Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. __)
Filed by the registrant |X|
Filed by a party other than the registrant |_|
Check the appropriate box:
|X| Preliminary proxy statement |X| Confidential, For Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
|_| Definitive proxy statement
|_| Definitive additional materials
|_| Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
Frontline Communications Corporation
(Name of Registrant as Specified in Its Charter)
Board of Directors of Frontline Communications Corporation
(Name of Person(s) Filing Proxy Statement, if other than Recipient)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total Fee Paid:
- --------------------------------------------------------------------------------
|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing party:
- --------------------------------------------------------------------------------
(4) Date filed:
- --------------------------------------------------------------------------------
<PAGE>
May __, 1999
Dear Stockholders:
You are cordially invited to attend the Annual Meeting of Stockholders of
Frontline Communications Corporation (the "Company") which will be held on
Monday, June 28, 1999 at 10:00 A.M. at the Hilton Hotel, 500 Veterans Memorial
Drive, Pearl River, New York 10965.
The Notice of Annual Meeting and Proxy Statement which follow describe the
business to be conducted at the meeting.
Your Board of Directors unanimously believes that (i) the election of the
nominees as directors; (ii) the approval of an amendment to the Company's
Certificate of Incorporation to increase the authorized Common Stock; and (iii)
the approval of an amendment to the Company's 1997 Stock Option Plan to increase
the number of shares reserved for issuance thereunder are in the best interests
of the Company and its stockholders and, accordingly, recommends a vote "FOR"
the foregoing proposals on the enclosed proxy card.
Whether or not you plan to attend the meeting in person, it is important
that your shares be represented and voted. After reading the enclosed Notice of
Annual Meeting and Proxy Statement, may I urge you to complete, sign, date and
return the enclosed proxy card in the envelope provided. If the address on the
accompanying material is incorrect, please advise our Transfer Agent, American
Securities and Transfer & Trust, Inc., in writing, at 938 Quail Street, Suite
101, Lakewood, Colorado 80215.
Your vote is very important, and we will appreciate a prompt return of your
signed proxy card. We hope to see you at the meeting and appreciate your
continued support.
Sincerely yours,
Stephen J. Cole-Hatchard
Chief Executive Officer
<PAGE>
FRONTLINE COMMUNICATIONS CORPORATION
One Blue Hill Plaza
P.O. Box 1548
Pearl River, New York 10965
--------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 28, 1999
--------------------
To the Stockholders of FRONTLINE COMMUNICATIONS CORPORATION.:
NOTICE IS HEREBY GIVEN that the Annual Meeting ("Annual Meeting") of
Stockholders of Frontline Communications Corporation (the "Company") will be
held on June 28, 1999, at 10:00 A.M. local time at the Hilton Hotel, 500
Veterans Memorial Drive, Pearl River, New York 10965 for the following purposes:
1. To elect five directors to hold office until the next Annual Meeting of
Stockholders and until their respective successors have been duly elected and
qualified;
2. To consider and vote on a proposal to approve an amendment to the
Company's Certificate of Incorporation to increase the number of authorized
shares of Common Stock from 10,000,000 to 25,000,000;
3. To consider and vote on a proposal to approve an amendment to the
Company's 1997 Stock Option Plan to increase the number of shares of Common
Stock reserved for issuance thereunder from 500,000 to 1,400,000; and
4. To transact such other business as may properly come before the Annual
Meeting or any adjournment or adjournments thereof.
Only stockholders of record at the close of business on May 20, 1999 are
entitled to notice of and to vote at the Annual Meeting or any adjournments
thereof.
By Order of the Board of Directors,
Stephen J. Cole-Hatchard
Chief Executive Officer
May __, 1999
- --------------------------------------------------------------------------------
IF YOU DO NOT EXPECT TO BE PRESENT AT THE MEETING:
PLEASE FILL IN, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE ENVELOPE
PROVIDED FOR THAT PURPOSE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED
STATES. THE PROXY MAY BE REVOKED AT ANY TIME PRIOR TO EXERCISE, AND IF YOU ARE
PRESENT AT THE MEETING YOU MAY, IF YOU WISH, REVOKE YOUR PROXY AT THAT TIME AND
EXERCISE THE RIGHT TO VOTE YOUR SHARES PERSONALLY.
<PAGE>
FRONTLINE COMMUNICATIONS CORPORATION
One Blue Hill Plaza
P.O. Box 1548
Pearl River, New York 10965
----------
PROXY STATEMENT
----------
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 28, 1999
This proxy statement (the "Proxy Statement") is furnished in connection
with the solicitation of proxies by the Board of Directors of Frontline
Communications Corporation (the "Company") for use at the Annual Meeting of
Stockholders (the "Annual Meeting") to be held on Monday, June 28, 1999,
including any adjournment or adjournments thereof, for the purposes set forth in
the accompanying Notice of Meeting.
Management intends to mail this proxy statement and the accompanying form
of proxy to stockholders on or about May 28, 1999.
Proxies in the accompanying form, duly executed and returned to the
management of the Company and not revoked, will be voted at the Annual Meeting.
Any proxy given pursuant to such solicitation may be revoked by the stockholder
at any time prior to the voting of the proxy by a subsequently dated proxy, by
written notification to the Secretary of the Company, or by personally
withdrawing the proxy at the Annual Meeting and voting in person.
The address and telephone number of the principal executive offices of the
Company are: One Blue Hill Plaza, P.O. Box 1548, Pearl River, New York 10965,
Telephone No.: (914) 623-8553.
OUTSTANDING STOCK AND VOTING RIGHTS
Only stockholders of record at the close of business on May 20, 1999 (the
"Record Date") are entitled to notice of and to vote at the Annual Meeting. As
of the Record Date, there were issued and outstanding __________ shares of the
Company's Common Stock, $.01 par value per share (the "Common Stock"). Each
share of Common Stock entitles the holder to one vote on each matter submitted
to a vote at the Annual Meeting.
- 1 -
<PAGE>
VOTING PROCEDURES AND PROXY INFORMATION
The directors will be elected by the affirmative vote of a plurality of the
shares of Common Stock present in person or represented by proxy at the Annual
Meeting, provided a quorum exists. A quorum is established if, as of the Record
Date, at least a majority of the combined outstanding shares of Common Stock are
present in person or represented by proxy at the Annual Meeting. Adoption of the
amendment to the Company's Certificate of Incorporation requires an affirmative
vote of a majority of the outstanding shares of Common Stock as of the Record
Date. Adoption of the amendment to the Company's 1997 Stock Option Plan requires
the affirmative vote of a majority of the shares of Common Stock present in
person or represented by proxy at the Annual Meeting, provided a quorum exists.
All other matters at the meeting will be decided by the affirmative vote of a
majority of the shares of Common Stock present in person or represented by proxy
at the meeting and entitled to vote on the subject matter, provided a quorum
exists. Votes will be counted and certified by one or more Inspectors of
Election who are expected to be employees of American Securities and Transfer &
Trust Company, Inc., the Company's transfer agent.
In accordance with Delaware law, abstentions and "broker non-votes" (i.e.,
proxies from brokers or nominees indicating that such persons have not received
instructions from the beneficial owner or other persons entitled to vote shares
as to a matter with respect to which the brokers or nominees do not have
discretionary power to vote) will be treated as present for purposes of
determining the presence of a quorum. For purposes of determining approval of a
matter presented at the meeting, abstentions will be deemed present and entitled
to vote and will, therefore, have the same legal effect as a vote "against" a
matter presented at the meeting. Broker non-votes will be deemed not entitled to
vote on the subject matter as to which the non-vote is indicated. However,
because of the requirement for an absolute majority of the outstanding shares of
Common Stock to authorize the amendment to the Certificate of Incorporation,
broker non-votes will also have the same effect as a vote "against" the
authorization of the amendment to the Certificate of Incorporation. Abstentions
and broker non-votes will have no effect on the election of directors.
The enclosed proxies will be voted in accordance with the instructions
thereon. Unless otherwise stated, all shares represented by such proxy will be
voted as instructed. Proxies may be revoked as noted above.
The entire cost of soliciting proxies, including the costs of preparing,
assembling, printing and mailing this Proxy Statement, the proxy and any
additional soliciting material furnished to stockholders, will be borne by the
Company. Arrangements will be made with brokerage houses and other custodians,
nominees and fiduciaries to send proxies and proxy materials to the beneficial
owners of stock, and such persons may be reimbursed for their expenses by the
Company. Proxies may also be solicited by directors, officers or employees of
the Company in person or by telephone, telegram or other means. No additional
compensation will be paid to such individuals for these services.
ELECTION OF DIRECTORS
At this year's Annual Meeting of Stockholders, five directors will be
elected to hold office for a term expiring at the Annual Meeting of Stockholders
to be held in 2000. It is the intention of the Board of Directors to nominate
Stephen J. Cole-Hatchard, Nicko Feinberg, Michael Olbermann, Ronald C. Signore
and Ronald Shapss as directors. Each director will be elected to serve until a
successor is elected and qualified or until the director's earlier resignation
or removal.
At this year's Annual Meeting of Stockholders, the proxies granted by
stockholders will be voted individually for the election, as directors of the
Company, of the persons listed below, unless a proxy specifies that it is not to
be voted in favor of a nominee for director. In the event any of the nominees
listed below shall be unable to serve, it is intended that the proxy will be
voted for such other nominees as are designated by the
- 2 -
<PAGE>
Board of Directors. Each of the persons named below has indicated to the Board
of Directors that he will be available to serve.
The Board of Directors recommends that stockholders vote FOR the election
of the nominees.
Following is information with respect to the nominees for directors:
Stephen J. Cole-Hatchard has been Chairman, Chief Executive Officer and
President of the Company since August 1997. Mr. Cole-Hatchard was Vice President
of Finance of the Company from February 1997 to August 1997 and has been a
director of the Company since February 1997. Prior to joining the Company, Mr.
Cole-Hatchard was Chief Financial Officer for Hudson Technologies, Inc. from
1993 to 1997. A 1989 cum laude graduate of Pace Law School, Mr. Cole-Hatchard is
a member of the bar of the State of New York.
Nicko Feinberg has been a director and Vice President of Technology of the
Company since November 1996 and Chief Information Officer since August 1997.
From April 1994 to October 1996, Mr. Feinberg was a Sales Manager and, from
April 1991 to April 1994, a Sales Account Executive for Microage Computer
Outlet, Inc., a company engaged in computer sales and training.
Michael Olbermann has been Chief Operating Officer since September 1997 and
a director of the Company since February 1997. Mr. Olbermann was also Vice
President of Business Development from February 1997 until September 1997. Mr.
Olbermann has owned and operated Rock House Construction Co., Inc., a company
engaged in commercial and residential construction, since 1986.
Ronald C. Signore has been a director of the Company since December 1997.
Mr. Signore, a Certified Public Accountant licensed in New York and New Jersey,
has been a partner in the accounting firm of Robert Gray & Co., LLP, for more
than the past five years.
Ronald Shapss has been a director of the Company since December 1997. Mr.
Shapss is the founder of Ronald Shapss Corporate Services, Inc., ("RSCS") a
company engaged in consolidating fragmented industries since 1992. RSCS was
instrumental in facilitating the roll-up of several companies into such entities
as U.S. Delivery, Inc., Consolidated Delivery & Logistics, Inc. and Corestaff,
Inc. Mr. Shapss was also the founder of Coach USA, Inc. and is presently on the
advisory boards of Consolidated Partners Founding Fund, L.L.C., and 1+ USA,
Inc., which founded Advanced Communications Group, Inc. (ADG), a competitive
local exchange carrier which trades on the New York Stock Exchange. A 1970
graduate of Brooklyn Law School, Mr. Shapss is a member of the New York bar.
Following is information with respect to certain of the Company's officers:
Vasan Thatham has been Vice President and Chief Financial Officer of the
Company since February, 1999. Prior to joining the Company, from 1994 through
1998. Mr. Thatham was Vice President and Chief Financial Officer of Esquire
Communications Ltd., a company engaged in providing legal support services. From
1987 to 1993, Mr. Thatham was comptroller and ultimately Chief Financial Officer
of Strings Ltd., a specialty retail chain. From 1978 to 1987, Mr. Thatham held
various positions with Ernst & Young in Kuwait and KMPG Peat Marwick in India.
Mr. Thatham is a chartered accountant under the laws of India.
Amy Wagner-Mele has been Vice President, Secretary and Corporate Counsel of
the Company since September 1998, and was recently promoted to Executive Vice
President, General Counsel. Prior to joining the Company, Ms. Wagner-Mele was an
associate with the New York office of Winston & Strawn, an international
Corporate/litigation firm, where she litigated securities actions, contract
disputes and appellate matters. From 1993 to 1997, Ms. Wagner-Mele was an
associate with Podvey, Sachs, Meanor, Catenacci, Hildner & Cocoziello, P.C. in
Newark, New Jersey, where she handled a variety of corporate litigation matters,
from filing through appeal. Ms. Wagner-Mele received her juris doctor from the
New York University School of
- 3 -
<PAGE>
Law in 1993. She received her bachelor's degree, magna cum laude, from the
University of Delaware in 1990. She is admitted to the New York and New Jersey
bars.
Margaret McGillin has been Vice President of Marketing and Sales of the
Company since October 1998 and was recently promoted to Executive Vice President
of Marketing and Sales. She is also President of WOWFactor. Ms. McGillin earned
her MBA from The Leonard N. Stern School of Business at New York University and
a bachelor's degree from Northeastern University with degrees in marketing,
finance and international business. During her 15 year career, Ms. McGillin has
served as Account Director for Modem Media, and as District Product Manager for
AT&T, before founding WOWFactor, Inc. in 1995. Ms. McGillin is an active
lecturer and panelist on issues concerning women in marketing and technology.
Her memberships include: Women in New Media, Women, Inc., The National
Association of Female Executives, The National Association of Women Business
Owners, George Dean's 50/50 by 2000, and the New York New Media Association.
During the fiscal year ended December 31, 1998, the Board of Directors held
five meetings. The meetings were attended by all of the directors, either in
person or by telephone. In addition, the Board took other action by unanimous
written consent in lieu of a meeting. In May 1998, the Company established an
Audit Committee comprised of Messrs. Signore and Shapss. The Audit Committee
supervises the audit and financial procedures of the Company.
- 4 -
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth the cash compensation paid by the Company
during the fiscal years ended December 31, 1997 and 1998 to its Chief Executive
Officer and to each of its executive officers whose compensation exceeded
$100,000 (the "Named Executive"):
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Award
------------------------------------------------------------------- ------------
Securities
Year Ended Other Annual Underlying
Name and Principal Position December 31, Salary($) Bonus($) Compensation(1) Options(#)
- --------------------------- ------------ --------- -------- --------------- ----------
<S> <C> <C> <C> <C> <C>
Stephen J. Cole-Hatchard 1998 34,846 -- -- 79,000(2)
Chief Executive Officer............. 1997 -- -- -- --
</TABLE>
- ------------
(1) The aggregate value of benefits to be reported under the "Other Annual
Compensation" column did not exceed the lesser of $50,000 or 10% of the
total of annual salary and bonus for the named executive.
(2) Represents stock options granted under the Company's 1997 Stock Option
Plan.
- 5 -
<PAGE>
The following table sets forth information concerning stock options granted
in the year ended December 31, 1998 to the Named Executives:
<TABLE>
<CAPTION>
Option Grants in Fiscal Year Ended December 31, 1998
Individual Grants
-------------------------------------
Number of
Securities Percent of Total
Underlying Options Granted Exercise
Options to Employees in Price Expiration
Name Granted (#) Fiscal Year(%) ($/Sh) Date
- ---- ----------- -------------- ------ ----
<S> <C> <C> <C> <C> <C>
Stephen J. Cole-Hatchard............ 79,000 18.54 2.50 10/8/2003
</TABLE>
The following table sets forth information concerning the value of options
exercised during the year ended December 31, 1998 and the value of unexercised
stock options held by the Named Executives as of December 31, 1998:
<TABLE>
<CAPTION>
Aggregated Option Exercises and Year End Values
Number of Securities
Underlying Value of Unexercised
Unexercised Options In-the-Money Options
at December 31, 1998 (#) at December 31, 1998 ($)*
------------------------------- ---------------------------------
Shares Value
Acquired on Realized
Name Exercise (#) ($) Exercisable Unexercisable Exercisable Unexercisable
- ---- ------------ --------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Stephen J. Cole-Hatchard 0 0 79,000 0 333,301 0
</TABLE>
- ----------
* Year-end values for unexercised in-the-money options represent the positive
spread between the exercise price of such options and the fiscal year-end market
value of the Common Stock, which was $6.719 on December 31, 1998.
Director Compensation
The Company does not currently pay its employee directors any fees for
attending Board meetings. The Company pays non-employee directors $3,000 per
annum for attending Board Meetings.
In December 1997, the Company entered into a consulting agreement with Mr.
Shapss which provides for Mr. Shapss to assist the Company with mergers and
acquisitions. In consideration of such services, the Company issued to Mr.
Shapss 100,000 shares of Common Stock and non-plan options to purchase 80,000
shares of Common Stock at an exercise price of $2.00 per share. The Company also
agreed to pay to Mr. Shapss $2,000 per month through May 1999.
- 6 -
<PAGE>
Employment Agreements
The Company has entered into three-year employment agreements with each of
Messrs. Feinberg, Cole-Hatchard and Olbermann which provide for an annual base
compensation of not less than $88,000, $45,000, and $88,000, respectively, and
such bonuses as the Board of Directors may, in its sole discretion, from time to
time determine. The Company also entered into a three-year employment agreement
with Margaret M. McGillin pursuant to which Ms. McGillin agreed to serve as
Executive Vice President of Sales of the Company at a salary of $82,000 per
annum, for year one, and not less than $98,000 per annum for year two and
thereafter. The Company also entered into a three-year employment agreement with
Amy Wagner-Mele pursuant to which Ms. Wagner-Mele agreed to serve as Corporate
Counsel at a salary of not less than $98,000 per annum. The employment
agreements provide for employment on a full-time basis and contain a provision
that the employee will not compete or engage in a business competitive with the
current or anticipated business of the Company during the term of the employment
agreement and for a period of two years thereafter.
- 7 -
<PAGE>
VOTING SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of the Record Date,
relating to the beneficial ownership of shares of Common Stock by (i) each
person or entity who is known by the Company to own beneficially 5% or more of
the outstanding Common Stock, (ii) each of the Company's directors, (iii) each
of the Named Executives, and (iv) all directors and executive officers of the
Company as a group.
<TABLE>
<CAPTION>
Number of Shares Percentage of Outstanding
of Common Stock Common Stock
Name and Address of Beneficial Owner Beneficially Owned(1) Beneficially Owned
- ------------------------------------ --------------------- ------------------
<S> <C> <C>
Nicko Feinberg.................................. 296,000(2) 8.6%
Stephen J. Cole-Hatchard........................ 296,000(3) 8.5%
Michael Olbermann............................... 228,000(2) 6.2%
Ronald Shapss................................... 200,000 5.9%
Ronald Signore.................................. 67,400(4) 2.0%
All directors and executive officers as a
group (eight persons)........................... 1,222,400(5) 30.6%
</TABLE>
- ------------
(1) The Company believes that all persons named in the table have sole voting
and investment power with respect to all shares of Common Stock
beneficially owned by them.
(2) Includes options to purchase 40,000 shares of Common Stock.
(3) Includes 144,000 shares held by the Cole-Hatchard Family Limited
Partnership, of which Mr. Cole-Hatchard is the general partner, and options
to purchase 99,000 shares of Common Stock. Does not include 20,000 shares
held by Mr. Cole-Hatchard's mother and brother and warrants to purchase
64,000 shares held by Mr. Cole-Hatchard's mother.
(4) Includes (i) warrants to purchase 39,200 shares of Common Stock held by The
Rough Group, of which Mr. Signore is a general partner, (ii) 3,200 shares
of Common Stock held by The Rough Group and (iii) options to purchase
25,000 shares of Common Stock held by Mr. Signore. Mr. Signore disclaims
beneficial ownership of other securities held by The Rough Group.
(5) Includes options and warrants to purchase 278,200 shares of Common Stock.
- 8 -
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In May 1997, the Company effected the Reorganization pursuant to which it
issued promissory notes in the amounts of $141,800, $66,800 and $163,537,
respectively, to Messrs. Nicko Feinberg and Stephen J. Cole-Hatchard, officers
and directors of the Company, and Mr. Michael Char, a former officer and
director of the Company. Included in such indebtedness was $21,737 and $35,000,
respectively, of advances made to the Company by Messrs. Char and Cole-Hatchard
to establish additional POPs. The promissory notes were issued to Messrs.
Feinberg, Char and Cole-Hatchard in partial consideration of their efforts in
founding the Predecessor Companies.
In August 1997, the Company borrowed $60,000 from Mr. Cole-Hatchard bearing
interest at the rate of 9.25%, per annum. The Company repaid $30,000 of such
indebtedness in December 1997. The balance was repaid in May 1998, directly to
Mr. Cole-Hatchard's lender, Provident Savings Bank.
In March 1998, the Company entered into a settlement agreement with Mr.
Char pursuant to which Mr. Char discontinued a lawsuit and released the Company
from all claims (including for monies owed) in consideration of (i) an up-front
payment of $65,000 and (ii) a payment of $435,000 in May 1998 to (a) satisfy
$240,000 of existing obligations due to Mr. Char (including $15,000 of legal
fees) and (b) repurchase 231,520 shares from Mr. Char.
In May 1998, the Company repaid $20,000 of indebtedness to each of Messrs.
Cole-Hatchard and Feinberg. The balance of the indebtedness owed to Messrs.
Cole-Hatchard and Feinberg of $46,800 and $121,800, respectively (aggregating
$168,600) bears interest at the rate of 8% per annum. The balance of
indebtedness owed to Messrs. Cole-Hatchard and Feinberg is due at such time as
the Company achieves $1.9 million in pre-tax earnings, but in no event sooner
than two years from May 13, 1998.
Mr. Cole-Hatchard's mother and brother purchased 12,000 shares and 8,000
shares, respectively, at $2.00 per share, pursuant to the Company's private
placement in May 1997. The Rough Group, a general partnership of which Mr.
Signore, a director of the Company, is a general partner, purchased 16,000
shares pursuant to the Company's private placement in May 1997. In addition, Mr.
Cole-Hatchard's mother and The Rough Group purchased $40,000 and $85,000,
respectively, principal amount of promissory notes pursuant to the Company's
December 1997 private placement, and received warrants to purchase 64,000 and
196,000 shares, respectively, at an exercise price of $5.00 per share. The notes
were repaid in May 1998.
In August 1998, Mr. Cole-Hatchard borrowed $46,800 from the Company
evidenced by a demand promissory note bearing interest at the rate of 8% per
annum.
In September 1998, Mr. Feinberg borrowed $55,000 from the Company evidenced
by a demand promissory note bearing interest at the rate of 8% per annum. In
October 1998, Mr. Feinberg borrowed an additional $42,000 on the same terms.
The Company believes that the foregoing transactions were on terms no less
favorable than those that could have been obtained from unaffiliated third
parties. All future transactions between the Company and its affiliates will be
on terms no less favorable than would be obtained from unaffiliated third
parties.
- 9 -
<PAGE>
PROPOSAL I
AMENDMENT TO THE CERTIFICATE OF INCORPORATION
TO INCREASE THE NUMBER OF SHARES OF
COMMON STOCK FROM 10,000,000 TO 25,000,000
---------------------------------------------
The Board has adopted a resolution unanimously approving and recommending
to the Company's stockholders for their approval an amendment to the Company's
Certificate of Incorporation to provide for an increase in the authorized number
of shares of Common Stock from 10,000,000 to 25,000,000. The text of the
proposed amendment to the Company's Certificate of Incorporation is attached
hereto as Exhibit A.
As of the Record Date, there were ____________ shares of Common Stock
outstanding (excluding (i) 300,000 shares issuable upon exercise of warrants
issued in a private offering, (ii) 1,840,000 shares issuable the upon exercise
of warrants issued in connection with the Company's initial public offering in
May 1998; (iii) 320,000 shares issuable upon exercise of warrants issued to the
underwriter of the Company's initial public offering; (iv) 613,000 shares (net
of forfeitures) issuable upon the exercise of options issued under the Company's
1997 Employee Stock Option Plan; (v) up to 250,000 shares issuable upon the
conversion of the Series A Preferred Stock; and 158,856 shares of Common Stock
and 21,226 shares of Common Stock underlying warrants issued in March 1999 in a
private transaction.
The Board believes the increase in the authorized number of shares of
Common Stock is in the best interests of the Company and believes it advisable
to authorize such shares to have them available for, among other things,
possible issuance in connection with future capital and financing activities.
The additional shares of Common Stock would be available for any proper
corporate purpose including, without limitation, the issuance in private or
public sales as a means of raising working capital, as consideration to be paid
by the Company for the acquisition of other businesses and properties, the
issuance of stock splits or dividends and the implementation of employee benefit
plans. The Company is currently seeking additional financing which involves the
issuance of equity securities.
The additional shares of Common Stock that would be available for issuance
if the proposed amendment is approved, could be issued for any proper corporate
purpose by the Board at any time without further stockholder approval, subject
to applicable law and to the rules of the NASDAQ Stock Market, Inc. ("NASDAQ")
that apply to the Company as a result of the quotation of the Common Stock on
the NASDAQ SmallCap Market so long as the Common Stock is so quoted. Except as
described above, further authorization from the Company's stockholders will not
be solicited prior to the issuance of Common Stock. The voting and equity
ownership rights of the Company's stockholders may be diluted by such issuances.
Stockholders will not have preemptive rights to subscribe for shares of Common
Stock, unless the Company grants such rights at the time of issue. Other than
described above, the Company currently has no plans or proposals to issue any of
the additional shares of Common Stock.
The Board is required to make any determination to issue shares of Common
Stock based on its judgment as to the best interests of the Company. Although
the Board has no present intention of doing so, it could issue shares of Common
Stock (within the limits imposed by applicable laws and the NASDAQ rules as
described above) that could, depending on the circumstances, make more difficult
or discourage an attempt to obtain control of the Company by means of a merger,
tender offer, proxy contest or otherwise. When in the judgment of the Board such
use would be in the best interest of the Company, such shares could be used to
create voting or other impediments or to discourage persons seeking to gain
control of the Company. Such shares could be privately placed with purchasers
favorable to the Board in opposing such action. The issuance of new shares of
Common Stock also could be used to dilute the stock ownership of a person or
entity seeking to obtain control of the Company should the Board consider the
action of such entity or person not to be in the
- 10 -
<PAGE>
best interest of the Company. Any such issuance could also have the effect of
diluting the earnings per share, book value per share and/or voting power of the
Common Stock.
The approval of the proposed amendment to amend the Certificate of
Incorporation to increase the authorized number of shares of Common Stock
requires the approval of a majority of the outstanding shares of Common Stock as
of the Record Date.
The Board believes that the proposed amendment to the Company's Certificate
of Incorporation is in the best interest of the Company and unanimously
recommends a vote FOR its approval.
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<PAGE>
PROPOSAL II
AMENDMENT OF 1997 STOCK OPTION PLAN TO INCREASE
THE NUMBER OF SHARES RESERVED FOR
ISSUANCE THEREUNDER FROM 500,000 TO 1,400,000
-----------------------------------------------
At the Annual Meeting, the Company's stockholders will be asked to approve
an amendment to the Company's 1997 Stock Option Plan to increase the number of
shares of Common Stock reserved for issuance under the Plan from 500,000 to
1,400,000.
The Board believes that in order to enable the Company to continue to
attract and retain personnel of the highest caliber, provide incentive for
officers, directors, key employees and other key persons and continue to promote
the well-being of the Company, it is in the best interest of the Company and its
stockholders to provide to officers, directors, key employees, consultants and
other independent contractors who perform services for the Company, through the
granting of stock options, the opportunity to participate in the value and/or
appreciation in value of the Company's Common Stock. The Board has found that
the grant of options under the 1997 Stock Option Plan has proven to be a
valuable tool in attracting and retaining key employees. It believes that such
authority, in view of the substantial growth of the Company and need to continue
to grow, should be expanded to increase the number of options which may be
granted under the 1997 Stock Option Plan. The Board believes that such authority
will provide the Company with significant means to attract and retain talented
personnel and maintain current key employees.
Summary of the 1997 Stock Option Plan
In February 1997, the Board of Directors and stockholders of the Company
adopted the 1997 Stock Option Plan (the "Plan"), pursuant to which 500,000
shares of Common Stock are reserved for issuance upon exercise of options. The
Plan is designed to serve as an incentive for retaining qualified and competent
employees, directors and consultants.
The Company's Board of Directors, or a committee thereof, administers the
Plan and is authorized, in its discretion, to grant options thereunder to all
eligible employees of the Company, including officers and directors (whether or
not employees) of, and consultants to, the Company. The Plan provides for the
granting of both "incentive stock options" (as defined in Section 422 of the
Internal Revenue Code of 1986, as amended) and non-qualified stock options.
Options can be granted under the Plan on such terms and at such prices as
determined by the Board of Directors, or a committee thereof, except that the
per share exercise price of options will not be less than the fair market value
of the Common Stock on the date of grant. In the case of an incentive stock
option granted to a stockholder who owns stock of the Company possessing more
than 10% of the total combined voting power of all classes of stock ("10%
stockholder"), the per share exercise price will not be less than 110% of such
fair market value. The aggregate fair market value (determined on the date of
grant) of the shares covered by incentive stock options granted under the Plan
that become exercisable by a grantee for the first time in any calendar year is
subject to a $100,000 limit.
Options granted under the Plan will be exercisable during the period or
periods specified in each option agreement. Options granted under the Plan are
not exercisable after the expiration of ten years from the date of grant (five
years in the case of incentive stock options granted to a 10% stockholder) and
are not transferable other than by will or by the laws of descent and
distribution.
As of December 31, 1998, the Company has granted options to purchase an
aggregate of 613,000 shares of Common Stock (net of forfeitures) under the Plan
at an exercise prices ranging from $2.00 to $5.18 per share. The grant of
213,000 of the options are subject to stockholder approval.
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<PAGE>
Certain Federal Income Tax Consequences of the 1997 Stock Option Plan
The following is a brief summary of the Federal income tax aspects of
grants made under the 1997 Stock Option Plan based upon statutes, regulations
and interpretations in effect on the date hereof. This summary is not intended
to be exhaustive, and does not describe state or local tax consequences.
1. Incentive Stock Options. The participant will recognize no taxable
income upon the grant or exercise of an Incentive Stock Option. Upon a
disposition of the shares after the later of two years from the date of grant
and one year after the transfer of the shares to the participant, (i) the
participant will recognize the difference, if any, between the amount realized
and the exercise price as long-term capital gain or long-term capital loss (as
the case may be) if the shares are capital assets in his or her hands; and (ii)
the Company will not qualify for any deduction in connection with the grant or
exercise of the options. The excess, if any, of the fair market value of the
shares on the date of exercise of an Incentive Stock Option over the exercise
price will be treated as an item of adjustment for his or her taxable year in
which the exercise occurs and may result in an alternative minimum tax liability
for the participant. In the case of a disposition of shares in the same taxable
year as the exercise where the amount realized on the disposition is less than
the fair market value of the shares on the date of exercise, there will be no
adjustment since the amount treated as an item of adjustment, for alternative
minimum tax purposes, is limited to the excess of the amount realized on such
disposition over the exercise price which is the same amount included in regular
taxable income.
If Common Stock acquired upon the exercise of an Incentive Stock Option is
disposed of prior to the expiration of the holding periods described above, (i)
the participant will recognize ordinary compensation income in the taxable year
of disposition in an amount equal to the excess, if any, of the lesser of the
fair market value of the shares on the date of exercise or the amount realized
on the disposition of the shares, over the exercise price paid for such shares;
and (ii) the Company will qualify for a deduction equal to any such amount
recognized, subject to the requirements of Section 162(m) of the Code and that
the compensation be reasonable. The participant will recognize the excess, if
any, of the amount realized over the fair market value of the shares on the date
of exercise, if the shares are capital assets in his or her hands, as short-term
or long-term capital gain, depending on the length of time that the participant
held the shares, and the Company will not qualify for a deduction with respect
to such excess.
Subject to certain exceptions for disability or death, if an Incentive
Stock Option is exercised more than three months following the termination of
the participant's employment, the option will generally be taxed as a
Non-Qualified Stock Option. See "Non-Qualified Stock Options."
2. Non-Qualified Stock Options. With respect to NonQualified Stock Options
(i) upon grant of the option, the participant will recognize no income; (ii)
upon exercise of the option (if the shares are not subject to a substantial risk
of forfeiture), the participant will recognize ordinary compensation income in
an amount equal to the excess, if any, of the fair market value of the shares on
the date of exercise over the exercise price, and the Company will qualify for a
deduction in the same amount, subject to the requirements of Section 162(m) of
the Code and that the compensation be reasonable; (iii) the Company will be
required to comply with applicable Federal income tax withholding requirements
with respect to the amount of ordinary compensation income recognized by the
participant; and (iv) on a sale of the shares, the participant will recognize
gain or loss equal to the difference, if any, between the amount realized and
the sum of the exercise price and the ordinary compensation income recognized.
Such gain or loss will be treated as short-term or long-term capital gain or
loss if the shares are capital assets in the participant's hands depending upon
the length of time that the participant held the shares.
The approval of the proposed amendment to the Company's 1997 Stock Option
Plan requires the affirmative vote of a majority of the shares of Common Stock
present in person or represented by proxy at the Annual Meeting, provided a
quorum exists.
- 13 -
<PAGE>
The Board believes that the Proposed Amendment to the 1997 Stock Option
Plan will help the Company attract and retain qualified officers, directors and
key employees. Accordingly, the Board believes that the Amendment to the 1997
Stock Option Plan is in the best interest of the Company and unanimously
recommends a vote FOR its approval.
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<PAGE>
INDEPENDENT AUDITORS
BDO Seidman LLP are the Company's independent auditors who reported on the
financial statements of the Company for the fiscal years ended December 31, 1997
and 1998. It is currently anticipated that BDO Seidman LLP will be selected by
the Board of Directors to examine and report on the financial statements of the
Company for the year ending December 31, 1999. Representatives of BDO Seidman
LLP are expected to be present at the Annual Meeting. They will have the
opportunity to make a statement if they desire to do so, and are expected to be
available to respond to appropriate questions.
STOCKHOLDER PROPOSALS FOR NEXT ANNUAL MEETING
Stockholders who wish to present proposals appropriate for consideration at
the Company's Annual Meeting of Stockholders to be held in 2000 must submit the
proposal in proper form to the Company at its address set forth on the first
page of this Proxy Statement not later than January __, 2000 in order for the
proposition to be considered for inclusion in the Company's proxy statement and
form of proxy relating to such annual meeting. Any such proposals, as well as
any questions related thereto, should be directed to the Secretary of the
Company.
OTHER INFORMATION
A COPY OF THE COMPANY'S ANNUAL REPORT FOR THE YEAR ENDED DECEMBER 31, 1998
IS BEING FURNISHED HEREWITH TO EACH STOCKHOLDER OF RECORD AS OF THE CLOSE OF
BUSINESS ON MAY 20, 1999. COPIES OF THE COMPANY'S ANNUAL REPORT ON FORM 10- KSB
WILL BE PROVIDED FOR A NOMINAL CHARGE UPON WRITTEN REQUEST TO:
FRONTLINE COMMUNICATIONS CORPORATION
ONE BLUE HILL PLAZA
P.O. BOX 1548
PEARL RIVER, NEW YORK 10965
ATTENTION: AMY WAGNER-MELE
The Board of Directors is aware of no other matters, except for those
incident to the conduct of the Annual Meeting, that are to be presented to
stockholders for formal action at the Annual Meeting. If, however, any other
matters properly come before the Annual Meeting or any adjournments thereof, it
is the intention of the persons named in the proxy to vote the proxy in
accordance with their judgment.
By order of the Board
of Directors,
Stephen J. Cole-Hatchard
Chief Executive Officer
May __, 1999
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<PAGE>
EXHIBIT A
FORM OF AMENDMENT OF THE RESTATED
CERTIFICATE OF INCORPORATION TO
INCREASE THE AUTHORIZED SHARES
OF COMMON STOCK FROM
10,000,000 TO 25,000,000 SHARES
Article FOURTH of the Certificate of Incorporation, which refers to the
authorized shares of the corporation, is hereby deleted in its entirety and a
new Article FOURTH is substituted in lieu thereof to read as follows:
"FOURTH. The total number of shares of capital stock which the
Corporation shall have authority to issue is Twenty-Six Million
(26,000,000) shares, of which Twenty-Five Million (25,000,000) shares shall
be Common Stock, par value $.01 per share, and One Million (1,000,000)
shares shall be Preferred Stock, par value $.01 per share.
The Preferred Stock may be issued from time to time in one or more
series. The Board of Directors of the Corporation is hereby expressly
authorized to provide, by resolution or resolutions duly adopted by it
prior to issuance, for the creation of each such series and to fix the
designation and the powers, preferences, rights, qualifications,
limitations and restrictions relating to the shares of each such series.
The authority of the Board of Directors with respect to each series of
Preferred Stock shall include, but not be limited to, determining the
following:
(a) the designation of such series, the number of shares to
constitute such series and the stated value if different from the par
value thereof;
(b) whether the shares of such series shall have voting rights,
in addition to any voting rights provided by law, and, if so, the
terms of such voting rights, which may be general or limited;
(c) the dividends, if any, payable on such series, whether any
such dividends shall be cumulative, and, if so, from what dates, the
conditions and dates upon which such dividends shall be payable, and
the preference or relation which such dividends shall bear to the
dividends payable on any shares of stock of any other class or any
other series of Preferred Stock;
(d) whether the shares of such series shall be subject to
redemption by the Corporation, and, if so, the times, prices and other
conditions of such redemption;
(e) the amount or amounts payable upon shares of such series
upon, and the rights of the holders of such series in, the voluntary
or involuntary liquidation, dissolution or winding up, or upon any
distribution of the assets, of the Corporation;
(f) whether the shares of such series shall be subject to the
operation of a retirement or sinking fund and, if so, the extent to
and manner in which any such retirement or sinking fund shall be
applied to the purchase or redemption of the shares of such series for
retirement or other corporate purposes and the terms and provisions
relating to the operation thereof;
(g) whether the shares of such series shall be convertible into,
or exchangeable for, shares of stock of any other class or any other
series of Preferred Stock or any other securities
<PAGE>
and, if so, the price or prices or the rate or rates of conversion or
exchange and the method, if any, of adjusting the same, and any other
terms and conditions of conversion or exchange;
(h) the limitations and restrictions, if any, to be effective
while any shares of such series are outstanding upon the payment of
dividends or the making of other distributions on, and upon the
purchase, redemption or other acquisition by the Corporation of, the
Common Stock or shares of stock of any other class or any other series
of Preferred Stock;
(i) the conditions or restrictions, if any, upon the creation of
indebtedness of the Corporation or upon the issue of any additional
stock, including additional shares of such series or of any other
series of Preferred Stock or of any other class; and
(j) any other powers, preferences and relative, participating,
optional and other special rights, and any qualifications, limitations
and restrictions, thereof.
The powers, preferences and relative, participating, optional and
other special rights of each series of Preferred Stock, and the
qualifications, limitations or restrictions thereof, if any, may differ
from those of any and all other series at any time outstanding. All shares
of any one series of Preferred Stock shall be identical in all respects
with all other shares of such series, except that shares of any one series
issued at different times may differ as to the dates from which dividends
thereof shall be cumulative."
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<PAGE>
FRONTLINE COMMUNICATIONS CORPORATION
One Blue Hill Plaza
P.O. Box 1548
Pearl River, New York 10965
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD JUNE 28, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints STEPHEN J. COLE-HATCHARD and AMY
WAGNER-MELE and each of them, Proxies, with full power of substitution in each
of them, in the name, place and stead of the undersigned, to vote at the Annual
Meeting of Stockholders of Frontline Communications Corporation (the "Company")
on June 28, 1999, at the Hilton Hotel, 500 Veterans Memorial Drive, Pearl River,
New York 10965 or at any adjournment or adjournments thereof, according to the
number of votes that the undersigned would be entitled to vote if personally
present, upon the following matters:
ELECTION OF DIRECTORS:
|_| FOR all nominees listed below |_| WITHHOLD AUTHORITY
(except as marked to the contrary below). to vote for all nominees
listed below.
Stephen J. Cole-hatchard, Nicko Feinberg, Michael Olbermann, Ronald C. Signore
and Ronald Shapss.
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name in the space below.)
- --------------------------------------------------------------------------------
(Continued and to be signed on reverse side)
<PAGE>
1. Approval of Amendment to the Company's Certificate of Incorporation
authorizing an increase in the number of shares of authorized Common Stock.
|_| FOR |_| AGAINST |_| ABSTAIN
2. Approval of Amendment to the Company's 1997 Stock Option Plan.
|_| FOR |_| AGAINST |_| ABSTAIN
3. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE INSTRUCTIONS GIVEN ABOVE.
IF NO INSTRUCTIONS ARE GIVEN, THIS PROXY WILL BE VOTED FOR THOSE NOMINEES
AND THE PROPOSALS LISTED ABOVE.
DATED: ________________________, 1999
Please sign exactly as name appears
hereon. When shares are held by joint
tenants, both should sign. When signing
as attorney, executor, administrator,
trustee or guardian, please give full
title as such. If a corporation, please
sign in full corporate name by President
or other authorized officer. If a
partnership, please sign in partnership
name by authorized person.
----------------------------------------
Signature
----------------------------------------
Signature if held jointly
Please mark, sign, date and return this proxy card using the enclosed envelope.
