<PAGE>
Schedule 14A
(Rule 14a-101)
Information Required in Proxy Statement
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:
/ / Preliminary proxy statement
/ / Confidential, For Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
/X/ 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)
------------------------------------------------------------
(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:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total Fee Paid:
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/ / 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing party:
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(4) Date filed:
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<PAGE>
FRONTLINE COMMUNICATIONS CORPORATION
One Blue Hill Plaza
P.O. Box 1548
Pearl River, New York 10965
May 22, 2000
Dear Stockholders:
You are cordially invited to attend the Annual Meeting of Stockholders of
Frontline Communications Corporation (the "Company") which will be held on
Thursday June 22, 2000 at 10:00 A.M. at The Empire Pavilion, Holiday Inn, 3
Executive Blvd., Suffern, New York 10901.
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; and (ii) 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
Stock Transfer & Trust Company, in writing, at 40 Wall Street, New York, New
York 10005.
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 22, 2000
--------------------
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 22, 2000, at 10:00 A.M. local time at The Empire Pavilion, Holiday
Inn, 3 Executive Blvd., Suffern, New York 10901 for the following purposes:
1. To elect four 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 1997 Stock Option Plan to increase the number of shares of Common
Stock reserved for issuance thereunder from 1,400,000 to 2,000,000; and
3. 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 18, 2000 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 22, 2000
- -----------------------------------------------------------------
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 22, 2000
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 Thursday, June 22, 2000,
including any adjournment or adjournments thereof, for the purposes set forth in
the accompanying Notice of Meeting. The Annual Meeting will be held at The
Empire Pavilion, Holiday Inn, 3 Executive Blvd., Suffern, New York 10901.
Management intends to mail this proxy statement and the accompanying form
of proxy to stockholders on or about May 24, 2000.
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 18, 2000 (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 5,666,022 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.
<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 1997 Stock Option Plan requires the
affirmative vote of a majority of the shares of Common Stock present in person
or represented by proxy and entitled to vote on the matter 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 the Company or its counsel or of American Stock Transfer & Trust Company, 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. 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.
<PAGE>
ELECTION OF DIRECTORS
At this year's Annual Meeting, four directors will be elected to hold
office for a term expiring at the Annual Meeting of Stockholders to be held in
2001. It is the intention of the Board of Directors to nominate Stephen J.
Cole-Hatchard, Nicko Feinberg, Ronald C. Signore and William A. Barron 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, 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 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, 42, has been Chairman of the Board, 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. From
1993 to 1996, Mr. Cole-Hatchard was Chief Financial Officer for Hudson
Technologies, Inc., a company engaged in the sale and reclamation of
refrigerants and servicing of commercial air conditioning and refrigerant
systems. 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, 28, 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.
Ronald C. Signore, 39, 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.
William A. Barron, 50, has been a director of the Company since January
2000. Prior to retirement, Mr. Barron served as Vice President and Chief
Financial Officer of Hudson Technologies, Inc. from July 1996 to March 1997.
Prior to that, Mr. Barron was President and Chief Operating Officer for
Diagnostek, Inc., a pharmacy benefit management company, from May 1994 to
October 1995 and Executive Vice President and Chief Financial Officer for
Diagnostek, Inc. from March 1993 to April 1994. Mr. Barron is currently a
defendant in two related class actions, Freedman et. al. v. Value Health et. al.
and Bash et. al. v. Value Health, Inc. et. al., pending in the United States
District Court in Bridgeport, Connecticut arising from the acquisition of
Diagnostek, Inc. by Value Health, Inc. The plaintiffs' claims in these actions
include claims against certain former officers of Diagnostek, including Mr.
Barron, under Section 15 of the Securities Act of 1933 and Sections 10(b) and 20
of the Securities Exchange Act of 1934, Rule 10b-5 of the Exchange Act and
certain attendant claims for common law fraud and negligent misrepresentation
and violations of state securities laws, relating to, among other things,
certain alleged inaccuracies regarding Diagnostek's financial condition
contained in the joint merger proxy statement and a joint press release relating
to the merger.
Following is information with respect to certain of the Company's officers:
Jodie L. Jackson, 46, has been our General Manager since September 1999
and our Chief Operations Officer since January 2000. From October 1996 to April
1999, Mr. Jackson served as a Chief Operating Officer at Paperless Adjudication
LLC, a developer of network solutions and proprietary software for processing
electronic transactions. From 1993 through September 1996, Mr. Jackson was the
Director of Marketing at Theratronics International Ltd., a manufacturer of
medical equipment, hardware and software.
<PAGE>
Michael Olbermann, 43, has been Executive Vice President of Operations
since January 2000 and was a director of the Company from February 1997 until
May 2000. Mr. Olbermann was also Chief Operations Officer from September 1997
until December 1999 and 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.
Vasan Thatham, 42, 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, 32, has been Vice President, Secretary and Corporate
Counsel of the Company since September 1998, and on April 28, 1999 was 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 law 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 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.
During the fiscal year ended December 31, 1999, 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. The Company's Audit Committee, which had
two meetings during the fiscal year ended December 31, 1999, is comprised of
Messrs. Signore and Barron. The Audit Committee supervises the audit and
financial procedures of the Company. The Company does not have standing
nominating or compensation committees of the Board or committees performing
similar functions.
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth compensation paid to our Chief
Executive Officer and our three other most highly compensated executive officers
(each of whom was serving at the end of our fiscal year ended December 31, 1999)
during the years ended December 31, 1997, 1998 and 1999. No other executive
officer of the Company received aggregate compensation which exceeded $100,000
during the year ended December 31, 1999. We refer to these four executive
officers as our "Named Executives."
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
--------------------------------------------------------- Securities
Other Annual Underlying
Name and Principal Position Year Salary Bonus Compensation(1) Options/SAR's(#)
- --------------------------- ---- ------ ----- --------------- ----------------
<S> <C> <C> <C> <C> <C>
Stephen J. Cole-Hatchard.................... 1999 $115,256 $0 $0 146,000(2)
Chief Executive Officer 1998 34,846 0 0 79,000(2)
1997 0 0 0
Nicko Feinberg.............................. 1999 $108,615 $0 $0 146,000(2)
Chief Information Officer 1998 79,500 0 0 20,000(2)
1997 29,000 0 0
Michael Olbermann........................... 1999 $108,615 $0 $0 146,000(2)
Chief Operations Officer 1998 95,100 0 0 20,000(2)
1997 49,730 0 0
Amy Wagner-Mele............................. 1999 $108,615 $0 $0 26,000(2)
Executive Vice President(3) 1998 29,169 0 0 75,000(2)
</TABLE>
- ------------
(1) The aggregate value of benefits to be reported under the "Other Annual
Compensation" column did not exceed the lesser of $50,000 or 10% of the
total of annual salary and bonus for any named executive officer.
(2) Represents stock options granted under our 1997 Stock Option Plan.
(3) Ms. Wagner-Mele joined us in September 1998.
<PAGE>
The following table sets forth information concerning stock options granted
in the year ended December 31, 1999 to the Named Executive:
Option/SAR Grants in Year Ended December 31, 1999
<TABLE>
<CAPTION>
Number of Shares % of Total
Underlying Options/SARs Exercise
Options/SARs Granted to Price Expiration
Name Granted Employees in Year ($/share) Date
- ---- ------- ----------------- --------- ----
<S> <C> <C> <C> <C>
Stephen J. Cole-Hatchard........................ 20,000 2.18% $6.06 1/13/04
1,000 (ii) 0.11 5.65 9/20/04
25,000 2.73 4.75 9/30/04
100,000 (i) 10.91 5.25 12/22/04
Nicko Feinberg.................................. 20,000 2.18 6.06 1/13/04
1,000 (ii) 0.11 5.65 9/20/04
25,000 2.73 4.75 9/30/04
100,000 (i) 10.91 5.25 12/22/04
Michael Olbermann............................... 20,000 2.18 6.06 1/13/04
1,000 (ii) 0.11 5.65 9/20/04
25,000 2.73 4.75 9/30/04
100,000 (i) 10.91 5.25 12/22/04
Amy Wagner-Mele................................. 1,000 (ii) 0.11 5.65 9/20/04
25,000 2.73 5.25 12/22/04
</TABLE>
All of the options granted were exercisable at December 31, 1999 except for:
(i) 50,000 of the options are exercisable from 12/23/2000.
(ii) Options are exercisable from 9/21/2002.
<PAGE>
The following table sets forth information concerning the number of
options owned by our Named Executives, the value of any in-the-money unexercised
options as of December 31, 1999 and information concerning options exercised by
our Named Executives during the year ended December 31, 1999:
Aggregated Option Exercises
And Year-End Option/SAR Values
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Shares Options/SARs Options/SARs
Acquired on Value at December 31, 1999(#) at December 31, 1999($)
Exercise Realized -------------------------- -----------------------
Name (#) ($) Exercisable Unexercisable Exercisable Unexercisable
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Stephen J. Cole-Hatchard.............. 0 0 174,000 51,000 $637,762 $123,938
Nicko Feinberg........................ 0 0 115,000 51,000 331,670 123,938
Michael Olbermann..................... 0 0 115,000 51,000 331,670 123,938
Amy Wagner-Mele....................... 15,000 $161,250 50,000 36,000 190,650 183,618
</TABLE>
The year-end values for unexercised in-the-money options represent the
positive difference between the exercise price of the options and the year-end
market value of our Common Stock. An option is "in-the-money" if the year-end
fair market value of our Common Stock exceeds the option exercise price. The
closing sale price of our Common Stock on December 31, 1999 was $7.688. The
value realized represents the positive spread between the exercise price of the
exercised options and the market price of our Common Stock on the date of
exercise.
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.
Employment Agreements
We have entered into 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. We
entered into an 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. We also entered into an employment agreement with Jodie L.
Jackson pursuant to which Mr. Jackson agreed to serve as Chief Operations
Officer and General Manager at a salary of not less than $110,000 per annum. The
employment agreements with Messrs. Feinberg, Cole-Hatchard and Olbermann expire
in August 2000, and the employment agreements with Ms. Wagner-Mele and Mr.
Jackson expire in September 2001 and September 2000, all subject to automatic
successive one year renewals unless either we or the employee give notice of
intention not to renew the agreement. 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 our current or anticipated
business during the term of the employment agreement and for a period of two
years thereafter. We have entered into a month-to-month employment agreement
with Mr. Thatham which provides for a base salary at a rate of $95,000 per year.
All of the employment agreements provide for each of the employees to be paid
additional compensation equal to 295% of their annual base salary in the event
of a change of ownership or effective control of the Company (as defined in the
agreements).
<PAGE>
VOTING SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information, as of May 18,
2000 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 five percent or
more of the outstanding Common Stock; (ii) each of the Named Executives; (iii)
each of the Company's directors; and (iv) all directors and executive officers
of the Company as a group.
Unless otherwise indicated, the address of each beneficial owner is care of
Frontline Communications Corporation, One Blue Hill Plaza, 7th Floor, Pearl
River, New York 10965. Unless otherwise indicated, we believe that all persons
named in the following table have sole voting and investment power with respect
to all shares of Common Stock that they beneficially own.
<TABLE>
<CAPTION>
Number of Shares Percentage of Shares
Name and Address of Beneficial Owner Beneficially Owned Beneficially Owned
- ------------------------------------ ------------------ ------------------
<S> <C> <C>
Stephen J. Cole-Hatchard..................................................... 371,000 6.4%
Nicko Feinberg............................................................... 371,000 6.4
Michael Olbermann............................................................ 303,000 5.2
Amy Wagner-Mele.............................................................. 65,000 1.1
Ronald Signore............................................................... 94,864 1.6
William Barron............................................................... 10,000 0.2
All directors and executive officers as a group (seven persons).............. 1,254,864 20.4%
</TABLE>
- ------------------
* Less than 1%.
The shares beneficially owned by Mr. Cole-Hatchard include 144,000 shares
held by the Cole-Hatchard Family Limited Partnership, of which Mr. Cole-Hatchard
is the general partner, and options to purchase 174,000 shares of Common Stock.
This 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.
The shares beneficially owned by Mr. Feinberg and Mr. Olbermann each includes
115,000 shares of Common Stock which may be purchased under immediately
exercisable options.
The shares beneficially owned by Ms. Wagner-Mele include 50,000 shares of
Common Stock which may be purchased under immediately exercisable options.
The shares beneficially owned by Mr. Signore include shares issuable upon the
exercise of (1) warrants to purchase 41,664 shares of Common Stock and (2)
immediately exercisable options to purchase 50,000 shares of Common Stock.
The shares beneficially owned by Mr. Barron are 10,000 shares of Common Stock
which may be purchased under immediately exercisable options.
The shares beneficially owned by all directors and executive officers as a
group include options and warrants to purchase an aggregate of 625,664 shares of
Common Stock.
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In May 1997, Messrs. Nicko Feinberg and Stephen J. Cole-Hatchard, two of
our current officers and directors, and Mr. Michael Char, a former officer and
director, exchanged their interests in the three predecessor companies to whose
business we succeeded for promissory notes in the principal amounts of $141,800,
$66,800 and $163,537. This indebtedness included $21,737 and $35,000 of advances
previously made to us by Messrs. Char and Cole-Hatchard. The promissory notes
were issued to Messrs. Feinberg, Char and Cole-Hatchard in partial consideration
of their efforts in founding the predecessor companies. In May 1998, we repaid
all outstanding indebtedness to Mr. Char and $20,000 of indebtedness to each of
Messrs. Cole-Hatchard and Feinberg. The balance of indebtedness owed to Messrs.
Cole-Hatchard and Feinberg of $46,800 and $121,800 bears interest at the rate of
8% per annum and is payable on demand.
In August 1997, we borrowed $60,000 from Mr. Cole-Hatchard, which
indebtedness bore interest at the rate of 9.25% per annum. We repaid $30,000 of
this indebtedness to Mr. Cole-Hatchard in December 1997 and the balance directly
to Mr. Cole-Hatchard's lender in May 1998.
In February 1997, we issued 256,000 shares of our Common Stock to each of
Messrs. Char, Feinberg and Cole-Hatchard, and 188,000 shares of our Common Stock
to Mr. Olbermann in consideration of $.01 per share. In December 1997, we issued
100,000 shares of our Common Stock to Ronald Shapss, a former director, in
consideration of $.01 per share.
Mr. Cole-Hatchard's mother and brother purchased 12,000 and 8,000 shares of
our Common Stock at $2.00 per share pursuant to our May 1997 private placement.
William A. Barron, a director, purchased 20,000 shares of Common Stock in our
May 1997 private placement. The Rough Group, a general partnership of which Mr.
Signore, a director, is a general partner, purchased 16,000 shares of Common
Stock pursuant to our May 1997 private placement. In addition, Mr.
Cole-Hatchard's mother and the Rough Group purchased $40,000 and $85,000
principal amount of promissory notes pursuant to our December 1997 private
placement, and received warrants to purchase 64,000 and 196,000 shares of our
Common Stock at an exercise price of $5.00 per share. The notes were repaid in
May 1998. These purchases were all on terms and conditions identical to those of
the other investors in these private placements.
In August 1998, Mr. Cole-Hatchard borrowed $46,800 from us, evidenced by a
demand promissory note bearing interest at the rate of 8% per annum.
In September 1998, Mr. Feinberg borrowed $55,000 from us, evidenced by a
demand promissory note bearing interest at the rate of 8% per annum. In October
1998 and January 1999, Mr. Feinberg borrowed an additional $42,000 and $24,800
from us on the same terms.
In June 1999, Amy Wagner-Mele, an officer of the Company, exercised options
to purchase 15,000 shares of our Common Stock pursuant to our stock option plan
with a secured promissory note in the principal amount of $37,500. This note
bears interest at a rate of 6%, is due on June 1, 2002 and is secured by
personal assets of Ms. Wagner-Mele and the shares of our Common Stock that she
acquired.
<PAGE>
Prior to December 31, 1999, the Company's Board of Directors passed a
resolution whereby $168,000 of notes payable to Messrs. Cole-Hatchard and
Feinberg were offset with $168,000 of notes receivable from Messrs.
Cole-Hatchard and Feinberg. The financial statements for the year ended December
31, 1999 have been adjusted to reflect this transaction as if it had occurred on
December 31, 1999.
PROPOSAL I
AMENDMENT OF 1997 STOCK OPTION PLAN TO INCREASE
THE NUMBER OF SHARES RESERVED FOR
ISSUANCE THEREUNDER FROM 1,400,000 TO 2,000,000
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
1,400,000 to 2,000,000.
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 1,400,000
shares of Common Stock are currently 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
<PAGE>
will or by the laws of descent and distribution.
As of the Record Date, the Company has granted options to purchase 1,402,568
shares of Common Stock (net of forfeitures) under the Plan at an exercise price
ranging from $2.00 to $8.50 per share. The grant of 2,568 of the options are
subject to stockholder approval of the amendment to the Plan.
The closing sale price of the Company's Common Stock on May 22, 2000 was
$1.3125.
The following table sets forth certain information regarding options to
purchase Common Stock issued (net of cancelled options) since the inception of
the Plan to each of the Named Executives who participated in the Plan, all
current executive officers as a group, all current directors who are not
executive officers as a group and all employees, including employees who are not
executive officers, who participated in the Plan as a group. No associate of any
director or officer has received options under the Plan.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING OPTIONS
------------------
<S> <C>
Stephen J. Cole-Hatchard
Chief Executive Officer 225,000
Nicko Feinberg 166,000
Chief Information Officer
Michael Olbermann 166,000
Executive Vice President of Operations
Amy Wagner-Mele 101,000
Executive Vice President
All current executive officers as a group (6 persons) 770,000
Non-employee directors as a group (2 persons) 60,000
All non-executive officer employees as a group (48 persons) 270,568
</TABLE>
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
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<PAGE>
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 Non-Qualified 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 and entitled to vote on the matter at
the Annual Meeting, provided a quorum exists.
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 year ended December 31,
1999. 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 fiscal year ending December 31, 2000. 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 2001 must (i)
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 22, 2001 and (ii)
satisfy the conditions established by The Securities Exchange Commission and the
Company's by-laws for stockholder proposals 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.
After the January 22, 2001 deadline, a stockholder may present a proposal at
the Company's 2001 Annual Meeting if it is submitted to the Company's Secretary
at the address set forth above no later than April 9, 2001. If timely submitted,
the stockholder may present the proposal at the 2001 Annual Meeting but the
Company is not obligated to present the matter in its proxy statement.
OTHER INFORMATION
A COPY OF THE COMPANY'S ANNUAL REPORT FOR THE YEAR ENDED DECEMBER 31,
1999 IS BEING FURNISHED HEREWITH TO EACH STOCKHOLDER OF RECORD AS OF THE CLOSE
OF BUSINESS ON MAY 18, 2000. COPIES OF THE COMPANY'S ANNUAL REPORT ON FORM
10-KSB WILL BE PROVIDED WITHOUT 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 22, 2000
<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 22, 2000
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 22, 2000 at The Empire Pavilion, Holiday Inn, 3 Executive Blvd.,
Suffern, New York 10901 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
(except as marked to the contrary below).
/ / WITHHOLD AUTHORITY
to vote for all nominees listed below.
Stephen J. Cole-Hatchard, Nicko Feinberg, Ronald C. Signore and William
A. Barron.
(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 1997 Stock Option Plan.
/ / FOR / / AGAINST / / ABSTAIN
2. 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: ________________________________, 2000
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.
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