<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 7, 2000.
REGISTRATION NO. 333-92969
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 2
TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
FRONTLINE COMMUNICATIONS CORPORATION
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 7374 13-3950283
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER IDENTIFICATION NUMBER)
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER)
</TABLE>
------------------------
ONE BLUE HILL PLAZA, 7TH FLOOR
PEARL RIVER, NEW YORK 10965
(914) 623-8553
(ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE
OFFICES AND PRINCIPAL PLACE OF BUSINESS)
------------------------
STEPHEN J. COLE-HATCHARD, CHIEF EXECUTIVE OFFICER
FRONTLINE COMMUNICATIONS CORPORATION
ONE BLUE HILL PLAZA, 7TH FLOOR
PEARL RIVER, NEW YORK 10965
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
------------------------
Copies to:
<TABLE>
<S> <C>
ROBERT J. MITTMAN, ESQ. HENRY O. SMITH III, ESQ.
BLANK ROME TENZER GREENBLATT LLP PROSKAUER ROSE LLP
THE CHRYSLER BUILDING 1585 BROADWAY
405 LEXINGTON AVENUE NEW YORK, NY 10036
NEW YORK, NY 10174 TELEPHONE NO. (212) 969-3000
TELEPHONE NO. (212) 885-5000 TELECOPIER NO. (212) 969-2900
TELECOPIER NO. (212) 885-5001
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: AS SOON AS
PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. / /
If this form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law (the "DGCL") contains
the provisions entitling the Registrant's directors and officers to
indemnification from judgments, fines, amounts paid in settlement, and
reasonable expenses (including attorney's fees) as the result of an action or
proceeding in which they may be involved by reason of having been a director or
officer of the Registrant. In its Certificate of Incorporation, the Registrant
has included a provision that limits, the personal liability of its directors to
the Registrant or its stockholders for monetary damages arising from a breach of
their fiduciary duties as directors except where such director (i) breaches his
duty of loyalty to the Registrant or its stockholders, (ii) fails to act in good
faith or engages in intentional misconduct or a knowing violation of law,
(iii) authorizes payment of an unlawful dividend or stock purchase or redemption
as provided in Section 174 of the DGCL, or (iv) obtains an improper personal
benefit. This provision does not prevent the Registrant or its stockholders from
seeking equitable remedies, such as injunctive relief or rescission. If
equitable remedies are found not to be available to stockholders in any
particular case, stockholders may not have any effective remedy against actions
taken by directors that constitute negligence or gross negligence.
The Certificate of Incorporation also includes provisions to the effect
that (subject to certain exceptions) the Registrant shall, to the maximum extent
permitted from time to time under the law of the State of Delaware, indemnify,
and upon request (subject to certain conditions) shall advance expenses to, any
director or officer to the extent that such indemnification and advancement of
expenses is permitted under such law, as may from time to time be in effect. In
addition, the By-Laws require the Registrant to indemnify, to the full extent
permitted by law, any person (which includes directors and officers) whom the
Registrant is empowered to indemnify pursuant to Section 145 of the DCGL, for
acts which such person reasonably believes are not in violation of the
Registrant's corporate purposes as set forth in the Certificate of
Incorporation. At present, the DGCL provides that, in order to be entitled to
indemnification, an individual must have acted in good faith and in a manner he
or she reasonably believed to be in or not opposed to the Registrant's best
interests.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to any charter provision, by-law, contract, arrangement,
statute or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Securities Act of 1933 and is, therefore, unenforceable.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the expenses (other than the underwriting
discounts and commissions and the Representative's non-accountable expense
allowance) expected to be incurred in connection with the issuance and
distribution of the securities being registered.
<TABLE>
<S> <C>
SEC registration fee................................................................................ $ 5,347.98
NASD filing fee..................................................................................... $ 2,150
Legal fees and expenses*............................................................................ $ 275,000
Printing and engraving costs*....................................................................... $ 100,000
Accounting fees and expenses*....................................................................... $ 100,000
American Stock Exchange listing fees and related expenses*.......................................... $ 30,000
Transfer agent fees................................................................................. $ 3,500
Miscellaneous*...................................................................................... $ 84,002.02
------------
Total.......................................................................................... $ 600,000
------------
------------
</TABLE>
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* Estimated
II-1
<PAGE>
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
The Company has made the following sales of unregistered securities in the
past three years:
In February 1997, the Company issued an aggregate of 1,148,000 shares of
its common stock for consideration of $.01 per share to the following persons:
Nicko Feinberg, Michael Char, Stephen J. Cole-Hatchard, Stephen Cole-Hatchard
Family Limited Partnership, Michael Olbermann, Vestrco, Inc., Nino Fontana,
Michael Garvey, Jeffrey Cohen, Edward Anderson, Peter Morris and Jay Edward &
Partners, Ltd.
In February 1997, the Company issued options to purchase an aggregate of
165,600 shares of common stock (net of forfeitures) to: Michael Garvey, Jeffrey
Cohen, Sharon Baker, Ron Signore, Chris Ann Stolecki and Jennifer Brodil.
Options issued to Ms. Baker and Mr. Signore were issued in consideration of
consulting services.
In May 1997, the Company issued an aggregate of 160,000 shares of common
stock for consideration of $2.00 per share to the following persons: Allen
Markowitz, William A. Barron, The Rough Group, Robert E. Sullivan and Virginia
M. Sullivan, Richard Baker, William E. Stolecki and James W. Stolecki, Doris
Cole-Hatchard, Patrick Keenan, Douglas J. Cole-Hatchard Jr., James P. Quinn and
Deborah A. Quinn, William J. Collins, Lewis L. Prince, Michael J. Dooling,
Maureen T. Donoghue, Geraldine Garvey, Edwin Kahn and Wilma R. Kahn, Bruce G.
Tracy, Elizabeth M. Dooling and FKF Holding Company, L.P.
In December 1997, the Company issued 100,000 shares of common stock and
options to purchase 80,000 shares to Ronald Shapss in consideration of
consulting services. In addition, 300,000 warrants were issued to Edward
Anderson (40,000), Doris Cole-Hatchard (64,000) and The Rough Group (196,000) in
connection with a private placement.
In October 1998, the Company issued 10 shares of Series A convertible
preferred stock to the stockholders of WOWFactor, Inc. in connection with the
Company's acquisition of all of the outstanding common stock of WOWFactor, Inc.
The Series A preferred stock is convertible into 98,462 shares of common stock.
In December 1998, the Company issued 113,364 shares of common stock to the
stockholders of Webspan, Inc. in connection with its acquisition of
substantially all of the assets of Webspan, Inc.
In March 1999, the Company issued 158,856 shares of its common stock and
warrants to purchase 17,330 shares of common stock to two investors in a private
transaction for aggregate consideration of $2,000,000 and issued warrants to
purchase 4,332 shares of common stock to the placement agent.
In April 1999, the Company issued 10,000 shares of common stock to Webspan,
Inc. for the use of equipment and services of Webspan, Inc.
In May 1999, the Company issued 41,204 shares of common stock in connection
with the acquisition of WebPrime, Inc.
In May 1999, the Company issued 9,232 shares of common stock and options to
purchase 768 shares in connection with the acquisition of ChanneliShop.com.
In May 1999, an officer of the Company exercised options to acquire 15,000
shares of common stock pursuant to the Company's stock option plan in exchange
for an interest-bearing secured promissory note in the principal amount of
$37,500.
In July 1999, the Company issued 99,900 shares of common stock and warrants
to purchase 10,900 shares of common stock to two investors for aggregate
consideration of $1,000,000, and issued warrants to purchase 2,725 shares of
common stock to the placement agent.
In July 1999, the Company issued warrants to purchase 25,000 shares of
common stock to JW Genesis Capital Markets, Inc. in exchange for consulting
services.
In August 1999, the Company issued 13,700 shares upon the exercise of
outstanding warrants.
In September 1999, the Company issued 5,974 shares of common stock to
Martin Janis & Co. in exchange for services rendered pursuant to a consulting
agreement.
In October 1999, the Company issued 33,065 shares of common stock in
connection with the acquisition of assets of United Computer Specialists, Inc.
II-2
<PAGE>
In October 1999, the Company issued 105,263 shares of common stock and
warrants to purchase 11,483 shares of common stock to two investors for
aggregate consideration of $500,000, and issued warrants to purchase 2,871
shares of common stock to the placement agent.
In December 1999, the Company issued 26,538 shares of common stock in
connection with the acquisition of FrontHost, LLC.
In December 1999, the Company issued 135,870 shares of common stock and
warrants to purchase 14,827 shares of common stock to two investors for
aggregate consideration of $750,000, and issued warrants to purchase 3,707
shares of common stock to the placement agent.
In December 1999, the Company issued 98,462 shares of common stock upon the
conversion of all outstanding shares of the Company's Series A convertible
preferred stock.
In January 2000, the Company issued 3,330 shares of common stock as
consideration for professional services rendered.
From April 1999 to December 1999, the Company issued an aggregate of
239,716 shares of common stock pursuant to repricing rights.
From February 1997 to January 2000, the Company issued an aggregate of
129,916 shares of common stock upon the exercise of options granted under its
stock option plan.
Each of the above investors had full access to information relating to the
Company and represented to the Company that he or she had the required
investment intent. Each of the above investors was sophisticated in that he or
she had such knowledge and experience in financial and business matters that he
or she was capable of evaluating the merits and risks of the investment. In
addition, the above-referenced securities bear appropriate restrictive legends,
and stop transfer orders were placed against such securities.
In connection with these issuances, the Company relied on the exemption
from registration offered by Section 4(2) of the Securities Act of 1933 for
transactions by an issuer not involving any public offering.
ITEM 27. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------------------------------------------------------------------------------------------------
<S> <C>
1.1 Form of Underwriting Agreement between the Company and the Representative.
3.1 Certificate of Incorporation of the Company.+
3.2 Certificate of Amendment of the Certificate of Incorporation of the Company.++++++
3.3 Certificate of Amendment of the Certificate of Incorporation of the Company.*
3.4 By-Laws of the Company.+
4.1 Certificate of Designation of Series A preferred stock.++
4.2 Certificate of Designation of Series B preferred stock.
4.3 Form of Representative's Warrant Agreement, including Form of Warrant Certificate.
5.1 Opinion of Blank Rome Tenzer Greenblatt LLP.
10.1 Employment Agreements with Messrs. Stephen Cole-Hatchard, Nicko Feinberg and Michael Olbermann.+
10.2 Employment Agreement with Amy Wagner-Mele.*
10.3 Employment Agreement with Vasan Thatham.*
10.4 Employment Agreement with Jodie L. Jackson.*
10.5 Stock Purchase Agreement dated as of October 1, 1998 by and among the Company, WOWFactor, Inc. and
the WOWFactor, Inc. stockholders.++
10.6 Form of Registration Rights Agreement among the Company and the WOWFactor, Inc. Stockholders.++
10.7 Letter Offer to Purchase Substantially all of the Assets of US Online, Inc.+++
10.8 Asset Purchase Agreement dated as of November 24, 1998 by and among the Company, Webspan, and the
sole stockholder of Webspan.++++
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
------- -----------------------------------------------------------------------------------------------------
<S> <C>
10.9 Amendment to Asset Purchase Agreement dated December 17, 1998 by and among the Company, Webspan, and
the sole stockholder of Webspan.++++
10.10 Form of Registration Rights Agreement among the Company and the sole stockholder of Webspan.++++
10.11 1997 Stock Option Plan of the Company.+
10.12 Stock Purchase Agreement dated March 25, 1999.+++++
10.13 Registration Rights Agreement dated March 25, 1999.+++++
10.14 Stock Purchase Agreement dated as of July 8, 1999.*
10.15 Registration Rights Agreement dated as of July 8, 1999.*
10.16 Stock Purchase Agreement dated as of October 7, 1999.*
10.17 Registration Rights Agreement dated as of October 7, 1999.*
10.18 Stock Purchase Agreement dated as of December 10, 1999.*
10.19 Registration Rights Agreement dated as of December 10, 1999.*
10.20 Office Lease between Registrant and Glorious Sun Robert Martin LLC.+
10.21 Amendment No. 1 to Office Lease.*
10.22 Amendment No. 2 to Office lease.*
10.23 Promissory Note of Amy Wagner-Mele dated as of June 1, 1999.*
21.1 Subsidiaries of the Company.*
23.1 Consent of BDO Seidman, LLP*
23.2 Consent of Joseph J. Repko, CPA*
23.3 Consent of Steven H. Mermelstein, CPA*
23.4 Consent of Blank Rome Tenzer Greenblatt LLP (included in opinion filed as Exhibit 5)
24.1 Power of Attorney (included in the signature page of this Registration Statement).
</TABLE>
- ------------------
* Previously filed.
** To be filed by amendment.
+ Incorporated by reference to the applicable exhibit contained in the
Company's Registration Statement on Form SB-2 (file no. 333-34115).
++ Incorporated by reference to the applicable exhibit contained in the
Company's Current Report on Form 8-K dated October 9, 1998.
+++ Incorporated by reference to the applicable exhibit contained in the
Company's Current Report on Form 8-K dated October 23, 1998.
++++ Incorporated by reference to the applicable exhibit contained in the
Company's Current Report on Form 8-K dated December 17, 1998.
+++++ Incorporated by reference to the applicable exhibit contained in the
Company's Annual Report on Form 10-KSB for the year ended December 31,
1998.
++++++ Incorporated by reference to the applicable exhibit contained in the
Company's Quarterly Report on Form 10-QSB for the quarterly period ended
June 30, 1999.
ITEM 28. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes to:
(1) File, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) Reflect in the prospectus any facts or events which, individually
or together, represent a fundamental change in the information in the
registration statement. Notwithstanding the foregoing, any
II-4
<PAGE>
increase or decrease in volume of securities offered (if the total dollar
value of securities offered would not exceed that which was registered) and
any deviation from the low or high end of the estimated maximum offering
range may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table in
the effective registration statement.
(iii) Include any additional or changed material information on the
plan of distribution.
(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial bona
fide offering.
(3) File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.
(b) Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by the
final adjudication of such issue.
(c) The undersigned Registrant hereby undertakes for the purpose of determining
any liability under the Securities Act, to treat the information omitted
from the form of prospectus filed as part of this Registration Statement in
reliance upon Rule 430A and contained in a form of prospectus filed by the
Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities
Act as part of this Registration Statement as of the time the Securities and
Exchange Commission declares it effective; and for the purpose of
determining any liability under the Securities Act, treat each
post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the registration
statement, and that offering of the securities at that time as the initial
bona fide offering of those securities.
II-5
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS OF FILING ON FORM SB-2 AND HAS DULY CAUSED THIS AMENDMENT NO. 2 TO
THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, IN
THE CITY OF PEARL RIVER, STATE OF NEW YORK, ON FEBRUARY 7, 2000.
FRONTLINE COMMUNICATIONS CORPORATION
By: /s/ STEPHEN J. COLE-HATCHARD
----------------------------------
Stephen J. Cole-Hatchard,
Chief Executive Officer
EACH PERSON WHOSE SIGNATURE APPEARS BELOW ON THIS AMENDMENT NO. 2 TO THIS
REGISTRATION STATEMENT HEREBY CONSTITUTES AND APPOINTS STEPHEN J. COLE-HATCHARD,
AS HIS TRUE AND LAWFUL ATTORNEY-IN-FACT AND AGENT, WITH FULL POWER OF
SUBSTITUTION FOR HIM AND IN HIS NAME, PLACE AND STEAD, IN ANY AND ALL CAPACITIES
(UNTIL REVOKED IN WRITING) TO SIGN ANY AND ALL AMENDMENTS (INCLUDING
POST-EFFECTIVE AMENDMENTS AND AMENDMENTS THERETO) TO THIS REGISTRATION STATEMENT
ON FORM SB-2 OF FRONTLINE COMMUNICATIONS CORPORATION AND TO FILE THE SAME, WITH
ALL EXHIBITS THERETO AND OTHER DOCUMENTS IN CONNECTION THEREWITH, WITH THE
SECURITIES AND EXCHANGE COMMISSION.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 2 TO THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN
THE CAPACITIES AND ON THE DATES INDICATED:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ ------------------------------------------- ------------------
<S> <C> <C>
/s/ STEPHEN J. COLE-HATCHARD Chief Executive Officer, President and February 7, 2000
- ------------------------------------------ Director (Principal Executive Officer)
Stephen J. Cole-Hatchard
/s/ NICKO FEINBERG Director February 7, 2000
- ------------------------------------------
Nicko Feinberg
/s/ MICHAEL OLBERMANN Director February 7, 2000
- ------------------------------------------
Michael Olbermann
/s/ VASAN THATHAM Chief Financial Officer and Executive Vice February 7, 2000
- ------------------------------------------ President (Principal Financial and
Vasan Thatham Accounting Officer)
/s/ * Director February 7, 2000
- ------------------------------------------
Ronald Signore
/s/ * Director February 7, 2000
- ------------------------------------------
William Barron
* By: /s/ STEPHEN J. COLE-HATCHARD
- ------------------------------------
Stephen J. Cole-Hatchard
Attorney-In-Fact
</TABLE>
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------------------------------------------------------------------------------------------------
<S> <C>
1.1 Form of Underwriting Agreement between the Company and the Representative.
3.1 Certificate of Incorporation of the Company.+
3.2 Certificate of Amendment of the Certificate of Incorporation of the Company.++++++
3.3 Certificate of Amendment of the Certificate of Incorporation of the Company.*
3.4 By-Laws of the Company.+
4.1 Certificate of Designation of Series A preferred stock.++
4.2 Certificate of Designation of Series B preferred stock.
4.3 Form of Representative's Warrant Agreement, including Form of Warrant Certificate.
5.1 Opinion of Blank Rome Tenzer Greenblatt LLP.
10.1 Employment Agreements with Messrs. Stephen Cole-Hatchard, Nicko Feinberg and Michael Olbermann.+
10.2 Employment Agreement with Amy Wagner-Mele.*
10.3 Employment Agreement with Vasan Thatham.*
10.4 Employment Agreement with Jodie L. Jackson.*
10.5 Stock Purchase Agreement dated as of October 1, 1998 by and among the Company, WOWFactor, Inc. and
the WOWFactor, Inc. stockholders.++
10.6 Form of Registration Rights Agreement among the Company and the WOWFactor, Inc. Stockholders.++
10.7 Letter Offer to Purchase Substantially all of the Assets of US Online, Inc.+++
10.8 Asset Purchase Agreement dated as of November 24, 1998 by and among the Company, Webspan, and the
sole stockholder of Webspan.++++
10.9 Amendment to Asset Purchase Agreement dated December 17, 1998 by and among the Company, Webspan, and
the sole stockholder of Webspan.++++
10.10 Form of Registration Rights Agreement among the Company and the sole stockholder of Webspan.++++
10.11 1997 Stock Option Plan of the Company.+
10.12 Stock Purchase Agreement dated March 25, 1999.+++++
10.13 Registration Rights Agreement dated March 25, 1999.+++++
10.14 Stock Purchase Agreement dated as of July 8, 1999.*
10.15 Registration Rights Agreement dated as of July 8, 1999.*
10.16 Stock Purchase Agreement dated as of October 7, 1999.*
10.17 Registration Rights Agreement dated as of October 7, 1999.*
10.18 Stock Purchase Agreement dated as of December 10, 1999.*
10.19 Registration Rights Agreement dated as of December 10, 1999.*
10.20 Office Lease between Registrant and Glorious Sun Robert Martin LLC.+
10.21 Amendment No. 1 to Office Lease.*
10.22 Amendment No. 2 to Office Lease.*
10.23 Promissory Note of Amy Wagner-Mele dated as of June 1, 1999.*
21.1 Subsidiaries of the Company.*
23.1 Consent of BDO Seidman, LLP*
23.2 Consent of Joseph J. Repko, CPA*
23.3 Consent of Steven H. Mermelstein, CPA*
23.4 Consent of Blank Rome Tenzer Greenblatt LLP (included in opinion filed as Exhibit 5)
24.1 Power of Attorney (included in the signature page of this Registration Statement).
</TABLE>
(Footnotes on next page)
<PAGE>
(Footnotes from previous page)
- ------------------
* Previously filed.
** to be filed by amendment.
+ Incorporated by reference to the applicable exhibit contained in the
Company's Registration Statement on Form SB-2 (file no. 333-34115).
++ Incorporated by reference to the applicable exhibit contained in the
Company's Current Report on Form 8-K dated October 9, 1998.
+++ Incorporated by reference to the applicable exhibit contained in the
Company's Current Report on Form 8-K dated October 23, 1998.
++++ Incorporated by reference to the applicable exhibit contained in the
Company's Current Report on Form 8-K dated December 17, 1998.
+++++ Incorporated by reference to the applicable exhibit contained in the
Company's Annual Report on Form 10-KSB for the year ended December 31,
1998.
++++++ Incorporated by reference to the applicable exhibit contained in the
Company's Quarterly Report on Form 10-QSB for the quarterly period ended
June 30, 1999.
<PAGE>
1,000,000 Shares
Frontline Communications Corporation
Series B Preferred Stock
UNDERWRITING AGREEMENT
February __, 2000
Prime Charter Ltd.,
As representative of the
several Underwriters named
in Schedule A hereto
810 Seventh Avenue
New York, New York 10019
Ladies and Gentlemen:
Frontline Communications Corporation, a Delaware corporation (the
"Company"), proposes to issue and sell 1,000,000 shares (the "Firm Shares") of
its authorized but unissued Series B Preferred Stock, par value $.01 per share
(the "Series B Preferred Stock"), to Prime Charter Ltd. (the "Representative")
and the other underwriters listed on Schedule A to this Agreement (the
Representative and the other underwriters being herein collectively called the
"Underwriters"). The Company also proposes to grant to the Underwriters an
option to purchase up to an aggregate of 150,000 additional shares (the
"Overallotment Shares") of Series B Preferred Stock on the terms and conditions
set forth in Section 3(c). The Firm Shares and the Overallotment Shares are
hereinafter collectively referred to as the "Shares."
The Company wishes to confirm as follows its agreements with the
Underwriters in connection with the several purchases by the Underwriters of the
Shares.
1. Registration Statement. The Company has prepared and filed with the
Securities and Exchange Commission (the "Commission") a registration statement
on Form SB-2 (File No. 333-92969), including a prospectus relating to the Shares
and each amendment thereto in conformity with the requirements of the
<PAGE>
Securities Act of 1933, as amended (the "Act"). There have been delivered to the
Representative signed copies of such registration statement and amendments,
together with copies of each exhibit filed therewith. Copies of such
registration statement and amendments and of the related preliminary prospectus
have been delivered to the Representative in such reasonable quantities as the
Representative has requested for each of the Underwriters. If such registration
statement has not become effective, a further amendment to such registration
statement, including a form of final prospectus, necessary to permit such
registration statement to become effective will be filed promptly by the Company
with the Commission. If such registration statement has become effective, a
final prospectus containing all Rule 430A Information (as hereinafter defined)
will be filed by the Company with the Commission in accordance with, and if
required by, Rule 424(b) of the rules and regulations of the Act (the "Rules and
Regulations") on or before the second business day after the date hereof (or
such earlier time as may be required by the Rules and Regulations).
The term "Registration Statement" as used in this Agreement shall mean
such registration statement (including all exhibits and financial statements) at
the time such registration statement becomes or became effective and, if any
post-effective amendment thereto becomes effective prior to the Closing Date (as
hereinafter defined), shall also mean such registration statement as so amended;
provided, however, that such term shall include all Rule 430A Information deemed
to be included in such registration statement at the time such registration
statement becomes effective as provided by Rule 430A of the Rules and
Regulations and shall also mean any registration statement filed pursuant to
Rule 462(b) of the Rules and Regulations with respect to the Shares. The term
"Preliminary Prospectus" shall mean any preliminary prospectus referred to in
the preceding paragraph and any preliminary prospectus included in the
Registration Statement at the time it becomes effective that omits Rule 430A
Information. The term "Prospectus" as used in this Agreement shall mean the
prospectus relating to the Shares in the form in which it is first filed with
the Commission pursuant to Rule 424(b) of the Rules and Regulations or, if no
filing pursuant to Rule 424(b) of the Rules and Regulations is required, shall
mean the form of final prospectus included in the Registration Statement at the
time such registration statement becomes effective. The term "Rule 430A
Information" means information with respect to the Shares and the offering
thereof permitted to be omitted from the Registration Statement when it becomes
effective pursuant to Rule 430A of the Rules and Regulations.
2. Representations and Warranties. The Company hereby represents and
warrants as follows:
<PAGE>
(a) The Company has not received, and has no notice of, any
order of the Commission preventing or suspending the use of any Preliminary
Prospectus, or the institution of proceedings for that purpose, and each
Preliminary Prospectus, at the time of filing thereof, conformed in all material
respects to the requirements of the Act and the Rules and Regulations. When the
Registration Statement became or becomes, as the case may be, effective (the
"Effective Date") and at all times subsequent thereto up to and at the Closing
Date (as hereinafter defined), any later date on which Overallotment Shares are
to be purchased (the "Overallotment Closing Date") and when any post-effective
amendment to the Registration Statement becomes effective or any amendment or
supplement to the Prospectus is filed with the Commission, (i) the Registration
Statement and Prospectus, and any amendments or supplements thereto, will
contain all statements which are required to be stated therein by, and will
comply with the requirements of, the Act and the Rules and Regulations and (ii)
neither the Registration Statement nor the Prospectus, nor any amendment or
supplement thereto, will include any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make
the statements therein not misleading. The foregoing representations and
warranties in this Section 2(a) do not apply to any statements or omissions made
in reliance on and in conformity with the information contained in the section
of the Prospectus entitled "Underwriting." The Company has not distributed any
offering material in connection with the offering or sale of the Shares other
than the Registration Statement, the Preliminary Prospectus, the Prospectus or
any other materials, if any, permitted by the Act.
(b) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State of
Delaware, with full corporate power and authority to own, lease and operate its
properties and conduct its business as described in the Registration Statement.
The Company is duly qualified to do business as a foreign corporation in good
standing in each jurisdiction where the ownership or leasing of its properties
or the conduct of its business requires such qualification, except where the
failure so to qualify would not have a material adverse effect on the business,
properties, prospects, financial condition or results of operations of the
Company and the Subsidiaries (as hereinafter defined) taken as a whole (a
"Material Adverse Effect"). The Company has no subsidiaries (as defined in the
Rules and Regulations) other than its wholly owned subsidiaries, CLEC
Communications Corporation, iShop Networks, Inc. (formerly, "Frontline
Commerce Corporation"), WOW Factor, Inc. and Webprime, Inc.
(the "Subsidiaries"). The Company does not own, directly or indirectly,
any shares of stock or any other equity or long-term
<PAGE>
debt securities of any corporation or have any equity interest in any firm,
partnership, joint venture, association or other entity other than the
Subsidiaries. Complete and correct copies of the certificates of incorporation
and of the bylaws of the Company and the Subsidiaries and all amendments thereto
have been delivered to the Representative and no changes therein will be made
subsequent to the date hereof and prior to the Closing Date or, if later, the
Overallotment Closing Date. Each of the Subsidiaries has been duly incorporated
and is validly existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, with full corporate power and authority to
own, lease and operate its properties and to conduct its business as described
in the Registration Statement. All of the outstanding shares of capital stock of
the Subsidiaries have been duly authorized and validly issued and are fully paid
and non-assessable. The Company owns all of the outstanding shares of capital
stock of the Subsidiaries. None of the outstanding shares of capital stock of
the Subsidiaries is subject to a lien, security interest, other encumbrance or
adverse claim. No options, warrants or other rights to purchase, agreements or
other obligation to issue or other rights to convert any obligation into shares
of capital stock or ownership interests in the Subsidiaries are outstanding.
(c) The Company has full power and authority (corporate and
other) to enter into this Agreement and the agreement between the Company and
the Representative relating to issuance of the Representative's Warrants (as
hereinafter defined) (the "Representative's Warrant Agreement"), which is being
executed concurrently herewith, and to perform the transactions contemplated
hereby and thereby to be performed by it. Each of this Agreement and the
Representative's Warrant Agreement has been duly authorized, executed and
delivered by the Company and is a valid and binding agreement on the part of the
Company, enforceable against the Company in accordance with its terms, except as
rights to indemnity and contribution hereunder or thereunder may be limited by
applicable laws, the public policies underlying such laws, or equitable
principles and except as enforcement hereof or thereof may be limited by
applicable bankruptcy, insolvency, reorganization or other similar laws relating
to or affecting creditors' rights generally or by general equitable principles.
The performance of this Agreement and the Representative's Warrant Agreement by
the Company and the consummation by the Company of the transactions contemplated
hereby and thereby will not result in a breach or violation of any of the terms
and provisions of, or constitute a default under, (i) any indenture, mortgage,
deed of trust, loan agreement, bond, debenture, note agreement or other evidence
of indebtedness, or any lease, contract or other agreement or instrument to
which the Company or any of the Subsidiaries are a
<PAGE>
party or by which any of their respective properties are bound, (ii) the
certificate of incorporation or bylaws of the Company or any of the Subsidiaries
or (iii) any law, order, rule, regulation, writ, injunction or decree of any
court or governmental agency or body to which the Company or any of the
Subsidiaries is subject. The Company is not required to obtain or make (as the
case may be) any consent, approval, authorization, order, designation or filing
by or with any court or regulatory, administrative or other governmental agency
or body as a requirement for the consummation by the Company of the transactions
contemplated by this Agreement or the Representative's Warrant Agreement, except
such as may be required under the Act, the Securities Exchange Act of 1934, as
amended (the "Exchange Act") or under state securities or blue sky ("Blue Sky")
laws or under the rules and regulations of The American Stock Exchange, Inc.
(the "AMEX").
(d) There is not pending or, to the Company's knowledge,
threatened, any action, suit, claim, proceeding or investigation against the
Company or any of the Subsidiaries or any of their respective officers or any of
their respective properties, assets or rights before any court or governmental
agency or body or otherwise which might result in a Material Adverse Effect or
prevent consummation of the transactions contemplated hereby. There are no
statutes, rules, regulations, agreements, contracts, leases or documents that
are required to be described in the Prospectus, or to be filed as exhibits to
the Registration Statement by the Act or by the Rules and Regulations that have
not been accurately described in all material respects in the Prospectus or
filed as exhibits to the Registration Statement.
(e) All outstanding shares of capital stock of the Company
have been duly authorized and validly issued and are fully paid and
nonassessable, have been issued in compliance with all federal and state
securities laws and were not issued in violation of any preemptive right, resale
right, right of first refusal or similar right. The authorized and outstanding
capital stock of the Company conforms in all material respects to the
description thereof contained in the Registration Statement and the Prospectus
(and such description correctly states the substance of the provisions of the
instruments defining the capital stock of the Company). Prior to the Closing
Date, the Certificate of Designation relating to the Shares (the "Certificate
of Designation") will be duly authorized and executed by the Company and
will be filed with the Secretary of State of the State of Delaware and,
when the Shares are issued, delivered and paid for pursuant to the terms of
the Certificate of Designation and this Agreement, will constitute a valid and
legally binding obligation of the Company in accordance with its terms,
except to the extent that
<PAGE>
enforceability may be limited by bankruptcy, insolvency, moratorium,
reorganization or other laws of general applicability relating to or affecting
creditors' rights or by general principles of equity, whether considered at law
or in equity. The Shares have been duly authorized for issuance and sale to the
Underwriters pursuant to this Agreement and, when issued and delivered by the
Company against payment therefor in accordance with the terms of this Agreement,
will be duly and validly issued and fully paid and nonassessable. The shares of
Common Stock issuable upon conversion of the Shares (the "Conversion Shares")
have been duly authorized, and when issued upon such conversion in accordance
with the terms of the Certificate of Designation, will be duly and validly
issued and fully paid and nonassessable. Any shares of Common Stock issuable as
dividends on the Shares or on the Warrant Shares in accordance with the terms
of the Certificate of Designation (the "Dividend Shares"), upon such issuance
will be duly and validly issued and fully paid and nonassessable. No preemptive
right, co-sale right, right of first refusal or other similar rights of
security holders exists with respect to any of the Shares, the Conversion Shares
or the Dividend Shares or the issue and sale thereof other than those that have
been expressly waived prior to the date hereof. No holder of securities of the
Company has the right to cause the Company to include such holder's securities
in the Registration Statement except for any such rights that have been waived
or previously satisfied. The Representative's Warrant Agreement and the
Representative's Warrants conform in all material respects to the descriptions
thereof contained in the Registration Statement and the Prospectus. The shares
of Series B Preferred Stock issuable upon exercise of the Representative's
Warrants (the "Warrant Shares") have been duly authorized for issuance and sale
to the holders of the Representative's Warrants pursuant to the Representative's
Warrant Agreement and, when issued and delivered by the Company against payment
therefor in accordance with the terms of the Representative's Warrant Agreement,
will be duly and validly issued and fully paid and nonassessable. The shares of
common stock issuable upon conversion of the Warrant Shares (the "Warrant
Conversion Shares") have been duly authorized and when issued upon such
conversion in accordance with the terms of the Certificate of Designation, will
be duly and validly issued and fully paid and nonassessable. No further approval
or authorization of any security holder, the Board of Directors or any duly
appointed committee thereof or others is required for the issuance and sale or
transfer of the Shares, the Conversion Shares, the Dividend Shares, the Warrant
Shares or the Warrant Conversion Shares, except as may be required under the
Act, the Exchange Act or Blue Sky laws. Except as disclosed in or contemplated
by the Prospectus and the consolidated financial statements of the Company and
the related notes thereto included in the Prospectus, the Company does not have
outstanding any options or warrants to purchase, or any preemptive rights or
other rights to subscribe for or to purchase, any securities or obligations
convertible into, or any contracts or commitments to issue or sell, shares of
its capital stock or any such options, rights, convertible securities or
obligations. The description of the Company's stock option and other plans or
<PAGE>
arrangements, and the options or other rights which may be or have been granted
and/or exercised thereunder, as set forth in the Prospectus, accurately and
fairly presents, in all material respects, the information required to be shown
with respect to such plans, arrangements, options and rights.
(f) BDO Seidman LLP (the "Accountants") who have examined the
consolidated financial statements of the Company, and the financial statements
of WOWFactor, Inc. and Roxy Systems, Inc., together with the respective related
schedules and notes, filed with the Commission as a part of the Registration
Statement, which are included in the Prospectus, are independent public
accountants within the meaning of the Act and the Rules and Regulations. Joseph
J. Repko, CPA, who has examined the financial statements of U.S. Online, Inc.,
together with the related schedules and notes of U.S. Online, Inc., filed with
the Commission as part of the Registration Statement which are included in the
Prospectus, is an independent public accountant within the meaning of the Act
and the Rules and Regulations. Steven H. Mermelstein, CPA, who has examined the
financial statements of Webspan, Inc., together with the related schedules and
notes of Webspan, Inc., filed with the Commission as part of the Registration
Statement which are included in the Prospectus, is an independent public
accountant within the meaning of the Act and the Rules and Regulations. The
consolidated financial statements of the Company, together with the related
schedules and notes, forming part of the Registration Statement and the
Prospectus, fairly present the consolidated financial position and the
consolidated results of operations of the Company at the respective dates and
for the respective periods to which they apply. The financial statements of
WOWFactor, Inc., Roxy Systems, Inc., U.S. Online, Inc. and Webspan, Inc.,
together with the related respective schedules and notes forming part of the
Registration Statement and the Prospectus, fairly present the respective
financial position and results of operations of WOWFactor, Inc., Roxy Systems,
Inc., U.S. Online, Inc. and Webspan, Inc. at the respective dates and for the
respective periods to which they apply. All financial statements, together with
the related schedules and notes, filed with the Commission as part of the
Registration Statement have been prepared in accordance with generally accepted
accounting principles as in effect in the United States consistently applied
throughout the periods involved except as may be otherwise stated in the
Registration Statement. The selected and summary financial and statistical data
included in the Registration Statement present fairly the information shown
therein and have been compiled on a basis consistent with the consolidated
financial statements included therein. No other financial statements or
schedules are required by the Act or the Rules and Regulations to be included in
the Registration Statement.
(g) Subsequent to the respective dates as of which information
is given in the Registration Statement and the Prospectus, there has not been,
except as described in the Prospectus, (i) any material adverse change, or any
development which, in the Company's reasonable judgment, is likely to cause a
material adverse change, in the business, prospects, properties or assets
described or referred to in the Registration Statement, or the results of
operations, condition (financial or otherwise), business or operations of the
Company, and the Subsidiaries taken as a whole, (ii) any transaction which is
material to the Company
<PAGE>
and the Subsidiaries, taken as a whole, except transactions in the ordinary
course of business, (iii) any obligation, direct or contingent, which is
material to the Company and the Subsidiaries taken as a whole, incurred by the
Company or any of the Subsidiaries, except obligations incurred in the ordinary
course of business, (iv) any change in the capital stock, ownership interests or
outstanding indebtedness of the Company or any of the Subsidiaries or (v) any
dividend or distribution of any kind declared, paid or made on the capital stock
of the Company. Neither the Company nor any of the Subsidiaries has any material
contingent obligation which is not disclosed in the Registration Statement.
(h) Except as set forth in the Prospectus, (i) the Company and
the Subsidiaries have good and marketable title to all material properties and
assets described in the Prospectus as owned by them, free and clear of any
pledge, lien, security interest, charge, encumbrance, claim, equitable interest
or restriction, (ii) the agreements to which the Company or any of the
Subsidiaries is a party described in the Prospectus are valid agreements,
enforceable against the Company or the Subsidiaries in accordance with their
respective terms, except as enforcement may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to or
affecting creditors' rights generally or by general equitable principles and
except as rights to indemnity and contribution thereunder may be limited by
applicable laws or equitable principles, and, to the Company's knowledge, the
other contracting party or parties thereto are not in material breach or default
under any of such agreements and (iii) each of the Company and the Subsidiaries
has valid and enforceable leases for the properties described in the Prospectus
as leased by it, and such leases conform in all material respects to the
description thereof, if any, set forth in the Registration Statement.
(i) The Company and the Subsidiaries now hold, and at the
Closing Date and any later Overallotment Closing Date, as the case may be, will
hold, all licenses, certificates, approvals and permits from all federal, state,
foreign and other regulatory authorities that are material to the conduct of the
business of the Company (as such business is currently conducted), except for
such licenses, certificates, approvals and permits the failure of which to hold
would not have a Material Adverse Effect, all of which are valid and in full
force and effect (and there is no proceeding pending or, to the knowledge of the
Company, threatened which may cause any such license, certificate, approval or
permit to be withdrawn, canceled, suspended or not renewed). Neither the Company
nor any of the Subsidiaries is in violation of its certificate of incorporation
or bylaws, or in default in the performance or observance of any obligation,
<PAGE>
agreement, covenant or condition contained in any bond, debenture, note or other
evidence of indebtedness or in any contract, indenture, mortgage, loan
agreement, joint venture or other agreement or instrument to which it is a party
or by which it or any of its properties are bound (except for defaults which
would not have a Material Adverse Effect), or in violation of any law, order,
rule, regulation, writ, injunction or decree of any court or governmental agency
or body.
(j) The Company and the Subsidiaries have filed on a timely
basis all necessary federal, state and foreign income, franchise and other tax
returns and has paid all taxes shown thereon as due, and the Company has no
knowledge of any tax deficiency which has been or might be asserted against the
Company or the Subsidiaries which might have a Material Adverse Effect. All
material tax liabilities are adequately provided for within the financial
statements of the Company.
(k) The Company and the Subsidiaries maintain insurance of the
types and in the amounts that the Company believes are adequate for their
business and consistent with insurance coverage maintained by similar companies
in similar businesses, including, but not limited to, business interruption
insurance and insurance for the material real and personal property owned or
leased against theft, damage, destruction, acts of vandalism and all other risks
customarily insured against, all of which insurance is in full force and effect.
(l) Neither the Company nor the Subsidiaries is involved in
any material labor dispute or disturbance nor, to the knowledge of the Company,
is any such material dispute or disturbance threatened.
(m) The Company and the Subsidiaries own or possess adequate
licenses or other rights to use all patents, trademarks, service marks,
tradenames, copyrights, trade secrets, know-how, franchises, and other material
intangible property and assets (collectively, "Intellectual Property") necessary
to the conduct of their business as conducted and as proposed to be conducted as
described in the Prospectus. The Company has no knowledge that it or the
Subsidiaries lack or will be unable to obtain any rights or licenses to use any
of the Intellectual Property necessary to conduct the business now conducted or
proposed to be conducted by them as described in the Prospectus. The Prospectus
fairly and accurately describes the Company's rights with respect to the
Intellectual Property. The Company has not received any notice of infringement
of or conflict with rights or claims of others with respect to any Intellectual
Property.
(n) The Company is not an "investment company," or a
<PAGE>
"promoter" or "principal underwriter" for a registered investment company, as
such terms are defined in the Investment Company Act of 1940, as amended.
(o) Neither the Company nor the Subsidiaries has incurred any
liability for a fee, commission or other compensation on account of the
employment of a broker or finder in connection with the transactions
contemplated by this Agreement other than the underwriting discounts and
commissions contemplated hereby.
(p) The Company and the Subsidiaries (i) are in compliance
with any and all applicable federal, state, foreign and local environmental
laws, rules, regulations, treaties, statutes and codes promulgated by any and
all governmental authorities relating to the protection of human health and
safety, the environment or toxic substances or wastes, pollutants or
contaminants ("Environmental Laws"), (ii) have received all permits, licenses or
other approvals required of it under applicable Environmental Laws to conduct
their business as currently conducted and (iii) are in compliance with all terms
and conditions of any such permit, license or approval, except where such
noncompliance with Environmental Laws, failure to receive required permit
licenses or other approvals would not, individually or in the aggregate, have a
Material Adverse Effect. No action, proceeding, revocation proceeding, writ,
injunction or claim is pending or threatened relating to the Environmental Laws
or to the Company's or the Subsidiaries' activities involving Hazardous
Materials. "Hazardous Materials" means any material or substance (y) that is
prohibited or regulated by any environmental law, rule, regulation, order,
treaty, statute or code promulgated by any governmental authority, or any
amendment or modification thereto, or (z) that has been designated or regulated
by any governmental authority as radioactive, toxic, hazardous or otherwise a
danger to health, reproduction or the environment.
(q) Neither the Company nor the Subsidiaries has engaged in
the generation, use, manufacture, transportation or storage of any Hazardous
Materials on any of the Company's or any of the Subsidiaries' properties or
former properties, except where such use, manufacture, transportation or storage
is in compliance with Environmental Laws. No Hazardous Materials have been
treated or disposed of on any of the Company's or any of the Subsidiaries'
properties or on properties formerly owned or leased by the Company or any of
the Subsidiaries during the time of such ownership or lease, except in
compliance with Environmental Laws. No spills, discharges, releases, deposits,
emplacements, leaks or disposal of any Hazardous Materials have occurred on or
under or have emanated from any of the Company's
<PAGE>
properties or former properties.
(r) Neither the Company nor the Subsidiaries has at any time
during the last five years (i) made any unlawful contribution to any candidate
for foreign office, or failed to disclose fully any contribution in violation of
law, or (ii) made any payment to any foreign, United States or state
governmental officer or official, or other person charged with similar public or
quasi-public duties, other than payments required or permitted by the laws of
the United States.
(s) The Shares have been duly authorized for listing on the
AMEX upon notice of issuance and the Common Stock has been duly authorized for
listing on the AMEX concurrently therewith. The Company has taken no action
designed to, or likely to have the effect of, terminating the registration of
the Series B Preferred Stock or the Common Stock under the Exchange Act or
delisting the Series B Preferred Stock or the Common Stock from the AMEX, nor
has the Company received any notification that the Commission, or the AMEX is
contemplating terminating such registrations or listings.
(t) Neither the Company nor, to its knowledge, any of its
officers, directors or affiliates has taken, and at the Closing Date and at any
later Overallotment Closing Date, neither the Company nor, to its knowledge, any
of its officers, directors or affiliates will have taken, directly or
indirectly, any action which has constituted, or might reasonably be expected to
constitute, the stabilization or manipulation of the price of sale or resale of
the Shares.
(u) The Company has obtained and delivered to the
Representative agreements (the "Lock-Up Agreements") from each of the persons
and entities listed on Schedule B hereto, representing all of the Company's
executive officers, directors and the stockholders of the Company who
beneficially own 5% or more of the outstanding shares of Common Stock (or
securities convertible into or exchangeable or exercisable for equity securities
of the Company), providing that, subject to certain exceptions contained in the
Lock-Up Agreements, such person or entity will not, commencing on the effective
date of the Registration Statement and continuing for a 12-month period
thereafter, without the Representative's prior written consent, directly or
indirectly, offer to sell, sell, pledge, solicit an offer to buy, contract to
sell, grant any option for the sale thereof, or otherwise encumber, or cause the
transfer or disposition of, or enter into any swap or other similar arrangement
relating to, any shares of Common Stock or Series B Preferred Stock, any
securities convertible into or exchangeable or exercisable for, Common Stock or
Series B Preferred Stock or
<PAGE>
other securities of the Company, or exercise any registration rights with
respect to any shares of Common Stock or Series B Preferred Stock or any
securities convertible into or exchangeable or exercisable for any shares of
Common Stock or Series B Preferred Stock.
(v) The Company agrees that it will not, without the
Representative's prior written consent, amend or grant waivers with respect to
any existing agreement between the Company and its executive officers, directors
or stockholders (or holders of securities convertible into or exchangeable or
exercisable for equity securities of the Company) who have not entered into a
Lock-Up Agreement with the Representative and under which such securityholders'
ability to transfer their securities is restricted (the "Existing Lock-Up
Agreements"); the Company further acknowledges and agrees, and will promptly
give written notice to the parties to the Existing Lock-Up Agreements, that the
Representative has specified that the one-year period commencing on the
Effective Date shall be the period during which such securityholders' ability to
transfer their securities shall be restricted under the Existing Lock-Up
Agreements; and the Company agrees that it will, at its own expense, strictly
enforce the Existing Lock-Up Agreements and, if the Company fails to do so, it
will be deemed to have assigned to the Representative all of the Company's
rights under the Existing Lock-Up Agreements and will indemnify the
Representative for all expenses, as and when incurred, arising out of the
Representative's enforcement of the Existing Lock-Up Agreements.
(w) The Company has not distributed and, prior to the latest
to occur of (i) the Closing Date, (ii) the Overallotment Closing Date and (iii)
the completion of the distribution of the Shares, will not distribute any
offering material in connection with the offering and sale of the Shares other
than the Registration Statement or any amendment thereto, any Preliminary
Prospectus or the Prospectus or any amendment or supplement thereto, or other
materials, if any, as permitted by the Act.
3. Purchase of the Shares by the Underwriters.
(a) On the basis of the representations and warranties and
subject to the terms and conditions herein set forth, the Company agrees to
issue and sell the Firm Shares to the several Underwriters, and each of the
Underwriters agrees to purchase from the Company the respective aggregate number
of Firm Shares set forth opposite its name on Schedule A, plus such additional
number of Firm Shares which such Underwriter may become obligated to purchase
pursuant to Section 3(b) hereof. The price at which such Firm Shares shall be
sold by the Company and purchased by the several Underwriters shall be $______
per share. In making
<PAGE>
this Agreement, each Underwriter is contracting severally and not jointly;
except as provided in Sections 3(b) and 3(c), the agreement of each Underwriter
is to purchase only the respective number of Firm Shares specified on Schedule
A.
(b) If for any reason one or more of the Underwriters shall
fail or refuse (otherwise than for a reason sufficient to justify the
termination of this Agreement under the provisions of Section 10 hereof) to
purchase and pay for the number of Shares agreed to be purchased by such
Underwriter or Underwriters, the non-defaulting Underwriters shall have the
right within 24 hours after such default to purchase, or procure one or more
other Underwriters to purchase, in such proportions as may be agreed upon
between the Representative and such purchasing Underwriter or Underwriters and
upon the terms herein set forth, all or any part of the Shares which such
defaulting Underwriter or Underwriters agreed to purchase. If the non-defaulting
Underwriters fail so to make such arrangements with respect to all such Shares
and portion, the number of Shares which each non-defaulting Underwriter is
otherwise obligated to purchase under this Agreement shall be automatically
increased on a pro rata basis (as adjusted by the Representative in such manner
as the Representative deems advisable to avoid fractional shares) to absorb the
remaining shares and portion which the defaulting Underwriter or Underwriters
agreed to purchase; provided, however, that the non-defaulting Underwriters
shall not be obligated to purchase the Shares and portion which the defaulting
Underwriter or Underwriters agreed to purchase if the aggregate number of such
Shares exceeds 10% of the total number of Shares which all Underwriters agreed
to purchase hereunder. If the total number of Shares which the defaulting
Underwriter or Underwriters agreed to purchase shall not be purchased or
absorbed in accordance with the two preceding sentences, the Company shall have
the right, within 24 hours next succeeding the 24-hour period referred to above,
to make arrangements with other underwriters or purchasers reasonably
satisfactory to the Representative for purchase of such Shares and portion on
the terms herein set forth. In any such case, either the Representative or the
Company shall have the right to postpone the Closing Date determined as provided
in Section 5 hereof for not more than seven business days after the date
originally fixed as the Closing Date pursuant to said Section 5 in order that
any necessary changes in the Registration Statement, the Prospectus or any other
documents or arrangements may be made. If the aggregate number of Shares which
the defaulting Underwriter or Underwriters agreed to purchase exceeds 10% of the
total number of Shares which all Underwriters agreed to purchase hereunder, and
if neither the non-defaulting Underwriters nor the Company shall make
arrangements within the 24-hour periods stated above for the purchase of all the
Shares which the defaulting
<PAGE>
Underwriter or Underwriters agreed to purchase hereunder, this Agreement shall
be terminated without further act or deed and without any liability on the part
of the Company to any non-defaulting Underwriter and without any liability on
the part of any non-defaulting Underwriter to the Company. Nothing in this
Section 3(b), and no action taken hereunder, shall relieve any defaulting
Underwriter from liability in respect of any default of such Underwriter under
this Agreement.
(c) On the basis of the representations, warranties and
covenants herein contained, and subject to the terms and conditions herein set
forth, the Company hereby grants an option to the several Underwriters to
purchase up to 150,000 shares of Series B Preferred Stock at the same price per
share as the Underwriters shall pay for the Firm Shares. Such option may be
exercised only to cover overallotments in the sale of the Firm Shares by the
Underwriters and may be exercised in whole or in part at any time, or from time
to time, on or before the 45th day after the date of the Prospectus upon written
or telegraphic notice by the Representative to the Company setting forth the
aggregate number of Overallotment Shares as to which the Underwriters are
exercising the option. Delivery of certificates for the Overallotment Shares,
and payment therefor, shall be made as provided in Section 5 hereof. Each
Underwriter shall purchase such percentage of the Overallotment Shares as is
equal to the percentage of Firm Shares that such Underwriter is purchasing, the
exact number of shares to be adjusted by the Representative in such manner as
the Representative deems advisable to avoid fractional shares.
(d) On the Closing Date, the Company shall issue and deliver
to the Representative, or at the direction of the Representative, to its
designees as provided in the Representative's Warrant Agreement, for a purchase
price of $.0001 per Representative's Warrant (an aggregate of $10), the
Representative's Warrants entitling the holder thereof to purchase 100,000
shares of Series B Preferred Stock on the terms and conditions set forth in the
Representative's Warrant Agreement.
4. Offering by Underwriters.
The terms of the offering of the Shares by the Underwriters
shall be as set forth in the Prospectus.
5. Delivery of and Payment for the Shares and the Representative's
Warrants.
(a) Delivery of certificates for the Firm Shares, the
Overallotment Shares (if the option granted pursuant to Section 3(c) hereof
shall have been exercised not later than
<PAGE>
1:00 p.m., New York time, on the date at least two business days preceding the
Closing Date) and the Representative's Warrants, and payment therefor, shall be
made at the office of Proskauer Rose LLP, 1585 Broadway, New York, New York
10036-8299 at 9:00 a.m., New York City time, on the fourth business day after
the date of this Agreement, or at such time on such other day, not later than
seven full business days after such fourth business day, as shall be agreed upon
in writing by the Company and the Representative (the "Closing Date").
(b) If the option granted pursuant to Section 3(c) hereof
shall be exercised after 1:00 p.m., New York City time, on the date two business
days preceding the Closing Date, and on or before the 45th day after the date of
this Agreement, delivery of certificates for the Overallotment Shares, and
payment therefor, shall be made at the office of Proskauer Rose LLP, 1585
Broadway, New York, New York 10036-8299 at 9:00 a.m., New York City time, on the
third business day after the exercise of such option.
(c) Payment for the Shares shall be made to the Company, by
either a same day funds check or federal funds wire transfer. Such payment shall
be made upon delivery of certificates for the Shares to the Representative for
the respective accounts of the several Underwriters against receipt therefor
signed by the Representative. Certificates for the Shares to be delivered to the
Representative shall be registered in such name or names and shall be in such
denominations as the Representative may request at least three business days
before the Closing Date, in the case of Firm Shares, and at least two business
days prior to the Overallotment Closing Date, in the case of the Overallotment
Shares. Such certificates will be made available to the Underwriters for
inspection, checking and packaging at a location in New York, New York,
designated by the Underwriters not less than one full business day prior to the
Closing Date or, in the case of the Overallotment Shares, by 3:00 p.m., New York
time, on the business day preceding the Overallotment Closing Date.
It is understood that the Representative, individually and not
on behalf of the Underwriters, may (but shall not be obligated to) make payment
to the Company for shares to be purchased by any Underwriter whose check shall
not have been received by the Representative on the Closing Date or any later
Overallotment Closing Date. Any such payment by the Representative shall not
relieve such Underwriter from any of its obligations hereunder.
(d) Payment for the Representative's Warrants shall be made to
the Company or its order, by either a same day funds check or federal funds wire
transfer. Such payment shall be made
<PAGE>
upon delivery of certificates for the Representative's Warrants to the
Representative against receipt therefor signed by the Representative.
Certificates for the Representative's Warrants to be delivered to the
Representative shall, subject to the terms and provisions of the
Representative's Warrant Agreement, be registered in such name or names as
permitted by the Representative's Warrant Agreement and shall be in such
denominations as the Representative may request at least three business days
before the Closing Date.
6. Further Agreements of the Company. The Company covenants and agrees
as follows:
(a) The Company will use its best efforts to cause the
Registration Statement and any amendment thereof, if not effective at the time
and date that this Agreement is executed and delivered by the parties hereto, to
become effective as promptly as possible; it will notify the Representative,
promptly after it shall receive notice thereof, of the time when the
Registration Statement or any subsequent amendment to the Registration Statement
has become effective or any supplement to the Prospectus has been filed. If the
Company omitted information from the Registration Statement at the time it was
originally declared effective in reliance upon Rule 430A(a), the Company will
provide evidence satisfactory to the Representative that the Prospectus contains
such information and has been filed, within the time period prescribed, with the
Commission pursuant to subparagraph (1) or (4) of Rule 424(b) of the Rules and
Regulations or as part of a post-effective amendment to such Registration
Statement as originally declared effective which is declared effective by the
Commission. If for any reason the filing of the final form of Prospectus is
required under Rule 424(b)(3) of the Rules and Regulations, it will provide
evidence satisfactory to the Representative that the Prospectus contains such
information and has been filed with the Commission within the time period
prescribed. The Company will notify the Representative promptly of any request
by the Commission for the amending or supplementing of the Registration
Statement or the Prospectus or for additional information. Promptly upon the
Representative's request, the Company will prepare and file with the Commission
any amendments or supplements to the Registration Statement or Prospectus which,
in the reasonable opinion of counsel to the Representative, may be necessary or
advisable in connection with the distribution of the Shares by the Underwriters.
The Company will promptly prepare and file with the Commission, and promptly
notify the Representative of the filing of, any amendments or supplements to the
Registration Statement or Prospectus which may be necessary to correct any
statements or omissions, if, at any time when a prospectus relating to the
Shares is required to be delivered under the Act,
<PAGE>
any event shall have occurred as a result of which the Prospectus or any other
prospectus relating to the Shares as then in effect would include an untrue
statement of a material fact or omit to state any material fact necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. In case any Underwriter is required to deliver a
prospectus within the nine-month period referred to in Section 10(a)(3) of the
Act in connection with the sale of the Shares, the Company will prepare promptly
upon request, but at the expense of such Underwriter, such amendment or
amendments to the Registration Statement and such prospectus or prospectuses as
may be necessary to permit compliance with the requirements of Section 10(a)(3)
of the Act. The Company will file no amendment or supplement to the Registration
Statement or Prospectus that shall not previously have been submitted to the
Representative a reasonable time prior to the proposed filing thereof or to
which the Representative shall reasonably object in writing or which is not in
compliance with the Act and Rules and Regulations or the provisions of this
Agreement.
(b) The Company will advise the Representative, promptly after
it shall receive notice or obtain knowledge thereof, of the issuance of any stop
order by the Commission suspending the effectiveness of the Registration
Statement or the use of the Prospectus or of the initiation or threat of any
proceeding for that purpose; and it will promptly use its best efforts to
prevent the issuance of any such stop order or to obtain its withdrawal at the
earliest possible moment if such stop order should be issued.
(c) The Company will cooperate with the Representative in
endeavoring to qualify the Shares for offering and sale under the securities
laws of such jurisdictions as the Representative may designate and to continue
such qualifications in effect for so long as may be required for purposes of the
distribution of the Shares, except that the Company shall not be required in
connection therewith or as a condition thereof to qualify as a foreign
corporation, or to execute a general consent to service of process in any
jurisdiction, or to make any undertaking with respect to the conduct of its
business. In each jurisdiction in which the Shares shall have been qualified,
the Company will make and file such statements, reports and other documents in
each year as are or may be reasonably required by the laws of such jurisdictions
so as to continue such qualifications in effect for so long a period as the
Representative may reasonably request for distribution of the Shares, or as
otherwise may be required by law.
(d) The Company will furnish to the Representative, as soon as
available, copies of the Registration Statement (three of
<PAGE>
which will be signed and which will include all exhibits), each Preliminary
Prospectus, the Prospectus, and any amendments or supplements to such documents,
including any prospectus prepared to permit compliance with Section 10(a)(3) of
the Act, all in such quantities as the Representative may from time to time
reasonably request.
(e) The Company will make generally available to its
stockholders as soon as practicable, but in any event not later than the 45th
day following the end of the fiscal quarter first occurring after the first
anniversary of the Effective Date, an earnings statement (which will be in
reasonable detail but need not be audited) complying with the provisions of
Section 11(a) of the Act and Rule 158 of the Rules and Regulations and covering
a 12-month period beginning after the Effective Date .
(f) During a period of two years after the date hereof, the
Company, as soon as practicable after the end of each respective period, will
furnish to its stockholders annual reports (including financial statements
audited by independent certified public accountants) and will make available to
its stockholders unaudited quarterly reports of operations for each of the first
three quarters of the fiscal year, and will, upon request, furnish to the
Representative and the other several Underwriters hereunder (i) concurrently
with making such reports available to its stockholders, statements of operations
of the Company for each of the first three quarters in the form made available
to the Company's stockholders; (ii) concurrently with the furnishing thereof to
its stockholders, a balance sheet of the Company as of the end of such fiscal
year, together with statements of operations, of stockholders' equity and of
cash flow of the Company for such fiscal year, accompanied by a copy of the
certificate or report thereon of its current or other nationally recognized
independent certified public accountants; (iii) concurrently with the furnishing
of such reports to its stockholders, copies of all reports (financial or other)
mailed to stockholders; (iv) as soon as they are available, copies of all
reports and financial statements furnished to or filed with the Commission, any
securities exchange or automated quotation system by the Company (except for
documents for which confidential treatment is requested); and (v) every material
press release and every material news item or article in respect of the Company
or its affairs which was generally released to stockholders or prepared for
general release by the Company. During such two-year period, if the Company
shall have any active subsidiaries, the foregoing financial statements shall be
on a consolidated basis to the extent that the accounts of the Company are
consolidated with any subsidiaries, and shall be accompanied by similar
financial statements for any significant subsidiary that is not so consolidated.
<PAGE>
(g) The Company shall not, during the 12 months following the
Effective Date, except with the Representative's prior written consent, file, or
announce an intent to file, a registration statement covering any of its shares
of capital stock other than (i) a registration statement on Form S-8 registering
shares of Common Stock issued or issuable under its stock option plans existing
on the date hereof, as described in the Prospectus, (ii) pursuant to existing
agreements granting registration rights to the current holders of the Company's
securities (subject to the Lock-Up Agreements or Existing Lock-Up Agreements to
which such holders are parties) and (iii) registration statements registering
shares of Common Stock issued or issuable pursuant to Section 6(h)(v), provided
that such registation statement may not be utilized by an officer, director or
5% stockholder of the Company for resale of securities until February __, 2001.
(h) The Company shall not, during the 12 months following the
Effective Date, except with the prior written consent of the Representative, in
its individual capacity and not in its capacity as representative of the
Underwriters, issue, sell, offer or agree to sell, grant, distribute or
otherwise dispose of, directly or indirectly, any shares of Common Stock or
Series B Preferred Stock, or any options, rights or warrants with respect to
shares of Common Stock or Series B Preferred Stock, or any securities
convertible into or exchangeable for Common Stock or Series B Preferred Stock,
other than the issuance of (i) the Overallotment Shares, (ii) the
Representative's Warrants, (iii) options which may be granted under the
Company's stock option plans existing on the date hereof, as described in the
Prospectus, (iv) shares of Common Stock issuable upon exercise of (A) options
issued or issuable under the Company's stock option plans existing on the date
hereof, as described in the Prospectus, or (B) warrants and repricing rights
outstanding on the date hereof as described in the Prospectus and (v) not more
than an aggregate of 1,000,000 shares of Common Stock issuable in connection
with one or more acquisitions by the Company.
(i) The Company will apply the net proceeds from the sale of
the Shares being sold by it in the manner set forth under the caption "Use of
Proceeds" in the Prospectus.
(j) The Company will maintain a transfer agent and a registrar
(which may be the same entity as the transfer agent) for the Series B Preferred
Stock.
(k) The Company will use its best efforts to maintain listing
of its shares of Common Stock and its Series B Preferred Stock on the AMEX.
(l) The Company is familiar with the Investment Company Act of
1940, as amended, and the rules and regulations
<PAGE>
thereunder, and has in the past conducted its affairs, and will in the future
conduct its affairs, in such a manner so as to ensure that the Company was not
and will not be an "investment company" within the meaning of the Investment
Company Act of 1940, as amended, and the rules and regulations thereunder.
(m) The Company will, at the option of the Representative,
during a period of five years from the Effective Date, (i) use its best efforts
to nominate and cause to be elected and reelected to the Board of Directors of
the Company a designee of the Representative or (ii) permit an agent of the
Representative to attend all meetings of the Board of Directors of the Company
as a non-voting observer, and will give such agent notice of all meetings of the
Board of Directors at the same time and in the same manner that directors are
notified and will reimburse such agent for all expenses incurred in attending
such meetings, including, but not limited to food, transportation and lodging.
7. Expenses.
The Company agrees with each Underwriter that:
(a) The Company will pay and bear all costs, fees and expenses
in connection with the preparation, printing and filing of the Registration
Statement (including all amendments, supplements, financial statements,
schedules and exhibits), as many Preliminary Prospectuses and final Prospectuses
and any amendments or supplements thereto that the Representative reasonably
deems necessary; the reproduction of this Agreement; the issuance and delivery
of the Shares and the Representative's Warrants, including stock transfer taxes,
if any; the cost of all stock certificates representing the Shares and transfer
agents' and registrars' fees; the fees and disbursements of counsel for the
Company; all fees and other charges of the Company's independent public
accountants; the cost of furnishing to the several Underwriters copies of the
Registration Statement (including appropriate exhibits), Preliminary
Prospectuses and the Prospectus; NASD filing fees and expenses incident to
securing any required review; all fees and expenses relating to the listing of
the Common Stock, the Shares and the Warrant Shares on the AMEX; all fees,
expenses and disbursements relating to the registration or qualification of the
Shares under the securities laws of such states and other jurisdictions as the
Representative may reasonably designate (including, without limitation, all
filing and registration fees and fees and disbursements of the Representative's
counsel in connection with Blue Sky matters, such as the Preliminary Blue Sky
Memoranda and any supplemental Blue Sky Memoranda and any instruments relating
to any of the foregoing; the fees and disbursements of counsel to
<PAGE>
the Underwriters (not to exceed $120,000) in connection with the offering, this
Agreement and the transactions contemplated hereby; the costs of all mailing and
printing of the underwriting documents (including, but not limited to, the
Underwriting Agreement, any Blue Sky surveys and memoranda and, if appropriate,
any Agreement Among Underwriters, Selected Dealers Agreement, Underwriter's
Questionnaire and Power of Attorney); the costs of preparing, printing and
delivering certificates representing the Shares and the Representative's
Warrants; and all other expenses directly incurred by the Company in connection
with the performance of its obligations hereunder.
(b) If the transactions contemplated hereby are not
consummated by reason of any failure, refusal or inability on the part of the
Company to perform any agreement on its part to be performed hereunder or to
fulfill any condition of the Underwriters' obligations hereunder, the Company
will, in addition to paying the expenses described in Section 7(a), reimburse
the several Underwriters for all out-of-pocket expenses (including fees and
disbursements of Underwriters' counsel without the limitations therein set forth
in Section 7(a)) incurred by the Underwriters in reviewing the Registration
Statement and the Prospectus and in otherwise investigating, preparing to market
or marketing the Shares.
(c) The Representative, in its individual capacity and not as
representative of the Underwriters, shall also be entitled to a non-accountable
expense allowance equal to 3% of the aggregate offering price of the Shares. The
Company has previously paid the Representative an aggregate of $100,000 in
partial payment of such non-accountable expense allowance, or, in the event of
termination of this Agreement prior to consummation of the transactions
contemplated hereby, such amounts previously paid shall be credited toward
actual accountable expenses of the Representative.
8. Conditions of Underwriters' Obligations.
The obligations of the several Underwriters to purchase and pay for the
Shares, as provided herein, shall be subject: (x) to the accuracy, as of the
date hereof and the Closing Date and any later Overallotment Closing Date, as
the case may be, of the representations and warranties of the Company herein and
to the performance by the Company of its obligations hereunder; and (y) to the
following additional conditions:
(a) The Registration Statement shall have become effective not
later than 9:00 a.m., New York City time, on the day immediately following the
date of this Agreement, or such later time or date as shall be consented to in
writing by the
<PAGE>
Representative. If the filing of the Prospectus, or any supplement thereto, is
required pursuant to Rule 424(b) and Rule 430A of the Rules and Regulations, the
Prospectus shall have been filed in the manner and within the time period
required by Rule 424(b) and Rule 430A of the Rules and Regulations. No stop
order suspending the effectiveness of the Registration Statement shall have been
issued and no proceeding for that purpose shall have been initiated or, to the
knowledge of the Company or any Underwriter, threatened by the Commission, and
any request of the Commission for additional information (to be included in the
Registration Statement or the Prospectus or otherwise) shall have been complied
with to the reasonable satisfaction of counsel to the Underwriters.
(b) All corporate proceedings and other legal matters in
connection with this Agreement, the form of Registration Statement, and the
Prospectus, and the registration, authorization, issue, sale and delivery of the
Shares shall have been reasonably satisfactory to counsel to the Underwriters,
and such counsel shall have been furnished with such papers and information as
they may reasonably have requested to enable them to pass upon the matters
referred to herein.
(c) The Representative shall have received, at no cost to it,
on the Closing Date and on any later Overallotment Closing Date, as the case may
be, (i) the opinion of Blank Rome Tenzer Greenblatt LLP, counsel to the Company,
dated the Closing Date or such later Overallotment Closing Date, in the form
attached hereto as Appendix A, and addressed to the Underwriters and with
reproduced copies of signed counterparts thereof for the Representative.
(d) The Representative shall have received from Proskauer Rose
LLP, Underwriters' Counsel, an opinion or opinions, dated the Closing Date or on
any later Overallotment Closing Date, as the case may be, in form and substance
reasonably satisfactory to the Representative, with respect to certain legal
matters as the Representative may reasonably require, and the Company shall have
furnished to such counsel such documents as it may have reasonably requested for
the purpose of enabling it to pass upon such matters.
(e) The Representative shall have received on the Closing Date
and on any later Overallotment Closing Date, as the case may be, a letter from
the Accountants addressed to the Company and the Underwriters, dated the Closing
Date or such later Overallotment Closing Date, as the case may be, confirming
that it is an independent certified public accountant with respect to the
Company within the meaning of the Act and the Rules and Regulations thereunder
and based upon the procedures
<PAGE>
described in its letter delivered to the Representative concurrently with the
execution of this Agreement (herein called the "Original Letter"), but carried
out to a date not more than three days prior to the Closing Date or any such
later Overallotment Closing Date, as the case may be, (i) confirming that the
statements and conclusions set forth in the Original Letter are accurate as of
the Closing Date or such later Overallotment Closing Date, as the case may be;
and (ii) setting forth any revisions and additions to the statements and
conclusions set forth in the Original Letter that are necessary to reflect any
changes in the facts described in the Original Letter since the date of such
letter, or to reflect the availability of more recent financial statements, data
or information. The letter shall not disclose any change, or any development
involving a prospective change, in or affecting the business or properties of
the Company which, in the Representative's reasonable judgment, makes it
impracticable or inadvisable to proceed with the public offering of the Shares
as contemplated by the Prospectus. All such letters shall be in a form
reasonably satisfactory to the Representative and its counsel.
(f) The Representative shall have received on the Closing Date
and on any later Overallotment Closing Date, as the case may be, a certificate
of the President and the Chief Financial Officer of the Company, dated the
Closing Date or such later date, to the effect that as of such date (and the
Representative shall be satisfied that as of such date):
(i) The representations and warranties of the Company
in this Agreement are true and correct, as if made on and as of the Closing Date
or any later Overallotment Closing Date, as the case may be; and the Company has
complied with all of the agreements and satisfied all of the conditions on its
part to be performed or satisfied at or prior to the Closing Date or any later
Overallotment Closing Date, as the case may be;
(ii) The Registration Statement has become effective
under the Act and no stop order suspending the effectiveness of the Registration
Statement or preventing or suspending the use of the Prospectus has been issued,
and no proceedings for that purpose have been instituted or are pending or, to
the best of their knowledge, threatened under the Act;
(iii) They have carefully reviewed the Registration
Statement and the Prospectus; and, when the Registration Statement became
effective and at all times subsequent thereto up to the delivery of such
certificate, the Registration Statement and any amendments or supplements
thereto contained all statements and information required to be included therein
or necessary to make the statements therein not
<PAGE>
misleading; and when the Registration Statement became effective, and at all
times subsequent thereto up to the delivery of such certificate, (a) none of the
Registration Statement or any amendment thereto included any untrue statement
of a material fact or omitted to state any material fact required to be
stated therein or necessary to make the statements therein, not misleading,
and (b) none of the Prospectus, any amendment and supplement thereto included
any untrue statement of a material fact or omittedto state any material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading; and,
since the Effective Date, there has occurred no event required to be set
forth in an amended or supplemented Prospectus that has not been so set
forth; and
(iv) Subsequent to the respective dates as of which
information is given in the Registration Statement, and the Prospectus, there
has not been (A) any material adverse change in the properties or assets
described or referred to in the Registration Statement and the Prospectus or in
the condition (financial or otherwise), operations, business or prospects of the
Company and the Subsidiaries, (B) any transaction which is material to the
Company and the Subsidiaries, except transactions entered into in the ordinary
course of business, (C) any obligation, direct or contingent, incurred by the
Company or any of the Subsidiaries, which is material to the Company or the
Subsidiaries, except obligations incurred in the ordinary course of business in
accordance with past practices,(D) any change in the capital stock, ownership
interest or outstanding indebtedness of the Company which is material to the
Company and the Subsidiaries taken as a whole or (E) any dividend or
distribution of any kind declared, paid or made on the capital stock of the
Company, except as specifically described in the Prospectus.
(g) The Company shall have furnished to the Representative
such further certificates and documents as the Representative shall reasonably
request as to the accuracy of the representations and warranties of the Company
herein, as to the performance by the Company of its obligations hereunder and as
to the other conditions precedent to the obligations of the Underwriters
hereunder.
(h) The Firm Shares and the Overallotment Shares, if any,
shall have been approved for listing upon notice of issuance on the AMEX
All such opinions, certificates, letters and documents will be in
compliance with the provisions hereof only if they are reasonably satisfactory
to counsel to the Underwriters. The
<PAGE>
Company will furnish the Representative with such number of conformed copies of
such opinions, certificates, letters and documents as the Representative shall
reasonably request.
9. Indemnification and Contribution.
(a) Subject to the provisions of Section 9(f), the Company
agrees to indemnify and hold harmless each Underwriter and each person
(including each partner or officer thereof) who controls any Underwriter within
the meaning of Section 15 of the Act from and against any and all losses,
claims, damages or liabilities, joint or several, to which such indemnified
parties or any of them may become subject under the Act, the Exchange Act, the
common law or otherwise, and the Company agrees to reimburse each such
Underwriter and controlling person for any legal or other out-of-pocket expenses
(including, except as otherwise hereinafter provided, reasonable fees and
disbursements of counsel) incurred by the respective indemnified parties in
connection with defending against any such losses, claims, damages or
liabilities or in connection with any investigation or inquiry of, or other
proceeding which may be brought against, the respective indemnified parties, in
each case arising out of or based upon (i) any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement
(including the Prospectus as part thereof and any 462(b) registration statement)
or any post-effective amendment thereto (including any 462(b) registration
statement), or the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, or (ii) any untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Prospectus or the Prospectus (as
amended or as supplemented if the Company shall have filed with the Commission
any amendment thereof or supplement thereto) or the omission or alleged omission
to state therein a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; provided, however, that (1) the indemnity agreements of the Company
contained in this Section 9(a) shall not apply to any such losses, claims,
damages, liabilities or expenses if such statement or omission is contained in
the section of the Prospectus entitled "Underwriting," and (2) the indemnity
agreement contained in this Section 9(a) with respect to any Preliminary
Prospectus shall not inure to the benefit of any Underwriter from whom the
person asserting any such losses, claims, damages, liabilities or expenses
purchased the Shares which is the subject thereof (or to the benefit of any
person controlling such Underwriter) if at or prior to the written confirmation
of the sale of such Shares a copy of the Prospectus (or the Prospectus as
amended or supplemented) was not sent or delivered to such person and the
<PAGE>
untrue statement or omission of a material fact contained in such Preliminary
Prospectus was corrected in the Prospectus (or the Prospectus as amended or
supplemented) unless the failure is the result of noncompliance by the Company
with Section 6(a) hereof. The indemnity agreements of the Company contained in
this Section 9(a) and the representations and warranties of the Company
contained in Section 2 hereof shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of any indemnified
party and shall survive the delivery of any payment for the Shares.
(b) Each Underwriter severally agrees to indemnify and hold
harmless the Company, each of its executive officers, each of its directors,
each other Underwriter and each person (including each partner or officer
thereof) who controls the Company or any such other Underwriter within the
meaning of Section 15 of the Act, from and against any and all losses, claims,
damages or liabilities, joint or several, to which such indemnified parties or
any of them may become subject under the Act, the Exchange Act, the common law
or otherwise and to reimburse each of them for any legal or other expenses
(including, except as otherwise hereinafter provided, reasonable fees and
disbursements of counsel) incurred by the respective indemnified parties in
connection with defending against any such losses, claims, damages or
liabilities or in connection with any investigation or inquiry of, or other
proceeding which may be brought against, the respective indemnified parties, in
each case arising out of or based upon (i) any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement
(including the Prospectus as part thereof and any Rule 462(b) registration
statement) or any post-effective amendment thereto (including any 462(b)
registration statement) or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading or (ii) any untrue statement or alleged untrue statement
of a material fact contained in any Preliminary Prospectus or the Prospectus (as
amended or as supplemented if the Company shall have filed with the Commission
any amendment thereof or supplement thereto) or the omission or alleged omission
to state therein a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; provided, however, that in the cases of clauses (i) and (ii) above,
such statement or omission is contained in the section of the Prospectus
entitled "Underwriting." The indemnity agreement of each Underwriter contained
in this Section 9(b) shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of any indemnified party
and shall survive the delivery of any payment for the Shares.
<PAGE>
(c) Each party indemnified under the provisions of Section
9(a) or (b) agrees that, upon the service of a summons or other initial legal
process upon it in any action or suit instituted against it or upon its receipt
of written notification of the commencement of any investigation or inquiry of,
or proceeding against it, in respect of which indemnity may be sought on account
of any indemnity agreement contained in such paragraphs, it will promptly give
written notice (a "Notice") of such service or notification to the party or
parties from whom indemnification may be sought hereunder. No indemnification
provided for in such Section 9(a) or (b) shall be available to any party who
shall fail so to give the Notice if the party to whom such Notice was not given
was unaware of the action, suit, investigation, inquiry or proceeding to which
the Notice would have related and was prejudiced by the failure to give the
Notice, but the omission so to notify such indemnifying party or parties of any
such service or notification shall not relieve such indemnifying party or
parties from any liability which it or they may have to the indemnified party
for contribution or otherwise than on account of such indemnity agreement. Any
indemnifying party shall be entitled at its own expense to participate in the
defense of any action, suit or proceeding against, or investigation or inquiry
of, an indemnified party. Any indemnifying party shall be entitled, if it so
elects within a reasonable time after receipt of the Notice by giving written
notice (the "Notice of Defense") to the indemnified party, to assume (alone or
in conjunction with any other indemnifying party or parties) the entire defense
of such action, suit, investigation, inquiry or proceeding, in which event such
defense shall be conducted, at the expense of the indemnifying party or parties,
by counsel chosen by such indemnifying party or parties and reasonably
satisfactory to the indemnified party or parties; provided, however, that (i) if
the indemnified party or parties reasonably determine, pursuant to an opinion of
counsel, that there may be a conflict between the positions of the indemnifying
party or parties and of the indemnified party or parties in conducting the
defense of such action, suit, investigation, inquiry or proceeding or that there
may be legal defenses available to such indemnified party or parties different
from or in addition to those available to the indemnifying party or parties,
then counsel for the indemnified party or parties shall be entitled to conduct
the defense to the extent reasonably determined by such counsel to be necessary
to protect the interests of the indemnified party or parties and (ii) in any
event, the indemnified party or parties shall be entitled, at its or their own
expense to have counsel chosen by such indemnified party or parties participate
in, but not conduct, the defense. It is understood that the indemnifying parties
shall not, in respect of the legal defenses of any indemnified party in
connection with any proceeding or related proceedings in the same
<PAGE>
jurisdiction, be liable for (y) the fees and expenses of more than one separate
firm (in addition to any local counsel) for all of the Underwriters and each
person, if any, who controls any Underwriter within the meaning of Section 15 of
the Act or, as the case may be, (z) the fees and expenses of more than one
separate firm (in addition to any local counsel) for the Company, its directors,
its officers who sign the Registration Statement and each person, if any, who
controls the Company within the meaning of Section 15 of the Act. If, within a
reasonable time after receipt of the Notice, an indemnifying party gives a
Notice of Defense and the counsel chosen by the indemnifying party or parties is
reasonably satisfactory to the indemnified party or parties, the indemnifying
party or parties will not be liable under Section 9(a) or (b) for any legal or
other expenses subsequently incurred by the indemnified party or parties in
connection with the defense of the action, suit, investigation, inquiry or
proceeding, except that (A) the indemnifying party or parties shall bear the
legal and other expenses incurred in connection with the conduct of the defense
as referred to in clause (i) of the proviso to the sentence before the preceding
sentence and (B) the indemnifying party or parties shall bear such other
expenses as it or they have authorized to be incurred by the indemnified party
or parties. If, within a reasonable time after receipt of the Notice, no Notice
of Defense has been given, the indemnifying party or parties shall be
responsible for any reasonable legal or other expenses incurred by the
indemnified party or parties in connection with the defense of the action, suit,
investigation, inquiry or proceeding. The indemnifying party or parties shall
not be liable for any settlement of any proceeding effected without its or their
written consent, provided such consent has not been unreasonably withheld.
(d) If the indemnification provided for in this Section 9 is
unavailable or insufficient to hold harmless an indemnified party under Section
9(a) or (b), then each indemnifying party shall, in lieu of indemnifying such
indemnified party, contribute to the amount paid or payable by such indemnified
party as a result of the losses, claims, damages or liabilities referred to in
Section 9(a) or (b),(i) in such proportion as is appropriate to reflect the
relative benefits received by each indemnifying party from the offering of the
Shares or (ii) if the allocation provided by clause (i) above is not permitted
by applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
each indemnifying party in connection with the statements or omissions that
resulted in such losses, claims, damages or liabilities, or actions in respect
thereof, as well as any other relevant equitable considerations. The relative
benefits received by the Company, on the one hand, and the Underwriters, on the
other, shall be deemed to be in the same respective proportions as the total net
proceeds from the offering of the Shares received by the Company and the total
underwriting discount received by the Underwriters, as set forth in the table on
the cover page of the Prospectus, bear to the aggregate public offering price of
the Shares. Relative fault shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by each indemnifying party and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent
<PAGE>
such untrue statement or omission.
The parties agree that it would not be just and equitable if
contributions pursuant to this Section 9(d) were to be determined by pro rata
allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take into account
the equitable considerations referred to in the first sentence of this Section
9(d). The amount paid by an indemnified party as a result of the losses, claims,
damages or liabilities or actions in respect thereof, referred to in the first
sentence of this Section 9(d) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigation, preparation to defend or defense against any action or claim
which is the subject of this Section 9(d). Notwithstanding the provisions of
this Section 9(d), no Underwriter shall be required to contribute any amount in
excess of the underwriting discount applicable to the Shares purchased by such
Underwriter. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. The
Underwriters' obligations in this Section 9(d) to contribute are several in
proportion to their respective underwriting obligations and not joint.
Each party entitled to contribution agrees that upon the
service of a summons or other initial legal process upon it in any action
instituted against it in respect of which contribution may be sought, it will
promptly give written notice of such service to the party or parties from whom
contribution may be sought, but the omission so to notify such party or parties
of any such service shall not relieve the party from whom contribution may be
sought from any obligation it may have hereunder or otherwise (except as
specifically provided in Section 9(c)).
(e) The Company will not, without the prior written consent of
each Underwriter, settle or compromise or consent to the entry of any judgment
in any pending or threatened claim, action, suit or proceeding in respect of
which indemnification may be sought hereunder (whether or not such Underwriter
or any person who controls such Underwriter within the meaning of Section 15 of
the Act or Section 20 of the Exchange Act is a party to such claim, action, suit
or proceeding) unless such settlement, compromise or consent includes an
unconditional release of such Underwriter and each such controlling person from
all liability arising out of such claim, action, suit or proceeding.
<PAGE>
(f) The parties to this Agreement hereby acknowledge that they
are sophisticated business persons who were represented by counsel during the
negotiations regarding the provisions hereof, including without limitation the
provisions of this Section 9 and are fully informed regarding said provisions.
They further acknowledge that the provisions of this Section 9 fairly allocate
the risks in light of the ability of the parties to investigate the Company and
its business in order to assure that adequate disclosure is made in the
Registration Statement and Prospectus as required by the Act and the Exchange
Act.
10. Termination. This Agreement may be terminated by the Representative
at any time on or prior to the Closing Date or on or prior to any later
Overallotment Closing Date, as the case may be, (i) if the Company shall have
failed, refused or been unable, at or prior to the Closing Date, or on or prior
to any later Overallotment Closing Date, as the case may be, to perform any
agreement on its part to be performed hereunder, or because any other condition
of the Underwriters' obligations hereunder required to be fulfilled by the
Company is not fulfilled, or (ii) if trading on the New York Stock Exchange, the
AMEX or the Nasdaq Stock Market, shall have been suspended, or minimum or
maximum prices for trading shall have been fixed, or maximum ranges for prices
for securities shall have been required on the New York Stock Exchange, AMEX or
Nasdaq Stock Market by such trading exchanges or by order of the Commission or
any other governmental authority having jurisdiction, or if a banking moratorium
shall have been declared by federal or New York authorities, or (iii) if the
Company shall have sustained a loss by strike, fire, flood, accident or other
calamity of such character as to have a Material Adverse Effect regardless of
whether or not such loss shall have been insured, or (iv) if there shall have
occurred an outbreak or escalation of hostilities between the United States and
any foreign power or of any other insurrection or armed conflict involving the
United States or other national or international calamity, hostilities or crisis
or the declaration by the United States of a national emergency which, in the
reasonable judgment of the
<PAGE>
Representative, adversely affects the marketability of the Shares, or (v) if
since the respective dates as of which information is given in the Registration
Statement and the Prospectus, there shall have occurred any material adverse
change or any development involving a material adverse change in or affecting
the condition, financial or otherwise, of the Company or the business, affairs,
management, or prospects of the Company, whether or not arising in the ordinary
course of business, or (vi) if any foreign, federal or state statute,
regulation, rule or order of any court or other governmental authority shall
have been enacted, published, decreed or otherwise promulgated which in the
reasonable judgment of the Representative materially and adversely affects or
will materially and adversely affect the business or operations of the Company,
or trading in the Series B Preferred Stock or Common Stock shall have been
suspended, or (vii) action shall be taken by any foreign, federal, state or
local government or agency in respect of its monetary or fiscal affairs which,
in the judgment of the Representative, has a material adverse effect on the
securities markets in the United States and on the marketability of the Shares.
If this Agreement shall be terminated in accordance with this Section 10, there
shall be no liability of the Company to the Underwriters and no liability of the
Underwriters to the Company; provided, however, that in the event of any such
termination the Company agrees to indemnify and hold harmless the Underwriters
from all costs or expenses incident to the performance of the obligations of the
Company under this Agreement, including all costs and expenses referred to in
Section 7; provided, further, that if such termination is pursuant to clause
(ii), (iv) or (vii), the Company's liability for such costs and expenses of the
Underwriters shall not exceed $175,000.
If the Representative elects to terminate this Agreement as provided in
this Section 10, the Company shall be notified promptly by the Representative by
telephone, telecopy or telegram, confirmed by letter.
11. Reimbursement of Certain Expenses.
(a) Subject to Section 9 of this Agreement, the Company hereby
agrees to reimburse on a monthly basis the Underwriters for all reasonable legal
and other expenses incurred in connection with investigating or defending any
claim, action, investigation, inquiry or other proceeding arising out of or
based upon any statement or omission, or any alleged statement or omission,
described in Section 9(a), notwithstanding the absence of a judicial
determination as to the propriety and enforceability of the obligations under
this Section 11 and the possibility that such payments might later be held to be
improper; provided, however, that (i) to the extent any such payment is
ultimately held to be improper, the persons receiving such payments shall
promptly refund them and (ii) such persons shall provide to the Company, upon
request, reasonable assurances of their ability to effect any refund, when and
if due.
(b) Subject to Section 9 of this Agreement, the Underwriters
hereby agree to reimburse on a monthly basis the Company for all reasonable
legal and other expenses incurred in connection with investigating or defending
any claim, action, investigation, inquiry or other proceeding arising out of or
based upon any statement or omission, or any alleged statement or
<PAGE>
omission, described in Section 9(b) of this Agreement, notwithstanding the
absence of a judicial determination as to the propriety and enforceability of
the obligations under this Section 11 and the possibility that such payments
might later be held to be improper; provided, however, that (i) to the extent
any such payment is ultimately held to be improper, the Company shall promptly
refund it and (ii) the Company shall provide to the Representative, upon
request, reasonable assurances of its ability to effect any refund, when and if
due.
12. Persons Entitled to Benefit of Agreement. This Agreement shall
inure to the benefit of the Company and the several Underwriters and, with
respect to the provisions of Section 9 hereof, the several parties (in addition
to the Company and the several Underwriters) indemnified under the provisions of
said Section 9, and their respective personal representatives, successors and
assigns. Nothing in this Agreement is intended or shall be construed to give to
any other person, firm or corporation any legal or equitable remedy or claim
under or in respect of this Agreement or any provision herein contained. The
term "successors and assigns" as herein used shall not include any purchaser, as
such purchaser, of any of the Shares from any of the several Underwriters.
(a) Notices. Except as otherwise provided herein, all communications
hereunder shall be in writing or by telegraph and, if to the Underwriters, shall
be mailed, telegraphed or delivered to Prime Charter Ltd., 499 Park Ave. - 20th
Floor New York, New York, 10022, Attention: Mr. Philip M. Getter; and if to the
Company, shall be mailed, telegraphed or delivered to it at its office,
Frontline Communications Corporation, One Blue Hill Plaza, Pearl River, New York
10965, Attn: President, with a copy to Blank Rome Tenzer Greenblatt LLP,
405 Lexington Avenue, New York, NY 10174, Attn: Robert J. Mittman, Esq.
(b) Jurisdiction; Venue; Service of Process. Each of the Representative
and the Company (a) agrees that any legal suit, action or proceeding arising out
of or relating to this letter shall be instituted exclusively in New York State
Supreme Court, County of New York or in the United States District Court for the
Southern District of New York, (b) waives any objection to the venue of any such
suit, action or proceeding and (c) irrevocably consents to the jurisdiction of
the New York State Supreme Court, County of New York, and the United States
District Court for the Southern District of New York, in any such suit, action
or proceeding. Each of the Representative and the Company further agrees to
accept and acknowledge service of any and all process which may be served in any
such suit, action or proceeding in the New York State Supreme Court, County of
New York, or in the United States District Court for the Southern District of
New
<PAGE>
York. Each of the Representative and the Company further agrees that service of
process upon it mailed by certified mail to its address shall be deemed in every
respect effective service of process upon it in any such suit, action or
proceeding.
(c) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(d) Miscellaneous. The reimbursement, indemnification and contribution
agreements contained in this Agreement and the representations, warranties and
covenants in this Agreement shall remain in full force and effect regardless of
(i) any investigation made by or on behalf of any Underwriter or controlling
person thereof, or by or on behalf of the Company or its respective directors or
officers and (ii) delivery of and payment for the Shares under this Agreement.
THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO RULES GOVERNING THE
CONFLICT OF LAWS.
Please sign and return to the Company the enclosed duplicate of this
letter, whereupon this letter will become a binding agreement among the Company
and the several Underwriters in accordance with its terms.
Very truly yours,
FRONTLINE COMMUNICATIONS CORPORATION
By
------------------------------
Name:
---------------------------
Title:
--------------------------
The foregoing Agreement
is hereby confirmed and
accepted as of the date
first above written.
PRIME CHARTER LTD.
By
---------------------------
Philip M. Getter
Managing Director
Acting on behalf of the several
<PAGE>
Underwriters, including themselves,
named on Schedule A hereto.
<PAGE>
SCHEDULE A
UNDERWRITERS
Number of
Shares
to be
Underwriters Purchased
- ------------ ---------
1. Prime Charter Ltd.
Total 1,000,000
---------
<PAGE>
SCHEDULE B
Lock-up Agreements
------------------
Name
----
1.
2.
3.
4.
5.
6.
7.
8.
Existing Lock-up Agreements
Name
1.
2.
3.
4.
5.
6.
<PAGE>
APPENDIX A
----------
<PAGE>
FRONTLINE COMMUNICATIONS CORPORATION
---------------
CERTIFICATE OF DESIGNATION
OF
SERIES B CUMULATIVE CONVERTIBLE
PREFERRED STOCK
---------------
(Pursuant to Section 151 of the Delaware General
Corporation Law)
The undersigned, the authorized officer of Frontline Communications
Corporation, a Delaware corporation (the "Corporation"), in accordance with the
provisions of Section 103 of the Delaware General Corporation Law (the "DGCL")
does hereby certify that, in accordance with Section 141 of the DGCL, the
following resolution was duly adopted by the Board of Directors of the
Corporation on ___________, 2000:
RESOLVED, that a series of Preferred Stock of the Corporation is hereby
created and the designation, number of shares, powers, preferences, rights,
qualifications, limitations and restrictions thereof (in addition to any
provisions set forth in the Certificate of Incorporation of the Corporation
which are applicable to the preferred stock of all classes and series) are as
follows:
SERIES B CUMULATIVE CONVERTIBLE
PREFERRED STOCK
Section 1. Designation and Amount; Stated Capital. The shares of such
series shall be designated as "Series B Cumulative Convertible Preferred Stock"
(the "Series B Convertible Preferred Stock"), the par value thereof shall be
$.01 per share and the number of shares constituting the Series B Convertible
Preferred Stock shall be 1,250,000. The amount to be represented in stated
capital at all times for each share of Series B Convertible Preferred Stock
shall be $.01.
Section 2. Rank. With respect to dividend rights and rights on
liquidation,
<PAGE>
winding-up and dissolution, the Series B Convertible Preferred Stock will rank:
(i) senior to: (A) the common stock, par value $.01 per share (the "Common
Stock"); (B) all other classes of common stock and (C) each other class or
series of preferred stock of the Corporation now or hereafter established by the
Board of Directors (the "Board of Directors" or the "Board") of the Corporation,
the terms of which do not expressly provide that it ranks senior to, or on a
parity with, the Series B Convertible Preferred Stock as to dividend and
redemption rights and rights on liquidation, winding-up and dissolution of the
Corporation (collectively referred to as "Junior Stock"); (ii) on a parity with
each other class or series of preferred stock of the Corporation established
hereafter by the Board of Directors, the terms of which expressly provide that
such class or series will rank on a parity with the Series B Convertible
Preferred Stock as to dividend and redemption rights and rights on liquidation,
winding-up and dissolution (collectively referred to as "Parity Stock"); and
(iii) junior to each class or series of preferred stock of the Corporation
established hereafter by the Board, the terms of which class or series expressly
provide that such class or series will rank senior to the Series B Convertible
Preferred Stock as to dividend and redemption rights or rights on liquidation,
winding-up and dissolution of the Corporation (collectively referred to as
"Senior Stock").
Section 3. Dividends and Distributions.
(a) The holders of shares of Series B Convertible Preferred Stock shall
be entitled to receive, when, as and if declared by the Board of Directors out
of funds legally available for such purpose, cumulative dividends at the rate of
$_____ per share of the Series B Convertible Preferred Stock per annum, and no
more. The dividend on each share of Series B Convertible Preferred Stock shall
accrue from the date of its original issuance. The dividend shall be payable on
the last business day of June and December of each year, commencing on June 30,
2000, to the holders of record as they appear on the stock books of the
Corporation on such record dates, not more than 60 nor less than 10 days
preceding the payment dates for such dividends, as shall be fixed by the Board.
The amount of dividends payable per share of Series B Convertible Preferred
Stock for each semi-annual dividend period shall be computed by dividing the
annual dividend amount by two. The amount of dividends payable for the initial
dividend period and any period shorter than a full semi-annual dividend period
shall be computed on the basis of a 365-day year and the actual days elapsed.
(b) Any dividends on the Series B Convertible Preferred Stock payable
pursuant to this Section 3 may be paid, at the Corporation's option, either in
cash or by the issuance of shares of Common Stock having an average daily
Closing Price (as hereinafter defined), on the five consecutive trading days
immediately preceding the day prior to the record date for the determination of
stockholders entitled to receive such dividend, equal to the amount of such
dividends; provided, however, that cash will be paid in lieu of the issuance of
fractional shares of
<PAGE>
Common Stock; and provided, further, that accrued and unpaid dividends payable
pursuant to Section 4 or 5 will be paid in cash.
(c) As used herein, the "Closing Price" for each day for any security
shall be the last reported sales price regular way or, in case no sale takes
place on such day, the average of the closing bid and asked prices regular way
on such day, in either case as reported on the principal national securities
exchange on which such security is listed or quoted (including, for this
purpose, the Nasdaq Stock Market), or, if not so listed or quoted, the average
of the high bid and low asked prices on such day as recorded by the Nasdaq Stock
Market, or, if the Nasdaq Stock Market shall not have reported any bid and asked
prices for such security on such day, the average of the bid and asked prices
for such day as furnished by any New York Stock Exchange member firm selected
from time to time by the Corporation for such purpose, or, if no such bid and
asked prices can be obtained from any such firm, the fair market value of such
security on such day as determined in good faith by the Board of Directors. Such
determination by the Board of Directors shall be conclusive.
(d) No dividends or other distributions, other than dividends payable
solely in shares of Junior Stock, shall be paid or set apart for payment on, and
no purchase, redemption or other acquisition shall be made by the Corporation
of, any shares of Junior Stock unless and until all accrued and unpaid dividends
due on the Series B Convertible Preferred Stock (whether or not declared) shall
have been paid or declared and set apart for payment; provided, however, that
the conversion, exercise or exchange of a security for Junior Stock shall not be
deemed a purchase, redemption or acquisition of the security so converted or
exercised for purposes of this Section 3(d).
(e) If at any time any dividend on any Senior Stock shall be in
default, in whole or in part, no dividend shall be paid or declared and set
apart for payment on the Series B Convertible Preferred Stock unless and until
all accrued and unpaid dividends with respect to the Senior Stock shall have
been paid or declared and set apart for payment, without interest.
(f) No full dividends shall be paid or declared and set apart for
payment on any Parity Stock for any period unless all accrued but unpaid
dividends (whether or not declared) have been, or contemporaneously are, paid or
declared and set apart for such payment on the Series B Convertible Preferred
Stock. No full dividends shall be paid or declared and set apart for payment on
the Series B Convertible Preferred Stock for any period unless all accrued but
unpaid dividends (whether or not declared) have been, or contemporaneously are,
paid or declared and set apart for payment on the Parity Stock for all dividend
periods terminating on or prior to the date of payment of such full dividends.
When dividends are not paid in full upon the Series B Convertible Preferred
Stock and the Parity Stock, all dividends paid or declared and set apart for
payment upon shares of Series B
<PAGE>
Convertible Preferred Stock and the Parity Stock shall be paid or declared and
set apart for payment pro rata, so that the amount of dividends paid or declared
and set apart for payment per share on the Series B Convertible Preferred Stock
and the Parity Stock shall in all cases bear to each other the same ratio that
accrued and unpaid dividends per share on the shares of Series B Convertible
Preferred Stock and the Parity Stock bear to each other. Any reference to
"distribution" contained in this Section 3 shall not be deemed to include any
distribution made in connection with any liquidation, dissolution or winding up
of the Corporation, whether voluntary or involuntary.
Section 4. Liquidation Preference. In the event of a liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
the holders of Series B Convertible Preferred Stock shall be entitled to receive
out of the assets of the Corporation, whether such assets constitute stated
capital or surplus of any nature, a sum in cash equal to $_____ per share (the
"Liquidation Preference"), together with an amount equal to the dividends
accrued and unpaid thereon (whether or not declared) to the date of final
distribution to such holders, without interest, and no more, before any payment
shall be made or any assets distributed to the holders of any Junior Stock;
provided, however, that such rights shall accrue to the holders of Series B
Convertible Preferred Stock only if the Corporation's payments with respect to
the liquidation preference of the holders of Senior Stock are fully met. After
the liquidation preferences of the Senior Stock are fully met, the entire assets
of the Corporation available for distribution shall be distributed ratably among
the holders of the Series B Convertible Preferred Stock and any Parity Stock in
proportion to the respective preferential amounts to which each is entitled (but
only to the extent of such preferential amounts). After payment in full of the
accrued and unpaid dividends and the Liquidation Preference of the shares of the
Series B Convertible Preferred Stock as provided in this Section 4, the holders
of such shares shall not be entitled to any further participation in any
distribution of assets by the Corporation. Neither a consolidation or merger of
the Corporation with another corporation nor a sale or transfer of all or part
of the Corporation's assets for cash, securities or other property will be
considered a liquidation, dissolution or winding up of the Corporation.
Section 5. Optional Redemption.
(a) If at any time after __________, 2000 (the "Issue Date"), the
Closing Price of the Series B Convertible Preferred Stock shall be $______ or
more per share for any 21 consecutive trading days, the Corporation, at its
option, may at any time (until the date that is five days after the last trading
day used in determining the Closing Price for such 21 consecutive trading day
period) give notice in accordance with Section 5(c) that it will redeem all, but
not less than all, of the Series B Convertible Preferred Stock (an "Optional
Price-Based Redemption") at a sum in cash equal to
<PAGE>
the Liquidation Preference per share, together with an amount equal to the
dividends accrued and unpaid thereon (whether or not declared), pro rata to the
date fixed for redemption.
(b) At any time after the date that is 180 days after the Issue Date,
the Corporation, at its option, may redeem (an "Optional Time-Based Redemption")
all, but not less than all, of the Series B Convertible Preferred Stock on any
date set by the Board of Directors, at the price per share set forth below (the
"Principal Price"), plus, in each case, an amount in cash per share equal to the
dividends accrued and unpaid thereon (whether or not declared), pro rata to the
date fixed for redemption. The Principal Price for an Optional Time-Based
Redemption shall be as follows:
If the date of the Optional Time-Based
Redemption is: The Principal Price Shall Be:
more than 180 days after the Issue
Date and less than 12 months after
the Issue Date ___% of the Liquidation Preference
12 months or more after the Issue
Date and less than 24 months after
the Issue Date ___% of the Liquidation Preference
24 months or more after the Issue
Date and less than 36 months after
the Issue Date ___% of the Liquidation Preference
36 months or more after the Issue ___% of the Liquidation Preference
Date and at any time thereafter
(c) Not more than 60 nor less than 15 days prior to any redemption
date, notice by first class mail, postage prepaid, shall be given to the holders
of record of the Series B Convertible Preferred Stock, addressed to such
stockholders at their last addresses as shown on the books of the Corporation.
Each such notice of redemption shall specify the date fixed for redemption, the
redemption price, the place or places of payment, the then effective Conversion
Rate (as hereinafter defined), that the right of holders of shares of Series B
Convertible Preferred Stock being redeemed to exercise their conversion right
shall terminate as to such shares at the close of business on the day that
immediately precedes the date that is fixed for redemption (provided that no
default by the Corporation in the payment of the applicable redemption price
shall have occurred and be continuing), that payment will be made upon
presentation and surrender of the shares of Series B Convertible Preferred
Stock, that accrued but unpaid dividends to the date fixed for redemption
(whether or not declared) will be paid on the date fixed for redemption, and
that on
<PAGE>
and after the redemption date, dividends will cease to accrue on such shares.
(d) Any notice which is mailed as herein provided shall be conclusively
presumed to have been duly given, whether or not the holder of the Series B
Convertible Preferred Stock receives such notice; and failure to give such
notice by mail, or any defect in such notice, to the holders of any shares
designated for redemption shall not affect the validity of the proceedings for
the redemption of any other shares of Series B Convertible Preferred Stock. On
or after the date fixed for redemption as stated in such notice, each holder of
the shares shall surrender the certificate (or certificates) evidencing such
shares to the Corporation at the place designated in such notice and shall
thereupon be entitled to receive payment of the applicable redemption price. If,
on the date fixed for redemption, funds necessary for the redemption shall be
available therefor and shall have been irrevocably deposited or set aside, then,
notwithstanding that the certificates evidencing any shares so called for
redemption shall not have been surrendered, the dividends with respect to the
shares so called shall cease to accrue after the date fixed for redemption, the
shares shall no longer be deemed outstanding, the holders thereof shall cease to
be stockholders, and all rights whatsoever with respect to the shares so called
for redemption (except the right of the holders to receive the applicable
redemption price, without interest, upon surrender of their certificates
therefor) shall terminate. Any monies deposited by the Corporation pursuant to
the foregoing provision and unclaimed at the end of one year from the date fixed
for redemption shall, to the extent permitted by law, be returned to the
Corporation, after which the holders of shares of Series B Convertible Preferred
Stock so called for redemption shall look only to the Corporation for the
payment thereof.
Section 6. No Sinking Fund.
The shares of Series B Convertible Preferred Stock shall not be subject
to the operation of a purchase, retirement or sinking fund.
Section 7. Conversion.
(a) At any time after the Issue Date but not later than the close of
business on the day preceding the date fixed for the redemption of the Series B
Convertible Preferred Stock in any notice of redemption given pursuant to the
provisions of Section 5 hereof if there is no default in payment of the
applicable redemption price, the holders of the Series B Convertible Preferred
Stock may, upon surrender of the certificates therefor, convert any or all of
their shares of Series B Convertible Preferred Stock into fully paid and
nonassessable shares of Common Stock and such other securities and property as
hereinafter provided. Each share of Series B Convertible Preferred Stock shall
be convertible at the office of any transfer agent for the Series B Convertible
Preferred Stock, and at such other office or offices, if any, as the Board of
Directors may designate, into that number of fully paid and nonassessable shares
of Common Stock (calculated as to each conversion
<PAGE>
to the nearest 1/100th of a share) as shall be equal to the Conversion Rate,
determined as hereinafter provided, in effect at the time of conversion. Shares
of Series B Convertible Preferred Stock may initially be converted into full
shares of Common Stock at the rate of _______ shares of Common Stock for each
share of Series B Convertible Preferred Stock subject to adjustment as
hereinafter provided (the "Conversion Rate"). Notwithstanding anything in this
Section 7 to the contrary, no change in the Conversion Rate shall actually be
made until the cumulative effect of the adjustments called for by this Section 7
since the date of the last change in the Conversion Rate would change the
Conversion Rate by more than 1%. However, once the cumulative effect would
result in such a change, the Conversion Rate shall actually be changed to
reflect all adjustments called for by this Section 7 and not previously made.
(b) The right of the holders of Series B Convertible Preferred Stock to
convert their shares shall be exercised by surrendering for such purpose to the
Corporation or its agent, as provided above, certificates representing shares to
be converted, duly endorsed in blank or accompanied by proper instruments of
transfer and a notice of conversion. The Corporation shall not, however, be
required to pay any tax which may be payable in respect of any transfer involved
in the issue and delivery upon conversion of shares of Common Stock or other
securities or property in a name other than that of the holder of the shares of
the Series B Convertible Preferred Stock being converted, and the Corporation
shall not be required to issue or deliver any such shares or other securities or
property unless and until the person or persons requesting the issuance thereof
shall have paid to the Corporation the amount of any such tax or shall have
established to the satisfaction of the Corporation that such tax has been paid.
(c) The Corporation (and any successor corporation) shall take all
action necessary so that a number of shares of the authorized but unissued
Common Stock (or common stock in the case of any successor corporation)
sufficient to provide for the conversion of the Series B Convertible Preferred
Stock outstanding upon the basis hereinbefore provided are at all times reserved
by the Corporation (or any successor corporation), free from preemptive rights,
for such conversion, subject to the provisions of Section 7(d). If the
Corporation shall issue any securities or make any change in its capital
structure which would change the number of shares of Common Stock into which
each share of the Series B Convertible Preferred Stock shall be convertible as
herein provided, the Corporation shall at the same time also make proper
provision so that thereafter there shall be a sufficient number of shares of
Common Stock authorized and reserved, free from preemptive rights, for
conversion of the outstanding Series B Convertible Preferred Stock on the new
basis.
(d) In case of any consolidation or merger of the Corporation with any
other corporation or in case of any sale or transfer of all or substantially all
of the assets of the Corporation, or in the case of any share exchange, in each
case
<PAGE>
pursuant to which all of the outstanding shares of Common Stock are converted
into other securities, cash or other property, the Corporation shall make
appropriate provision or cause appropriate provision to be made so that each
holder of shares of Series B Convertible Preferred Stock then outstanding shall
have the right thereafter (in lieu of the right to convert into Common Stock,
which right shall cease) to convert such shares of Series B Convertible
Preferred Stock into the kind and amount of securities, cash or other property
receivable upon such consolidation, merger, sale, transfer or share exchange by
a holder of the number of shares of Common Stock into which such shares of
Series B Convertible Preferred Stock could have been converted immediately prior
to the effective date of such consolidation, merger, sale, transfer or share
exchange. If, in connection with any such consolidation, merger, sale, transfer
or share exchange, each holder of shares of Common Stock is entitled to elect to
receive either securities, cash or other property upon completion of such
transaction, the Corporation shall provide or cause to be provided to each
holder of Series B Convertible Preferred Stock the right to elect the
securities, cash (other than by the exercise of appraisal rights) or other
property into which the Series B Convertible Preferred Stock held by such holder
shall be convertible after completion of any such transaction on the same terms
and subject to the same conditions applicable to holders of the Common Stock
(including, without limitation, notice of the right to elect, limitations on the
period in which such election shall be made and the effect of failing to
exercise the election). The Corporation shall not effect any such transaction
unless the provisions of this Section 7(d) have been complied with. The above
provisions shall similarly apply to successive consolidations, mergers, sales,
transfers or share exchanges.
(e) Upon the surrender of certificates representing shares of Series B
Convertible Preferred Stock, the person converting shall be deemed to be the
holder of record of the Common Stock issuable upon such conversion, and all
rights with respect to the shares surrendered shall forthwith terminate except
the right to receive the Common Stock or other securities, cash or other
property as herein provided.
(f) No fractional shares of Common Stock shall be issued upon
conversion of Series B Convertible Preferred Stock but, in lieu of any fraction
of a share of Common Stock which would otherwise be issuable in respect of the
aggregate number of such shares surrendered for conversion at one time by the
same holder, the Corporation shall pay in cash an amount equal to the product of
(i) the Closing Price of a share of Common Stock on the last trading day before
the conversion date and (ii) such fraction of a share.
(g) The Conversion Rate shall be adjusted from time to time under
certain circumstances, subject to the provisions of the last two sentences of
Section 7(a), as follows:
<PAGE>
(i) In case the Corporation shall (A) pay a dividend or make a
distribution on its Common Stock in shares of its capital stock, (B)
subdivide its outstanding Common Stock into a greater number of shares,
(C) combine the shares of its outstanding Common Stock into a smaller
number of shares, or (D) issue by reclassification of its Common Stock
any shares of its capital stock, then in each such case the Conversion
Rate in effect immediately prior thereto shall be proportionately
adjusted so that the holder of any Series B Convertible Preferred Stock
thereafter surrendered for conversion shall be entitled to receive, to
the extent permitted by applicable law, the number and kind of shares
of capital stock of the Corporation which it would have owned or have
been entitled to receive after the happening of such event had such
Series B Convertible Preferred Stock been converted immediately prior
to the record date for such event (or if no record date has been
established in connection with such event, the effective date for such
action). An adjustment pursuant to this Section 7(g)(i) shall become
effective immediately after the record date in the case of a stock
dividend or distribution and shall become effective immediately after
the effective date in the case of a subdivision, combination, or
reclassification.
(ii) In case the Corporation shall issue rights or warrants to
all holders of the Common Stock entitling such holders to subscribe for
or purchase Common Stock on the record date referred to below at a
price per share less than the average daily Closing Prices of the
Common Stock on the 30 consecutive trading days commencing 45 business
days before such record date (the "Current Market Price"), then in each
such case the Conversion Rate in effect on such record date shall be
adjusted in accordance with the formula
c1 = C x O + N
--------
O + N x P
-----
M
where
c1 = the adjusted Conversion Rate.
C = the current Conversion Rate (immediately preceding the issuance of
such rights or warrrants).
O = the number of shares of Common Stock outstanding on the record
date.
N = the number of additional shares of Common Stock issuable pursuant
to
<PAGE>
the exercise of such rights or warrants.
P = the exercise price per share of such rights or warrants.
M = the Current Market Price per share of Common Stock on such record
date.
Such adjustment shall become effective immediately after the record date for the
determination of stockholders entitled to receive such rights or warrants. If
any or all of such rights or warrants are not so issued or expire or terminate
before being exercised, the Conversion Rate then in effect shall be readjusted
appropriately.
(iii) In case the Corporation shall, by dividend or otherwise,
distribute to all holders of its Junior Stock or Parity Stock evidences
of its indebtedness or assets (including cash or securities, but
excluding any warrants or subscription rights referred to in Section
7(g)(ii) above, any ordinary dividend paid in cash out of the retained
earnings of the Corporation and any dividend or distribution referred
to in Section 7(g)(i) above), then in each such case the Conversion
Rate then in affect shall be adjusted in accordance with the formula
c1 = C x M
---
M-F
where
c1 = the adjusted Conversion Rate.
C = the current Conversion Rate (immediately preceding such
distribution).
M = the Current Market Price per share of Common Stock with respect to
the record date mentioned below.
F = the aggregate amount of such cash dividend and/or the fair market
value on such record date of the assets or securities to be
distributed, divided by the number of shares of Common Stock
outstanding on the record date. In the case of securities, the fair
market value shall be the average of the daily Closing Price for the
30 trading days preceding such record date (or such fewer number of
days for which there shall be a recognized trading market);
provided, however, that if there shall not be any recognized trading
market for such securities until after such record date, the fair
market value shall be the average of the daily Closing Price for the
10 trading days following such record date. In all other cases, the
Board of Directors shall determine such
<PAGE>
fair market value, which determination shall be conclusive.
Such adjustment shall become effective immediately after the record date for the
determination of stockholders entitled to receive such dividend or distribution.
(iv) All calculations hereunder shall be made to the nearest
cent or to the nearest 1/100 of a share, as the case may be.
(v) If at any time as a result of an adjustment made pursuant
to Section 7(g)(i), the holder of any Series B Convertible Preferred
Stock thereafter surrendered for conversion shall become entitled to
receive securities, cash, or assets other than Common Stock, the number
or amount of such securities or property so receivable upon conversion
shall be subject to adjustment from time to time in a manner and on
terms as nearly equivalent as practicable to the provisions with
respect to the Common Stock contained in Section 7(g)(i) to (iv),
inclusive, above.
(h) Except as otherwise provided above in this Section 7, no adjustment
in the Conversion Rate shall be made in respect of any conversion for share
distributions or dividends theretofore declared and paid or payable on the
Common Stock.
(i) Whenever the Conversion Rate is adjusted as herein provided, the
Corporation shall send to each transfer agent for the Series B Convertible
Preferred Stock and the Common Stock, and to the principal securities exchange,
if any, on which the Series B Convertible Preferred Stock and the Common Stock
is traded, or the Nasdaq Stock Market if the Series B Convertible Preferred
Stock or Common Stock is admitted for quotation thereon, a statement signed by
the Chairman of the Board, the President, or any Vice President of the
Corporation and by its Treasurer or its Secretary or Assistant Secretary stating
the adjusted Conversion Rate determined as provided in this Section 7, and any
adjustment so evidenced, given in good faith, shall be binding upon all
stockholders and upon the Corporation. Whenever the Conversion Rate is adjusted,
the Corporation will give notice by mail to the holders of record of Series B
Convertible Preferred Stock, which notice shall be made within 45 days after the
effective date of such adjustment and shall state the adjustment and the
Conversion Rate. Notwithstanding the foregoing notice provisions, failure by the
Corporation to give such notice or a defect in such notice shall not affect the
binding nature of such corporate action of the Corporation.
(j) Whenever the Corporation shall propose to take any of the actions
specified in Section 7(d) or in Section 7(g)(i), (ii) or (iii) which would
result in any adjustment in the Conversion Rate under this Section 7, the
Corporation shall use its best efforts to cause a notice to be mailed at least
20 days prior to the date on which the books of the Corporation will close or on
which a record will be taken for such action, to the holders of record of the
outstanding Series B Convertible
<PAGE>
Preferred Stock on the date of such notice. Such notice shall specify the action
proposed to be taken by the Corporation and the date as of which holders of
record of the Common Stock shall participate in any such actions or be entitled
to exchange their Common Stock for securities or other property, as the case may
be. Failure by the Corporation to mail the notice or any defect in such notice
shall not affect the validity of the transaction.
(k) Notwithstanding any other provision of this Section 7, no
adjustment in the Conversion Rate need be made (i) for a transaction referred to
in Section 7(g)(i), (ii) or (iii) if holders of Series B Convertible Preferred
Stock are to participate in the transaction or distribution on a basis and with
notice that the Board of Directors reasonably determines such transaction to be
fair to the holders of the Series B Convertible Preferred Stock and appropriate
in light of the basis on which holders of Common Stock or, in the case of a
transaction referred to in Section 7(g)(iii), holders of Junior Stock
participate in the transaction; (ii) for sales of Common Stock pursuant to a
plan for reinvestment of dividends and interest, provided that the purchase
price in any such sale is at least equal to 90% of the fair market value of the
Common Stock at the time of such purchase, or pursuant to any plan adopted by
the Corporation for the benefit of its employees, directors or consultants;
(iii) for a change in par value of the Common Stock not involving a subdivision
or combination described in Section 7(g)(i)(B) or 7(g)(i)(C); or (iv) after the
Series B Convertible Preferred Stock becomes convertible solely into cash by
reason of an adjustment pursuant to Section 7(d) hereof.
Section 8. Voting Rights.
(a) The holders of Series B Convertible Preferred Stock will not have
any voting rights except as set forth in this Section 8 or as otherwise from
time to time required by law.
(b) The affirmative vote or consent of the holders of at least a
majority of the outstanding shares of the Series B Convertible Preferred Stock,
voting separately as a class, will be required for (i) the issuance of any
Senior Stock or Parity Stock or (ii) any amendment, alteration or repeal of this
Certificate of Designation if such amendment, alteration or repeal materially
and adversely affects the powers, preferences or special rights of the Series B
Convertible Preferred Stock. The creation, authorization or issuance of any
shares of any Junior Stock or the increase or decrease in the amount of
authorized capital stock of any class, including preferred stock, shall not
require the consent of holders of the Series B Convertible Preferred Stock and
shall not be deemed to affect adversely the rights, preferences, privileges or
voting rights of shares of Series B Convertible Preferred Stock. Such right of
the holders of Series B Convertible Preferred Stock to vote as hereinabove
provided may be exercised at any annual meeting or at any special meeting called
for such purpose as hereinafter provided or at any adjournment thereof.
<PAGE>
(c) If dividends on the Series B Convertible Preferred Stock are in
arrears and unpaid for six or more dividend periods (whether or not consecutive)
(a "Dividend Default"), then the number of directors constituting the Board of
Directors of the Corporation will be increased by two and the holders of the
then outstanding shares of Series B Convertible Preferred Stock (together with
the holders of Parity Stock upon which like rights have been conferred and are
exercisable), voting separately and as a class, shall have the right and power
to elect such two additional directors. The occurrence of a Dividend Default is
a "Voting Rights Triggering Event." A Voting Rights Triggering Event shall not
be deemed to have occurred if at the time of such event there are less than
25,000 shares of Series B Convertible Preferred Stock then outstanding.
(d) The voting rights set forth in Section 8(c) will continue until
such time as (x) in the case of a default in the payment of dividends, all
dividends in arrears on the Series B Convertible Preferred Stock are paid in
full or (y) there are fewer than 25,000 shares of Series B Convertible Preferred
Stock outstanding, at which time the term of any directors elected pursuant to
the provisions of Section 8(c) shall terminate and the number of directors
constituting the Board of Directors shall be decreased by two (until the
occurrence of any subsequent Voting Rights Triggering Event). At any time after
voting power to elect directors shall have become vested and be continuing in
the holders of Series B Convertible Preferred Stock pursuant to Section 8(c), or
if vacancies shall exist in the offices of directors elected by such holders, a
proper officer of the Corporation may, and upon the written request of the
holders of record of at least 25% of the shares of Series B Convertible
Preferred Stock then outstanding addressed to the Secretary of the Corporation
shall, call a special meeting of the holders of Series B Convertible Preferred
Stock; provided, however, that no such special meeting shall be called if the
next annual meeting of stockholders of the Corporation is to be held within 60
days after the voting power to elect directors shall have become vested, in
which case such meeting shall be deemed to have been called for such next annual
meeting. If such meeting shall not be called by a proper officer of the
Corporation within 20 days after personal service to the Secretary of the
Corporation at its principal executive offices, then the holders of record of at
least 25% of the outstanding shares of Series B Convertible Preferred Stock may
designate in writing one of their members to call such meeting at the expense of
the Corporation, and such meeting may be called by the person so designated upon
the notice required for the annual meetings of stockholders of the Corporation
and shall be held at the place for holding the annual meetings of stockholders.
Any holder of Series B Convertible Preferred Stock so designated shall have, and
the Corporation shall provide, access to the lists of holders of Series B
Convertible Preferred Stock to be called pursuant to the provisions hereof. If
no special meeting of the holders of Series B Convertible Preferred Stock is
called as provided in this Section 8(d), then such meeting shall be deemed to
have been called for the next annual meeting of stockholders of the Corporation
or special meeting of the holders of any other
<PAGE>
capital stock of the Corporation.
(e) At any meeting held for the purposes of electing directors at which
the holders of Series B Convertible Preferred Stock (together with the holders
of Parity Stock upon which like rights have been conferred and are exercisable)
shall have the right, voting together as a separate class, to elect directors as
aforesaid, the presence in person or by proxy of the holders of at least a
majority in voting power of the outstanding shares of Series B Convertible
Preferred Stock (and such Parity stock) shall be required to constitute a quorum
thereof.
(f) Any vacancy occurring in the office of a director elected by the
holders of Series B Convertible Preferred Stock (and such Parity Stock) may be
filled by the remaining director elected by the holders of Series B Convertible
Preferred Stock (and such Parity Stock) unless and until such vacancy shall be
filled by the holders of Series B Convertible Preferred Stock (and such Parity
Stock).
(g) In any case in which the holders of Series B Convertible Preferred
Stock shall be entitled to vote pursuant to this Section 8 or pursuant to
Delaware law, each holder of Series B Convertible Preferred Stock entitled to
vote with respect to such matters shall be entitled to one vote for each share
of Series B Convertible Preferred Stock held.
Section 9. Outstanding Shares. All shares of Series B Convertible
Preferred Stock shall be deemed outstanding except: (i) from the date fixed for
redemption pursuant to Section 5 hereof, all shares of Series B Convertible
Preferred Stock which have been so called for redemption under Section 5, if
funds necessary for such redemption of such shares are available; (ii) from the
date of surrender of certificates representing shares of Series B Convertible
Preferred Stock for conversion into Common Stock, all shares of Series B
Convertible Preferred Stock converted into Common Stock; and (iii) from the date
of registration of transfer, all shares of Series B Convertible Preferred Stock
held of record by the Corporation or any subsidiary of the Corporation.
IN WITNESS WHEREOF, Frontline Communications Corporation has caused its
corporate seal to be hereunto affixed and this certificate to be signed by
Stephen J. Cole-Hatchard, its Chief Executive Officer this ____ day of , 2000.
FRONTLINE COMMUNICATIONS CORPORATION
By
--------------------------------------------
Stephen J. Cole-Hatchard
Chief Executive Officer
<PAGE>
WARRANT AGREEMENT
BETWEEN
FRONTLINE COMMUNICATIONS CORPORATION
AND
PRIME CHARTER LTD.
DATED AS OF _________, 2000
<PAGE>
WARRANT AGREEMENT, dated as of ________, 2000 (the "Effective Date"),
between FRONTLINE COMMUNICATIONS CORPORATION, a Delaware corporation (the
"Company"), and PRIME CHARTER LTD., a Delaware corporation ("Prime Charter").
The Company proposes to sell to Prime Charter and/or its designee(s)
warrants (the "Warrants") to purchase an aggregate of 100,000 shares (the
"Warrant Shares") of the Company's Series B Convertible Preferred Stock, par
value $.01 per share (the "Preferred Stock"), in connection with a public
offering by the Company of 1,000,000 shares of Preferred Stock (the "Offering")
pursuant to a registration statement (the "Registration Statement") on Form SB-2
(File No. 333-92969) filed by the Company with the Securities and Exchange
Commission (the "Commission") under the Securities Act of 1933, as amended (the
"Act").
THEREFORE, in consideration of the mutual undertakings contained
herein, the Company and Prime Charter hereby agree as follows:
1. Issuance of Warrants. Concurrently with the initial closing (the
"Closing") under the Underwriting Agreement of even date herewith between the
Company and Prime Charter, as representative of the several underwriters named
therein (the "Underwriting Agreement"), relating to the Offering, the Company
shall issue, sell and deliver the Warrants to Prime Charter and/or, at Prime
Charter's direction, to one or more underwriters or other members of the
National Association of Securities Dealers, Inc. that participate in the
Offering and/or the bona fide officers or partners of Prime Charter or such
other participants (each, a "Permitted Designee") for a purchase price of $.0001
per Warrant. Each certificate for Warrants (a "Warrant Certificate") shall be
substantially in the form of Annex A attached hereto.
2. Registration. The Company shall maintain a register for the Warrants
at its principal executive offices for the registration of the issuance and
transfer of Warrants. The Company shall be entitled to treat the registered
holder of any Warrant (the "Holder") as the owner in fact thereof for all
purposes and shall not be bound to recognize any equitable or other claim to or
interest in such Warrant on the part of any other person. The Warrants shall be
registered initially in the name of Prime Charter and/or one or more Permitted
Designees in such denominations as Prime Charter may request not less than two
business days prior to the scheduled date of the Closing as set forth in the
Underwriting Agreement.
3. Transfer and Exchange of Warrants. Any Warrant shall be transferable
only upon surrender thereof at the Company's principal executive offices duly
endorsed by its Holder or by such Holder's duly authorized attorney or
representative, or accompanied by proper evidence of succession, assignment or
authority to transfer. Upon any registration of transfer, the Company shall
deliver a new Warrant or Warrants to the persons entitled thereto. In addition,
a Warrant
<PAGE>
Certificate may be exchanged, at the option of the Holder thereof, for another
Warrant Certificate or Warrant Certificates of different denominations, of like
tenor and representing in the aggregate the right to purchase a like number of
Warrant Shares upon surrender at the Company's principal executive offices.
Notwithstanding the foregoing, the Warrants may not be sold, assigned,
transferred, pledged, hypothecated or otherwise disposed of until after the
first anniversary of the Effective Date, except to a Permitted Designee, by
operation of law or by reason of a reorganization of the Company. Thereafter,
the Warrants and any Warrant Shares shall be freely transferable, subject only
to compliance with applicable securities laws.
4. Exercise of Warrants.
4.1 Exercise Price and Term. Each Warrant shall entitle the Holder
thereof to purchase from the Company one Warrant Share at a purchase price per
share of $____ (the "Exercise Price"), as such purchase price and number of
Warrant Shares may be adjusted from time to time pursuant to the provisions of
Section 8 hereof, payable in full at the time of exercise of such Warrant. The
Warrants may be exercised, in whole or in part, at any time or from time to time
during the four-year period commencing on the first anniversary of the Effective
Date and ending at 5:00 p.m., New York City time, on the fifth anniversary of
the Effective Date (the "Expiration Date"). After the Expiration Date, any
unexercised Warrants shall be void and all rights of the Holders with respect
thereto shall cease.
4.2 Payment of Exercise Price. At the election of any Holder, the
aggregate Exercise Price for any Warrants being exercised may be paid: (a) in
cash in the amount of the aggregate Exercise Price then in effect for the number
of Warrants being exercised, (b) by surrender to the Company of shares of
Preferred Stock having an aggregate Fair Market Value (as defined below) on the
date of exercise equal to the aggregate Exercise Price then in effect for the
number of Warrants being exercised, (c) by surrender to the Company of shares of
Common Stock having an aggregate Fair Market Value on the date of exercise equal
to the aggregate Exercise Price then in effect for the number of Warrants being
exercised, (d) by a surrender of Warrants covering a number of Warrant Shares
having an aggregate Fair Market Value, net of the applicable aggregate Exercise
Price therefor, equal to the aggregate Exercise Price then in effect for the
number of Warrants being exercised, or (e) by a combination of the
aforementioned methods of payment. For purposes of this Agreement, the "Fair
Market Value" per share of Preferred Stock or Common Stock on a given date shall
be: (i) if the Preferred Stock or Common Stock is listed on a national
securities exchange or included on the Nasdaq National Market, the closing price
per share of Preferred Stock or Common Stock on such date (or, if there was no
trading on such date, on the next preceding day on which there was trading);
(ii) if the Preferred Stock or Common Stock is not listed on a national
securities exchange or included on the Nasdaq National Market, the average of
the closing bid and asked quotations per share of Preferred Stock or Common
Stock as reported by Nasdaq (or the National Quotation Bureau Incorporated or
any similar organization) on such date (or, if there were no quotations for the
Preferred Stock or Common
<PAGE>
Stock on such date, on the next preceding day on which there were quotations) as
provided by such organization; and (iii) if the Preferred Stock or Common Stock
is not traded on a national securities exchange or included on the Nasdaq
National Market and bid and asked quotations are not provided by Nasdaq (or the
National Quotation Bureau Incorporated or any similar organization), as
determined by the agreement of the parties in good faith or, in the absence of
such agreement, as determined pursuant to arbitration under the auspices of the
American Arbitration Association.
4.3 Exercise Procedure. Warrants may be exercised by their surrender at
the Company's principal executive offices, with the Election to Purchase form
attached thereto duly completed and executed, accompanied by payment of the
aggregate Exercise Price for the Warrant Shares to be purchased upon such
exercise. Payment for the Warrant Shares shall be made (a) if payment is to be
made in cash, by a certified or bank cashier's check payable to the order of the
Company or by wire transfer to an account designated by the Company, (b) if
payment is to be made through a surrender of shares of Preferred Stock or Common
Stock, by surrender of certificates duly endorsed for transfer (with all
transfer taxes paid or provided for), and (c) if payment is to be made by a
surrender of Warrants, by surrender of certificates representing such Warrants.
Promptly after the exercise of any Warrants, upon compliance with Section 5
hereof, the Company shall issue a certificate or certificates, for the number of
full Warrant Shares to which the Holder thereof is entitled, registered in
accordance with the instructions set forth in the Election to Purchase, together
with cash as provided in Section 10 of this Warrant Agreement payable in respect
of fractional shares and (if applicable) a new Warrant Certificate or
Certificates representing all remaining unexercised Warrants. All Warrant Shares
shall be duly authorized, validly issued, fully paid, non-assessable and free of
preemptive rights, and free from all liens and charges other than those created
by the Holder. Upon compliance with Section 5 hereof, certificates representing
such Warrant Shares and remaining unexercised Warrants shall be issued by the
Company in such names and denominations, and shall be delivered to such persons,
as are specified by written instructions of the Holder.
4.4 Record Holder. Each person in whose name any such certificate for
Warrant Shares is issued shall for all purposes be deemed to have become the
holder of record of the Warrant Shares represented thereby on the date upon
which such Warrants were surrendered for exercise, accompanied by payment of the
aggregate Exercise Price as aforesaid, irrespective of the date of issuance or
delivery of such certificate for Warrant Shares; provided, however, that if, at
the date of the surrender of such Warrants and payment of the aggregate Exercise
Price, the transfer books for the Preferred Stock or any other class of stock
purchasable upon the exercise of such Warrants shall be closed, the certificates
for the Warrant Shares or for shares of such other class of
<PAGE>
stock in respect of which such Warrants are then exercisable shall be issuable
as of the date on which such books shall next be opened (whether before or after
the Expiration Date) and, until such date, the Company shall be under no duty to
deliver any certificate for such Warrant Shares or for shares of such other
class of stock; and, provided, further, that the transfer books of record,
unless otherwise required by law, shall not be closed at any one time for a
period longer than 20 days.
5. Payment of Taxes. The Company shall promptly pay all documentary
stamp taxes attributable to the issuance of Warrants or the issuance of Warrant
Shares upon the exercise of any Warrants, except that any transfer taxes payable
in connection with the issuance of Warrants or Warrant Shares in any name other
than that of the Holder of the Warrants surrendered shall be paid by such Holder
and, if any such tax would otherwise be payable by the Company, no such issuance
or delivery shall be made unless and until the person requesting such issuance
has paid to the Company the amount of any such tax or it is established to the
reasonable satisfaction of the Company that any such tax has been paid.
6. Replacement Warrants. In case any Warrant Certificate shall be
mutilated, lost, stolen or destroyed, the Company shall issue and deliver in
exchange and substitution for and upon cancellation of the mutilated Warrant
Certificate or in lieu of and substitution for the lost, stolen or destroyed
Warrant Certificate, a new Warrant Certificate of like tenor and representing an
equivalent right or interest, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction of such Warrant
Certificate, together with an appropriate agreement regarding indemnification of
the Company relating to the issuance of a replacement Warrant Certificate.
7. Reservation of Warrant Shares. (i)The Company shall at all times
reserve and keep available for issuance the number of its authorized but
unissued shares of Preferred Stock or other stock sufficient to permit the
exercise in full of the Warrants and any transfer agent for the Preferred Stock
or other stock issuable upon the exercise of Warrants shall be directed at all
times to reserve such number as shall be sufficient for such purpose and (ii)
the Company shall at all times reserve and keep available for issuance the
number of its authorized but unissued shares of Common Stock or other stock
sufficient to permit the conversion in full of the Warrant Shares and any
transfer agent for the Common Stock or other stock issuable upon the exercise of
Warrants shall be directed at all times to reserve such number as shall be
sufficient for such purpose. The Company will keep a copy of this Warrant
Agreement on file with each such transfer agent and will supply such transfer
agent with duly executed stock certificates for such purpose and will provide or
otherwise make available any cash that may be payable as provided in Section 10
hereof. All Warrants surrendered upon the exercise thereof shall be canceled.
After the Expiration Date, no shares of Preferred Stock or Common Stock shall be
subject to reservation in respect of any unexercised Warrants.
<PAGE>
8. Adjustments.
8.1 Adjustment of Exercise Price.
8.1.1 Initial Exercise Price. The Exercise Price, which
initially will be as provided in Section 4.1, shall be adjusted and readjusted
from time to time as provided in this Section 8.1 and, as so adjusted or
readjusted, shall remain in effect until a further adjustment or readjustment
thereof is required by this Section 8.1.
8.1.2 Issuance of Additional Shares of Preferred Stock. In
case the Company, at any time after the date of the Closing, shall issue
additional shares of Preferred Stock for no consideration in connection with a
dividend, stock split or other distribution on the Preferred Stock (including,
without limitation, any distribution of Preferred Stock by way of spin-off,
reclassification or corporate rearrangement), then, and in each such case, the
Exercise Price shall be reduced concurrently with such issuance to a price
(calculated to the nearest cent) determined by multiplying such Exercise Price
by a fraction of which:
(a) the numerator shall be the number of shares of Preferred
Stock outstanding immediately prior to such issuance, and
(b) the denominator shall be the number of shares of Preferred
Stock outstanding immediately after such issuance.
8.1.3 Dividends and Distributions. In case the Company, at any
time after the Effective Date, shall pay or make a dividend or other
distribution on the Preferred Stock (including, without limitation, any
distribution of stock (other than Preferred Stock) or other securities,
including securities that are convertible into or exchangeable or exercisable
for Preferred Stock, property or options by way of dividend, spin-off,
reclassification or corporate rearrangement) then, and in each such case, the
Exercise Price in effect immediately prior to the close of business on the
record date fixed for the determination of the holders of the Preferred Stock
entitled to receive such dividend or other distribution shall be reduced,
effective as of the close of business on such record date, to a price
(calculated to the nearest cent) determined by multiplying such Exercise Price
by a fraction of which:
(a) the numerator shall be the Exercise Price in effect
immediately prior to the close of business on such record date minus the value
of such dividend or other distribution (as determined in good faith by the Board
of Directors of the Company) applicable to one share of Preferred Stock, and
(b) the denominator shall be such Exercise Price in effect
immediately prior to the close of business on such record date; provided,
however, that no such reduction shall be made pursuant to this Section 8.1.3 for
a dividend payable in shares of Preferred Stock (which is subject to Section
8.1.2) or the ordinary stated dividend on the
<PAGE>
Preferred Stock, whether payable in Common Stock or cash or other property. If a
dividend or distribution covered under this Section 8.1.3 is declared prior to
the Expiration Date but not paid =by such date, the Expiration Date shall be
extended until the payment thereof.
8.1.4 Adjustments for Combinations, etc. In case the
outstanding shares of Preferred Stock shall be combined or consolidated, by
reclassification or otherwise, into a lesser number of shares of Preferred
Stock, the Exercise Price in effect immediately prior to such combination or
consolidation shall be proportionately increased concurrently with the
effectiveness of such combination or consolidation.
8.1.5 Minimum Adjustment of Exercise Price. If the amount of
any adjustment of the Exercise Price required pursuant to this Section 8.1 would
be less than $.01, such amount shall be carried forward, and an adjustment with
respect thereto shall be made at the time of and together with any subsequent
adjustment that, together with such amount and any other amount or amounts so
carried forward, shall aggregate at least $.01.
8.1.6 Minimum Exercise Price. Notwithstanding anything to the
contrary set forth herein, no adjustment provided for in this Section 8.1 shall
reduce the Exercise Price below the par or stated value of the Preferred Stock
and the Company shall have no obligation to change such value to permit a
further reduction of the Exercise Price; provided, however, that, except in the
event of any transactions of the type contemplated under Section 8.1.4 hereof,
the Company agrees not to change the par or stated value of the Preferred Stock.
8.2 Adjustment of Number of Warrant Shares. Upon each adjustment of the
Exercise Price pursuant to the provisions of Section 8.1, the number of Warrant
Shares that the Holder of a Warrant shall be entitled to receive upon exercise
thereof shall be adjusted to equal that number of Warrant Shares determined by
multiplying the number of Warrant Shares issuable upon exercise of such Warrant
immediately prior to such adjustment of the Exercise Price by a fraction of
which:
(a) the numerator shall be the Exercise Price in effect
immediately prior to such adjustment of the Exercise Price, and
(b) the denominator shall be the Exercise Price in effect
immediately following such adjustment of the Exercise Price.
8.3 Notice, Evidence of Adjustments. Whenever the Exercise Price is
adjusted as herein provided, the Company shall promptly cause a notice setting
forth the adjusted Exercise Price and adjusted number of Warrant Shares,
issuable upon exercise of each Warrant to be mailed to the Holders, at their
last addresses appearing in the Warrant register, and shall cause a copy thereof
to be mailed to each transfer agent for the Preferred Stock. The Company shall
make any computation by this Section 8, and a certificate signed by the Chief
Financial Officer shall
<PAGE>
accompany said notice and shall be conclusive evidence of the correctness of
such adjustments.
9. Consolidation, Merger, Sale of Assets, Reorganization, etc.
9.1 General Provisions. In case at any time after the Effective Date
(a) the Company shall consolidate with or merge into any other person and not be
the continuing or surviving person of such consolidation or merger, (b) any
other person shall consolidate with or merge into the Company and the Company
shall be the continuing or surviving person but, in connection with such
consolidation or merger, the Preferred Stock or other securities then issuable
upon exercise of the Warrants shall be changed into or exchanged for cash, stock
or other securities or property, (c) shall transfer, directly or indirectly, all
or substantially all its properties and assets to any other person or (d) shall
effect a capital reorganization or reclassification of the Preferred Stock or
other securities then issuable upon exercise of the Warrants (other than a
capital reorganization or reclassification resulting in an adjustment of the
Exercise Price as provided in Section 8.1), then, and in the case of each such
transaction, the Company shall make proper provision such that, upon the terms
and in the manner provided in this Warrant Agreement, the Holder of each
Warrant, upon the exercise thereof at any time after the consummation of such
transaction, shall be entitled to receive, at the Exercise Price then in effect,
in lieu of the Preferred Stock or other securities issuable upon such exercise
immediately prior to such transaction, the amount of cash, stock or other
securities or property to which such Holder would have been entitled if such
Warrant had been exercised in full immediately prior to such transaction,
subject to adjustments subsequent to such transaction as nearly equivalent as
possible to the adjustments provided for in Section 8 and this Section 9.
9.2 Assumption of Obligations. Notwithstanding anything contained in
this Warrant Agreement to the contrary, the Company shall not effect any of the
transactions described in Section 9.1(a), (b), (c) or (d) unless, prior to the
consummation thereof, the person (other than the Company) that may be required
to deliver any cash, stock or other securities or property upon exercise of any
Warrant as provided herein shall assume, by written instrument delivered to the
Holders of the Warrants, (a) the obligations of the Company under this Warrant
Agreement and the Warrants (and if the Company shall survive the consummation of
any such transaction, such assumption shall not release the Company from any
continuing obligations of the Company under this Warrant Agreement and the
Warrants) and (b) the obligation to deliver to such Holder such cash, stock or
other securities or other property as such Holder may be entitled to receive in
accordance with the provisions of this Section 9; provided, however, that this
Section 9.2 shall not be applicable to any transaction described in Section 9.1
if all such cash, stock, property or other consideration receivable upon
consummation of such transaction is delivered to the Company at such time. Such
person shall similarly
<PAGE>
deliver to the Company an opinion of counsel to the effect that this Warrant
Agreement and the Warrants shall continue in full force and effect after any
such transaction and that the terms hereof (including, without limitation all of
the provisions of Section 8 and this Section 9.2) and thereof shall be
applicable to the cash, stock or other securities or property that such person
may be required to deliver upon any exercise of the Warrants.
9.3 No Dilution or Impairment. The Company shall not, by amendment of
its certificate of incorporation or by-laws or through any consolidation,
merger, reorganization, transfer of assets, dissolution, issue, sale, grant or
assumption of securities or any other voluntary action, avoid or seek to avoid
the observance or performance of any of the terms of this Warrant Agreement or
the Warrants, but will at all times, whether or not requested to do so, in good
faith assist in the carrying out of all such terms and in the taking of all such
action as may be necessary or appropriate in order to protect the rights of the
Holders against dilution or other impairment. Without limiting the generality of
the foregoing, the Company agrees that it shall take all such reasonable action
as may be necessary or appropriate in order that the Company may validly and
legally issue fully paid and non-assessable shares of stock upon the exercise of
all Warrants from time to time outstanding.
10. Fractional Interests. The Company shall not be required to issue
fractions of shares of Preferred Stock upon the exercise of any Warrants. If
more than one Warrant shall be presented for exercise at the same time by the
same Holder, the number of Warrant Shares that shall be issuable upon the
exercise thereof shall be computed on the basis of the aggregate number of
Warrant Shares purchasable on exercise of the Warrants so presented. If any
fraction of a share of Preferred Stock would, except for the provisions of this
Section 10, be issuable on the exercise of any Warrant, the Company shall
purchase such fraction for an amount in cash equal to the same fraction of the
Fair Market Value of one share of Preferred Stock on the date of exercise.
11. Restrictions on Dispositions. The Warrants, the Warrant Shares have
been registered under the Act pursuant to the Registration Statement; however,
Prime Charter acknowledges that the Warrants, the Warrant Shares and the
Conversion Shares may not be transferred except pursuant to (i) a post-effective
amendment to the Registration Statement, (ii) an effective registration
statement under the Act or (iii) any available exemption from registration under
the Act permitting such disposition of securities and upon delivery to the
Company of an opinion of counsel, reasonably satisfactory to counsel for the
Company, that such exemption from registration is available. Prime Charter
agrees that the certificates representing the Warrants, Warrant Shares and
Conversion Shares shall bear an appropriate restrictive legend to such effect.
12. Registration Rights.
<PAGE>
12.1 Demand Registration. Upon written request of the Holder(s) of at
least a majority of the then outstanding Warrants, Warrant Shares and Conversion
Shares made at any time within the period ending five years after the Effective
Date, the Company shall file within a reasonable period of time and, in any
event within the time period provided in Section 12.3(a) after receipt of such
written request, on one occasion, a registration statement (or a post-effective
amendment to a registration statement) under the Act registering the Warrant
Shares and Conversion Shares. Within 15 days after receiving any such notice,
the Company shall give notice to the other Holders of the Warrants, Warrant
Shares and Conversion Shares advising that the Company is proceeding with such
registration statement or post-effective amendment (the"Demand Registration
Statement"), and offering to include therein the Warrant Shares of such other
Holders. The Company shall not be obligated to include the Warrant Shares or
Conversion Shares of any such other Holder in such registration unless such
other Holder shall accept such offer by notice in writing to the Company within
15 days after receipt of such notice from the Company. The Company shall use its
reasonable best efforts to file and cause the Demand Registration Statement to
become effective as promptly as practicable and to remain effective for the
period of time provided in Section 12.3, to reflect in the Demand Registration
Statement financial statements that are prepared in accordance with Section
10(a)(3) of the Act, and to amend or supplement the Demand Registration
Statement to reflect any facts or events arising that, individually or in the
aggregate, represent a material change in the information set forth in the
Demand Registration Statement to enable any Holders of Warrants to exercise
warrants and/or sell Warrant Shares or Conversion Shares during such time period
provided in Section 12.3. If any registration pursuant to this Section 12.1 is
an underwritten offering, the Holders of a majority of the Warrant Shares or
Conversion Shares to be included in such registration will select an underwriter
(or managing underwriter if such offering should be syndicated) approved by the
Company, such approval not to be unreasonably withheld. Notwithstanding anything
in this Warrant Agreement to the contrary, the Company shall be entitled to
postpone for a reasonable period of time (not exceeding 60 days in any 12-month
period) the filing or effectiveness of the Demand Registration Statement
otherwise required to be prepared and filed by it pursuant to this Section 12.1
if the Company's Board of Directors determines, in its reasonable discretion,
that such registration and offering would adversely affect any financing,
acquisition, corporate reorganization or other material transaction involving
the Company and the Company promptly gives the Holders written notice of such
determination specifying the grounds therefor and an estimate of the anticipated
delay. If the Company shall so postpone the filing of the Demand Registration
Statement, a majority-in-interest of the requesting Holders shall have the right
to withdraw the request for demand registration by giving written notice to the
Company within 30 days after receipt of the notice of postponement.
12.2 Piggyback Registration. If, at any time within the period commencing
one year and ending
<PAGE>
seven years after the Effective Date, the Company proposes to register any
voting equity securities under the Act in a primary registration on behalf of
the Company and/or in a secondary registration on behalf of holders of such
securities, and the registration form to be used may be used for registration of
the Warrant Shares or Conversion Shares, the Company shall give prompt written
notice (which, in the case of a registration pursuant to the exercise of demand
registration rights other than those provided in Section 12.1, shall be within
10 business days after the Company's receipt of notice of such exercise and, in
any event, shall be at least 30 days prior to the date of such filing) to the
Holders of Warrants, Warrant Shares and Conversion Shares (regardless of whether
some of the Holders shall have theretofore availed themselves of the demand
rights provided in Section 12.1) of its intention to effect registration and
shall offer to include in such registration such number of Warrant Shares and
Conversion Shares with respect to which the Company has received written
requests for inclusion therein within 10 business days after receipt of such
notice from the Company upon generally the same terms and conditions as the
person or persons for whom such registration is being effected have agreed to.
This Section 12.2 is not applicable to any registration statement to be filed by
the Company on Forms S-4 or S-8 or any successor forms. The Company shall not be
obligated to cause to be effective any registration statement as to which it has
given notice to the Holders of Warrants, Warrant Shares or Conversion Shares and
shall have discretion to withdraw any such registration without liability to
Holders of Warrants, Warrant Shares or Conversion Shares.
Notwithstanding the foregoing, if the managing underwriter of the
offering shall determine in good faith and advise the Company in writing that
the inclusion of the Warrant Shares, Conversion Shares and other securities
being offered in such registration would materially and adversely affect the
marketability of the offering, then the Company and the managing underwriter may
reduce the number of Warrant Shares and Conversion Shares to be registered on a
pro rata basis proportionate to the reduction of all other holders of securities
participating in such registration pursuant to the exercise of piggyback
registration rights. In such event, the Company may reduce the number of Warrant
Shares and Conversion Shares to be registered to zero as long as no other
securities are registered in such registration statement pursuant to an exercise
of piggyback registration rights.
12.3 Registration Procedures. If and whenever the Company is required
by the provisions of this Section 12 to use its reasonable best efforts to
effect the registration of any Warrant Shares or Conversion Shares under the
Act, the Company will, as expeditiously as possible:
(a) in connection with any registration pursuant to Section
12.1, prepare and file with the Commission a registration statement (which shall
be filed as soon as practical after receipt of requisite requests from Holders
of Warrant Shares or Conversion Shares for registration, but not more than 90
days in the case of a registration statement on Form S-1 or SB-2, or 45 days in
the case of any other form) with respect to the Warrant Shares or Conversion
Shares and use its reasonable best efforts to cause such registration statement
to become and remain effective for the period of the distribution contemplated
thereby (determined as hereinafter provided);
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective for
the period specified in Section 12.3(a) and comply with the provisions of the
Act with respect to the disposition of all Warrant Shares and Conversion Shares
covered by such registration statement in accordance with the Holders' intended
method of disposition set forth in such registration statement for such period
(so long as such registration statement was filed pursuant to Section 12.1);
(c) furnish to each seller of Warrant Shares and Conversion
Shares and to each underwriter such number of copies of the registration
statement and the prospectus included therein (including each preliminary
prospectus) as such persons reasonably may request in order to facilitate the
<PAGE>
public sale or other disposition of the Warrant Shares and Conversion Shares
covered by such registration statement;
(d) use its reasonable best efforts to register or qualify the
Warrant Shares and Conversion Shares covered by such registration statement
under such securities or blue sky laws of such jurisdictions as each seller
shall request, and do any and all other acts and things which may be necessary
under such securities or blue sky laws to enable such seller to consummate the
public sale or other disposition in such jurisdictions of the securities to be
sold by such seller, except that the Company shall not for any such purpose be
required to qualify to do business as a foreign corporation in any jurisdiction
wherein it is not qualified or to file any general consent to service of
process;
(e) use its reasonable best efforts to list the Warrant Shares
and Conversion Shares covered by such registration statement with any securities
exchange or automated quotation system on which the Preferred Stock and Common
Stock, as the case may be, is then listed;
(f) immediately notify each seller of Warrant Shares and
Conversion Shares and each underwriter under such registration statement, at any
time when a prospectus relating thereto is required to be delivered under the
Act, of the happening of any event of which the Company has knowledge as a
result of which the prospectus contained in such registration statement, as then
in effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing;
(g) enter into such agreements (including an underwriting
agreement, if applicable) and take all such other actions reasonably necessary
in connection therewith in order to expedite and facilitate the disposition of
the Warrant Shares and Conversion Shares to be registered;
(h) whether or not the offering is underwritten and at the
request of any seller of Warrant Shares or Conversion Shares, furnish: (i) such
representations and warranties to such seller and the underwriters, if any, as
are customary in primary underwritten offerings, (ii) an opinion of counsel
representing the Company for the purposes of such registration, addressed to the
underwriters, if any, and to such seller of Warrant Shares or Conversion Shares,
dated the effective date of such registration statement and in form and
substance as is customarily given to underwriters in an underwritten public
offering and to such other effect as reasonably may be requested by counsel for
the underwriters or by such seller of Warrant Shares or Conversion Shares its
counsel and (iii) a letter dated such effective date from the independent public
accountants retained by the Company, addressed to the underwriters, if any, and
to such seller of Warrant Shares or Conversion Shares, in form and substance as
is customarily given by independent certified public accountants to underwriters
in an underwritten public offering, and such letter shall additionally cover
such other financial matters (including information as to the period ending no
more than five business days prior to the date of such letter) with respect to
such registration as such underwriters reasonably may request;
(i) make available upon reasonable notice for inspection by
each seller of Warrant Shares or Conversion Shares, any underwriter
participating in any distribution pursuant to such registration statement, and
any attorney, accountant or other agent retained by such seller of Warrant
Shares or Conversion Shares or underwriter, all financial and other records,
pertinent corporate documents and properties of the Company, and cause the
Company's officers, directors and employees to supply all information reasonably
requested by any such seller, underwriter, attorney, accountant or agent in
connection with such registration statement; and
(j) otherwise use its reasonable best efforts to comply with
all applicable rules and regulations of the Commission, and make available to
its securityholders, as soon as reasonably practicable,
<PAGE>
but not later than 18 months after the effective date of the registration
statement, an earnings statement covering the period of at least 12 months
beginning with the first full month after the effective date of such
registration statement, which earnings statements shall satisfy the provisions
of Section 11(a) of the Act.
For purposes of Section 12.3(a) and (b), the period of
distribution of Warrant Shares or Conversion Shares in a firm commitment
underwritten public offering shall be deemed to extend until each underwriter
has completed the distribution of all securities purchased by it, and the period
of distribution of Warrant Shares or Conversion Shares in any other registration
shall be deemed to extend until the earlier of the sale of all Warrant Shares or
Conversion Shares covered thereby and 120 days after the effective date thereof.
In connection with each registration hereunder the sellers of
Warrant Shares or Conversion Shares will furnish to the Company in writing such
information with respect to themselves and the proposed distribution by them as
reasonably shall be necessary and shall be requested by the Company in order to
comply with federal and applicable state securities laws.
In connection with each registration pursuant to this Section
12 covering an underwritten public offering, the Company and each seller of
Warrant Shares or Conversion Shares agree to enter into a written agreement with
the managing underwriter (unless the Holder is the managing underwriter) in such
form and containing such provisions as are customary in the securities business
for such an arrangement between such underwriter and companies of the Company's
size and investment stature.
12.4 Expenses. All expenses incurred by the Company in complying with
Sections 12.1, 12.2 and 12.3, including, without limitation, all registration
and filing fees, printing expenses, fees and disbursements of counsel and
independent public accountants for the Company, fees and expenses (including
counsel fees) incurred in connection with complying with state securities or
"blue sky" laws, fees of the National Association of Securities Dealers, Inc.,
transfer taxes, fees of transfer agents and registrars, costs of insurance and
reasonable fees and disbursements of counsel for the sellers of Warrant Shares
or Conversion Shares, but excluding any Selling Expenses, are herein referred to
as "Registration Expenses." "Selling Expenses," as used herein, mean all
underwriting discounts, selling commissions and non-accountable or similar
expense allowances applicable to the sale of Warrant Shares or Conversion
Shares.
The Company will pay or cause to be paid all Registration
Expenses of the participating sellers of Warrant Shares or Conversion Shares in
connection with each registration statement under Sections 12.1 and 12.2. All
Selling Expenses in connection with each registration statement under Sections
12.1 and 12.2 shall be borne by the participating sellers of Warrant Shares or
Conversion Shares in proportion to the number of Warrant Shares or Conversion
Shares sold by each, or by such participating sellers of Warrant Shares or
Conversion Shares other than the Company (except to the extent the Company shall
be a seller of Securities) as they may agree.
12.5 No Conflicts. The Company will not enter into any agreement
granting registration rights to any person or entity on terms which conflict
with the provisions of this Section 12.
12.6 Indemnification and Contribution. (a) In the event of a
registration of any Warrant Shares or Conversion Shares under the Act pursuant
to this Section 12, the Company will indemnify and hold harmless, to the fullest
extent permitted by law, each person selling Warrant Shares or Conversion Shares
thereunder, each underwriter thereunder, and each other person, if any, who
controls such seller of Warrant Shares or Conversion Shares or underwriter
within the meaning of the Act or the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), against any losses, claims, damages, liabilities and
expenses, joint or several, to which such seller underwriter or controlling
person may become subject under the Act
<PAGE>
or otherwise, insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of or are based upon an untrue statement or
alleged untrue statement of a material fact contained in any registration
statement under which such Warrant Shares or Conversion Shares were registered
under the Act pursuant to Section 12, any preliminary prospectus or final
prospectus contained therein, or any amendment or supplement thereof, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will pay or reimburse each such seller, each such
underwriter and each such controlling person for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability or action; provided, however, that the
Company (i) will not be liable in any such case if and to the extent that (A)
any such loss, claim, damage or liability arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission so
made in conformity with information furnished by any such seller any such
underwriter or any such controlling person, as the case may be, in writing
specifically for use in such registration statement, prospectus, amendment or
supplement or (B) in respect to such statement, alleged statement omission or
alleged omission with respect to which such loss, claim, damage or liability
directly relates, the final prospectus for such registration statement corrected
in all material respects such statement alleged statement, omission or alleged
omission and a copy of such final prospectus was not sent or given by or on
behalf of such seller (or otherwise delivered in accordance with applicable law
or regulation) at or prior to the confirmation of the sale of Warrant Shares or
Conversion Shares of such seller and (ii) will not be liable for amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Company, such consent not to
be unreasonably withheld or delayed.
(b) In the event of a registration of any Warrant Shares or
Conversion Shares under the Act pursuant to this Section 12, each seller of
Warrant Shares or Conversion Shares thereunder, severally and not jointly, will
indemnify and hold harmless the Company, each person, if any, who controls the
Company within the meaning of the Act, each officer of the Company who signs the
registration statement, each director of the Company, each underwriter and each
person who controls any underwriter within the meaning of the Act, against all
losses, claims, damages or liabilities, joint or several, to which the Company
or such officer, director, underwriter or controlling person may become subject
under the Act or otherwise, but only to the extent that such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon (i) an untrue statement or alleged untrue statement or omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, made in reliance upon
and in conformity with information pertaining to such seller, as such, furnished
in writing to the Company by such seller specifically for use in such
registration statement under which such Warrant Shares or Conversion Shares was
registered under the Act pursuant to this Section 12, any preliminary prospectus
or final prospectus contained therein, or any amendment or supplement thereof,
and will pay or reimburse the Company and each such officer, director,
underwriter and controlling person for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage liability or action or (ii) any statement, alleged statement,
omission or alleged omission made by the Company with respect to which such
loss, claim, damage or liability directly relates, if the final prospectus for
such registration statement corrected in all material respects such statement,
alleged statement, omission or alleged omission and a copy of such final
prospectus was not sent or given by or on behalf of such seller (or otherwise
delivered in accordance with applicable law or regulation) at or prior to the
confirmation of the sale of Warrant Shares or Conversion Shares of such seller,
provided, however, that (A) the liability of each seller hereunder shall be
limited to the proportion of any such loss, claim, damage, liability or expense
which is equal to the proportion that the public offering price of the Warrant
Shares and Conversion Shares sold by such seller under such registration
statement bears to the total public offering price of all securities sold
thereunder, but not in any event to exceed the net proceeds received by such
seller from the sale of Warrant Shares and Conversion Shares covered by such
registration statement and (B) no seller shall be liable for amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of such seller, such consent not to
be unreasonably withheld or delayed.
<PAGE>
(c) Promptly after receipt by an indemnified party hereunder
of written notice of any claim or the commencement of any action or proceeding,
such indemnified party shall, if a claim in respect thereof is to be made
against the indemnifying party hereunder, notify the indemnifying party in
writing thereof, but the omission so to notify the indemnifying party shall not
relieve it from any liability which it may have to such indemnified party,
except to the extent the indemnifying party is materially prejudiced by such
omission. In case any such action shall be brought against any indemnified party
and the indemnified party shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate in
and, to the extent it shall wish, to assume and undertake the defense thereof
with counsel reasonably satisfactory to such indemnified party and, after notice
from the indemnifying party to such indemnified party of its election so to
assume and undertake the defense thereof, the indemnifying party shall not be
liable to such indemnified party under this Section 12.6(c) for any legal or
other professional expenses subsequently incurred by such indemnified party in
connection with the defense thereof. No indemnifying party, in the defense of
any such claim or litigation against an indemnified party, shall consent to
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect of such claim or
litigation, unless such indemnified party shall otherwise consent in writing. An
indemnifying party who elects to assume the defense of a claim shall not be
obligated to pay the fees and expenses of counsel for the parties indemnified
by such indemnifying party with respect to such claim, unless any indemnified
party reasonably concludes, based upon the opinion of counsel, that there may
be legal defenses available to such indemnified party with respect to such
claim which are different from or additional to those available to any other
of such indemnified parties or that a conflict of interest may exist between
such indemnified party and any other of such indemnified parties with respect
to such claim, in which event the indemnifying party shall be obligated to
pay the reasonable fees and expenses of one such additional counsel (in
addition to any local counsel).
(d) In order to provide for just and equitable contribution in
any case in which either (i) any Holder exercising registration rights under
this Section 12, or any controlling person of any such Holder, makes a claim for
indemnification pursuant to this Section 12.6, but it is judicially determined
(by the entry of a final judgment or decree by a court of competent jurisdiction
and following the expiration of time to appeal or the denial of the last right
of appeal) that such indemnification may not be enforced in such case
notwithstanding the fact that this Section 12.6 provides for indemnification in
such case or (ii) contribution under the Act may be required on the part of any
such Holder or any such controlling person in circumstances for which
indemnification is provided under this Section 12.6, then, and in each such
case, the Company and such Holder shall contribute to the aggregate losses,
claims, damages or liabilities to which they may be subject (after contribution
from others) in such proportion as is appropriate to reflect both the relative
benefit received by such Holder and the relative fault of the Company and such
Holder; provided, however, that, in any such case, (A) no Holder will be
required to contribute any amount in excess of the public offering price of all
such Warrant Shares and Conversion Shares offered by it pursuant to such
registration statement and (B) no person or entity guilty of fraudulent
misrepresentation (within, the meaning of Section 11(f) of the Act) will be
entitled to contribution from any person or entity who was not guilty of such
fraudulent misrepresentation. For purposes of the preceding sentence, the
relative benefit received by the seller of Warrant Shares or Conversion Shares
shall be deemed to be in the same proportion as the public offering price of its
Warrant Shares or Conversion Shares offered by the registration statement bears
to the public offering price of all securities offered by such registration
statement; and the relative fault of the Company and such seller shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or omission of a material fact relates to
information supplied by the Company or by the seller and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.
<PAGE>
12.7 Securities Law Compliance. The Company covenants that it will
timely file all reports required to be filed by it under the Act and the
Exchange Act. So long as the Company is subject to the periodic reporting
requirements of the Exchange Act, the Company covenants to make publicly
available such information as may be necessary to permit the sale of Warrant
Shares and Conversion Shares without registration under the Act pursuant to the
exemption provided by Rule 144 under the Act, as such rule may be amended from
time to time, or any similar rule or regulation hereafter adopted by the
Commission. Upon the request of any holder of Warrants, Warrant Shares or
Conversion Shares at any time, if applicable the Company will deliver to such
holder or such holder's prospective transferee such information as may be
necessary to permit the sale of Warrants, Warrant Shares or Conversion Shares
pursuant to Rule 144A under the Act, as such rule may be amended from time to
time. Upon request of any holder of Warrants, Warrant Shares or Conversion
Shares, the Company will deliver to such holder a written statement as to
whether it has complied with such information requirements.
13. Notices to Holders.
13.1 Nothing contained in this Warrant Agreement or in any of the
Warrants shall be construed as conferring upon the Holders thereof as such the
right to vote or to receive dividends or to consent or to receive notice as
stockholders in respect of the meetings of stockholders or the election of
directors of the Company or any other matter or any other rights whatsoever as
stockholders of the Company.
13.2 In the event the Company intends to:
(a) make any distribution on or with respect to its Preferred
Stock (or other securities that may then be issuable in lieu thereof upon the
exercise of Warrants), other than the ordinary stated dividend on the Preferred
Stock,
(b) issue subscription rights or warrants to holders of its
Preferred Stock,
(c) consolidate or merge with or into another entity,
(d) liquidate, dissolve or sell or otherwise dispose of
substantially all its assets, or
(e) take any other action that would result in an adjustment
to the Exercise Price or an adjustment to the number of Warrant Shares that the
Holder of a Warrant shall be entitled to receive upon exercise thereof, then the
Company shall cause a notice of its intention to take such action to be sent by
first-class mail, postage prepaid, at least 20 days prior to the date fixed as a
record date or the date of closing the transfer books for the determination of
the stockholders entitled to such distribution or issuance or to vote upon such
proposed consolidation, merger, liquidation, sale or conveyance to each Holder
at its address appearing on the Warrant register, but failure to mail or to
receive such notice or any defect therein or in the mailing thereof shall not
affect the validity of any action taken in connection with such distribution,
issuance, consolidation, merger, liquidation, sale or conveyance.
14. Notices. Any notice or demand required by this Warrant Agreement to
be given or made by any Holder to or on the Company shall be sufficiently given
or made if sent by registered or certified mail, postage prepaid, or by
facsimile transmission address as follows:
Frontline Communications Corporation
One Blue Hill Plaza
Pearl River, New York 10965
Any notice or demand required by this Warrant Agreement to be given or made by
the Company to or on
<PAGE>
the Holder of any Warrant shall be sufficiently given or made, whether or not
such Holder receives the notice, if sent by first-class mail, postage prepaid,
addressed to such Holder at his last address as shown on the books of the
Company.
15. Governing Law. The validity, interpretation and performance of this
Warrant Agreement, of each Warrant issued hereunder and of the respective terms
and provisions thereof shall be governed by the laws of the State of New York
without giving effect to principles of conflicts of law.
16. Counterparts. This Warrant Agreement may be executed in two
counterparts, each of which when so executed shall be deemed to be an original;
but such counterparts shall together constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Warrant Agreement as
of the date first set forth above.
FRONTLINE COMMUNICATIONS CORPORATION
By___________________________________
Name:
Title:
PRIME CHARTER LTD.
By___________________________________
Name:
Title:
<PAGE>
ANNEX A
THE WARRANTS REPRESENTED HEREBY AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT");
HOWEVER, NONE OF SUCH SECURITIES MAY BE OFFERED, OR SOLD OR OTHERWISE
TRANSFERRED EXCEPT PURSUANT TO (i) A POST-EFFECTIVE AMENDMENT TO THE
REGISTRATION STATEMENT UNDER WHICH SUCH SECURITIES WERE REGISTERED UNDER THE
ACT; (ii) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, OR (iii) AN
AVAILABLE EXEMPTION FROM REGISTRATION UNDER THE ACT RELATING TO THE DISPOSITION
OF SECURITIES AND UPON DELIVERY TO THE COMPANY OF AN OPINION OF COUNSEL,
REASONABLY SATISFACTORY TO COUNSEL FOR THE COMPANY, THAT SUCH EXEMPTION FROM
REGISTRATION UNDER THE ACT IS AVAILABLE. IN ADDITION, THE WARRANTS REPRESENTED
HEREBY MAY NOT BE TRANSFERRED OR EXERCISED EXCEPT IN ACCORDANCE WITH THE
PROVISIONS OF THE WARRANT AGREEMENT DATED AS OF ___________, 2000 BETWEEN
FRONTLINE COMMUNICATIONS CORPORATION AND PRIME CHARTER LTD.
No. 1 120,000 Warrants
Void After 5:00 p.m. New York City Time
On ___________, 2005
FRONTLINE COMMUNICATIONS CORPORATION
Warrant Certificate
THIS CERTIFIES THAT, for value received, Prime Charter Ltd., or
registered assigns, is the Holder of the number of Warrants set forth above,
each Warrant entitling the owner thereof to purchase at any time after ________,
2001 and prior to 5:00 p.m., New York City time, on ____, 2005 (the "Expiration
Date"), one fully paid and non-assessable share of Series B Preferred Stock, par
value $.01 per share ("Preferred Stock"), of Frontline Communications
Corporation, a Delaware corporation (the "Company"), at a purchase price per
share (the "Exercise Price") initially equal to $_____, upon presentation and
surrender of this Warrant Certificate with the Form of Election to Purchase
(attached hereto) duly executed. The number of Warrants evidenced by this
Warrant Certificate (and the number of shares that may be purchased upon
exercise hereof (the "Warrant Shares") set forth above and the Exercise Price
set forth above are the number and Exercise Price as of the date of original
issuance of this Warrant Certificate, based on the Preferred Stock as
constituted at such date. As provided in the Warrant Agreement referred to
below, the Exercise Price and the number or kind of shares that may be purchased
upon the exercise of the Warrants evidenced by this Warrant Certificate are
subject to modification and adjustment upon the happening of certain events.
This Warrant Certificate is subject to, and entitled to the benefits
of, all of the terms, provisions and conditions of the Warrant Agreement dated
as of ________, 2000 between the Company and Prime Charter Ltd., which Warrant
Agreement is hereby incorporated herein reference and made a part hereof and to
which reference is hereby made for a full description of the rights, limitations
of rights, duties and immunities hereunder of the Company and the Holders of the
Warrant Certificates. A copy of the Warrant Agreement is on file at the
principal office of the Company.
This Warrant Certificate, with or without other Warrant Certificates,
upon surrender at the principal office of the Company, may be exchanged for
another Warrant Certificate or Warrant Certificates of like tenor, evidencing
Warrants entitling the Holder to purchase a like aggregate number of shares of
<PAGE>
Common Stock as the Warrants evidenced by the Warrant Certificate or Warrant
Certificates surrendered entitled such Holder to purchase. If this Warrant
Certificate shall be exercised in part, the Holder hereof shall be entitled to
receive upon surrender hereof another Warrant Certificate or Warrant
Certificates for the number of whole Warrants not exercised.
The Exercise Price may be paid in cash or by surrender of the
appropriate number of Warrants or shares of Preferred Stock in a cashless
exercise or in a combination thereof as provided in Section 4.2 of the Warrant
Agreement.
No fractional shares of Preferred Stock will be issued upon the
exercise of any Warrant or Warrants evidenced hereby, but in lieu thereof a cash
payment will be made as provided in the Warrant Agreement.
No Holder of this Warrant Certificate, as such, shall be entitled to
vote or to receive dividends or to consent or to receive notice as a stockholder
of the meetings of stockholders for the election of directors of the Company or
any other matter or to any rights whatsoever as stockholder of the Company,
until the Warrants evidenced by this Warrant Certificate shall have been
exercised and the Warrant Shares shall have been delivered as provided in the
Warrant Agreement.
If this Warrant Certificate shall be surrendered for exercise within
any period during which the transfer books for the Preferred Stock or other
class of stock issuable upon exercise of this Warrant Certificate are closed for
any purpose, the Company shall not be required to make delivery of certificates
for shares issuable upon such exercise until the date of the reopening of said
transfer books as provided in the Warrant Agreement.
IN WITNESS WHEREOF, Frontline Communications Corporation has caused the
signature (or facsimile signature) of its Chief Executive Officer and Secretary
to be printed hereon.
FRONTLINE COMMUNICATIONS CORPORATION
By___________________________________
Name:
Title:
Attest:
Secretary
<PAGE>
FORM OF ASSIGNMENT
(To be executed by the Holder if such Holder desires to transfer this Warrant
Certificate).
TO FRONTLINE COMMUNICATIONS CORPORATION
FOR VALUE RECEIVED, __________________________________________ hereby
sells, assigns and transfers unto ________________________ this Warrant
Certificate, together with all rights, title and interest therein, and does
hereby irrevocably constitute and appoint ______________________, to transfer
the within Warrant Certificate on the books of the within-named Company, with
full power of substitution.
DATED:__________________________
Signature Guaranteed: Signature__________________________
NOTICE:
The signature on the foregoing assignment must correspond to the name
as written upon the face of this Warrant Certificate in every particular,
without alteration or enlargement or any change whatsoever.
<PAGE>
FORM OF ELECTION TO PURCHASE
(To be executed if Holder desires to exercise the Warrants evidenced by this
Warrant Certificate).
TO FRONTLINE COMMUNICATIONS CORPORATION
The undersigned hereby (1) irrevocably elects to exercise
___________________________________ Warrants represented by this Warrant
Certificate to purchase __________ shares of Preferred Stock issuable upon the
exercise of such Warrants, (2) makes payment in full of the aggregate Exercise
Price for such Warrants by enclosure of a bank cashier's check or money order
therefor or by surrendering Warrants or shares of Common Stock for application
to the aggregate Exercise Price, upon condition that new Warrants be issued for
the balance of the Warrants remaining, and (3) requests that certificates for
shares and Warrants be issued in the name of.
(Please insert social security or other
identifying number)__________________________
(Please print name and address)__________________________
If such number of Warrants shall not be all the Warrants evidenced by this
Warrant Certificate, a new Warrant Certificate for the balance remaining of such
Warrants shall be registered in the name of and delivered to:
Please insert social security or other
identifying number)__________________________
(Please print name and address)
DATED:__________________________, 20___
Signature Guaranteed: Signature__________________________
NOTICE:
The signature on the foregoing election to purchase must correspond to the name
as written upon the face of this Warrant Certificate in every particular,
without alteration or enlargement or any change whatsoever.
<PAGE>
BLANK ROME TENZER GREENBLATT LLP
405 LEXINGTON AVENUE
NEW YORK, NEW YORK 10174
February 7, 2000
Frontline Communications Corporation
One Blue Hill Plaza
Pearl River, New York 10965
Gentlemen:
You have requested our opinion with respect to the sale by Frontline
Communications Corporation, a Delaware corporation (the "Company") pursuant to a
Registration Statement (the "Registration Statement") on Form SB-2 under the
Securities Act of 1933, as amended (the "Act"), of : (i) up to 1,150,000 shares
(the "Shares") of Series B Convertible Preferred Stock, par value $.01 per share
(the "Preferred Stock"), (ii) the shares of common stock, $.01 per share, of the
Company ("Common Stock") that may be issued upon conversion of the Shares (the
"Conversion Shares"), (iii) 230,000 shares of Common Stock that have been
registered for issuance in lieu of cash dividends on the Shares (the "Dividend
Shares"), (iv) warrants to purchase 100,000 shares of Preferred Stock to be
issued to the representative of the underwriter of the Company's offering
contemplated by the Registration Statement (the "Warrants"), (v) 100,000 shares
of Preferred Stock (the "Representative's Preferred Shares") that may be issued
upon exercise of the Warrants and (vi) shares of Common Stock (the
Representative's Common Stock") that may be issued upon conversion of the
Representative's Preferred Shares .
We have examined originals, or copies certified or otherwise identified
to our satisfaction of such documents and corporate and public records as we
deem necessary as a basis for the opinion hereinafter expressed. With respect to
such examination, we have assumed the genuiness of all signatures appearing on
all documents presented to us as conformed or reproduced copies. Where factual
matters relevant to such opinion were not independently established, we have
relied upon certificates of appropriate state and local officials, and upon
certificates of executive officers and responsible employees and agents of the
Company .Based upon the foregoing, it is our opinion that: (1) the Shares when
sold, paid for and issued as contemplated by the Registration Statement, will be
validly issued, fully paid and nonassessable; (2) the Conversion Shares when
issued by the Company upon conversion of the Shares, in accordance with their
terms, will be validly issued, fully paid and non assessable; (3) the Dividend
Shares when issued by the Company as a dividend on the Shares in accordance with
their terms, will be validly issued, fully paid and non assessable; (4) the
Warrants, when issued and paid for as contemplated by the Registration
Statement, will constitute the binding obligation
<PAGE>
Frontline Communications Corporation
February 7, 2000
Page 2
of the Company, enforceable in accordance with their terms subject to the effect
of (a) applicable bankruptcy, reorganization, insolvency, moratorium and other
similar laws of general application (including, without limitation, statutory or
other laws regarding fraudulent or preferential transfers) relating to, limiting
or affecting the enforcement of creditors' rights generally, (b) general
principles of equity that may limit the enforceability of the remedies,
covenants or other provisions of the Securities and the availability of
injunctive relief or other equitable remedies and (c) the application of
principles of equity (regardless of whether enforcement is considered in
proceedings at law or in equity) as such principles relate to, limit or affect
the enforcement of creditors' rights generally; (5) the Representative's
Preferred Shares when issued upon exercise of the Warrants, in accordance with
their terms, will be validly issued, fully paid and non assessable and (6) the
Representative's Common Stock when issued upon conversion of the
Representative's Preferred Shares in accordance with the terms thereof, will be
validly issued, fully paid and non assessable.
We hereby consent to the use of this opinion in the Registration
Statement, and to the use of our name as counsel in connection with the
Registration Statement and in the Prospectus forming a part thereof. In giving
this consent, we do not thereby concede that we come within the categories of
persons whose consent is required by the Act or the General Rules and
Regulations promulgated thereunder.
Very truly yours,
/s/ Blank Rome Tenzer Greenblatt LLP
BLANK ROME TENZER GREENBLATT LLP
