districts encompass any part of the
City of New York or the state courts of the State of New York sitting in the
City of New York in connection with any dispute arising under this Agreement and
hereby waives, to the maximum extent permitted by law, any objection, including
any objection based upon forum non conveniens, to the bringing of any such
proceeding in such jurisdictions. In the event that any provision of this
Agreement is invalid or unenforceable under any applicable statute or rule of
law, then such provision shall be deemed inoperative to the extent that it may
conflict therewith and shall be deemed modified to conform with such statute or
rule of law. Any provision hereof which may prove invalid or unenforceable under
any law shall not effect the validity or enforceability of any other provision
hereof.
(e) This Agreement constitutes the entire agreement among the parties hereto
with respect to the subject matter hereof. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein.
This Agreement supersedes all prior agreements and understandings among the
parties hereto with respect to the subject matter hereof.
(f) Subject to the requirements of Section 9 hereof, this Agreement shall inure
to the benefit of and be binding upon the successors and assigns of each of the
parties hereto.
(g) All pronouns and any variations thereof refer to the masculine, feminine or
neuter, singular or plural, as the context may require.
(h) The headings in this Agreement are for convenience of reference only and
shall not Emit or otherwise affect the meaning thereof.
(i) This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original but all of which shall constitute one and the same
agreement. This Agreement, once executed by a party, may be delivered to the
other party hereto by telephone line facsimile transmission of a copy of this
Agreement bearing the signature of the party so delivering this Agreement.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed
by their respective officers thereunto duly authorized as of the day and year
first above written.
FRONTLINE COMMUNICATIONS CORPORATION
By: ________________________________
Name: ________________________________
Title: ________________________________
CANADIAN ADVANTAGE LIMITED PARTNERSHIP
By: ________________________________
Name: ________________________________
Title: ________________________________
ABERDEEN AVENUE LLC
By: ________________________________
Name: ________________________________
Title: ________________________________
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