STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement"), dated as of March 25, 1999, is
entered into by and between FRONTLINE COMMUNICATIONS CORP., a Delaware
corporation, with headquarters located at Xxx Xxxx Xxxx Xxxxx, 0xx Xxxxx, P. O.
Xxx 0000, Xxxxx Xxxxx, XX 00000 (the "Company"), and the undersigned (the
"Buyer").
Buyer hereby represents and warrants to, and agrees with the Company as follows:
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, (THE "1933 ACT"), ARE RESTRICTED SECURITIES (AS DEFINED
IN RULE 144 UNDER THE 1933 ACT) AND MAY NOT BE OFFERED FOR SALE, SOLD OR
OTHERWISE TRANSFERRED EXCEPT PURSUANT TO REGISTRATION UNDER THE 1933 ACT OR AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE 1933 ACT. THE SECURITIES ARE
SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED
OR RESOLD EXCEPT AS PERMITTED UNDER SUCH LAWS PURSUANT TO REGISTRATION OR AN
EXEMPTION THEREFROM. THE SECURITIES HAVE NOT BE APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY OTHER REGULATORY AUTHORITY ANY
REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
WITNESSETH:
WHEREAS, the Company and the Buyer are executing and delivering this Agreement
in reliance upon exemptions from securities registration afforded under
Regulation D ("Regulation D") as promulgated by the United States Securities and
Exchange Commission (the "SEC") under the Securities Act of 1933, as amended
(the "1933 Act") and/or Section 4(2) of the 1933 Act; and
WHEREAS, the Company will issue to Buyer and the Finder (as hereinafter
defined), upon the terms and conditions of this Agreement (i) shares of Common
Stock, $.01 par value per share (the "Common Stock"), (ii) Repricing Rights (as
hereinafter defined) to acquire shares of Common Stock (the "Additional
Shares"), and (iii) Warrants to purchase shares of Common Stock (the "Warrant
Shares"). The Common Stock, Repricing Rights, Additional Shares, Warrants and
Warrant Shares are hereinafter referred to collectively, as the "Securities";
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 parties agree as follows:
1. AGREEMENT TO PURCHASE; PURCHASE PRICE.
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a. Purchase. The undersigned hereby agrees to purchase from the Company
U.S.D.$2,000,000 of Common Stock of the Company at a price per share equal
to the average closing bid price of the Common Stock as reported by Nasdaq
for the five (5) trading days immediately preceding March 19,1999 (the
"Purchase Price Per Share"), together with certain Repricing Rights (as
defined in Section 5(a) hereof) for an aggregate purchase price of
$2,000,000 (the "Purchase Price"). In no event shall the Company issue in
the aggregate more than 450,000 shares of Common Stock, Additional Shares
and Warrant Shares under the terms of this Agreement.
b. Option to fund subsequent tranche. During the 60 day period following the
date the registration statement covering this offering is declared
effective, the Company may request one additional funding tranche of up to
$1,000,000, as long as such amount does not cause the Buyer's holdings to
equal or exceed 5% of the then current market capitalization of the
Company. The funding of a subsequent tranche is also subject to no material
adverse changes in the Company since the prior Closing Date and the trading
volume equaling or exceeding the average trading volume in the calendar
month prior to the Closing Date, sustained for a period of at least one
month prior to the subsequent tranche. In the event that the parties agree
to a subsequent tranche, the parties will enter into a stock purchase
agreement in substantially the same form. The 450,000 share cap referred to
in 1(a) above shall not apply to shares issued in any subsequent tranche.
c. Warrant Coverage. The Buyer shall receive warrants to purchase 17,330
shares of Common Stock on the Closing Date. The Warrants shall have a three
year term and an exercise price of 110% of the Purchase Price Per Share.
d. Form of Payment. The Buyer shall pay the purchase price for the Common
Stock by delivering immediately available good funds in United States
Dollars to Xxxxxx X. XxXxxxx as the escrow agent (the "Escrow Agent"). Upon
confirmation that the funds are received , within two business days
following payment by the Buyer to the Escrow Agent of the purchase price of
the Common Stock, the Company shall deliver a Certificate for the Common
Stock duly executed on behalf of the Company, to the Escrow Agent.
e. Method of Payment. Payment into escrow of the purchase price for the Common
Stock shall be made in accordance with instructions provided by the
Company.
Not later than 4:00 p.m., Eastern Standard Time, on or before March 26, 1999,
the Buyer shall wire the Purchase Price to the Escrow Agent. On March 26, 1999
the Company shall deliver the Common Stock being purchased to the Escrow Agent.
Once the Escrow Agent is in possession of the Common Stock being purchased and
has received the Purchase Price into his escrow account he shall notify the
Company and wire the Purchase Price in accordance with instructions received
from the Company, less a 8%
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placement fee and $15,000 document preparation and escrow fee (the $15,000 fee
shall also cover document preparation and escrow services for the second
tranche), to the Company and overnight the Common Stock to the Buyer. Time is of
the essence with respect to such payment, and failure by the Buyer to make such
payment, shall allow the Company to cancel this Agreement.
The Escrow Agent shall not be liable for any action taken or omitted by him in
good faith and in no event shall the Escrow Agent be liable or responsible
except for the Escrow Agent's own gross negligence or willful misconduct. The
Escrow Agent has made no representations or warranties in connection with this
transaction and has not been involved in the negotiation of the terms of this
Agreement or any matters relative thereto. The Buyer and the Company each agree
to indemnify and hold harmless the Escrow Agent from and with respect to any
suits, claims, actions or liabilities arising in any way out of this transaction
including the obligation to defend any legal action brought which in any way
arises out of or is related to this Agreement. The Escrow Agent is not rendering
securities advice to anyone with respect to this proposed transaction; nor is
the Escrow Agent opining on the compliance of the proposed transaction under
applicable securities law.
2. BUYER REPRESENTATIONS, WARRANTIES; ACCESS TO INFORMATION; INDEPENDENT
INVESTIGATION.
The Buyer represents and warrants to, and covenants and agrees with, the Company
as follows:
a. The Buyer is purchasing the Common Stock for its own account for investment
only and not with a view towards the resale, public sale or distribution thereof
and not with a view to or for sale in connection with any distribution thereof;
b. The Buyer is (i) an "accredited investor" as that term is defined in Rule 501
of the General Rules and Regulations under the 1933 Act by reason of Rule
50f(a)(3), and (ii) experienced in making investments of the kind described in
this Agreement and the related documents, (iii) able, by reason of the business
and financial experience of its officers (if an entity) and professional
advisors (who are not affiliated with or compensated in any way by the Company
or any of its affiliates or selling agents), to protect its own interests in
connection with the transactions described in this Agreement, and the related
documents, and (iv) able to afford the entire loss of its investment in the
Common Stock;
c. All subsequent offers and sales of the shares of Common Stock by the Buyer
shall be made pursuant to registration under the 1933 Act or pursuant to an
exemption from registration;
d. The Buyer understands that the Common Stock is being offered and sold, and
the Securities are being offered, to it in reliance on specific exemptions from
the registration requirements of federal and state securities laws and that the
Company is relying upon the truth and accuracy of, and the Buyer's compliance
with, the representations, warranties,
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agreements, acknowledgements and understandings of the Buyer set forth herein in
order to determine the availability of such exemptions and the eligibility of
the Buyer to acquire the Common Stock and receive an offer of the Securities ;
e. The Buyer and its advisors, if any, have either been furnished with all
materials relating to the business, finances and operations of the Company and
materials relating to the offer and sale of the Common Stock which have been
requested by the Buyer or have had access thereto. The Buyer and its advisors,
if any, have been afforded the opportunity to ask questions of the Company and
have received complete and satisfactory answers to any such inquiries. Without
limiting the generality of the foregoing, the Buyer has also had the opportunity
to obtain and to review the Company's (1) Quarterly Reports on Form 10-QSB for
the fiscal quarters ended March 31, 1998, June 30, 1998 and September 30, 1998
and Form 10-QSB/A for the fiscal quarter ended June 30, 1998 and (2) Forms 8-K,
if any, filed since October 16, 1998, as well as copies of the Company's press
releases since June 30, 1998 (the "Company's SEC Documents").
f. The Buyer understands that its investment in the Securities involves a high
degree of risk;
g. The Buyer understands that no federal or state agency or any other government
or governmental agency has passed on or made any recommendation or endorsement
of the Securities;
h. This Agreement has been duly and validly authorized, executed and delivered
on behalf of the Buyer and is a valid and binding agreement of the Buyer
enforceable in accordance with its terms, subject as to enforceability to
general principles of equity and to bankruptcy, insolvency, moratorium and other
similar laws affecting the enforcement of creditors' rights generally.
i. No Short Sales. Buyer expressly agrees that until such time it has sold all
of the securities and/or all of the Shares and Warrants that it shall not,
directly or indirectly, through an affiliate (as that term is defined under Rule
405 promulgated under the Act) or by, with or through an unrelated third party
or entity, whether or not pursuant to a written or oral understanding,
agreement, arrangement, scheme, or artifice of any nature whatsoever, engage in
the short selling of the Company's Common Stock or any other equity securities
of the Company whether now existing or hereafter issued, or engage in any other
activity of any nature whatsoever that has the same affect as a short sale, or
is a de facto or de jure short sale, of the Company's Common Stock or any other
equity security of the Company whether now existing or hereafter issued,
including but not limited to the sale of any rights pursuant to any
understanding, agreement, arrangement, scheme or artifice of any nature
whatsoever, whether oral or in writing, relative to the Company's Common Stock
or any other equity securities of the Company whether now existing or hereafter
created.
j. The Buyer is not purchasing the Common Stock and Warrants as a result of, or
pursuant to, any advertisement, article, notice or other communication published
in any newspaper, magazine or similar media or broadcast over television or
radio or presented
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at any seminar or meeting whose attendees, including the Buyer, had been invited
by any general advertising or general solicitation.
3. COMPANY REPRESENTATIONS
The Company represents and warrants to the Buyer that:
a. Concerning the Shares. The Common Stock has been duly authorized and, when
paid for as provided herein, will be duly and validly issued, fully paid and
non-assessable and will not subject the holder thereof to personal liability by
reason of being such holder. There are no preemptive rights of any stockholder
of the Company, as such, to acquire the Common Stock.
b. Reporting Company Status. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and is duly qualified as a foreign corporation in all jurisdictions in which the
failure to so qualify would have a material adverse effect on the Company and
its subsidiaries taken as a whole. The Company has registered its Common Stock
pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the Common Stock is listed and traded on The Nasdaq Small
Cap Market . The Company has filed all material required to be filed pursuant to
all reporting obligations under either Section 13(a) or l5(d) of the Exchange
Act, and has received no notice, either oral or written, with respect to the
continued eligibility of the Common Stock for such listing.
c. Stock Purchase Agreement; Registration Rights Agreement and Stock. This
Agreement and the Registration Rights Agreement, the form of which is attached
hereto (the "Registration Rights Agreement"), have been duly and validly
authorized by the Company, this Agreement has been duly executed and delivered
by the Company and this Agreement is, and the Registration Rights Agreement,
when executed and delivered by the Company, will be, valid and binding
agreements of the Company enforceable in accordance with their respective terms,
subject as to enforceability to general principles of equity, the
indemnification provisions of the Registration Rights Agreement, and to
bankruptcy, insolvency, moratorium, and other similar laws affecting the
enforcement of creditors' rights generally; and the Securities will be duly and
validly issued, fully paid and non-assessable when delivered on behalf of the
Company upon payment therefor in accordance with this Agreement, subject to
general principles of equity and to bankruptcy, insolvency, moratorium, or other
similar laws affecting the enforcement of creditors' rights generally.
d. Non-contravention. The execution and delivery of this Agreement and the
Registration Rights Agreement by the Company, the issuance of the Securities,
and the consummation by the Company of the other transactions contemplated by
this Agreement, the Registration Rights Agreement, and the Common Stock do not
and will not conflict with or result in a breach by the Company of any of the
terms or provisions of or constitute a default under, the articles of
incorporation or by-laws of the Company, or any material indenture, mortgage,
deed of trusts or other material agreement or
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instrument to which the Company is a party or by which it or any of its
properties or assets are bound, or any material existing applicable law, rule,
or regulation or any applicable decree, judgment, or order of any court, United
States federal or state regulatory body, administrative agency, or other
governmental body having jurisdiction over the Company or any of its properties
or assets, except such conflict, breach or default which would not have a
material adverse effect on the transactions contemplated herein.
e. Approvals. No authorization, approval or consent of any court, governmental
body, regulatory agency, self-regulatory organization, or stock exchange or
market is required to be obtained by the Company for the issuance and sale of
the Securities to the Buyer as contemplated by this Agreement.
f. SEC Filings. None of the Company's filings with the Securities and Exchange
Commission since June 1, 1998 contained, at the time they were filed, any untrue
statement of a material fact or omit to state any material fact or necessary to
make the statements made therein in light of the circumstances under which they
were made, not misleading. The Company has since June 1, 1998 filed all
requisite forms, reports and exhibits thereto with the Securities and Exchange
Commission.
g. Absence of Certain Changes. Since June 1, 1998 , there has been no material
adverse change and no material adverse development in the business, properties,
operations, financial condition, outstanding securities, or results of
operations of the Company, except as disclosed in the documents referred to in
Section 2(e) hereof.
h. Full Disclosure. There is no fact known to the Company (other than general
economic conditions known to the public generally) that has not been disclosed
in writing to the Buyer (including through the publicly filed documents of the
Company) that (i) could reasonably be expected to have a material adverse effect
on the condition (financial or otherwise) or in the earnings, business affairs,
properties or assets of the Company or (ii) could reasonably be expected to
materially and adversely affect the ability of the Company to perform its
obligations pursuant to this Agreement.
i. Absence of Litigation. Except as disclosed in the documents referred to in
Section 2(e) hereof, there is no action, suit, proceeding, inquiry or
investigation before or by any court, public board or body pending or, to the
knowledge of the Company or any of its subsidiaries, threatened against or
affecting the Company or any of its subsidiaries, wherein an unfavorable
decision, ruling or finding would have a material adverse effect on the
properties, business, condition (financial or other), or results of operations
of the Company and its subsidiaries taken as a whole or the transactions
contemplated by this Agreement or any of the documents contemplated hereby or
which would materially adversely affect the validity or enforceability of, or
the authority or ability of the Company to perform its obligations under, this
Agreement or any of such other documents.
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j. Absence of Events of Default. Except as disclosed in writing to the Buyer
(including through the publicly filed documents of the Company) no Event of
Default, as defined in any agreement to which the Company is a party, and no
event which, with the giving of notice or the passage of time or both, would
become an Event of Default (as so defined), has occurred and is continuing,
which would have a material adverse effect on the Company's financial condition
or results of operations.
k. No Default. Except as disclosed in writing to the Buyer (including through
the publicly filed documents of the Company) the Company is not in default in
the performance or observance of any material obligation, agreement, covenant or
condition contained in any material indenture, mortgage, deed of trust or other
material instrument or agreement to which it is a party or by which it or its
property may be bound, and neither the execution, nor the delivery by the
Company, nor the performance by the Company of its obligations under this
Agreement or the Common Stock, other than the conversion provision thereof, will
conflict with or result in the breach or violation of any of the terms or
provisions of, or constitute a default or result in the creation or imposition
of any lien or charge on any assets or properties of the Company under, any
material indenture, mortgage, deed of trust or other material agreement or
instrument to which the Company is a party or by which it is bound or any
statute or the Certificate of Incorporation or By-laws of the Company, or any
decree, judgment, order, rule or regulation of any court or governmental agency
or body having jurisdiction over the Company or its properties, or its listing
agreement with respect to any securities exchange or trading market on which the
Common Stock is listed.
l. Prior Issues. During the twelve (12) months preceding the date hereof, the
Company has not issued any debt, securities or convertible securities in capital
transactions which have not been fully disclosed in the Company's SEC Documents.
Except for employee restricted stock and employee stock options, all such
issuances have been fully converted into shares of common stock and there are no
outstanding unconverted debt or convertible securities from those transactions,
except as disclosed in the SEC Documents.
m. Finder. Merchant Bancorp of America, Reg'd (the "Finder") shall receive a
placement fee of 8% of all funds raised, payable in cash from escrow at closing.
The Finder shall also receive Warrants to purchase 4,332 shares of Common Stock
on the Closing Date.) The Warrants shall have a three year term and an exercise
price per share of 110% of the Purchase Price Per Share.
4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
a. Transfer Restrictions. The Buyer acknowledges that (1) the Securities have
not been and are not being registered under the provisions of the 1933 Act and,
except as provided in the Registration Rights Agreement, the Securities have not
been and are not being registered under the 1933 Act, and may not be transferred
unless (A) subsequently registered thereunder, or (B) the Buyer shall have
delivered to the Company an opinion of counsel, reasonably satisfactory in form,
scope and substance to the Company and its counsel, to the effect that the
Securities to be sold or
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transferred may be sold or transferred pursuant to an exemption from such
registration; (2) any sale of the Securities made in reliance on Rule 144
promulgated under the 1933 Act may be made only in accordance with the terms of
said Rule and further, if said Rule is not applicable, any resale of such
Securities under circumstances in which the seller, or the person through whom
the sale is made, may be deemed to be an underwriter, as that term is used in
the 1933 Act, may require compliance with some other exemption under the 1933
Act or the rules and regulations of the SEC thereunder; and (3) neither the
Company nor any other person is under any obligation to register the Securities
(other than pursuant to the Registration Rights Agreement) under the 1933 Act or
to comply with the terms and conditions of any exemption thereunder.
b. Restrictive Legend. The Buyer acknowledges and agrees that until such time as
the Common Stock have been registered under the 1933 Act as contemplated by the
Registration Rights Agreement and sold in accordance with such Registration
Statement, the shares of Common Stock, shall bear a restrictive legend in
substantially the following form (and a stop transfer order may be placed
against transfer of the shares of Common Stock):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE (THE "SECURITIES") HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE OFFERED OR SOLD EXCEPT IN
RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
AND SUCH LAWS OR PURSUANT TO A REGISTRATION STATEMENT.
c. Registration Rights Agreement. The parties hereto agree to enter into the
Registration Rights Agreement on or before the Closing Date.
d. Filings. The Company undertakes and agrees to make all necessary filings in
connection with the sale of the Common Stock to the Buyer as required by United
States securities laws and regulations, or by Nasdaq. Buyer agrees to make all
necessary filings with the SEC, including Schedule 13D, if applicable.
e. Reporting Status. So long as the Buyer beneficially owns any of the Common
Stock, the Company shall file all reports required to be filed with the SEC
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as
amended (the "1934 Act"), and the Company shall not terminate its status as an
issuer required to file reports under the 1934 Act even if the 1934 Act or the
rules and regulations thereunder would permit such termination.
f. Use of Proceeds. The Company will use the proceeds from the sale of the
Common Stock (excluding amounts paid by the Company for legal fees and finder's
fees in connection with the sale of the Common Stock) for working capital and
shall not, directly or indirectly (except in any situation where the Company is
acquired by merger or
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otherwise by a third party) use such proceeds for any loan to or investment in
any other corporation, partnership enterprise or other person.
g. Certain Agreements. The Company will not raise any Regulation D financing
and/or private placement with common stock registration/public resale rights
into equity markets solely for the purpose of raising working capital, unless
the common shares are restricted from re-sale for at least eight months after
the Closing Date. In the event the Company breaches the terms of this
subsection, the Buyer shall have the option of either (i) exercising its Demand
Redemption as set forth in Section 5(i) hereof or (ii) completely replacing the
terms of this Stock Purchase Agreement with the terms of the other agreement,
which terms shall be applied to the balance of the Purchase Price in Common
Stock still held by the Buyer together with any accrued interest and any
accumulated liquidated damages.
5. ISSUANCE OF ADDITIONAL SHARES BASED UPON REPRICING RIGHTS; REDEMPTION TERMS.
a. Repricing Rights. Subject to Section 1(a), the Buyer is entitled to one
Repricing Right for each share of common stock purchased under the terms of this
Agreement. The Repricing Rights entitle the Buyer to acquire additional shares
of Common Stock (or its cash equivalent) for each share sold on the date of the
Exercise Notice (in the form annexed hereto as Exhibit A), equal to the number
of Repricing Rights exercised multiplied by a fraction, the numerator of which
is the difference between the Repricing Price and the Market Price (as defined
herein) and the denominator of which is the Market Price. The Repricing Price,
will be initially set at 120% of the Purchase Price Per Share (as defined in
Section 1(a) above) and increase by 2.5% per six month period thereafter. The
Market Price shall be calculated at the average closing bid price of the Common
Stock for the five trading days preceeding the date an Exercise Notice is
tendered to the Company via facsimile transmission. The Exercise Notice shall
state the number of shares of Common Stock sold by the Buyer on the date of the
Exercise Notice. A Repricing Right may only be exercised on the date of, and in
connection with, a sale of the underlying Common Stock.
At any time after the earlier of the effectiveness of the Registration
Statement or 120 days following the Closing Date, the Buyer will be permitted to
exercise up to 25% per calendar month cumulatively, of their Repricing Rights.
The Company may, at its sole option, pay the Buyer the cash value of the
Repricing Right in lieu of additional shares upon receiving a Exercise Notice by
confirming the same within two business days and wiring the cash value of the
Repricing Right to the Buyer within 5 business days of receipt of the Exercise
Notice (except if the cash value of the Repricing Right exceeds $50,000, the
Company shall have fourteen (14) calendar days to make said payment).
After effectiveness of the registration statement covering the Common Stock
being purchased, if (i) the Company's Common Stock price appreciates to more
than 127.5% of the closing price as of the Closing Date, (ii) the average
trading volume equals or exceeds a total value of $1,000,000 per day and (iii)
both (i) and (ii) are sustained for a period of at least thirty (30) consecutive
calendar days, then 25% of the total number of Repricing Rights will expire per
each thirty (30) consecutive calendar day period in
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which the requirements of (i), (ii) and (iii) have been met, so long as the
Company is in compliance in all material respects with its obligations to the
Buyer under this Agreement and the other agreements, instruments and documents
contemplated thereby. The Repricing Rights will expire in their entirety 14
months after the effectiveness of the Registration Statement.
b. Additional Shares. The Additional Shares shall be fully paid, non-assessable
Common Stock of the Company, bearing no restrictive legends, not subject to any
stop transfer instructions and registered pursuant to the terms of the
Registration Rights Agreement, a copy of which is attached hereto. In the event
the Company is required to issue Additional Shares, and does not have a
sufficient number of shares of Common Stock available to be issued, the Company
shall pay the Buyer the cash value of the Repricing Right as set forth in
Section 5(c) below.
c. Redemption Terms and Floor Price. (i) The Company may opt to pay the Buyer
the cash value of the Repricing Right in lieu of additional shares upon
receiving a Exercise Notice by confirming the same within two business days. In
the event that the Company elects to pay the cash value of the Repricing Rights
in excess of $50,000, the Company shall have 14 calendar days to make such
payment. The Company may also elect to notify the Buyer within 7 business days
advance notice that any future exercise of Repricing Rights shall be redeemed
for cash in lieu of issuing additional shares. If the Company defaults in timely
payment, then all future redemptions must be paid within 7 calendar days.
(ii) During the six month period following the Closing Date, an initial
Floor Price below which the Buyer shall not be entitled to exercise its
Repricing Rights will be set at $6.00. After the expiration of the sixth month
period following the Closing Date the floor price will be reduced to $4.00. If
the closing bid price of the Company's Common Stock falls below $4.00, the Buyer
may demand redemption at market value for the outstanding balance of the
Repricing Rights and Common Stock. The Company shall have 60 calendar days from
the date that such notice is given to make the redemption payment. If the
Company defaults, the Buyer will be permitted to continue exercising its
Repricing Rights subject to the limit set forth in Section 1(a).
(iii) In addition, at any time prior to the effectiveness of the
Registration Statement, the Company may elect to redeem the total number of
shares of Common Stock issued to the Buyer for $2,400,000, or a portion of said
shares at a pro rata price equal to 120% of the Purchase Price Per Share as set
forth in section 1(a).
d. The Company shall not issue any fractional shares of Common Stock as a result
of this Section 5. In the event additional shares are required to issued
hereunder, and the numbers of shares to be issued is not a whole number, then
the number of shares to be issued will be rounded down to the nearest whole
number.
e. The Company shall pay any documentary, stamp or similar issue or transfer tax
due on the issue of additional shares. However, the Holder shall pay any such
taxes which are due because such shares are issued in name other than its name.
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f. Subject to the limitation set forth in section 1(a) , the Company shall use
reasonable efforts to reserve out of its authorized but unissued Common Stock
enough shares of Common Stock to permit the issuance of all of the additional
shares required to be issued hereunder. All additional shares shall be, when
issued in accordance herewith, duly authorized, validly issued, fully-paid and
nonassessable.
g. At no time shall the Buyer be required to fund a subsequent tranche if in the
opinion of the Company's counsel shareholder approval would be required and such
approval has not yet been obtained.
h. The Company shall pay Buyer a cash fee of 2% of the Purchase Price per thirty
calendar day period pro rata, for the period that the following obligations
remain unsatisfied: (i) if the Repricing Rights of the Buyer are suspended for
any reason; or (ii) if the Company fails to deliver shares pursuant to the
exercise of Repricing Rights or a sale within 7 business days of company's
receipt of a facsimile Exercise Notice in the form annexed hereto as Exhibit A,
and/or fails to make a cash payment within the time periods set forth in this
Agreement or the Registration Rights Agreement, as the case may be. The Company
acknowledges that its suspension of the Repricing Rights, failure to deliver
shares pursuant to the exercise of the Repricing Rights and/or failure to make a
cash payment in a timely manner will cause the Buyer to suffer damages in an
amount that will be difficult to ascertain. Accordingly, the parties agree that
it is appropriate to include in this Agreement a provision for liquidated
damages. The parties acknowledge and agree that the liquidated damages provision
set forth in this section represents the parties' good faith effort to quantify
such damages and, as such, agree that: 1) the form and amount of such liquidated
damages are reasonable and will not constitute a penalty; and 2) said liquidated
damages constitute the Buyer's only remedy. The payment of liquidated damages
shall not relieve the Company from its obligations to deliver Common Stock or
honor Repricing Rights pursuant to the terms of this Agreement.
i. Demand Redemption. In the event any default by the Company under the terms of
this Agreement is continuing for more than 180 calendar days, Buyer may at its
sole option send written notice of a demand redemption to the Company. Upon
receipt of the written notice from the Buyer, the Company shall within 10
business days make a cash payment to Buyer equal to the cash value of Buyer'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.
j. Limits on Amount of Ownership. In no event shall the Buyer be entitled to
exercise that number of Repricing Rights in excess of the amount upon exercise
of which the sum of (1) the number of shares of Common Stock beneficially owned
by the Buyer and its affiliates (other than shares of Common Stock which may be
deemed beneficially owned through the ownership of the unexercised portion of
the Repricing Rights), and (2) the number of shares
11
of Common Stock issuable upon exercise of the Repricing Rights with respect to
which the determination of this proviso is being made, would result in
beneficial ownership by the Buyer and its affiliates of more than 4.9% of the
outstanding shares of Common Stock of the Company. For purposes of this
provision to the immediately preceding sentence, beneficial ownership shall be
determined in accordance with Section 13 (d) of the Securities Exchange Act of
1934, as amended, and Regulation 13 D-G thereunder, except as otherwise provided
in clause (1) of such provision.
6. Adjustments
a. Stock dividends; splits. If after the date on which the Common Stock is first
issued to Buyer and while Buyer still owns said Common Stock, the number of
outstanding shares of Common Stock is increased by a stock dividend payable in
shares of Common Stock or by a split of shares of Common Stock or other similar
event, then, on the date following the date fixed for the determination of
holders of Common Stock entitled to receive such stock dividend or split, the
number of shares of Common Stock purchased by the Buyer and the number of
Repricing Rights shall be increased in proportion to such increase in
outstanding shares (ignoring for this purpose any provision for the repurchase
or cash payment of fractional shares).
b. Aggregation of shares. If after the date on which the Common Stock is first
issued to Buyer and while Buyer still owns said Common Stock, the number of
outstanding shares of Common Stock is decreased by a consolidation, combination
or reclassification of shares of Common Stock or other similar event, then,
after the effective date of such consolidation, combination or reclassification,
the number of shares of Common Stock purchased by the Buyer and the number of
Repricing Rights shall be decreased in proportion to such decrease in
outstanding shares (ignoring for this purpose any provision for the repurchase
or cash payment of fractional shares).
c. Reorganization, etc. If after the date on which the Common Stock is first
issued, any capital reorganization or reclassification of the Common Stock, or
consolidation or merger of the Company with another corporation, or the sale of
all or substantially all of its assets to another corporation or other similar
event shall be effected, then, as a condition of such reorganization,
reclassification, consolidation, merger, or sale, lawful and fair provision
shall be made whereby the Buyer shall thereafter have the right to purchase and
receive upon the basis and upon the terms and conditions specified in this
Agreement such shares of stock, securities, or assets as may be issued or
payable with respect to or in exchange for a number of outstanding shares of
such Common Stock equal to the number of shares of such stock immediately
theretofore purchasable and receivable upon the exercise of the rights
represented by this Agreement had such reorganization, reclassification,
consolidation, merger, or sale not taken place, and in such event appropriate
provision shall be made with respect to the rights and interests of the Buyer to
the end that the provisions hereof shall thereafter be applicable, as nearly as
may be in relation to any share of stock, securities, or assets thereafter
deliverable upon the exercise hereof. The Company shall not effect any such
consolidation, merger, or sale unless prior to the consummation thereof the
successor corporation (if other than the
12
Company) resulting from such consolidation or merger, or the corporation
purchasing such assets, shall assume by written instrument executed and
delivered to the Agent the obligation to deliver to the Buyer such shares of
stock, securities, or assets as, in accordance with the foregoing provisions,
the Buyer may be entitled to purchase. Upon the occurrence of any event
specified in this section, the Company shall give written notice of the record
date for such dividend, distribution, or subscription rights, or the effective
date of such reorganization, reclassification, consolidation, merger, sale,
dissolution, liquidation, winding up or issuance. Such notice shall also specify
the date as of which the holders of Common Stock of record shall participate in
such dividend, distribution, or subscription rights, or shall be entitled to
exchange their Common Stock for stock, securities, or other assets deliverable
upon such reorganization, reclassification, consolidation, merger, sale,
dissolution, liquidation, winding up or issuance. Failure to give such notice,
or any defect therein shall not affect the legality or validity of such event.
d. Notices of Changes. Upon every adjustment of the number of shares of Common
Stock purchased by the Buyer and the number of Repricing Rights, the Company
shall give written notice thereof to the Buyer, which notice shall state the
increase or decrease, if any, in the number of shares of Common Stock purchased
by the Buyer and the number of Repricing Rights, setting forth in reasonable
detail the method of calculation and the facts upon which such calculation is
based.
7. TRANSFER AGENT INSTRUCTIONS.
(i) Promptly following the delivery by the Buyer of the aggregate purchase price
for the Common Stock in accordance with Section l(c) hereof the Company will
instruct its transfer agent to issue certificates for the Common Stock
purchased, bearing the restrictive legend specified in Section 4(b) of this
Agreement. The Common Stock shall be registered in the name of the Buyer or its
nominee (duly assigned to), and in such denominations to be specified by the
Buyer. If the Buyer provides the Company with an opinion of counsel reasonably
satisfactory to the Company and its counsel that registration of a resale by the
Buyer of any of the Securities in accordance with clause (1)(B) of Section 4(a)
of this Agreement is not required under the 1933 Act, the Company shall (except
as provided in clause (2) of Section 4(a) of this Agreement) permit the transfer
of the Securities. (ii) After effectiveness of a Registration Statement, and
upon receipt of an Exercise Notice in the form annexed hereto as Exhibit A, the
Company shall deliver the number of shares specified in the Notice to the Buyer,
free of any restrictive legend or stop transfer instructions, to the address
specified in the notice within seven (7) business days of the Company's receipt
of the notice.
8. DELIVERY INSTRUCTIONS.
The Common Stock shall be delivered by the Company to the Escrow Agent pursuant
to Section l(b) hereof on a delivery against payment basis at the closing.
13
9. CLOSING DATE.
The date and time of the issuance and sale of the Common Stock (the "Closing
Date") shall be March 26, 1999. The closing shall occur on the Closing Date at
the offices of the Escrow Agent. Notwithstanding anything to the contrary
contained herein, the Escrow Agent will be authorized to release the funds
representing the Purchase Price for the Common Stock, and the certificates
representing the shares of the Common Stock only upon satisfaction of the
conditions set forth in Sections 10 and 11 hereof.
10. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The Buyer understands that the Company's obligation to sell the Common Stock to
the Buyer pursuant to this Agreement is conditioned upon:
a. The receipt and acceptance by the Company of such Agreement as evidenced by
execution of such Agreement;
b. The accuracy on the Closing Date of the representations and warranties of the
Buyer contained in this Agreement as if made on the Closing Date and the
performance by the Buyer on or before the Closing Date of all covenants and
agreements of the Buyer required to be performed on or before the Closing Date;
c. There shall not be in effect any law, rule or regulation prohibiting or
restricting the transactions contemplated hereby, or requiring any consent or
approval which shall not have been obtained.
11. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
The Company understands that the Buyer's obligation to purchase the Common Stock
is conditioned upon:
a. Acceptance by Buyer of an Agreement for the sale of Common Stock, as
indicated by execution of this Agreement;
b. Delivery by the Company to the Escrow Agent of the Common Stock in accordance
with this Agreement;
c. The accuracy on the Closing Date of the representations and warranties of the
Company contained in this Agreement as if made on the Closing Date and the
performance by the Company on or before the Closing Date of all covenants and
agreements of the Company required to be performed on or before the Closing
Date; and
d. The Company shall have its counsel prepare an opinion letter concerning the
authority of the Company to make this offering. The Company shall also prepare a
Board
14
Resolution authorizing this offering. The opinion letter and Board Resolution
shall be delivered to the escrow agent who shall deliver a copy to the Buyer.
12. GOVERNING LAW: MISCELLANEOUS.
This Agreement shall be governed by and interpreted in accordance with the laws
of the State of Delaware. Each of the parties consents to the jurisdiction of
the federal courts whose districts encompass any part of 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 on forum non coveniens, to the bringing of any such proceeding in such
jurisdictions. A facsimile transmission of this signed Agreement shall be legal
and binding on all parties hereto. This Agreement may be signed in one or more
counterparts, each of which shall be deemed an original. The headings of this
Agreement are for convenience of reference and shall not form part of, or affect
the interpretation of, this Agreement. If any provision of this Agreement shall
be invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement or the validity or enforceability of this Agreement
in any other jurisdiction. This Agreement may be amended only by an instrument
in writing signed by the party to be charged with enforcement. This Agreement
supersedes all prior agreements and understandings among the parties hereto with
respect to the subject matter hereof.
13. NOTICES. Any notice required or permitted hereunder shall be given in
writing (unless otherwise specified herein) and shall be deemed effectively
given upon personal delivery or seven business days after deposit in the United
States Postal Service, by (a) advance copy by fax, and (b) mailing by express
courier or registered or certified mail with postage and fees prepaid, addressed
to each of the other parties thereunto entitled at the following addresses, or
at such other addresses as a party may designate by ten days advance written
notice to each of the other parties hereto.
COMPANY: Xxxxxxx Xxxx-Xxxxxxxx, President
Frontline Communications Corp.
Xxx Xxxx Xxxx Xxxxx, 0X Xxxxx
P. O. Xxx 0000
Xxxxx Xxxxx, XX 00000
Telecopier No.: 0-000-000-0000
with a copy to: Xxxxxxx Xxxxxxxxx, Esq.
Xxxxxx, Xxxxxxxxxx
The Chrysler Building
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000-0000
Telecopier No.: 0-000-000-0000
15
BUYER: At the address set forth on the signature page of this
Agreement.
ESCROW AGENT: Xxxxxx X. XxXxxxx, Esq.
00 Xxxxxx Xxxxxx, Xxxxx 000
Xxx Xxxxxx, XX 00000
Telecopier No.: 0-000-000-0000
13. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Each party's representations and
warranties shall survive the execution and delivery hereof of this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
16
IN WITNESS WHEREOF, this Agreement has been duly executed by the Buyer or one of
its officers thereunto duly authorized as of the date set forth below.
NUMBER OF SHARES OF COMMON STOCK TO BE PURCHASED: 158,856
AGGREGATE PURCHASE PRICE OF SUCH COMMON STOCK: $12.59
SIGNATURES FOR ENTITIES
INVESTOR #1:
IN WITNESS WHEREOF, the undersigned represents that the foregoing statements are
true and correct and that it has caused this Stock Purchase Agreement to be duly
executed on its behalf this ____ day of March, 1999.
______________________________________ ______________________________________
Address Canadian Advantage Limited Partnership
Printed Name of Subscriber
Telecopier No. _______________________ By:____________________________________
(Signature of Authorized Person)
______________________________________ ______________________________________
Jurisdiction of Incorporation or Printed Name and Title
Organization
Federal Identification No.: _________________________
17
INVESTOR #2:
IN WITNESS WHEREOF, the undersigned represents that the foregoing statements are
true and correct and that it has caused this Stock Purchase Agreement to be duly
executed on its behalf this _____ day of March, 1999.
______________________________________ ______________________________________
Address Aberdeen Avenue LLC
Printed Name of Subscriber
Telecopier No. _______________________ By:____________________________________
(Signature of Authorized Person)
______________________________________ ______________________________________
Jurisdiction of Incorporation or Printed Name and Title
Organization
Federal Identification No.: _________________________
This Agreement has been accepted as of the date set forth below.
FRONTLINE COMMUNICATIONS CORP
By: _________________________________ Date:_______________________
Printed Name and Title: ___________________________________
18
EXHIBIT A
NOTICE OF EXERCISE OF REPRICING
RIGHTS AND/OR SALE OF COMMON STOCK
TO: Frontline Communications Corporation CC:
One Blue Hill Plaza
P.O. Box 1548
Pearl River, New York 10965
Attention: Xxxxxxx X. Xxxx-Xxxxxxxx, President/CEO
Facsimile No.: (000) 000-0000
This Exercise Notice is given pursuant to the terms of the Stock Purchase
Agreement dated as of March 25, 1999 (the "Agreement"), by and between Frontline
Communications Corporation, a Delaware corporation (the "Company") and the
undersigned (the "Buyer"). Capitalized terms used herein and not otherwise
defined herein have the respective meanings provided in the Agreement. The Buyer
hereby notifies you as follows:
Check below if applicable:
|_| Exercise of Repricing Right and Sale of Shares
(1) Exercise Date: ___________________________
(2) No. of Repricing Rights outstanding: _______________
(3) No. of Repricing Rights exercised hereby: _______________
(4) Repricing Price: __________________
(5) Average Market Price: _________________
(6) Repricing Rate: __________________
(7) Number of Repricing Shares due to Buyer: ___________. Please
issue such number of Repricing Shares in the name(s) and to the
address or the account specified immediately below or, if
additional space is necessary, on an attachment hereto:
Delivery Instructions
for Common Stock: ____________________
Address: ____________________________________________
The exercise of these Repricing Rights is being made for an
immediate sale of Common Stock being issued.
(8) This is to advise you that we have sold common stock through
______________________. The sale of these shares was in
compliance with the "plan of distribution" section of the
prospectus, dated ________________, 1999, which listed
____________________ as a selling shareholder. A copy of said
prospectus was properly delivered with respect to the prospectus
delivery requirements of Section 5(b)(2) of the Securities Act of
1933, as amended. Please authorize the transfer of sale shares
into the name of __________________________ without further
restriction.
|_| Sale of Shares
This is to advise you that we have sold common stock through
______________________. The sale of these shares was in compliance
with the "plan of distribution" section of the prospectus, dated
________________, 1999, which listed ____________________ as a selling
shareholder. A copy of said prospectus was properly delivered with
respect to the prospectus delivery requirements of Section 5(b)(2) of
the Securities Act of 1933, as amended. Please authorize the transfer
of sale shares into the name of __________________________ without
further restriction.
SS or Tax ID Number: ________________________________
NAME OF BUYER:
Date: ____________________ __________________________________
By:_______________________________
Name:
Title
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