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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF
SECURITIES EXCHANGE ACT OF 1934
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DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): JULY 22, 1996
THE FOREFRONT GROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 0-27438 76-0365256
(STATE OR OTHER JURISDICTION (COMMISSION FILE NO.) (I.R.S. EMPLOYER
OF INCORPORATION) IDENTIFICATION NO.)
1330 POST OAK BOULEVARD, SUITE 1300
HOUSTON, TEXAS 77056
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(713) 961-1101
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
1360 POST OAK BOULEVARD, SUITE 1660
HOUSTON, TEXAS 77056
(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On July 22, 1996, The ForeFront Group, Inc. (the "Company") consummated the
acquisition of AllMicro, Inc. ("AllMicro") pursuant to the terms of the
Agreement and Plan of Reorganization, dated as of July 19, 1996 (the "Merger
Agreement") by and among the Company, AllMicro Acquisition Corporation, AllMicro
and Michael and Anita Kaplan, the stockholders (the "Stockholders") of AllMicro.
The acquisition was effectuated by way of a merger (the "Merger") of a wholly-
owned subsidiary of the Company with and into AllMicro. As a result of the
Merger, AllMicro became a wholly-owned subsidiary of the Company. The Merger is
being treated as a "pooling of interests" for accountng purposes. Pursuant to
the Merger Agreement, the Stockholders received an aggregate of 1,056,152 shares
of common stock, $.01 par value of the Company ("ForeFront Common Stock"), ten
percent of which was placed in escrow to satisfy claims of the Company that may
arise for any breach of the representations and warranties made by AllMicro and
the Stockholders in the Merger Agreement. The shares held in escrow will be
released upon the Company's filing of audited financial statements for calendar
year 1996, except for pending claims. The number of shares of ForeFront Common
Stock issued to the Stockholders was determined through arms-length negotiation.
There was no material relationship between the parties prior to the Merger.
The shares of ForeFront Common Stock were issued to the Stockholders
pursuant to an exemption from registration under Section 3(a)(10) of the
Securities Act of 1933, as amended (the "Securities Act"); however, the
Stockholders agreed not to sell the shares of ForeFront Common Stock acquired in
the Merger prior to the time that financial results covering at least 30 days
post-Merger combined operations of the Company and AllMicro have been published.
In addition, any sales of ForeFront Common Stock by the Stockholders must be in
compliance with the volume limitations of Rule 145 under the Securities Act.
The Stockholders have also been granted piggyback registration rights under
certain circumstances.
AllMicro is a supplier of technology that allows PC users to troubleshoot,
tune and enhance the performance of their PCs. AllMicro's major products consist
of Troubleshooter/TM/ professional diagnostic tool for PC troubleshooting;
Discovery Card/TM/, the first diagnostic card to resolve configuration
conflicts; Rescue Data Recovery System/TM/, the first software product to
recover data from crashed drives; and CNE Self Study Course/TM/, a self study
program for certification of Novell network engineers.
ForeFront is engaged in the business of developing, marketing and
supporting client, server and integrated application software products that
enable the capture, organization and exchange of information over the Internet
and private computer networks. The Company launched its first two Internet
products in 1995: GrabNet/TM/, a tool that enables a user to capture and
organize information from the World Wide Web; and WebWhacker/TM/, a product that
enables the storage of information captured from the Web for off-line use and
distribution. In 1996 the Company expanded its product offerings with the
release of WebSeeker/TM/, a unified search engine that queries more than twenty
internet engines and RoundTable/TM/, a multimedia, Internet and Intranet
conferencing product.
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Statements of Businesses Acquired. It is impracticable for
ForeFront to provide the required financial statements of AllMicro at this time.
ForeFront will file the required financial statements as soon as practicable.
(b) Pro Forma Financial Information. It is impracticable for ForeFront to
provide the required pro forma financial information at this time. ForeFront
will file the required pro forma financial information as soon as practicable.
(c) Exhibits.
99.1. Agreement and Plan of Reorganization among The ForeFront Group,
Inc., AllMicro Acquisition Corporation, AllMicro, Inc. and the Shareholders
listed on the execution pages thereto, dated July 19, 1996
99.2. Escrow Agreement, dated as of July 19, 1996, by and among The
ForeFront Group, Inc., AllMicro Acquisition Corporation, AllMicro, Inc., Texas
Commerce Bank National Association, and the Shareholders listed on the execution
pages thereto.
99.3. Registration Rights Agreement, dated as of July 19, 1996, by and
among The ForeFront Group, Inc. and the Shareholders of AllMicro, Inc. set forth
on the signature pages thereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
THE FOREFRONT GROUP, INC., a Delaware
corporation
Date: August 5, 1996 By: /s/ Jeffrey R. Harder
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Name: Jeffrey R. Harder
Title: VP, Corporate Development
& General Counsel
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EXHIBIT INDEX
Sequential
Exhibit Page
Number Document Description Number
------- -------------------- ----------
99.1. Agreement and Plan of Reorganization among The ForeFront
Group, Inc., AllMicro Acquisition Corporation, AllMicro,
Inc. and the Shareholders listed on the execution pages
thereto, dated July 19, 1996.
99.2. Escrow Agreement, dated as of July 19, 1996, by and among
The ForeFront Group, Inc., AllMicro Acquisition Corporation,
AllMicro, Inc., Texas Commerce Bank National Association,
and the Shareholders listed on the execution pages thereto.
99.3. Registration Rights Agreement, dated as of July 19, 1996,
by and among The ForeFront Group, Inc. and the Shareholders
of AllMicro, Inc. set forth on the signature pages thereto.
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EXHIBIT 99.1
AGREEMENT AND PLAN OF REORGANIZATION
AMONG
THE FOREFRONT GROUP, INC.
ALLMICRO ACQUISITION CORPORATION
ALLMICRO, INC.
AND
THE SHAREHOLDERS LISTED ON THE
EXECUTION PAGES HERETO
JULY 19, 1996
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TABLE OF CONTENTS
ARTICLE 1
PLAN OF REORGANIZATION
<TABLE>
<CAPTION>
<C> <S> <C>
1.1 Board of Directors' and Shareholders' Approval 1
1.2 The Merger 1
1.3 The Closing 2
1.4 Effective Time 2
1.5 Exemption from Registration 2
1.6 Restricted Securities 2
1.7 Surrender and Exchange of Outstanding Certificates;
Status of Outstanding Certificates; Fractional Shares 3
1.8 Dissenters' Rights 3
1.9 Tax-Free Reorganization; Pooling 3
1.10 Articles of Incorporation; Bylaws; Directors and Officers
of the Surviving Corporation 3
1.11 Escrow 4
</TABLE>
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF ALLMICRO
<TABLE>
<CAPTION>
<C> <S> <C>
2.1 Organization and Standing 4
2.2 Capitalization 5
2.3 Subsidiaries 5
2.4 Authority, Approval and Enforceability 5
2.5 Financial Statements 6
2.6 Material Changes 7
2.7 Returns 7
2.8 Properties and Inventories 8
2.9 Insurance 8
2.10 Material Agreements 8
2.11 Intellectual Property Rights 10
2.12 Employees and Employee Benefit Plans 11
2.13 Environmental and Safety Laws 12
2.14 Compliance with Laws 12
2.15 Absence of Litigation 13
2.16 No Brokers 13
2.17 Taxes 13
2.18 Compliance with Instruments 16
2.19 Related Party Transactions 16
2.20 Pooling 16
</TABLE>
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2.21 Disclosure; Accuracy of Documents and Information 16
ARTICLE 2A
REPRESENTATIONS AND WARRANTIES
OF EACH OF THE SHAREHOLDERS
2A.1. Authority, Approval and Enforceability 17
ARTICLE 3
REPRESENTATIONS AND WARRANTIESOF FFGI AND ACQUISITION SUB
<TABLE>
<CAPTION>
<C> <S> <C>
3.1 Organization and Standing 18
3.2 Authority, Approval and Enforceability 18
3.3 Financial Statements and Reports 19
3.4 Material Changes 19
3.5 No Undisclosed Liabilities 19
3.6 FFGI Common Stock 20
3.7 Certain Litigation 20
3.8 Taxes 20
3.9 Governmental Authorizations and Licenses 20
3.10 No Brokers 21
</TABLE>
ARTICLE 4
COVENANTS
<TABLE>
<CAPTION>
<C> <S> <C>
4.1 Maintenance of Business 21
4.2 Actions Contrary to Pooling and Tax Free Treatment 21
4.3 Other Discussions 21
4.4 Continuity of Interest and Restrictions on Resale 22
4.5 Best Efforts 22
4.6 Shareholder Vote 22
4.7 NASDAQ Listing 22
4.8 Employee Matters 22
4.9 Observer Role 22
4.10 Tax Elections 23
4.11 Fairness Hearing 23
4.12 Additional Tax Representations 23
4.13 Approval Distributions 23
4.14 Filing of Combined Operations 23
</TABLE>
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ARTICLE 5
CONDITIONS TO MERGER
<TABLE>
<CAPTION>
<C> <S> <C>
5.1 Conditions to Obligations of FFGI, Acquisition Sub,
the Shareholders and AllMicro 24
5.2 Conditions to Obligations of FFGI and Acquisition Sub 24
5.3 Conditions to Obligations of AllMicro and the Shareholders 25
</TABLE>
ARTICLE 6
INDEMNITY
<TABLE>
<CAPTION>
<C> <S> <C>
6.1 Survival of Representations, Warranties, Covenants and Agreements 26
6.2 Indemnification of FFGI and the Surviving Corporation
and the Escrow Deposit of FFGI Common Stock 26
6.3 Indemnification of the Shareholders 28
6.4 Procedure for Indemnification of FFGI and the
Surviving Corporation with Respect to Non-Third Party Claims 29
6.5 Procedure for Indemnification of the Shareholders with
Respect to Non-Third Party Claims 29
6.6 Procedure for Indemnification with Respect to Third-Party Claims 30
6.7 Fraud or Willful Misrepresentation 31
6.8 Settlement and General Release of the FFGI Released Parties 32
6.9 Settlement and General Release of the Shareholders Released Parties 33
</TABLE>
ARTICLE 7
TERMINATION
<TABLE>
<CAPTION>
<C> <S> <C>
7.1 Termination by Mutual Consent 34
7.2 Termination by FFGI or Acquisition Sub or AllMicro 34
7.3 Effect of Termination 34
</TABLE>
ARTICLE 8
MISCELLANEOUS
<TABLE>
<CAPTION>
<C> <S> <C>
8.1 Notices 35
8.2 Entire Agreement; Modifications; Waiver 35
8.3 Counterparts 35
8.4 Publicity 35
8.5 Successors and Assigns 35
8.6 Governing Law 35
8.7 Further Assurances 37
8.8 Expenses 37
</TABLE>
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<TABLE>
<CAPTION>
<C> <S> <C>
8.9 Attorneys' Fees 37
8.10 Covenant Not To Compete 37
8.11 Consent to Service of Process 38
8.12 Obligations of Shareholders 39
</TABLE>
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<TABLE>
<CAPTION>
EXHIBITS
<S> <C>
Exhibit A Agreement and Plan of Merger
Exhibit B Affiliates Letter and Continuity of Interest Certificate
Exhibit C Escrow Agreement
Exhibit D Employment Agreement
Exhibit E Opinion of AllMicro Counsel
Exhibit F Opinion of ForeFront Counsel
Exhibit G Additional Tax Representations from AllMicro and
Shareholders
Exhibit H Additional Tax Representations from FFGI
Exhibit I Registration Rights Agreement
SCHEDULES
Schedule 2.2 Capitalization
Schedule 2.4 Consents
Schedule 2.5 Financial Statement Exceptions
Schedule 2.6 Material Changes
Schedule 2.8 Assets
Schedule 2.9 Insurance
Schedule 2.10 Material Agreements
Schedule 2.11 Intellectual Property Rights
Schedule 2.12 Employee Benefit Plans
Schedule 2.15 Litigation
Schedule 2.17 Taxes
Schedule 2.19 Related Party Transactions
Schedule 4.8 Employee Bonuses and Options
</TABLE>
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AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization ("the Agreement") is entered
into as of July 19, 1996 by and among The ForeFront Group, Inc., a Delaware
corporation ("FFGI"), AllMicro Acquisition Corporation, a Florida corporation
("Acquisition Sub"), AllMicro, Inc., a Florida corporation ("AllMicro" or the
"Surviving Corporation") and Michael Kaplan and Anita Kaplan (the
"Shareholders").
RECITALS
The parties hereto intend that, subject to the terms and conditions
hereinafter set forth, Acquisition Sub will be merged with and into AllMicro
(the "Merger") in accordance with the terms of this Agreement, an Agreement and
Plan of Merger substantially in the form attached hereto as Exhibit A (the
"Agreement of Merger") and the applicable provisions of the laws of the State of
Florida, in connection with which all of the outstanding shares of common stock
of AllMicro ("AllMicro Common Stock") will be exchanged for shares of common
stock of FFGI ("FFGI Common Stock"). The AllMicro Common Stock shall be
automatically converted into FFGI Common Stock, and certificates representing
AllMicro Common Stock will be exchanged for certificates representing FFGI
Common Stock, as provided in this Agreement and the Agreement of Merger.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements contained herein, the parties hereto, intending to be legally bound,
do hereby agree as follows:
ARTICLE 1
PLAN OF REORGANIZATION
1.1 BOARD OF DIRECTORS' AND SHAREHOLDERS' APPROVAL. The respective
boards of directors of FFGI, Acquisition Sub and AllMicro have duly adopted and
approved this Agreement, and, following the completion of the Fairness Hearing
and the issuance of the Permit (as each are defined in Section 4.11) this
Agreement shall be submitted to the shareholders of AllMicro for approval in
accordance with the applicable provisions of Florida law (the "Florida Law").
1.2 THE MERGER. Subject to the terms and conditions of this Agreement
and the Agreement of Merger, Acquisition Sub shall be merged with and into
AllMicro pursuant to the Agreement of Merger, with AllMicro as the surviving
corporation, and the separate existence of Acquisition Sub shall thereupon
cease. At the Effective Time (as hereinafter defined) AllMicro, as the
surviving corporation in the Merger, shall continue its corporate existence
under the laws of the State of Florida.
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(a) At the Effective Time, each of the issued and outstanding shares
of AllMicro Common Stock (other than shares as to which dissenters' rights are
perfected under Sections 1301, 1302 and 1320 of the Florida Business Corporation
Act (the "Florida Law") (Chapter 607 of Florida Statutes), and any shares of
AllMicro which are owned by AllMicro or any direct or indirect wholly-owned
subsidiary of AllMicro) shall be converted automatically into and exchanged for
10,561.52 shares of FFGI Common Stock. Any shares of AllMicro Common Stock that
are owned by AllMicro shall be canceled, and no securities of FFGI or other
consideration shall be delivered in exchange therefor. At the Effective Time,
each share of common stock of Acquisition Sub, which is issued and outstanding
immediately prior to the Effective Time, will be converted into and be
exchangeable for one fully paid and nonassessable share of common stock of
AllMicro. No other shares of capital stock of AllMicro shall be issued in or
outstanding immediately after the Merger. No shares of stock of Acquisition Sub
shall be issued in or outstanding after the Merger.
(b) If, between the date of this Agreement and the Effective Time,
the outstanding shares of FFGI Common Stock shall have been changed into a
different number of shares or a different class by reason of any
reclassification, recapitalization, split, reverse split or combination, the
consideration to be issued to the holders of AllMicro Common Stock in the Merger
shall be correspondingly adjusted.
1.3 THE CLOSING. Upon the satisfaction or satisfactory waiver of all
conditions set forth in Article 5 of this Agreement, the closing (the "Closing")
of the Merger shall take place immediately upon the Effective Time of the Merger
(as defined in Section 1.4) at the offices of the Company, or such other place,
time and date as FFGI and AllMicro may mutually select (with the date of the
Closing being referred to herein as the "Closing Date").
1.4 EFFECTIVE TIME. Pursuant to (S) 607.1105, Florida Statutes,
Articles of Merger shall be filed, simultaneously with the Closing, in the
office of the Secretary of State for the State of Florida. The Merger shall
become effective immediately upon the filing of the Articles of Merger and
related certificates with the office of the Secretary of State for the State of
Florida (the "Effective Time").
1.5 EXEMPTION FROM REGISTRATION. The FFGI Common Stock to be issued in
connection with the Merger will be exempt from the Securities Act of 1933, as
amended (the "Securities Act"), and exempt from registration or qualification
under the Florida Securities and Investor Protection Act (the "Florida
Securities Act") and any other applicable state securities laws.
1.6 RESTRICTED SECURITIES. The FFGI Common Stock will be subject to
the restrictions and obligations imposed in connection with representations and
warranties contained in an Affiliates Letter and Continuity of Interest
Certificate, to be executed by each of the Shareholders, substantially in the
form attached hereto as Exhibit B.
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1.7 SURRENDER AND EXCHANGE OF OUTSTANDING CERTIFICATES; STATUS OF
OUTSTANDING CERTIFICATES; FRACTIONAL SHARES.
The conversion of shares of AllMicro Common Stock into FFGI Common Stock as
provided for by this Agreement and the Agreement of Merger shall occur
automatically at the Effective Time without further action by the holders
thereof. Until surrendered, each certificate that prior to the Effective Time
represented shares of AllMicro Common Stock will be deemed to evidence the right
to receive the number of shares of FFGI Common Stock into which such AllMicro
Common Stock has been converted. At the Closing, each holder of a certificate
or certificates theretofore representing a share or shares of AllMicro Common
Stock shall be entitled to receive from FFGI, in exchange for and upon the
surrender of all of such holder's AllMicro certificates, the number of shares of
FFGI Common Stock to which the holder of such certificates is entitled pursuant
to Section 1.2 of this Agreement and the Agreement of Merger (less the number of
shares, if any, of FFGI Common Stock being deposited in escrow pursuant to this
Agreement and the Escrow Agreement). Stock certificates for fractions of FFGI
Common Stock shall not be issued in the Merger and such fractional interests
shall not entitle the owners thereof to vote, to receive dividends or to
exercise any other right of a stockholder with respect to such fractional
interest. In lieu of any such fractional interests, each holder of AllMicro
Common Stock who would otherwise have been entitled to a fraction of a share of
FFGI Common Stock upon surrender of stock certificates will be paid cash
(rounded to the nearest cent, 0.5 cents to be rounded to 1 cent) upon such
surrender in an amount equal to such fraction times the closing sale price of a
share of FFGI Common Stock on the NASDAQ National Market on the day of the
Effective Time.
1.8 DISSENTERS' RIGHTS. Holders of AllMicro Common Stock who have
complied with all requirements for perfecting the dissenters' rights as set
forth in Section 1320 of the Florida Law shall be entitled to their rights under
such laws. AllMicro shall give FFGI prompt written notice of any assertions of
dissenters' rights or withdrawals of assertions of dissenters' rights, and any
other instrument in respect thereof received by AllMicro and the opportunity to
participate in all negotiations and proceedings with respect to demands for
appraisal.
1.9 TAX-FREE REORGANIZATION; POOLING. The parties intend to adopt the
Agreement as a plan of reorganization within the meaning of Section 354 of the
Internal Revenue Code of 1986, as amended (the "Code") and to consummate the
Merger in accordance with Section 368(a) of the Code, and that the Merger be
treated for accounting purposes as a "pooling of interests" under Opinion No. 16
of the Accounting Principles Board.
1.10 ARTICLES OF INCORPORATION; BYLAWS; DIRECTORS AND OFFICERS OF THE
SURVIVING CORPORATION.
(a) The Articles of Incorporation and Bylaws of AllMicro as the
Surviving Corporation shall be amended and restated in their entirety to conform
with the Articles of Incorporation and Bylaws of Acquisition Sub immediately
prior to the Effective Time with such conforming changes as are necessary to
preserve the name "AllMicro, Inc."
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(b) The directors and officers of the surviving corporation
immediately following the Effective Time shall be the directors and officers of
Acquisition Sub immediately prior to the Effective Time until their successors
are elected or appointed and qualified.
1.11 ESCROW. 105,615 shares of FFGI Common Stock issued in the Merger
(the "Escrow Shares") shall be held in escrow as collateral for the
indemnification obligations of the Shareholders pursuant to Article 6 of this
Agreement pursuant to the terms of an escrow agreement ("Escrow Agreement")
substantially in the form attached hereto as Exhibit C. The Escrow Shares shall
be withheld pro rata from the shares of FFGI Common Stock to be received by the
Shareholders in the Merger.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF ALLMICRO
AllMicro and the Shareholders represent and warrant to FFGI and Acquisition Sub
as follows subject to the exceptions set forth in the Schedules attached hereto
which shall be deemed to qualify all applicable representations and warranties
in this Article 2 even if not specifically cross referenced as pertaining
thereto:
2.1 ORGANIZATION AND STANDING.
(a) AllMicro is a corporation duly organized, validly existing and in
good standing under the laws of the State of Florida, has all requisite
corporate power and authority to own, operate and lease its properties and carry
on its business as now conducted, and is duly qualified to do business and is in
good standing as a foreign corporation in each jurisdiction in which the failure
to so qualify would have a Material Adverse Effect. Whenever used in this
Article 2, "Material Adverse Effect" shall mean any fact, event or condition, or
the absence of any fact, event or condition, as the context requires, which,
individually or in the aggregate, would have a material adverse effect on the
business, financial condition or results of operations of AllMicro.
(b) AllMicro has delivered to FFGI complete and accurate copies of
its Articles of Incorporation and Bylaws and minutes of all of its directors'
and shareholders' meetings. AllMicro stock books provided to FFGI are complete
and accurate in all material respects as of the date hereof.
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2.2 CAPITALIZATION.
(a) There are 100 outstanding shares of AllMicro Common Stock.
Schedule 2.2 accurately sets forth the ownership of the AllMicro Common Stock
and the addresses of all of its security holders. Except as set forth in the
preceding sentence, there are no outstanding shares of capital stock of AllMicro
and there are no options, warrants or other securities convertible into capital
stock of AllMicro nor any other rights, agreements or arrangements with respect
to the issuance of capital stock of AllMicro or securities convertible into or
exchangeable for common stock of AllMicro.
(b) All of the issued and outstanding shares of AllMicro Common Stock
have been duly authorized, validly issued, are fully paid and non assessable,
and were issued in full compliance with all applicable federal and state
securities laws and were not issued in violation of any preemptive rights. None
of the issued and outstanding shares of AllMicro Common Stock is subject to
repurchase.
(c) Except for any restrictions imposed by applicable state and
federal securities laws, there is no right of first refusal, co-sale right,
right of participation, right of first offer, option or other restriction on
transfer applicable to any shares of AllMicro Common Stock. AllMicro is not
under any obligation to register under the Securities Act or the Florida
Securities Act any shares of AllMicro Common Stock. AllMicro is not a party or
subject to any agreement or understanding, and there is no agreement or
understanding between or among any persons, that affects or relates to the
voting or giving of written consent with respect to any shares of AllMicro
Common Stock.
2.3 SUBSIDIARIES. AllMicro does not own, directly or indirectly, an
interest in any corporation, partnership, business, trust or other entity.
2.4 AUTHORITY, APPROVAL AND ENFORCEABILITY.
(a) Subject to obtaining any required approvals of the holders of
AllMicro Common Stock, AllMicro has all requisite corporate power and authority
to execute, deliver and perform its obligations under this Agreement, the
Agreement of Merger and the Escrow Agreement, and all corporate action on its
part necessary for such execution, delivery and performance has been duly taken.
(b) The execution and delivery by AllMicro of this Agreement, the
Agreement of Merger and the Escrow Agreement do not, and the performance and
consummation of the transactions contemplated by this Agreement, the Agreement
of Merger and the Escrow Agreement will not, result in any conflict with, breach
or violation of or default, termination or forfeiture under (or upon the failure
to give notice or the lapse of time, or both, result in any conflict with,
breach or violation of or default, termination or forfeiture under) any terms or
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provisions of (i) its Articles of Incorporation or Bylaws, (ii) any statute,
rule, regulation, or any judicial, governmental, regulatory or administrative
decree, order or judgment, or (iii) except as set forth on Schedule 2.4, any
agreement, lease or other instrument to which it is a party or by which it or
any of its assets may be bound, the conflict with, breach or violation of or
default, termination or forfeiture under would have a Material Adverse Effect.
(c) No consent, approval, authorization, order, registration,
qualification or filing of or with any court or any regulatory authority or any
other governmental or administrative body is required on the part of AllMicro
for the consummation by it of the transactions contemplated by this Agreement,
the Agreement of Merger and the Escrow Agreement, except the filing of the
Articles of Merger and related certificates with the Secretary of State of the
State of Florida and filing that may be required under state or securities "blue
sky" law which are the responsibility of FFGI.
(d) Upon due execution and delivery by AllMicro, this Agreement, the
Agreement of Merger and the Escrow Agreement will be its legal, valid and
binding obligation, enforceable against it in accordance with the respective
terms hereof and thereof, except as such enforcement may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally and subject to the availability of
equitable remedies.
2.5 FINANCIAL STATEMENTS.
(a) AllMicro has delivered to FFGI complete copies of its audited
balance sheets as of December 31, 1992, 1993, 1994 and 1995 and the related
audited statements of income and retained earnings and cash flows for the years
then ended (collectively, the "AllMicro Audited Financials") accompanied by the
auditors' report of its independent certified public accountants. The AllMicro
Audited Financials present fairly its financial position as of those dates and
the results of its operations and cash flows for the years then ended in
conformity with generally accepted accounting principles ("GAAP") applied on a
consistent basis.
(b) AllMicro has delivered to FFGI an unaudited balance sheet as of
May 31, 1996 and the related unaudited statement of income and retained earnings
and cash flows for the five month period then ended (the "AllMicro Interim
Financials"). The AllMicro Interim Financials present fairly its financial
position as of May 31, 1996 and the results of its operations and cash flows for
the five months then ended in conformity with GAAP applied on a basis consistent
with the AllMicro Audited Financials (except for the absence of notes thereto
and subject to normal year-end audit adjustments which are not material). The
AllMicro Audited Financials and the AllMicro Interim Financials are hereinafter
collectively referred to as the "AllMicro Financials."
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(c) There is no outstanding claim, liability or obligation of any
nature, whether absolute, accrued, contingent or otherwise, other than the
liabilities and obligations reflected on the AllMicro Interim Financials,
except for liabilities and obligations incurred in the ordinary course of
business since the date of the AllMicro Interim Financials.
(d) All of the accounts receivable reflected on the AllMicro Interim
Financials and all accounts receivable incurred since that date are fully
collectible in the normal course of business and there are no known or asserted
claims or other rights of set-off against any thereof, except for any reserves
established for sales returns or uncollectible accounts. Except as set forth on
Schedule 2.5, as of May 31, 1996 there is (i) no account debtor delinquent in
its payment by more than 90 days, (ii) no account debtor that has refused (or,
to the best knowledge of AllMicro, threatened to refuse) to pay its obligations
for any reason, (iii) to the best knowledge of AllMicro, no account debtor that
is insolvent or bankrupt, and (iv) no account receivable which is pledged to any
third party by AllMicro.
(e) All of the accounts payable reflected on the AllMicro Interim
Financials and all accounts payable incurred since that date arose in the
ordinary course of business, and there is no such account payable delinquent in
its payment except those having to do with normal trade disputes, none of which
exceed $5,000 individually or $10,000 in the aggregate as of the date hereof.
(f) Since the date of the AllMicro Interim Financial Statements,
AllMicro has continued to replenish inventories in a normal and customary manner
consistent with past practices. AllMicro has not received written or oral notice
that it will experience in the foreseeable future any difficulty in obtaining,
in the desired quantity and quality and at a reasonable price and upon
reasonable terms and conditions, the raw materials, supplies or component
products required for the manufacture, assembly or production of its products.
The values at which inventories are carried reflect the inventory valuation
policy of AllMicro which is consistent with its past practice and in accordance
with GAAP applied on a consistent basis.
(g) AllMicro's quick ratio (i.e., cash plus account receivables less
current liabilities and including any reserve for contingent liabilities in
accordance with GAAP) at the Closing will be equal to one.
2.6 MATERIAL CHANGES. Since December 31, 1995, except as is set forth
on Schedule 2.6, there has not been any material change in its assets,
liabilities, financial condition, or operating results from that reflected in
the AllMicro Audited Financials, except (a) changes reflected in the AllMicro
Interim Financials or (b) changes in the ordinary course of business that have
not, in the aggregate, resulted in a Material Adverse Effect.
2.7 RETURNS. Except as set forth on Schedule 2.7, AllMicro has not had
any of its products returned by a purchaser or user thereof, other than for
minor, nonrecurring warranty
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problems, stock balancing, overstock and version changes. AllMicro is not aware
of any pending warranty claims other than those that arise in the ordinary
course of business and which are not expected to require a bulk recall of or
modification of products currently sold to customers or in the distribution
channel.
2.8 PROPERTIES AND INVENTORIES.
(a) AllMicro has good title to, valid leasehold interest in, or other
right to use all of the assets used in its operations or necessary for the
conduct of its business including, without limitation, the assets reflected on
the AllMicro Interim Financials, free and clear of any mortgages, pledges,
security interests, encumbrances, material restrictions or adverse claims except
as reflected in the Financial Statements, or Schedule 2.8, and except for such
imperfections of title and encumbrances, if any, which are not substantial in
character, amount or extent, and which do not and are not reasonably likely to
materially detract from the value, or interfere with the present use, of the
property subject thereto or affected thereby. All of such assets are in good
operating condition, normal wear and tear excepted, and are adequate and
suitable for the purposes for which they are presently being used.
(b) Since the date of the AllMicro Interim Financials, there has not
occurred any transfer of title other than in the ordinary course of business,
any abandonment, any pilferage or any other material loss with respect to, any
of its property, plant or equipment.
(c) Set forth on Schedule 2.8 is a true and correct list of all of
the assets (including fixed assets) having a net book value in excess of $10,000
owned or leased by AllMicro. AllMicro does not own any real property. To the
knowledge of AllMicro, all improvements on leased property used in the business
of AllMicro and the present use thereof are in accordance with the applicable
laws.
2.9 INSURANCE. To the knowledge of AllMicro, it is in compliance with
each of such policies such that none of the coverage provided under such
policies has been invalidated. Schedule 2.9 sets forth a list of the insurance
policies held by AllMicro.
2.10 MATERIAL AGREEMENTS.
(a) Except as set forth on Schedule 2.10, AllMicro is not a party to
or subject to any oral or written:
(i) agreement for the purchase of inventory, supplies,
equipment or other real or personal property, or the procurement of services,
except individual purchase orders or aggregate purchase orders to a single
vendor involving payments of less than $50,000;
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(ii) lease or ownership of equipment, machinery or other
personal property involving aggregate annual payments in excess of $10,000;
(iii) agreement for the sale or lease of products or
furnishings of its services except individual purchase orders or aggregate
purchase orders from a single customer involving payments of less than $50,000
since December 31, 1995;
(iv) joint venture, partnership or other contract or
arrangement involving the sharing of profits other than license agreements;
(v) agreement relating to the purchase or acquisition, by
merger or otherwise, of a significant portion of its business, assets or
securities by any other person or of any other person by it other than as
contemplated herein;
(vi) agreement containing a covenant or covenants which purport
to limit its ability or right to engage in any lawful business activity material
to it or compete with any person or entity in a business material to it;
(vii) agreement presently in effect pursuant to which it
has appointed any organization or person to act as its distributor or sales
agent or pursuant to which it has been appointed a distributor or sales agent by
any third party;
(viii) agreement with any of its officers, directors or
affiliates;
(ix) agreement for the license of any patent, copyright, trade
secret or other proprietary information agreements or agreements for the sale of
product to end users;
(x) agreements involving payments to or obligations of it not
otherwise described in this Section 2.10 in excess of $50,000; or
(xi) agreement of indebtedness or capital equipment leases in
excess of $10,000.
Each agreement, contract, mortgage, indenture, plan, lease, instrument,
permit, license and commitment listed on Schedule 2.10 pursuant to this Section
2.10 shall herein be referred to individually as a "Significant Contract" and
collectively the "Significant Contracts."
(b) To AllMicro's knowledge, no party to any Significant Contract,
intends to cancel, withdraw, modify or amend such Significant Contract.
(c) AllMicro has performed all material obligations required to be
performed by it on or prior to the date hereof under each Significant Contract,
and it is not in
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default, breach or violation thereunder, and is not aware of any facts from
which it should reasonably conclude that it will not be able to perform all
obligations required to be performed by it subsequent to the date hereof under
each such Significant Contract, except for such defaults, breaches, or
violations under such instruments or obligations that would not have a Material
Adverse Effect.
2.11 INTELLECTUAL PROPERTY RIGHTS.
(a) AllMicro has full title and ownership of or rights to utilize all
patents, trademarks, license rights, service marks, trade names, copyrights,
trade secrets, information, proprietary rights and processes (collectively,
"Intellectual Property") necessary for or used in its business as now conducted
without, to its knowledge, any infringement of the rights of others, except as
set forth on Schedule 2.11. To AllMicro's knowledge, all Intellectual Property
is valid, subsisting, unexpired, enforceable and has not been abandoned. No
holding decision or judgment has been rendered by any governmental authority
which would limit, cancel or question the validity of any Intellectual Property.
Except as set forth on Schedule 2.11, there are no outstanding options,
licenses, liens, encumbrances or agreements of any kind relating to the
foregoing, nor is it bound by or a party to any options, licenses, liens,
encumbrances or agreements of any kind with respect to the Intellectual Property
of any other person or entity. AllMicro has not received any communications nor
is it aware of any entity alleging that AllMicro has infringed or, by conducting
its business as currently conducted, would infringe any intellectual property
right of any other person or entity. AllMicro has used its commercially
reasonable best efforts to prevent any infringement of the Intellectual Property
by third parties. AllMicro has not received any communication from any
governmental agency stating that AllMicro is not entitled to register, or
receive patents for, any of its Intellectual Property. Except as set forth on
Schedule 2.11, AllMicro is not aware that any of its employees or consultants is
obligated under any contract (including licenses, covenants or commitments of
any nature) or other agreement, or subject to any judgment, decree or order of
any court or administrative agency, that would interfere with the use of his or
her best efforts to promote and secure the Intellectual Property of AllMicro or
that would conflict with its business as proposed to be conducted. Neither the
execution or delivery of this Agreement or the Agreement of Merger, nor the
carrying on of its business by its employees or consultants, nor the conduct of
its business as currently conducted, will conflict with or result in a breach of
the terms, conditions or provisions of, or constitute a default under, any
contract, covenant or instrument under which any of such employees or
consultants or the Company is now obligated. To AllMicro's knowledge, each of
AllMicro's employees and consultants who participate in the creation of
Intellectual Property, past and present, have executed, enforceable agreements
with AllMicro assigning or licensing his or her rights in any Intellectual
Property to AllMicro. AllMicro does not believe it is or will be necessary to
utilize any inventions of any of its employees or consultants (or persons it
currently intends to hire as service providers) made prior to their employment
by it (except for inventions that AllMicro currently owns or has a right to
utilize and which are set forth on Schedule 2.11). Schedule 2.11 also
sets forth all material patents, patent applications
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trademarks (registered or unregistered), copyright processes and license
agreements owned or licensed by AllMicro which are necessary for or used in its
business as now conducted. Schedule 2.11 also sets forth all independent
contractor or consulting agreements pursuant to which AllMicro provided
consulting services which require a consent or waiver to consummate the
transactions contemplated in this Agreement. All of AllMicro license agreements
or assignments with respect to its Intellectual Property are in writing and
evidence legitimate ownership or licensing of such rights in AllMicro. All
royalty obligations of AllMicro are listed on Schedule 2.11. No unlicensed
invention that is shown as being owned by any employee or consultant of AllMicro
is necessary for the conduct of AllMicro business as presently conducted.
(b) Except as set forth on Schedule 2.11, AllMicro is not making use
of any confidential information of third parties nor any confidential
information in which any of its present or past employees or other service
providers, has claimed, by written communication to AllMicro, a proprietary
interest; and AllMicro is not aware of any facts that would give rise to such a
claim.
(c) Without limiting the generality of the foregoing representations,
AllMicro expressly represents and warrants that:
(i) AllMicro has satisfied all material obligations pursuant
to any and all consulting agreements pursuant to which AllMicro provided
consulting services and AllMicro is not using nor has it developed any
derivatives or modifications except as expressly authorized under such
agreements;
(ii) AllMicro has no reasonable basis to believe that any event
has occurred which would give rise to any present or future liability under any
agreement to provide indemnification for infringement of any third party rights
or otherwise; or
(iii) AllMicro is not in arrears in the payment of any
royalty obligations pursuant to any license agreements with third parties
concerning the Intellectual Property.
2.12 EMPLOYEES AND EMPLOYEE BENEFIT PLANS. Except as set forth on
Schedule 2.12, AllMicro does not maintain and is not a party to any compensation
or employee benefit plans within the meaning of Section 3(3) of ERISA, programs
or contracts (the "Compensation and Benefit Programs") for employees or former
employees or their dependents.
AllMicro has provided FFGI with all documents and government filings
relating to the Compensation and Benefit Programs and has provided a written
summary of any unwritten Compensation and Benefit Programs.
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The Compensation and Benefit Programs have been maintained in compliance
with all applicable laws, and there are no liabilities associated with the
Compensation and Benefit Programs (statutory, contractual or otherwise) which
have not been fully funded by AllMicro.
Neither AllMicro nor any ERISA Affiliate has sponsored, maintained or
contributed to, or has had any obligation to constitute, any pension plan
regulated under Title IV of ERISA within the last six years.
No Compensation or Benefit Program provides benefits described in Section
3(1) of ERISA to any former employees or retirees of AllMicro or any ERISA
Affiliate except as required under Part 6 Title I of ERISA.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
"ERISA Affiliate" of AllMicro means any other person that, together
with AllMicro as of the relevant measuring date under ERISA, was or
is required to be treated as a single employer under Section 414 of
the Code.
2.13 ENVIRONMENTAL AND SAFETY LAWS. AllMicro has complied and is in
compliance with all applicable local, state and federal environmental laws,
regulations, ordinances and administrative and judicial orders relating to the
generation, recycling, use, sale, storage, handling, transfer and disposal of
any Hazardous Substances, and AllMicro has not received any written or oral
notice in which AllMicro has been alleged to be in violation of, or been subject
to any administrative, judicial or regulatory proceeding pursuant to, such laws
or regulations. As used herein, "Hazardous Substances" shall mean any asbestos,
petroleum or any substance or material defined or designated as hazardous or
toxic waste, hazardous or toxic material, hazardous or toxic substance, or other
similar term, by any federal, state or local environmental statute, regulation
or ordinance presently in effect, including, without limitation, any material or
substance which is designated or defined as a "hazardous substance," "hazardous
waste" or "toxic substance" in (i) the Federal Water Pollution Control Act, 33
U.S.C. (S) 1251 et seq., and any amendments thereto, (ii) the Federal Resource
Conservation and Recovery Act 42 U.S.C. (S)(S) 6901 et seq., and any amendments
thereto, (iii) the Comprehensive Environmental Response, Compensation and
Liability Act, 42 U.S.C. (S) 9601 et seq., and any amendments thereto, or (iv)
the Hazardous Material Transportation Act, 49 U.S.C. (S) 1801 et seq., and any
amendments thereto.
2.14 COMPLIANCE WITH LAWS. AllMicro has complied in all material
respects with all foreign, federal, state, local and county laws, ordinances,
regulations, judgments, orders, decrees or rules of any court, arbitrator or
governmental, regulatory or administrative agency or entity. AllMicro has
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made all valid and current permits, licenses, orders, authorizations,
registrations, approvals and other analogous instruments (and each is in full
force and effect) and AllMicro has made all filings and registrations and the
like necessary or required by law to conduct its business, except where the
failure to maintain such permits and other instruments or to make such filings
and registrations would not have a Material Adverse Effect. Except as set forth
on Schedule 2.14, AllMicro has not received any governmental notice of any
violation by AllMicro of any such laws, rules, regulation of orders. AllMicro is
not in default or material noncompliance under any such permits, consents, or
similar instruments except where such default or non-compliance would not have a
Material Adverse Effect.
2.15 ABSENCE OF LITIGATION. Except as set forth on Schedule 2.15,
AllMicro is not a party to any litigation, claim, arbitration, investigation or
other proceeding, nor, to its knowledge, is there any reasonable basis therefor.
Neither AllMicro nor, to its knowledge, any of its officers or directors is
bound by any judgment, decree, injunction, ruling or order of any court,
governmental, regulatory or administrative department, commission, agency or
instrumentality, arbitrator or any other person.
2.16 NO BROKERS. AllMicro is not obligated for the payment of fees
or expenses of any broker or finder in connection with the origin, negotiation
or execution of this Agreement or the Agreement of Merger or in connection with
any transaction contemplated hereby or thereby, other than any obligation it may
have to the Corum Group and Saul Lipson and Company.
2.17 TAXES.
(a) Definitions. For purposes of this Agreement:
(i) the term "Taxes" means (A) all federal, state, local,
foreign and other net income, gross income, gross receipts, sales, use, ad
valorem, transfer, franchise, profits, license, lease, service, service use,
withholding, payroll, employment, excise, severance, stamp, occupation, premium,
property, windfall profits, customs, duties or other taxes, fees, assessments or
charges of any kind whatsoever, together with any interest and any penalties,
additions to tax or additional amounts with respect thereto, (B) any liability
for payment of amounts described in clause (A) whether as a result of transferee
liability, of being a member of an affiliated, consolidated, combined or unitary
group for any period, or otherwise through operation of law and (C) any
liability for the payment of amounts described in clauses (A) or (B) as a result
of any tax sharing, tax indemnity or tax allocation agreement or any other
express or implied agreement to indemnify any other person; and the term "Tax"
means any one of the foregoing Taxes; and
(ii) the term "Returns" means all returns, declarations,
reports, statements and other documents required to be filed in respect of
Taxes, and the term "Return" means any one of the foregoing Returns.
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(b) AllMicro has properly completed and filed on a timely basis and
in correct form all Returns required to be filed. As of the time of filing, the
Returns did not materially misstate the facts regarding the income, business,
assets, operations, activities, status or other matters of AllMicro or any other
information required to be shown thereon and none of such Returns contains a
disclosure statement under Section 6662 of the Code (or any predecessor
provision or comparable provision of state, local or foreign law). AllMicro will
have properly completed and filed on a timely basis and in correct form all
Returns required to be filed after the date of this Agreement and on or prior to
the Closing, and will provide FFGI the reasonable opportunity to review and
comment on any such Return prior to its filing.
(c) With respect to all amounts of Taxes imposed upon AllMicro, or
for which AllMicro is liable, whether to taxing authorities (as, for example,
under law) or to other persons or entities (as, for example, under tax
allocation agreements), with respect to all taxable periods or portions of
periods ending on or before the date of Closing, all applicable Tax laws and
agreements have been fully complied with, and all such amounts required to be
paid by AllMicro to taxing authorities or others have been paid. AllMicro does
not owe any Taxes on compensation paid to any of its employees, other than Taxes
which are not yet due and payable.
(d) Except as set forth on Schedule 2.17, no issues have been raised
(and are currently pending) by any taxing authority in connection with any of
the Returns. No claim has been communicated to AllMicro by a Tax authority in a
jurisdiction where AllMicro does not file Returns that it is or may be subject
to Tax by that jurisdiction. No extensions or waivers of statutes of limitations
with respect to the Returns have been given by or requested from AllMicro. No
power of attorney granted by AllMicro with respect to Taxes is in force.
Schedule 2.17 sets forth: (i) the taxable years of AllMicro as to which the
respective statues of limitations on the assessment of United States federal
income and any applicable state, local or foreign income or franchise Taxes have
not expired, and (ii) with respect to such taxable years sets forth those years
for which examinations by the Internal Revenue Service or the state, local or
foreign taxing authority have been completed, those years for which examinations
by such agencies are presently being conducted, those years for which notice of
pending or threatened examination or adjustment has been received, those years
for which examinations by such agencies have not been initiated, and those years
for which required Returns for such Taxes have not yet been filed. Except to the
extent indicated in Schedule 2.17, all deficiencies asserted or assessments made
as a result of any examinations by the Internal Revenue Service or state, local
or foreign taxing authority have been fully paid, or are fully reflected as a
liability in the AllMicro Financials, or are being contested and an adequate
reserve therefor has been established and is fully reflected in the AllMicro
Financials to the extent required by GAAP. Schedule 2.17 sets forth all Returns
presently under examination with respect to Taxes and all assessments and
deficiencies with respect to the Returns that are presently being contested by
AllMicro.
(e) There are no liens for Taxes (other than for current Taxes not
yet due and payable) upon the assets of AllMicro.
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(f) AllMicro is not a party to or bound by any tax indemnity, tax
sharing or tax allocation agreement.
(g) AllMicro has never been a member of an affiliated group of
corporations, within the meaning of Section 1504 of the Code, or a member of
combined, consolidated or unitary group for state, local or foreign Tax
purposes. AllMicro has not filed a consent pursuant to the collapsible
corporation provisions of Section 341(f) of the Code (or any corresponding
provision of state, local or foreign income Tax law) or agreed to have Section
341(f)(2) of the Code (or any corresponding provision of state, local or foreign
income Tax law) apply to any disposition of any asset owned by it.
(h) AllMicro has had in effect a valid election under Section
1362(a) of the Code (and any comparable provision of state, local or other tax
laws) at all times during the taxable periods of AllMicro for which the
applicable statute of limitations remains open.
(i) AllMicro has not agreed to make, nor is it required to make, any
adjustment under Sections 481(a) or 263A of the Code or any comparable provision
of state or foreign tax laws by reason of a change in accounting method or
otherwise. AllMicro has taken no action which is not in accordance with past
practice that could defer a liability for Taxes of AllMicro or the Shareholders
from any taxable period ending on or before the Closing Date to any taxable
period ending after such date.
(j) AllMicro is not a party to any agreement, contract, arrangement
or plan that has resulted or would result, separately or in the aggregate, in
connection with the Merger, any change of control of AllMicro or any other
transaction contemplated by this Agreement, in the payment of any "excess
parachute payments" within the meaning of Section 280G of the Code.
(k) AllMicro is not, and has not been, a United States real property
holding corporation (as defined in Section 897(c)(2) of the Code) during the
applicable period specified in Section 897(c)(1)(A)(ii) of the Code.
(l) No shareholder of AllMicro is other than a United States person
within the meaning of the Code.
(m) AllMicro does not have and has not had a permanent establishment
in any foreign country, as defined in any applicable Tax treaty or convention
between the United States and such foreign country and AllMicro has not engaged
in a trade or business within any foreign country.
(n) AllMicro is not party to any joint venture, partnership, or
other arrangement or contract which could be treated as a partnership for
federal income tax purposes.
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(o) The unpaid Taxes of AllMicro as set forth in AllMicro's audited
balance sheet as of December 31, 1995 do not exceed the reserve for Tax
liability (excluding any reserve for deferred Taxes established to reflect
timing differences between book and Tax income) set forth or included in
AllMicro balance sheets as at December 31, 1995. No material Tax liability of
AllMicro has been incurred since December 31, 1995 other than in the ordinary
course of business.
(p) All material elections with respect to Taxes affecting AllMicro
as of the date of this Agreement that are not readily identifiable on the
Returns heretofore provided to or made available to FFGI and any attachments
thereto are set forth in Schedule 2.17.
2.18 COMPLIANCE WITH INSTRUMENTS. AllMicro is not in violation of
or conflict with, breach of or in default under (either with the giving of
notice or the passage of time or both) any term or provision of its Articles of
Incorporation or Bylaws, or any Significant Contract, where such would not have
a Material Adverse Effect.
2.19 RELATED PARTY TRANSACTIONS. No employee, officer or director
of AllMicro or member of his or her immediate family is indebted to AllMicro,
nor is AllMicro indebted (or committed to make loans or extend or guarantee
credit) to any of them, except for advances to employees of less than $3,000.
Except as set forth on Schedule 2.19, to AllMicro's knowledge, none of such
persons has any direct or indirect ownership interest in any firm or corporation
with which AllMicro is affiliated or with which AllMicro has a business
relationship, or any firm or corporation that competes with AllMicro, except
that the employees, officers or directors of AllMicro and members of their
immediate families may own stock in publicly traded companies that may compete
with AllMicro. No member of the immediate family of any officer or director of
AllMicro is directly interested in any material contract with AllMicro.
2.20 POOLING. Neither AllMicro nor the Shareholders have engaged in
any transaction which it believes would preclude the Merger from being accounted
for as a pooling of interests.
2.21 DISCLOSURE; ACCURACY OF DOCUMENTS AND INFORMATION. No
representation or warranty made by AllMicro or the Shareholders in this
Agreement contains any untrue statement of a material fact or omits to state any
material fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The copies of all
instruments, agreements, other documents and written information delivered by
AllMicro to FFGI or their counsel are and will be complete and correct in all
material respects as of the date of delivery thereof.
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ARTICLE 2A
REPRESENTATIONS AND WARRANTIES
OF EACH OF THE SHAREHOLDERS
Each of the Shareholders severally and not jointly represent and warrant
to FFGI and Acquisition Sub as follows:
2A.1. AUTHORITY, APPROVAL AND ENFORCEABILITY.
(a) Such Shareholder has full power and authority to execute,
deliver and perform its obligations under this Agreement and the Escrow
Agreement, and all action on its part necessary for such execution, delivery and
performance has been duly taken.
(b) The execution and delivery by such Shareholder of this Agreement
does not, and the performance and consummation of the transactions contemplated
by this Agreement and the Escrow Agreement will not, result in any conflict
with, breach or violation of or default, termination or forfeiture under (or
upon the failure to give notice or the lapse of time, or both, result in any
conflict with, breach or violation of or default, termination or forfeiture
under) any statute, rule, regulation, judicial, governmental, regulatory or
administrative decree, order or judgment, or any agreement or other instrument
to which it is a party or to which any of its assets is subject.
(c) Upon due execution and delivery by such Shareholder, this
Agreement and the Escrow Agreement will be his or her legal, valid and binding
obligation, enforceable against him or her in accordance with the respective
terms hereof and thereof, except as such enforcement may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally and subject to the availability of
equitable remedies.
(d) Such Shareholder is the record and beneficial owner of the
shares of AllMicro Common Stock reflected as owned by him or her on Schedule
2.2, free and clean of any and all liens or encumbrances.
(e) Such Shareholder has not engaged in any transaction which he or
she believes would preclude the Merger from being accounted for as a pooling of
interests.
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES
OF FFGI AND ACQUISITION SUB
FFGI represents and warrants to AllMicro and the Shareholders as follows:
3.1 ORGANIZATION AND STANDING.
Each of FFGI and Acquisition Sub is a corporation duly organized, validly
existing and in good standing under the laws of the state of its incorporation,
has all requisite corporate power and authority to own, operate and lease its
properties and carry on its business as now conducted, and is duly qualified to
do business and is in good standing as a foreign corporation in each
jurisdiction in which the failure to so qualify would have a Material Adverse
Effect. Whenever used in this Article 3, "Material Adverse Effect" shall man
and be defined as any fact, event or condition, or the absence of any fact,
event or condition, as the context requires, which, individually or in the
aggregate, would have a material adverse effect on the business, financial
condition or results of operations of FFGI and its subsidiaries (on a
consolidated basis).
3.2 AUTHORITY, APPROVAL AND ENFORCEABILITY.
(a) Subject to obtaining the required approval of FFGI, as sole
shareholder of Acquisition Sub, each corporation has full corporate power and
authority to execute, deliver and perform its obligations under this Agreement,
the Agreement of Merger and the Escrow Agreement, as the case may be, and all
corporate action on their respective parts necessary for such execution,
delivery and performance has been duly taken. No vote or consent of the
stockholders of FFGI is required in connection with the transactions
contemplated by this Agreement.
(b) The execution and delivery by each of FFGI and Acquisition Sub,
as the case may be, of this Agreement, the Agreement of Merger and the Escrow
Agreement do not, and the performance and consummation of the transactions
contemplated by this Agreement, the Agreement of Merger and the Escrow Agreement
will not, result in any conflict with, breach or violation of or default,
termination or forfeiture under (or upon the failure to give notice or the lapse
of time, or both, result in any conflict with, breach or violation of or
default, termination of forfeiture under) any terms or provisions of its (i)
Certificate of Incorporation or Articles of Incorporation, as the case may be,
or Bylaws, (ii) any statute, rule, regulation or any judicial, governmental,
regulatory or administrative decree, order or judgment, or (iii) any material
agreement, lease or other instrument to which either is a party or to which it
or any of its assets may be bound.
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(c) No consent, approval, authorization, order, registration,
qualification or filing of or with any court or any regulatory authority or any
other governmental or administrative body is required on its part for the
consummation by each of FFGI and Acquisition Sub, as the case may be, of the
transactions contemplated by this Agreement, the Agreement of Merger and the
Escrow Agreement, except any approvals or filings required under state "blue
sky" laws and the filing of the Articles of Merger and related certificates with
the Secretary of State of the State of Florida.
(d) Upon due execution and delivery by the parties hereto and
thereto, this Agreement, the Agreement of Merger and the Escrow Agreement will
be the legal, valid and binding obligation of the parties hereto and thereto,
enforceable against such parties in accordance with the respective terms hereof
and thereof, except as such enforcement may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors'
rights generally.
3.3 FINANCIAL STATEMENTS AND REPORTS. FFGI has timely filed all
required forms, reports, statements and documents with the Securities and
Exchange Commission (the "Commission") all of which have complied in all
material respects with all applicable requirements of the Securities Act and the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). FFGI has
delivered to AllMicro true and complete copies of (i) FFGI's Annual Reports on
Form 10-KSB for the fiscal year ended December 31, 1995 and its Quarterly Report
on Form 10-QSB for the fiscal quarter ended March 31, 1996 (ii) its proxy
statements relating to FFGI's annual stockholders meeting held May 7, 1996 (iii)
all other forms, reports, statements and documents filed by FFGI with the
Commission since December 31, 1995 and (iv) all reports, statements and other
information provided by FFGI to its shareholders since December 31, 1995
(collectively, the "FFGI Reports"). As of their respective dates, the FFGI
Reports did not contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. The financial statements of FFGI included or incorporated
by reference in the FFGI Reports were prepared in accordance with GAAP applied
on a consistent basis (except as otherwise stated in such financial statements
or, in the case of audited statements, the related report thereon of independent
certified public accounts), and present fairly the financial position and
results of operations, cash flows and of changes in stockholders' equity of FFGI
as of the dates and for the periods indicated, subject, in the case of unaudited
interim financial statements, to normal year-end audit adjustments, none of
which either singly or in the aggregate are or will be material, and except that
the unaudited interim financial statements do not contain all of the disclosures
required by GAAP.
3.4 MATERIAL CHANGES. Since December 31, 1995, there has not been
any material adverse change in FFGI's assets, liabilities, financial condition,
or operating results.
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3.5 NO UNDISCLOSED LIABILITIES. Except as and to the extent set
forth on the consolidated balance sheet of FFGI as of December 31, 1995 included
in the FFGI Reports, neither FFGI nor any of its subsidiaries had, at such date,
any liabilities or obligations (absolute, accrued, contingent or otherwise)
material to FFGI and its subsidiaries taken as a whole, and since that date
neither FFGI nor any of its subsidiaries has incurred any such liabilities or
obligations material to FFGI and its subsidiaries taken as a whole except those
incurred in the ordinary course of business and consistent with past practice or
in connection with or as a result of the transactions contemplated by this
Agreement.
3.6 FFGI COMMON STOCK. The shares of FFGI Common Stock to be issued
to the holders of AllMicro Common Stock as contemplated hereunder are duly
authorized and, when issued and exchanged pursuant to the terms of this
Agreement, will be validly issued, fully paid, non-assessable and not subject to
any preemptive rights and will have been issued in compliance with applicable
federal and state securities laws.
3.7 CERTAIN LITIGATION. To the best knowledge of FFGI there is no
action, suit, proceeding, arbitration, investigation or claim pending or
threatened against FFGI which in any manner challenges or seeks to prevent,
enjoin, alter or materially delay any of the transactions contemplated hereby.
3.8 TAXES.
(a) All Tax returns, statements, reports and forms (including
estimated Tax returns and reports and information returns and reports) required
to be filed with any Tax authority with respect to any Taxable period ending on
or before the consummation of the transactions set forth herein, by or on behalf
of FFGI (collectively, the "FFGI Returns"), have been or will be filed when due
(including any extensions of such due date), and all amounts shown to be due
thereon on or before the Closing have been or will be paid on or before such
date, except to the extent such failure to file or pay has not had and could not
reasonably be expected to have a Material Adverse Effect.
(b) The financial statements of FFGI contained in FFGI's Annual
Report to Stockholders for the year ended December 31, 1995 fully accrue all
actual and contingent liabilities for Taxes with respect to all periods through
the date thereof in accordance with GAAP.
3.9 GOVERNMENTAL AUTHORIZATIONS AND LICENSES. FFGI is the holder of
all material licenses, authorizations, permits, concessions, certificates and
other franchises of any governmental entity required to operate its business
(collectively, the "FFGI Government Licenses") which FFGI Government Licenses
are in full force and effect, and is in material compliance with the terms,
conditions, limitations, restrictions, standards, prohibitions, requirements and
obligations of such FFGI Government Licenses except to the extent failure to
hold and maintain such FFGI Government licenses or to so comply would not be
reasonably
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likely to have a Material Adverse Effect. There is not now pending, nor to the
best knowledge of FFGI is there threatened, any action, suit, investigation or
proceeding against FFGI before any governmental entity with respect to the FFGI
Government Licenses, nor is there any issued or outstanding notice, order or
complaint with respect to the violation by FFGI of the terms of any FFGI
Government Licenses or any rule or regulation applicable thereto, except to the
extent that any such action would not be reasonably likely to have a Material
Adverse Effect.
3.10 NO BROKERS. Neither FFGI or any of its affiliates is obligated
for the payment of fees or expenses of any broker or finder in connection with
the origin, negotiation or execution of this Agreement or the Merger or in
connection with any transaction contemplated hereby or thereby, other than
FFGI's obligations to Montgomery Securities.
ARTICLE 4
COVENANTS
4.1 MAINTENANCE OF BUSINESS. During the period from the date hereof
to the Effective Time, AllMicro will carry on its business in the ordinary
course and in substantially in the same manner as it has prior to the date of
this Agreement and agrees not to enter into any material agreements or take any
other significant actions (excluding non-exclusive licensing agreements entered
into consistent with past practice) without the prior written consent of FFGI,
which shall not be unreasonably withheld. Without limiting the generality of
the foregoing, except as expressly permitted or contemplated by Section 4.13 of
this Agreement, AllMicro will not, set aside or pay any dividend or distribution
of assets to, or repurchase any of its stock from, any of its shareholders.
4.2 ACTIONS CONTRARY TO POOLING AND TAX FREE TREATMENT. Each party
will use its best efforts to cause the Merger to be eligible for pooling-of-
interests accounting treatment and to consummate the Merger in accordance with
Sections 368(a)(1)(A) and 368(a)(2)(E) of the Code and accordingly will not,
either before or after consummation of the Merger, take any action or fail to
take any action inconsistent with such eligibility or tax treatment. FFGI has
no plan or intention to liquidate AllMicro; to merge AllMicro with or into
another corporation; to sell or otherwise dispose of the stock of AllMicro
except for transfers of stock to corporations controlled by FFGI; or to cause
AllMicro to sell or otherwise dispose of any of its assets, except for
dispositions made in the ordinary course of business of transfers of assets to a
corporation controlled by AllMicro.
4.3 OTHER DISCUSSIONS. From and after the date of this Agreement
until the Closing or this Agreement is terminated in accordance with its terms,
neither AllMicro nor any of its officers, directors, agents or representatives
(including the Shareholders) will initiate discussions, solicit or negotiate
including providing any non-public information concerning its business), or
authorize any person or entity to discuss, solicit or negotiate on its or their
behalf,
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with any other party concerning the possible sale or disposition of AllMicro's
business, assets or capital stock. AllMicro will immediately notify FFGI,
however, if any offer is received from a potential purchaser or of any
discussions with a potential purchaser.
4.4 CONTINUITY OF INTEREST AND RESTRICTIONS ON RESALE. Each of the
shareholders of AllMicro shall execute and deliver to FFGI the Affiliates Letter
and Continuity of Interest Certificate in the form attached hereto as Exhibit B.
4.5 BEST EFFORTS. Each party will use its best efforts to cause all
conditions to the Closing to be satisfied as soon as practicable. Each party
shall use its best efforts to obtain any consents necessary or desirable in
connection with the consummation of the transactions contemplated by this
Agreement.
4.6 SHAREHOLDER VOTE. Following the completion of the Fairness
Hearing and the issuance of the Permit, as defined in Section 4.11, the
Shareholders agree to vote all shares of AllMicro Common Stock held by them in
favor of the Merger. AllMicro will provide to all holders of its capital stock
entitled to vote upon or consent to the Merger such information as is necessary
to satisfy all requirements of applicable federal and state securities laws and
Florida corporate law in connection with the submission of the Merger to such
shareholders for their approval.
4.7 NASDAQ LISTING. FFGI shall cause the shares of FFGI Common
Stock to be issued in the Merger to be listed on the NASDAQ National Market
promptly following the Closing Date.
4.8 EMPLOYEE MATTERS. Concurrent with the Closing Date, FFGI shall
grant an aggregate of 247,688 options under its employee stock option plan in
the amounts and to the persons set forth on Schedule 4.8 (the "Key Employees"),
which will vest 1/24th per month over the two year period following the Closing
Date, subject to continued employment with FFGI or the Surviving Corporation.
As soon as practicable following the Closing and in no event later than 90 days
following the Closing, FFGI shall cause the resale of the shares of Common Stock
issuable upon exercise of such options to be registered under the Securities Act
of 1933, as amended (the "Securities Act") by means of a registration statement
on Form S-8. On each of the first and second anniversary dates of the Closing
Date, FFGI shall cause the Surviving Corporation to pay bonuses for services
rendered subsequent to the Closing Date in an amount of $237,500 ($475,000 in
the aggregate) to certain of the Key Employees who are employed by AllMicro on
the Closing Date and continue as employees of FFGI or the Surviving Corporation
on the first and second anniversary of the Closing Date in exchange for the non-
competition agreements contained in their Employment Agreements delivered
pursuant to Section 5.2(h). The names of each Key Employee and the amount of
bonus each is entitled to is set forth on Schedule 4.8. FFGI and AllMicro agree
that existing AllMicro employees as of the Closing shall be provided with such
employee benefits and service credits as may be mutually determined by Mike
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Kaplan and FFGI following the Closing. AllMicro represents that they have no
other obligations to employees for bonuses and further represents that they have
made no commitments regarding any equity participation to any individual or
entity.
4.9 OBSERVER ROLE. Michael Kaplan shall be entitled to receive notices
of, and to attend meetings of, the Board of Directors of FFGI as a non-voting
observer with the right to participate in discussions and to the same rights of
access to the books and records of FFGI as are available to directors of FFGI,
until such individual is no longer employed on a full-time basis by FFGI or the
Surviving Corporation.
4.10 TAX ELECTIONS. No material election with respect to Taxes will
be made after the date of this Agreement without the prior written consent of
FFGI and Acquisition Sub.
4.11 FAIRNESS HEARING. The shares of FFGI Common Stock to be issued
in connection with the Merger will be issued in a transaction exempt from
registration under the Securities Act, by reason of Section 3(a)(10) thereof.
FFGI shall prepare an application for qualification of securities by permit (the
"Permit") under Section 25121 of the California Corporate Securities Code of
1968, as amended (the "California Securities Law") an application for hearing, a
related notice of hearing and the proxy statement or other disclosure material
to be supplied to the AllMicro Shareholders in connection with the Merger
(collectively, the "Hearing Documents"). FFGI shall use commercially reasonable
efforts to obtain a finding of fairness before the California Commissioner of
Corporations (the "Fairness Hearing") and to have the Permit issued under the
California Securities Law as promptly as practicable after the filing. AllMicro
shall furnish to FFGI all information concerning AllMicro and the Shareholders
as may be reasonably requested in connection with any action contemplated by
this Section 4.11. Assuming a finding of fairness at the Fairness Hearing and
the issuance of the Permit, the Shareholders will thereupon promptly execute and
deliver this Agreement.
4.12 ADDITIONAL TAX REPRESENTATIONS. In order to evidence the
intent of FFGI and AllMicro to have the Service treat the Merger as a tax-free
reorganization in a manner which qualifies under the provisions of Section 368
of the Code, as described in the provisions of Sections 368(a) of the Code,
simultaneously with the execution of this Agreement, FFGI and AllMicro and,
immediately upon a finding of fairness and the issuance of the Permit, each of
the Shareholders shall execute and deliver to each other the FFGI Additional Tax
Representations and the AllMicro Additional Tax Representations in substantially
the form of Exhibit H and Exhibit G hereto, respectively, which representations
shall survive for two (2) years after the Closing Date.
4.13 APPROVED DISTRIBUTIONS. Prior to the Closing, Shareholders
shall be entitled to receive cash distributions from AllMicro of all amounts
which exceed the amount necessary to meet the requirements of Section 2.5 (g).
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4.14 FILING OF COMBINED OPERATIONS. FFGI will cause the results of its
combined operations following the Closing Date to be published in a registration
statement, in a Form 10-QSB or 8-KSB, or any other public statement that
satisfies the publication requirements of the Commission for pooling
transactions, as soon as practicable following the Closing Date and in no event
later than October 15, 1996.
ARTICLE 5
CONDITIONS TO MERGER
5.1 CONDITIONS TO OBLIGATIONS OF FFGI, ACQUISITION SUB, THE SHAREHOLDERS
AND ALLMICRO. The respective obligations of FFGI, Acquisition Sub, the
Shareholders and AllMicro to consummate the transactions contemplated hereby are
subject to satisfaction (or waiver) of the following conditions:
(a) The parties hereto shall have obtained all consents and
approvals of shareholders and third parties (including governmental authorities)
required to consummate the transactions contemplated by this Agreement and the
Agreement of Merger.
(b) Consummation of the transactions contemplated by this Agreement
and the Agreement of Merger shall not violate any order, decree or judgment of
any court or governmental body having jurisdiction.
(c) FFGI shall have obtained all necessary blue sky approvals for
the issuance of the FFGI Common stock required to be obtained prior to the
Effective Time.
(d) The Escrow Agreement shall be executed and delivered by the
parties thereto.
(e) Each of the Key Employees shall have entered into an employment
agreement, in the form of Exhibit D, attached hereto. Mr. Kaplan's employment
term shall be for two years.
(f) Following the Fairness Hearing, the Permit shall have been
issued by the California Department of Corporations with respect to the FFGI
Common Stock to be issued in the Merger.
5.2 CONDITIONS TO OBLIGATIONS OF FFGI AND ACQUISITION SUB. The
obligations of FFGI and Acquisition Sub to consummate the transactions
contemplated hereby are subject to satisfaction (or waiver) of the following
conditions:
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(a) All representations and warranties of AllMicro and the
Shareholders made herein shall be true and correct in all material respects as
of the date made and as of the Closing Date. AllMicro and the Shareholders shall
have performed all obligations and agreements undertaken to be performed by them
at or prior to the Closing.
(b) FFGI and Acquisition Sub shall have received at the Closing an
opinion of counsel to AllMicro substantially in the form of Exhibit E attached
hereto.
(c) FFGI and Acquisition Sub shall have received an Affiliates
Letter and Continuity of Interest Certificate executed by each of the
shareholders of AllMicro.
(d) FFGI shall be satisfied that no holders of shares of AllMicro
Common Stock shall exercise dissenters' rights in connection with the Merger.
(e) FFGI shall have received from Arthur Andersen LLP, independent
certified public accountants for FFGI, a letter dated the date of the Effective
Time confirming, as of that date, their prior advice to FFGI that the Merger
will be treated for accounting purposes as a "pooling of interests" under
Opinion No. 16 of the Accounting Principles Board.
(f) The Board of Directors of FFGI shall have received a written
opinion from Montgomery Securities that the terms for the merger are fair to
FFGI's stockholders from a financial point of view.
(g) FFGI shall have received the Additional Tax Representations from
AllMicro and the Shareholders in the form of Exhibit G hereto.
(h) FFGI shall have received an executed Employment Agreement from
each of the Key Employees, in the form of Exhibit D attached hereto.
5.3 CONDITIONS TO OBLIGATIONS OF ALLMICRO AND THE SHAREHOLDERS. The
obligations of AllMicro and the Shareholders to consummate the transactions
contemplated hereby are subject to satisfaction (or waiver ) of the following
conditions:
(a) All representations and warranties of FFGI made herein shall be
true and correct in all material respects as of the date made and as of the
Closing Date. FFGI shall have performed all obligations and agreements
undertaken to be performed by them at or prior to the Closing.
(b) AllMicro and the Shareholders shall have received at the Closing
an opinion of counsel to FFGI substantially in the form of Exhibit F attached
hereto.
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(c) AllMicro and the Shareholders shall have received from Joel S.
Baum, P.A., independent certified public accountants for AllMicro, a letter
dated the date of the Effective Time confirming, as of that date, their prior
advice to AllMicro and the Shareholders that the Merger will be treated for
accounting purposes as a "pooling of interests" under Opinion No. 16 of the
Accounting Principles Board.
(d) AllMicro and the Shareholders shall have received the FFGI
Additional Tax Representations in the form of Exhibit H attached hereto.
(e) FFGI shall have executed and delivered the Registration Rights
Agreement in the form attached hereto on Exhibit I.
(f) FFGI shall have executed and delivered the Employment Agreement
in the form attached on Exhibit D hereto with each of the Key Employees.
ARTICLE 6
INDEMNITY
6.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS.
(a) All representations, warranties, covenants and agreements of
FFGI, AllMicro and the Shareholders in this Agreement shall survive the
execution, delivery, and performance of this Agreement in accordance with this
paragraph. All representations and warranties of each party set forth in this
Agreement shall be deemed to have been made again by such party at and as of the
Closing Date. The representations and warranties of FFGI, AllMicro and the
Shareholders set forth in this Agreement (absent fraud or willful
misrepresentation) shall terminate on the date upon which FFGI's audited
financial statements for calendar year 1996 are completed and filed with the
Commission, except to the extent that claims against the Escrow Shares are
pending. All representations and warranties shall in any event terminate on
December 31, 1997.
(b) As used in this Article, any reference to a representation or
warranty contained in any Article of this Agreement shall include the portion of
the AllMicro or FFGI Schedule relating, or otherwise applicable to, such
Article.
6.2 INDEMNIFICATION OF FFGI AND THE SURVIVING CORPORATION AND THE ESCROW
DEPOSIT OF FFGI COMMON STOCK
(a) Each of the Shareholders agrees to indemnify, defend and hold
harmless FFGI against and in respect of, any and all claims, demands, losses,
costs, expenses, obligations, liabilities, damages, remedies and penalties,
including interest, penalties and attorneys' fees and
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expenses (collectively, "Losses") that any of the FFGI Released Parties (as
defined below) shall incur or suffer and which arise from or are attributable to
by reason of or in connection with any breach or inaccuracy of or any failure to
perform or comply with any of AllMicro's or such Shareholder's representations,
warranties, agreements or covenants contained in this Agreement or in the Escrow
Agreement and with respect to any losses in excess of $100,000 resulting from
the pending litigation filed by Internet Videos, d/b/a FireFly Communications
Group against AllMicro in United States District Court, Case No. 96-1268-Cir.T-
17-C (the "Internet Videos Claim"). The parties agree that the Shareholders
shall have the right to control the defense and approve the settlement of the
Internet Videos Claim, subject to the consent of FFGI which shall not
unreasonably be withheld. The Shareholders shall deliver the Escrow Shares into
escrow on the date of Closing pursuant to the Escrow Agreement.
(b) For purposes of the indemnification set forth in this Article 6,
the fair market value of one share of FFGI Common Stock shall be equal to
$12.375.
(c) The indemnity obligations of each Shareholder pursuant to this
Section 6.1 for a breach or inaccuracy of any or all of such representations and
warranties and covenants shall terminate (absent fraud or willful
misrepresentation) upon the date upon which FFGI's audited financial statements
for the calendar year ended December 31, 1996 are completed and filed with the
Commission (such date being referred to herein as the "Escrow Termination Date")
except to the extent that claims against the Escrow Shares are pending.
(d) The indemnity obligations set forth herein (absent fraud or
willful misrepresentation) shall be the exclusive remedy of the FFGI Released
Parties with respect to a breach or inaccuracy of the representations,
warranties and covenants of AllMicro and/or the Shareholders and shall be
satisfied solely and exclusively by recourse against the Escrow Shares in
accordance with the Escrow Agreement and this Agreement, except with respect to
the Internet Videos Claim. Furthermore, the Shareholders shall have no indemnity
obligation hereunder with respect to any Losses arising directly or indirectly
from the Corum/Lipson Obligation (as defined below), in an aggregate amount up
to $925,000, or with respect to any losses arising directly or indirectly from
the Internet Videos Obligation in an aggregate amount up to $100,000. In so
doing, FFGI expressly assumes and accepts the risk that Losses may exceed the
value of the Escrowed Shares and that it will have to absorb excess Losses
without recourse to the Shareholders, except with respect to the Internet Videos
Claim.
(e) The "Corum/Lipson Obligation" is defined herein as the amounts
(if any), including shares of FFGI stock, owed by FFGI, AllMicro or the
Shareholders to the Corum Group and/or to Saul Lipson and Company with respect
to the Merger or any of the transactions contemplated by this Agreement, under
the letter dated August 7, 1995 from Corum to AllMicro, any Corum claims under
any quantum merit or other equitable doctrine.
(f) In any case in which claims have been asserted or are pending, all
parties agree that the indemnity obligations of the Shareholders with respect to
such matters shall
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continue in full force and effect until such matters have been settled by
agreement of the parties or by resolution of such matters in accordance with the
terms of this Agreement and the Escrow Agreement. Except as set forth in this
Agreement including the Schedules attached hereto and the other written
agreements entered into concurrently herewith, FFGI has not relied upon any
representation, warranty and covenant of AllMicro and the Shareholders including
without limitation any oral representations. No disclosure by AllMicro or the
Shareholders other than as set forth in this Agreement or the schedules hereto
nor any investigation made by or on behalf of FFGI with respect to AllMicro or
the Shareholders shall be deemed to affect FFGI's reliance on the
representations, warranties, covenants and agreements made by AllMicro or the
Shareholders contained in this Agreement and shall not constitute a waiver of
FFGI's reliance on the representations, warranties, covenants and agreements
made by AllMicro or the Shareholders contained in this Agreement and shall not
constitute a waiver of FFGI's rights to indemnity as herein provided for the
breach or inaccuracy of or failure to perform or comply with any of AllMicro or
the Shareholders' representations, warranties, covenants or agreements under
this Agreement.
6.3 INDEMNIFICATION OF THE SHAREHOLDERS.
(a) FFGI agrees to indemnify, defend and hold harmless the
Shareholders from and against and in respect of, any and all claims, demands,
losses, costs, expenses, obligations, liabilities, damages, remedies and
penalties, including interest, penalties and attorneys' fees and expenses
(collectively, "Shareholder Losses") that any of the Shareholder Releases
Parties (as defined below) shall incur or suffer and which arise from or are
attributable to by reason of or in connection with any breach or inaccuracy of
or any failure to perform or comply with any of FFGI's representations,
warranties, agreements or covenants contained in this Agreement or in the Escrow
Agreement and with respect to any claims made by the Corum Group and/or Saul
Lipson and Company with respect to the Corum/Lipson Obligation (up to an
aggregate amount of $925,000).
(b) The indemnity obligations of FFGI pursuant to this Section 6.3
for a breach or inaccuracy of any or all of such representations, warranties and
covenants shall terminate on (absent fraud or willful misrepresentation) the
"Escrow Termination Date" (except to the extent that claims against FFGI have
been submitted or notice of the claim has been provided during such period).
(c) The indemnity obligations set forth herein shall (absent fraud
or willful misrepresentation) be the exclusive remedy of the Shareholders with
respect to a breach or inaccuracy of the representations and warranties of FFGI
or Acquisition Sub.
(d) In any case in which claims have been asserted or are pending,
all parties agree that the indemnity obligations of FFGI with respect to such
matters shall continue in full force and effect until such matters have been
settled by agreement of the parties or by
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resolution of such matters in accordance with the terms of this Agreement and
the Escrow Agreement. Except as set forth in this Agreement including the
Schedules attached hereto and the Affiliate Letter and other written agreements
entered into concurrently herewith, the Shareholders have not relied upon any
representation, warranty and covenant of FFGI, including without limitation any
oral representations. No disclosure by FFGI other than as set forth in this
Agreement or the schedules hereto nor any investigation made by or on behalf of
the Shareholders with respect to FFGI shall be deemed to affect the
Shareholders' reliance on the representations, warranties, covenants and
agreements made by FFGI contained in this Agreement and shall not be a waiver of
the Shareholders' rights to indemnity as herein provided for the breach or
inaccuracy of or failure to perform or comply with any of FFGI's
representations, warranties, covenants or agreements under this Agreement.
6.4 PROCEDURE FOR INDEMNIFICATION OF FFGI AND THE SURVIVING
CORPORATION WITH RESPECT TO NON-THIRD PARTY CLAIMS. If FFGI shall have any
claim against the Shareholders pursuant to this Article 6 (but excluding claims
resulting from the assertion of liability by third parties), it shall promptly
give written notice thereof to the Escrow Agent (as defined in the Escrow
Agreement) and the Shareholders, including in such notice a brief description of
the facts upon which such claims is based and the amount thereof. If the
Shareholders object to the allowance of any such claims, they shall give written
notice to FFGI and the Escrow Agent within twenty days following receipt of
FFGI's notice of claim, advising it and the Escrow Agent that they do not
consent to the delivery of any of the Escrow Shares out of escrow for
application to such claims. If no such notice is timely provided by the
Shareholders to FFGI and the Escrow Agent, the Escrow Agent shall, within five
business days after the expiration of the prior notice period, deliver out of
escrow the lesser of: (a) the number of the Escrow Shares (in whole shares)
that have an aggregate market value (determined as provided above) most nearly
equal to the amount of the claim or claims thus to be satisfied, or (b) all of
the Escrow Shares. If the Shareholders advise FFGI and the Escrow Agent within
the foregoing twenty day period that they object to such application of the
Escrow Shares after a claim has been made, the Escrow Agent shall hold the
Escrow Shares in escrow until the rights of the Shareholders and FFGI with
respect thereto have been agreed upon in accordance with the Escrow Agreement.
If any distribution referred to in this Section 6.4 involves fewer than all of
the Escrow Shares, it shall be allocated pro rata against the Escrow Shares
therein based on the Escrow Shares beneficially owned by each Shareholder
(unless the claim made is based disproportionately on a representation made
individually by a Shareholder under Article 2A, in which case the distribution
shall be appropriately adjusted).
6.5 PROCEDURE FOR INDEMNIFICATION OF THE SHAREHOLDERS WITH RESPECT
TO NON-THIRD PARTY CLAIMS. If the Shareholders have any claim against FFGI
pursuant to this Article 6 (but excluding claims resulting from the assertion of
liability by third parties), the Shareholders shall promptly give written notice
thereof to FFGI, including in such notice a brief description of the facts upon
which such claim is based, the amount thereof. If FFGI, within twenty days
after receipt of the Shareholders' notice of claim, does not give written notice
to the Shareholders
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announcing its intent to contest such assertion of the Shareholders such
assertion shall be deemed accepted and the amount of claim shall be deemed a
valid claim and FFGI shall, within fifteen days after expiration of the prior
notice period, deliver to the Shareholders the amount of the claim, allocated on
a pro rata basis based on the Escrow Shares beneficially owned by each
Shareholder. In the event, however, that FFGI contests the assertion of a claim
by giving such written notice to the Shareholders within said period, then the
parties shall act in good faith to reach agreement regarding such claim. In the
event the parties are unable to reach an agreement regarding such claim, such
claim shall be settled in accordance with the Escrow Agreement.
6.6 PROCEDURE FOR INDEMNIFICATION WITH RESPECT TO THIRD-PARTY CLAIMS.
(a) If an indemnified party determines to seek indemnification under
this Article 6 with respect to a claim resulting from the assertion of liability
by third parties, such indemnified party shall promptly give notice to the
indemnifying parties of facts upon which any such claim will be based; the
notice shall set forth such material information with respect thereto as is then
reasonably available to such indemnified party. In case any such liability is
asserted against the indemnified party, and the indemnified party notifies the
indemnifying parties thereof, the indemnifying parties will be entitled, if such
indemnifying parties so elect by written notice delivered to the indemnified
party within ten business days after receiving the indemnified party's notice,
to assume the defense thereof with counsel satisfactory to the indemnified
party. Notwithstanding the foregoing, (i) the indemnified party shall also have
the right to employ its own counsel in any such case, but the fees and expenses
of such counsel shall be at the expense of the indemnified party unless the
indemnified party shall reasonably determine that there is a conflict of
interest between or among the indemnified party and any indemnifying party with
respect to such claim, in which case the fees and expenses of such counsel will
be borne by such indemnifying parties, (ii) the rights of an indemnified party
to be indemnified hereunder in respect of claims resulting from the assertion of
liability by third parties shall not be adversely affected by its failure to
give notice pursuant to the foregoing unless, and, if so, only to the extent
that, such indemnifying parties are materially prejudiced thereby. With respect
to any assertion of liability by a third party that results in an indemnifiable
claim, the parties hereto shall make available to each other all relevant
information in their possession material to any such assertion.
(b) In the event that such indemnifying parties, within ten business days
after receipt of the aforesaid notice of a claim, fail to assume the defense of
an indemnified party against such claim, the indemnified party shall have the
right to undertake the defense, compromise, or settlement of such action on
behalf of and for the account, expense, and risk of such indemnifying parties.
(c) Notwithstanding anything in this Article 6 to the contrary, if there
is a reasonable probability that a claim may materially adversely affect an
indemnified party, the indemnified party shall have the right to participate (at
the indemnified party's expense) in such defense, compromise, or settlement and
such indemnifying parties shall not, without the
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indemnified party's written consent (which consent shall not be unreasonably
withheld), settle or compromise any such claim or consent to entry of any
judgment in respect thereof unless such settlement, compromise, or consent
includes as an unconditional term thereof the giving by the claimant or the
plaintiff to the indemnified party a release from all liability in form and
substance satisfactory to such indemnified party in respect of such claim. If
the indemnifying parties notify the indemnified party that they wish to accept a
bona fide written offer from any such claimant or plaintiff (which offer
includes a release of the indemnified party from all liability in respect of
such claim), and the indemnified party does not consent to such settlement, the
indemnifying parties shall not be liable under this Section 6.5 for the amount
by which any subsequent settlement or judgment with respect to such claim
exceeds such bona fide written settlement offer.
(d) In the event any FFGI Released Party is an "indemnified party"
with respect to a third party claim and a settlement or judgment is reached with
respect to such claim, such indemnified party shall promptly give written notice
thereof to the Shareholders and the Escrow Agent. If the Shareholders object to
the allowance of any such claims, they shall give written notice to such
indemnified party and the Escrow Agent within ten days following receipt of such
notice of claim, advising such indemnified party that they do not consent to the
delivery of any of the Escrow Shares out of escrow to such indemnified party for
application to such claims. If no such notice is timely provided by the
Shareholders to such indemnified party and the Escrow Agent, the Escrow Agent
shall, within five business days after the expiration of the prior notice
period, deliver out of escrow the lesser of: (a) the number of the Escrow Shares
(in whole shares) that have an aggregate market value (determined as provided
above) most nearly equal to the amount of the claim or claims thus to be
satisfied, or (b) all of the Escrow Shares.
If the Shareholders advise such indemnified party and the Escrow Agent within
the foregoing ten day period that they object to such application of the Escrow
Shares, the Escrow Agent shall hold the Escrow Shares in escrow until the rights
of the Shareholders and such indemnified party with respect thereto have been
agreed upon between the Shareholders and such indemnified party or until such
rights are finally determined in accordance with the Escrow Agreement. If any
distribution referred to in this Section 6.5 involves fewer than all of the
Escrow Shares, it shall be allocated pro rata against the Escrow Shares therein
based on the Escrow Shares beneficially owned by each Shareholder (unless the
claim made is based disproportionately on a representation made individually by
a Shareholder under Article 2A, in which case the distribution shall be
appropriately adjusted).
6.7 FRAUD OR WILLFUL MISREPRESENTATION.
Any claim for fraud or willful misrepresentation arising from this
Agreement or the transactions contemplated thereby must be asserted by the party
seeking indemnification by December 31, 1997. With respect to any fraud or
willful misrepresentation claim brought by any party seeking indemnification
against any other party, the party seeking indemnification will bear the burden
of proof of demonstrating that the other party had actual knowledge of the
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<PAGE>
alleged falsehood and intentionally or recklessly misled such party with respect
to same. Knowledge of a fact or omission on which a fraud or willful
misrepresentation claim is based may not be imputed or attributed to a party on
the basis of his or her position as an officer or director of FFGI or AllMicro,
as applicable, or access to information arising from such position unless it can
be demonstrated that in fact such access was used by such party to obtain such
information or any lack of investigation by such party. Each Shareholder's
maximum obligation for any Losses relating to any fraud or willful
misrepresentation claim arising under this paragraph shall be limited to the
proceeds received or to be received by such Shareholder under this Agreement.
FFGI's maximum liability to any Shareholder relating to any fraud or willful
misrepresentation claim arising under this paragraph shall be limited to the
total consideration paid, or to be paid under this Agreement.
6.8 SETTLEMENT AND GENERAL RELEASE OF THE FFGI RELEASED PARTIES.
(a) From and after the Closing, for the consideration set forth
herein and for other due and valid consideration, the receipt and sufficiency of
which is hereby acknowledged and received, each of the Shareholders, for and on
behalf of themselves and on behalf of their respective affiliates, successors,
assigns, agents and representatives waive and finally release and forever
discharge (absent fraud or willful misrepresentation) FFGI and AllMicro and each
of their officers, directors, employees, agents, affiliates, representatives,
successors and assigns (collectively, the "FFGI Released Parties") from any and
all claims, causes of action, suits, debts, demands, costs, expenses, attorneys'
fees, contracts, agreements, payments, compensation, liabilities or obligations,
contingent or fixed, liquidated or unliquidated, matured or unmatured, of every
name and nature, known or unknown, arising or which may have existed from the
beginning of the world arising from this Agreement or the transactions
contemplated hereby, including, without limitation, the Merger, against any such
person (hereinafter collectively referred to as the "Shareholders' Released
Claims"). The Shareholders' Released Claims shall not include a release of the
rights to receive the Merger consideration, the rights to indemnification under
the terms of Article 6 of this Agreement or the covenants set forth in Article
4, Article 7 and 8 or the parties' rights under any other written agreement,
instrument or opinion letter entered into or delivered to the Shareholders
concurrently herewith or any rights to indemnity or contribution under
AllMicro's by-laws, articles, or at common law or equity.
(b) Each of the Shareholders for and on behalf of themselves and on
behalf of their respective affiliates, successors, assigns, agents and
representatives covenants not to sue or otherwise institute or cause to be
instituted or in any way participate in any legal, administrative or other
proceedings or action against any of the FFGI Released Parties with respect to
any matter of any kind arising out of the Shareholders' Released Claims.
(c) The Shareholders acknowledge that this waiver and release
extends to all claims of every nature and kind, known or unknown, suspected or
unsuspected, past, present or
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future, arising from the Shareholders' Released Claims, and any and all rights
granted to such Shareholders under any state law or federal law or regulation
are hereby expressly waived.
(d) This Section 6.8 shall constitute a complete defense to any
claim released herein and shall survive indefinitely, without restriction,
qualification or limitation, notwithstanding anything in this Agreement to the
contrary.
6.9 SETTLEMENT AND GENERAL RELEASE OF THE SHAREHOLDERS RELEASED PARTIES.
(a) From and after the Closing, for the consideration set forth
herein and for other due and valid consideration, the receipt and sufficiency of
which is hereby acknowledged and received, FFGI, Acquisition Sub and AllMicro,
each severally for and on behalf of itself and on behalf of its respective
affiliates, subsidiaries, successors, assigns, agents and representatives waives
and finally releases and forever discharges (absent fraud or willful
misrepresentation) each of the Shareholders and their agents, representatives,
successors and permitted assigns (collectively, the "Shareholders Released
Parties") from any and all claims, causes of action, suits, debts, demands,
costs, expenses, attorneys' fees, contracts, agreements, payments, compensation,
liabilities or obligations, contingent or fixed, liquidated or unliquidated,
matured or unmatured, of every name and nature, known or unknown, arising or
which may have existed from the beginning of the world arising from this
Agreement or the transactions contemplated hereby, including, without
limitation, the Merger, against any such person (hereinafter collectively
referred to as the "FFGI/AllMicro Released Claims"). The FFGI/AllMicro Released
Claims shall not include a release of the rights to indemnification under the
terms of Article 6 of this Agreement or the covenants set forth in Article 4,
Article 7 and 8 or the parties' rights under any other written agreement entered
into concurrently herewith.
(b) FFGI and AllMicro each severally and on behalf of itself and on
behalf of its respective officers, directors, shareholders and each of their
respective affiliates, agents, successors, representatives, successors and
assigns covenants not to sue or otherwise institute or cause to be instituted or
in any way participate in any legal, administrative or other proceedings or
action against any of the Shareholder Released Parties with respect to any
matter of any kind arising out of the FFGI/AllMicro Released Claims.
(c) FFGI and AllMicro acknowledge that this waiver and release
extends to all claims of every nature and kind, known or unknown, suspected or
unsuspected, past, present or future, arising from the FFGI/AllMicro Released
Claims, and any and all rights granted to FFGI and AllMicro under any state law
or federal law or regulation are hereby expressly waived.
(d) This Section 6.9 shall constitute a complete defense to any
claim released herein and shall survive indefinitely, without restriction,
qualification or limitation, notwithstanding anything in this Agreement to the
contrary.
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<PAGE>
ARTICLE 7
TERMINATION
7.1 TERMINATION BY MUTUAL CONSENT. At any time prior to the
Closing, this Agreement and the Agreement of Merger may be terminated by written
consent of FFGI, Acquisition Sub and AllMicro, notwithstanding approval of the
Merger by the shareholders of Acquisition Sub or AllMicro.
7.2 TERMINATION BY FFGI OR ACQUISITION SUB OR ALLMICRO.
(a) FFGI or Acquisition Sub may terminate this Agreement and the
Agreement of Merger at any time prior to the Closing by delivery of written
notice to AllMicro if: (1) FFGI determines in the exercise of its reasonable
judgment that the pendency of any lawsuit or the institution or threat of any
governmental or administrative action, investigation or inquiry which questions
the validity or the legality of the transactions contemplated hereby or which
seeks to prevent, restrain, change or obtain damages in respect of such
transactions, makes it inadvisable to consummate the transactions contemplated
hereby; (2) AllMicro or the Shareholders have breached or violated this
Agreement in any material respect and, if such breach or violation is curable,
has failed to cure such violations within ten days of receiving written notice
thereof; (3) any representation or warranty made by AllMicro or the Shareholders
is false or inaccurate in any material respect; or (4) the Closing has not
occurred by July 31, 1996.
(b) AllMicro may terminate this Agreement and the Agreement of
Merger at any time prior to the Closing by delivery of written notice to FFGI
and Acquisition Sub if: (1) AllMicro determines in the exercise of its
reasonable judgment that the pendency of any lawsuit or the institution of
threat of any governmental or administrative action, investigation or inquiry
which questions the validity or the legality of the transactions contemplated
hereby or which seeks to prevent, restrain, change or obtain damages in respect
of such transactions, makes it inadvisable to consummate the transactions
contemplated hereby; (2) FFGI or Acquisition Sub has breached or violated this
Agreement in any material respect and, if such breach or violation is curable,
has failed to cure such violations within ten days of receiving written notice
thereof; (3) any representation or warranty made by FFGI or Acquisition Sub is
false or inaccurate in any material respect; or (4) the Closing has not occurred
by July 31, 1996.
7.3 EFFECT OF TERMINATION. In the event of termination as provided
above, the obligations of the parties hereunder shall terminate; provided, that
(a) Sections 8.1, 8.4, 8.6, 8.8, 8.9, 8.10 and 8.11 shall survive such
termination and continue in full force and effect and (b) nothing herein will
relieve any party from liability for any breach of this Agreement prior to such
termination.
ARTICLE 8
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<PAGE>
MISCELLANEOUS
8.1 NOTICES. Any notice given hereunder shall be in writing and
shall be deemed effective upon the earlier of personal delivery (including
personal delivery by facsimile) or the third day after mailing by certified or
registered mail, postage prepaid, as follows:
(a) If to FFGI or Acquisition Sub:
The ForeFront Group, Inc.
1330 Post Oak Blvd., Suite 1300
Houston, Texas 77056
Attention: Mr. Jeffrey R. Harder
Facsimile: (713) 961-1149
With a copy to:
Jeffrey L. Wade
Andrews & Kurth L.L.P.
2170 Buckthorne Place, Suite 150
Facsimile: (713) 364-9538
(b) If to AllMicro:
AllMicro, Inc.
18820 U.S. Hwy 19 North, Suite 215
Clearwater, Florida 34624
Attention: Michael Kaplan
Facsimile: (813) 536-8374
With a copy to:
Jorge del Calvo, Esq.
Pillsbury Madison & Sutro
2700 Sand Mill Road
Menlo Park, CA 94025-7020
Facsimile: (415) 233-4545
(c) If to the Shareholders:
Michael Kaplan
18820 U.S. Hwy 19 North, Suite 215
Clearwater, Florida 34624
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<PAGE>
or to such other address as any party may have furnished in writing to the other
parties in the manner provided above.
8.2 ENTIRE AGREEMENT; MODIFICATIONS; WAIVER. This Agreement and the
exhibits and schedules hereto and the documents referred to herein and the Non-
Disclosure Agreement between the parties hereto constitute the final, exclusive
and complete understanding of the parties with respect to the subject matter
hereof and supersede any and all prior agreements, understandings and
discussions with respect thereto, including, without limitation, the Letter of
Intent, dated June 6, 1996, as amended, by and among FFGI, AllMicro and the
Shareholders. No variation or modification of this Agreement and no waiver of
any provision or condition hereof, or granting of any consent contemplated
hereby, shall be valid unless in writing and signed by the party against whom
enforcement of any such variation, modification, waiver or consent is sought.
The rights and remedies available to FFGI and Acquisition Sub and the
Shareholders pursuant to this Agreement and all exhibits hereunder shall be
cumulative.
8.3 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which when so executed shall constitute an original copy
hereof, but all of which together shall constitute one agreement.
8.4 PUBLICITY. Neither AllMicro, nor FFGI, nor their officers,
directors, shareholders, affiliates, agents or representatives shall, unless
required by law, issue any statement or communication to the general public or
the press regarding the Merger without the prior written consent of the other.
Each party shall consult with, and seek input from, the other party prior to,
and with respect to the contents of, any statement or communication to the
general public or the press regarding the Merger.
8.5 SUCCESSORS AND ASSIGNS. No party may, without the prior express
written consent of each other party, assign this Agreement in whole or in part.
This Agreement shall be binding upon and inure to the benefit of the respective
successors and permitted assigns of the parties hereto.
8.6 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware as applied to
contracts between Delaware residents made and to be performed entirely within
the State of Delaware.
8.7 FURTHER ASSURANCES. At the request of any of the parties
hereto, and without further consideration, the other parties agree to execute
such documents and instruments and to do such further acts as may be necessary
or desirable to effectuate the Merger.
8.8 EXPENSES. Any expenses incurred prior to the consummation of
the Merger shall be incurred for the incurring party's own account. If the
Merger is consummated, the parties agree that FFGI shall cause the Surviving
Corporation to promptly pay (I) the reasonable
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counsel and accounting fees and expenses of AllMicro relating to the
transactions contemplated by this Agreement up to an aggregate amount of $87,500
and (ii) in consideration of the execution of a release acceptable to FFGI of
any claims by such individuals or entities for compensation from AllMicro, the
Shareholders or FFGI, will also pay amounts owed by AllMicro or the Shareholders
to the Corum Group and Saul Lipson and Company with respect to the Corum/Lipson
Obligations, up to an aggregate amount of $925,000.
8.9 ATTORNEYS' FEES. In the event of any suit or other proceeding
to construe or enforce any provision of this Agreement or any other agreement to
be entered into pursuant hereto, or otherwise in connection with this Agreement,
the prevailing party's or parties' reasonable attorneys' fees and costs (in
addition to all other amounts and relief to which such party or parties may be
entitled) shall be paid by the other party or parties.
8.10 COVENANT NOT TO COMPETE.
(a) In exchange for the payments required to be made by FFGI
pursuant to Section 8.10(b) below, each of the Shareholders, severally and not
jointly, agree that until the expiration of the earlier to occur of (a) the
third anniversary of the Closing Date and 12 months after the termination of
employment with FFGI or the Surviving Corporation, as the case may be, he shall
not, directly or indirectly, as principal, agent, employee, employer,
consultant, stockholder, partner or in any other individual or representative
capacity, engage in the development, sale, marketing, licensing or support of
client, server and/or integrated application software products that enable the
capture, organization and/or exchange of information over the Internet and
private computer networks or intranets or any other business currently or
subsequently conducted by FFGI or AllMicro or either of their subsidiaries
during such period of time, if any, that such Shareholder is an employee or
consultant of FFGI or AllMicro or either of their subsidiaries (the "Competitive
Business") wherever FFGI or AllMicro or either of their subsidiaries conducts
such business and only for so long as FFGI or AllMicro or either of their
subsidiaries is engaged in such business. Notwithstanding anything to the
contrary herein, a Shareholder may, without violating the provisions of this
Section 8.10, (i) purchase and hold up to 5% of any entity whose shares are
publicly traded on NASDAQ or any U.S. or foreign stock exchange (a "Public
Company"), whether or not such entity competes with FFGI or any affiliate
thereof; (ii) purchase up to 10% of any privately-held company or more than 10%
of any Public Company (in either case as a passive investor) provided that at
the time of the investment such Shareholder reasonably believed that such entity
was not engaged and had no present intention to engage in, a Competitive
Business and continue to hold such investment even if such entity unbeknownst to
him is engaged in a Competitive Business or subsequently enters into a
Competitive Business; (iii) enter into a relationship as a principal, agent,
employee, consultant or in any other representative capacity with an entity that
Shareholder reasonably believes, at the initiation of such relationship, is not
engaged in, and has no present intention of engaging in, a Competitive Business,
provided that if such entity subsequently engages in such Competitive Business,
Shareholder may only maintain such relationship if he does not personally
directly
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<PAGE>
engage in such Competitive Business and such entity has annual revenues in
excess of $100 million in its most recent fiscal year. FFGI and its subsidiaries
current business is the development, sale, licensing and support of client,
server and integrated application software products that enable the capture,
organization and exchange of information over the Internet and private computer
networks or intranets. With respect to any subsequent business that FFGI or
AllMicro or either of their subsidiaries enters into while a Shareholder is
employed as a consultant or employee by FFGI or AllMicro or either of their
subsidiaries, such business shall only be deemed to be a Competitive Business
hereunder with respect to such Shareholder, if and to the extent that at the
time of the alleged violation of this Section 8.10 Shareholder is actually aware
that FFGI was engaged in such business while he was so employed. Each of such
person agree that FFGI shall, in addition to any other rights or remedies
available under this Agreement, at law or otherwise, be entitled to an
injunction to be issued by a court of competent jurisdiction enjoining and
restraining such persons from committing any violation of this Section 8.10. Any
provision of this Section 8.10 which is deemed invalid or unenforceable in any
jurisdiction shall, as to that jurisdiction and subject to this paragraph be
ineffective to the extent of such invalidity or unenforceability, without
affecting in any way the remaining provisions hereof in such jurisdiction or
rendering that or any other provisions of this Agreement invalid or
unenforceable in any other jurisdiction. If any covenant should be deemed
invalid or unenforceable because of its scope, geographical area or duration, or
any combination thereof, such covenant shall be modified and reformed so that
the scope, geographic area and duration of the covenant is reduced only to the
minimum extent necessary to render the modified covenant valid and enforceable.
The foregoing shall not preclude the continued, direct or indirect ownership of,
and participation in activities and fulfillment of any management
responsibilities with respect to AllMicro or FFGI.
(b) FFGI shall be required to pay the Shareholder the sum of
$250,000.00 in twelve equal monthly installments commencing thirty days after
the Closing and on the expiration of each 30-day period thereafter, as
consideration for the covenants made by the Shareholders in Section 8.10(a)
above.
8.11 CONSENT TO SERVICE OF PROCESS. The parties hereto irrevocably
consent to the jurisdiction of the courts of the State of California and of any
Federal court located in such state in connection with any action, suit or other
proceeding arising out of or relating to this Agreement.
8.12 OBLIGATIONS OF SHAREHOLDERS. Neither FFGI nor AllMicro is
assuming any obligations or liabilities of any of the Shareholders (except with
respect to the Corum/Lipson Obligation, if any).
IN WITNESS WHEREOF, each of the parties has executed this Agreement as of
the date first above written.
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THE FOREFRONT GROUP, INC.
By: /s/ David Sikora
-----------------
Title:President and Chief Executive Officer
-------------------------------------
ALLMICRO ACQUISITION CORPORATION
By: /s/ David Sikora
------------------
Title: Chairman
---------
ALLMICRO, INC.
By: /s/ Michael Kaplan
-------------------
Title: President
---------
THE SHAREHOLDERS:
/s/ Michael Kaplan
------------------
Michael Kaplan
/s/ Anita Kaplan
----------------
Anita Kaplan
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Exhibit A
AGREEMENT AND PLAN OF MERGER
BETWEEN
ALLMICRO ACQUISITION CORPORATION
AND
ALLMICRO, INC.
This Agreement and Plan of Merger, dated as of the 19th day of July,
1996 ("Plan of Merger"), by and between AllMicro Acquisition Corporation, a
Florida corporation ("Acquisition Sub"), and AllMicro, Inc., a Florida
corporation ("AllMicro").
RECITALS
--------
A. AllMicro was incorporated in the State of Florida on February 7,
1991, and on the date hereof has 100 shares of its Common Stock outstanding
("AllMicro Common Stock").
B. Acquisition Sub was incorporated in the State of Florida on July
18, 1996. On the date hereof, Acquisition Sub has 1,000 shares of its Common
Stock outstanding, all of which are owned by The ForeFront Group, Inc., a
Delaware corporation ("ForeFront"), the corporate parent of Acquisition Sub.
C. AllMicro, certain shareholders of AllMicro, ForeFront and
Acquisition Sub have entered into an Agreement and Plan of Reorganization (the
"Agreement and Plan of Reorganization") providing for certain representations,
warranties, covenants and agreements in connection with the transactions
contemplated hereby.
D. The Boards of Directors of AllMicro and Acquisition Sub deem it
advisable and in their mutual best interests and in the best interests of the
shareholders of AllMicro and the shareholder of Acquisition Sub that AllMicro be
acquired by ForeFront through a merger ("Merger") of Acquisition Sub with and
into AllMicro.
E. The Boards of Directors of AllMicro and Acquisition Sub and their
shareholders approved the Merger on July 19, 1996.
AGREEMENTS
----------
The parties hereto hereby agree as follows:
1. Acquisition Sub shall be merged with and into AllMicro, and
AllMicro shall be the surviving corporation.
<PAGE>
2. The Merger shall become effective at such time (the "Effective
Time" of the Merger) as Articles of Merger, containing or annexing this Plan of
Merger are filed with the Office of Secretary of State of Florida pursuant to
Section 1105 of the Florida Business Corporation Act.
3. (a) At the Effective Time, each of the issued and outstanding
shares of AllMicro Common Stock (other than shares as to which dissenters'
rights are perfected under Section 1320 of the Florida Business Corporation Act,
and any shares which are owned by ForeFront or AllMicro or any direct or
indirect wholly-owned subsidiary of ForeFront or AllMicro) shall be converted
automatically into and exchanged for 10,561.52 shares of ForeFront Common Stock.
Any shares of AllMicro Common Stock that are owned by AllMicro shall be
canceled, and no securities of ForeFront or other consideration shall be
delivered in exchange therefor. At the Effective Time, each share of common
stock of Acquisition Sub, which is issued and outstanding immediately prior to
the Effective Time, will be converted into and be exchangeable for one fully
paid and nonassessable share of common stock of AllMicro. No other shares of
capital stock of AllMicro shall be issued in or outstanding immediately after
the Merger. No shares of stock of Acquisition Sub shall be issued in or
outstanding after the Merger.
(b) If, between the date of this Agreement and the Effective Time, the
outstanding shares of ForeFront Common Stock shall have been changed into a
different number of shares or a different class by reason of any
reclassification, recapitalization, split, reverse split or combination, the
consideration to be issued to the holders of AllMicro Common Stock in the Merger
shall be correspondingly adjusted.
4. Stock certificates for fractions of ForeFront Common Stock shall
not be issued in the Merger and such fractional interests shall not entitle the
owners thereof to vote, to receive dividends or to exercise any other right of a
stockholder with respect to such fractional interest. In lieu of any such
fractional interests, each holder of AllMicro Common Stock who would otherwise
have been entitled to a fraction of a share upon surrender of stock certificates
will be paid cash (rounded to the nearest cent, 0.5 cents to be rounded to 1
cent) upon such surrender in an amount equal to such fraction times the closing
sale price of a share of ForeFront Common Stock on the NASDAQ National Market on
the day of the Effective Time.
5. The conversion of AllMicro Common Stock as provided by this Merger
Agreement shall occur automatically at the Effective Time without action by the
holders thereof. Each holder of AllMicro Common Stock shall thereupon be
entitled to receive shares of ForeFront Common Stock in accordance with Section
3. Such shareholder shall receive certificates that represent that number of
shares of ForeFront Common Stock (less the number of shares of ForeFront Common
Stock being deposited in escrow pursuant to the Agreement and Plan of
Reorganization and the Escrow Agreement (the "Escrow Agreement") attached as an
exhibit to such Agreement and Plan of Reorganization) in accordance with the
terms of the Agreement and Plan of Reorganization.
2
<PAGE>
6. At the Effective Time, the separate existence of Acquisition Sub
shall cease, and AllMicro shall succeed, without other transfer, to all of the
rights and properties of Acquisition Sub and shall be subject to all of the
debts and liabilities thereof in the same manner as if AllMicro had itself
incurred them. All rights of creditors and all liens upon the property of each
corporation shall be preserved unimpaired, provided that such liens upon
property of Acquisition Sub shall be limited to the property affected thereby
immediately prior to the Effective Time of the Merger.
7. After the Effective Time, Acquisition Sub, through the persons who
were its officers immediately prior to the Merger, shall execute or cause to be
executed such further assignments, assurances or other documents as may be
necessary or desirable to confirm title to properties, assets and rights in
AllMicro.
8. This Plan of Merger is intended to be and to effectuate a plan of
reorganization within the meaning of Section 368 of the Internal Revenue Code of
1986, as amended.
9. (a) Notwithstanding the approval of this Plan of Merger by the
shareholders of AllMicro and the sole shareholder of Acquisition Sub, this Plan
of Merger may be terminated at any time prior to the Effective Time of the
Merger by mutual agreement of the Boards of Directors of AllMicro and
Acquisition Sub.
(b) This Plan of Merger may be signed in one or more counterparts,
each of which shall be deemed an original and all of which shall constitute one
agreement.
(c) This Plan of Merger may be amended by the parties hereto anytime
before or after approval hereof by the shareholders of AllMicro and the sole
shareholder of Acquisition Sub, but, after such approval, no amendments shall be
made which by law require the further approval of such shareholders without
obtaining such approval. This Plan of Merger may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
Article 1
The name of this corporation shall be AllMicro, Inc.
3
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Merger Agreement as
of the date first written above.
ALLMICRO, INC.,
a Florida corporation
Attest:
-------------
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
ALLMICRO ACQUISITION CORPORATION,
a Florida corporation
Attest:
-------------
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
4
<PAGE>
EXHIBIT 99.2
ESCROW AGREEMENT
This Escrow Agreement is made and entered into as of this 19th day of
July, 1996, by and among Texas Commerce Bank, National Association (the "Escrow
Agent"), The ForeFront Group, Inc., a Delaware corporation ("ForeFront"),
AllMicro Acquisition Corporation, a Florida corporation ("Acquisition Sub"),
AllMicro, Inc., a Florida corporation ("AllMicro" or the "Surviving
Corporation"), and Michael Kaplan and Anita Kaplan (individually, a
"Shareholder" and, collectively, the "Shareholders").
W I T N E S S E T H:
WHEREAS, ForeFront, Acquisition Sub, AllMicro and the Shareholders
have entered into an Agreement and Plan of Reorganization, dated as of July 15,
1996 (collectively, with all amendments, schedules, exhibits and certificates
referred to therein, the "Reorganization Agreement"), which provides for the
merger of Acquisition Sub with and into AllMicro (the "Merger"); and
WHEREAS, the Reorganization Agreement provides that on the effective
date of the Merger, certain shares of ForeFront common stock, par value $.01 per
share (the "ForeFront Common Stock") to be issued in the Merger and otherwise
distributable to the Shareholders pursuant thereto will be deposited in escrow
with the Escrow Agent pursuant to this Agreement.
NOW, THEREFORE, in consideration of the mutual premises and covenants
contained in the Reorganization Agreement and herein, the parties agree as
follows:
ARTICLE I
ESCROW AND ESCROW SHARES
1.1 Escrow. Subject to Section 2.1, the Escrow Agent shall initially
hold in escrow ForeFront Common Stock certificates in the names of the
Shareholders. Such stock certificates shall represent, in the aggregate,
105,615 shares, of ForeFront Common Stock issued in connection with the Merger
to the Shareholders allocated on a pro rata basis among the shares of ForeFront
Common Stock issued to each Shareholder in connection with the Merger
(collectively, the "Escrow Shares"). Concurrently with their delivery of the
Escrow Shares to the Escrow Agent, the Shareholders shall execute a stock power
with respect to each of the certificates, which stock powers shall be delivered
to the Escrow Agent and attached to the certificates representing the Escrow
Shares. The Escrow Shares shall be held and distributed by the Escrow Agent in
accordance with the terms and conditions of this Agreement. The number of
Escrow Shares beneficially owned by each Shareholder is set forth in Exhibit A
attached hereto.
<PAGE>
ARTICLE II
APPLICATION OF ESCROW SHARES
2.1 Distribution of Escrow Shares. The Escrow Shares shall serve as
collateral for the indemnity obligations of the Shareholders under the
Reorganization Agreement. Any claim by ForeFront for indemnification against
the Shareholders shall be conducted in accordance with the terms of this Section
2.1 If ForeFront shall have any claim against the Shareholders (excluding
claims resulting from the assertion of liability by third parties), it shall
promptly give written notice thereof to the Escrow Agent and the Shareholders,
including in such notice a brief description of the facts upon which such claims
are based and the amount thereof. If the Shareholders object to the allowance
of any such claims, they shall give written notice to ForeFront and the Escrow
Agent within twenty days following receipt of ForeFront's notice of claim,
advising it and the Escrow Agent that they do not consent to the delivery of any
of the Escrow Shares out of escrow for application to such claims. If no such
notice is timely provided by the Shareholders to ForeFront and the Escrow Agent,
the Escrow Agent shall, within five business days after the expiration of the
prior notice period, deliver out of escrow the lesser of: (a) the number of the
Escrow Shares (in whole shares) that have an aggregate market value as notified
of in writing by ForeFront and the Shareholders most nearly equal to the amount
of the claim or claims thus to be satisfied, or (b) all of the Escrow Shares.
If the Shareholders advise ForeFront and the Escrow Agent within the foregoing
twenty day period that they object to such application of the Escrow Shares
after a claim has been made, the Escrow Agent shall hold the Escrow Shares in
escrow until the rights of the Shareholders and ForeFront with respect thereto
have been agreed upon in accordance with the terms of this Agreement. If any
distribution pursuant to this Section 2.1 involves fewer than all of the Escrow
Shares, it shall be allocated pro rata against the Escrow Shares therein based
on the Escrow Shares beneficially owned by each Shareholder (unless the claim
made is based disproportionately on a representation made individually by a
Shareholder in which case the distribution shall be appropriately adjusted).
In the event any of ForeFront, Surviving Corporation, or any of their
officers, directors, employees, agents, affiliates, representatives, successors
and assigns is an "indemnified party" with respect to a third party claim and a
settlement or judgment is reached with respect to such claim, such indemnified
party shall promptly give written notice thereof to the Shareholders and the
Escrow Agent. If the Shareholders object to the allowance of any such claims,
they shall give written notice to such indemnified party and the Escrow Agent
within ten days following receipt of such notice of claim, advising such
indemnified party that they do not consent to the delivery of any of the Escrow
Shares out of escrow to such indemnified party for application to such claims.
If no such notice is timely provided by the Shareholders to such indemnified
party and the Escrow Agent, the Escrow Agent shall, within five business days
after the expiration of the prior notice period, deliver out of escrow the
lesser of: (a) the number of the Escrow Shares (in whole shares) that have an
aggregate market value (determined as provided above) most nearly equal to the
amount of the claim or claims thus to be satisfied, or (b) all of the Escrow
Shares.
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<PAGE>
If the Shareholders advise such indemnified party and the Escrow Agent
within the foregoing ten day period that they object to such application of the
Escrow Shares, the Escrow Agent shall hold the Escrow Shares in escrow until the
rights of the Shareholders and such indemnified party with respect thereto have
been agreed upon between the Shareholders and such indemnified party or until
such rights are finally determined in accordance with this Escrow Agreement. If
any distribution referred to in this Section 2.1 involves fewer than all of the
Escrow Shares, it shall be allocated pro rata against the Escrow Shares therein
based on the Escrow Shares beneficially owned by each Shareholder (unless the
claim made is based disproportionately on a representation made individually by
a Shareholder, in which case the distribution shall be appropriately adjusted).
Upon the issuance of ForeFront's 1996 audited financial statements
which include the results of the operations of AllMicro and ForeFront has
received a signed opinion from its independent auditors certifying such
financial statements, the Escrow Agent shall upon written notice from ForeFront
and the Shareholders distribute to the Shareholders (pro rata based on the
number of shares of ForeFront Common Stock issued to the Shareholders in
connection with the Merger) all of the Escrow Shares originally deposited in the
escrow pursuant to Article 1 hereof, less any Escrow Shares previously delivered
to ForeFront pursuant to this Section 2.1 and less the number of Escrow Shares
(in whole shares) having an aggregate market value (as notified in writing by
ForeFront and the Shareholders) most nearly equal to the amount of any pending
claims asserted by ForeFront with the value of such pending claims determined in
good faith by the Board of Directors of ForeFront, after taking into account
such factors as the Board of Directors shall deem appropriate, provided that if
the Shareholders do not agree with the Board of Directors' determination of the
amount of any such pending claims, the amount of any such pending claim shall be
finally determined in accordance with Section 2.3 of this Agreement.
The Escrow Shares not so distributed pursuant to this Section 2.1
shall be retained in escrow by the Escrow Agent until all such pending claims
are resolved; provided, that upon the disposition of any such claims prior to
the disposition of all such claims, the Escrow Agent shall deliver to the
Shareholders such number of Escrow Shares (in whole shares) as is most nearly
equal to the excess of the aggregate market value of the remaining Escrow Shares
(determined as provided above) over the amount of the remaining aggregate claims
as determined above.
2.2 Ownership of Escrow Shares; Voting Rights. The Shareholders
shall have all indicia of ownership of the Escrow Shares while they are held in
escrow, including, without limitation, the right to vote the Escrow Shares and
receive distributions thereon and the obligations to pay all taxes, assessments,
and charges with respect thereto, but excluding the right to sell, transfer,
pledge, hypothecate or otherwise dispose of any Escrow Shares; provided, that
any distribution of stock of ForeFront on or with respect to the Escrow Shares
and any other shares or securities into which such Escrow Shares may be changed
or for which they may be exchanged pursuant to corporate action of ForeFront
affecting holders of ForeFront Common Stock generally shall be delivered to and
held by the Escrow Agent in escrow and shall be subject to the provisions of
this Agreement.
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<PAGE>
2.3 Arbitration. Any controversy involving a claim by ForeFront on
the Escrow Shares shall be finally settled by arbitration in Palo Alto,
California in accordance with the then-current Commercial Arbitration Rules of
the American Arbitration Association, and judgment upon the award rendered by
the arbitrators may be entered in any court having jurisdiction thereof. Such
arbitration shall be conducted by three arbitrators chosen by mutual agreement
of the Shareholders and ForeFront. Failing such agreement, the arbitration
shall be conducted in accordance with the foregoing rules. There shall be
limited discovery prior to the arbitration hearing, subject to the discretion of
the arbitrators, as follows: (a) exchange of witness lists and copies of
documentary evidence and documents related to or arising out of the issues to be
arbitrated, (b) depositions of all party witnesses, and (c) such other
depositions as may be allowed by the arbitrators upon a showing of good cause.
Each party shall pay its own costs and expenses (including counsel fees) of any
such arbitration.
ARTICLE III
ESCROW AGENT
3.1 Duties and Obligations. The duties and obligations of the Escrow
Agent are purely ministerial and limited to those specifically set forth in this
Agreement, as each may from time to time be amended. The Escrow Agent shall
only be liable for, any loss, liability, cost or expense (including reasonable
attorneys' fees and expenses ) resulting from any breach of the express terms of
this Agreement or the Escrow Agent's own gross negligence, willful misconduct or
lack of good faith.
3.2 Risk of Loss. The Escrow Agent acknowledges and agrees that the
Escrow Agent bears the exclusive risk of loss, theft or damage with respect to
the Escrow Shares in its possession.
3.3 Escrow Agent's Compensation, Expenses and Indemnification.
ForeFront shall pay to the Escrow Agent compensation in respect of the Escrow
Agent's duties and obligations under this Agreement. Upon the execution of this
Agreement and the delivery of the Escrow Shares to the Escrow Agent, the Escrow
Agent shall be entitled to a one-time escrow fee of $3,500.
3.4 Resignation. The Escrow Agent may resign at any time by giving
not less than sixty days written notice thereof to each of ForeFront and the
Shareholders.
3.5 Successor Escrow Agent. Upon receipt of the Escrow Agent's
notice of resignation, ForeFront and the Shareholders may appoint a successor
escrow agent. Upon the acceptance of the appointment as escrow agent hereunder
by a successor escrow agent and the transfer to such successor escrow agent of
the Escrow Shares, the resignation of the Escrow Agent shall become effective
and the Escrow Agent shall be discharged from any future duties and obligations
under this Agreement.
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<PAGE>
3.6 Conflicting Demands. If on or before the close of escrow the
Escrow Agent receives or becomes aware of any conflicting demands or claims with
respect to the Escrow Shares or the rights of any of the parties hereto to such
Escrow Shares, the Escrow Agent shall have the right to discontinue any or all
future acts on the Escrow Agent' part until such conflict is resolved to the
Escrow Agent's satisfaction; to commence or defend any action or proceedings for
the determination of such conflict; or to file a suit in interpleader and obtain
an order from a court of competent jurisdiction requiring all parties involved
to interplead and litigate in such court their rights among themselves and with
the Escrow Agent. In the event any of the above-described events occur, each of
ForeFront, on the one hand, and the Shareholders, on the other hand, agree to
pay one half of all costs, damages, judgments and expenses, including reasonable
attorneys fees, suffered or incurred by the Escrow Agent in connection with, or
arising out of, such conflicting demands or claims, including, without
limitation, a suit in interpleader brought by the Escrow Agent.
3.7 Indemnity. The Shareholders and ForeFront hereby agree to
jointly and severally indemnify the Escrow Agent for, and to hold it harmless
against any loss, liability or expense arising out of or in connection with this
Agreement and carrying out its duties hereunder, including the costs and
expenses of defending itself against any claim of liability, except in those
cases where the Escrow Agent has been guilty of gross negligence or willful
misconduct. Anything in this Agreement to the contrary notwithstanding, in no
event shall the Escrow Agent be liable for special, indirect or consequential
loss or damage of any kind whatsoever (including but not limited to lost
profits), even if the Escrow Agent has been advised of the likelihood of such
loss or damage and regardless of the form of action.
ARTICLE IV
MISCELLANEOUS
4.1 Notices. Any notice or other communication required or permitted
to be given to the parties hereto shall be deemed to have been given if
personally delivered (including personal delivery by facsimile), or two days
after mailing by certified or registered mail, return receipt requested, first
class postage prepaid, addressed as follows (or at such other address as the
addressed party may have substituted by notice pursuant to this Section 4.1):
(a) If to ForeFront or Acquisition Sub:
The ForeFront Group, Inc.
1330 Post Oak Blvd, Suite 1300
Houston, Texas 77056
Attention: Jeffrey R. Harder
Facsimile: (713) 961-1101
(b) If to the Shareholders:
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<PAGE>
Michael and Anita Kaplan
18820 U.S. Highway 19 North, Suite 215
Clearwater, Florida 34624
(c) If to the Escrow Agent:
Texas Commerce Bank, N.A.
600 Travis Street, Suite 1150
Houston, Texas 77002
Attention: Corporate Trust, Escrow Section
Fax: (713) 216-5476
4.2 Termination. This Agreement shall terminate upon the mutual
written express agreement of ForeFront and the Shareholders. In any event, this
Agreement terminates when all of the Escrow Shares have been distributed
according to its terms.
4.3 Interpretation. The validity, construction, interpretation and
enforcement of this Agreement shall be determined and governed by the laws of
the State of Texas. The invalidity or unenforceability of any provision of this
Agreement or the invalidity or unenforceability of any provision as applied to a
particular occurrence or circumstance shall not affect the validity or
enforceability of any of the other provisions of this Agreement or the
applicability of such provision, as the case may be.
4.4 Counterparts. This Agreement may be signed in one or more
counterparts, each of which shall be deemed an original and all of which shall
constitute one agreement.
4.5 Transfer of Interests. None of the Shareholders shall sell,
transfer, pledge, hypothecate or otherwise dispose of any Escrow Shares, or any
interest therein prior to the distribution of such Escrow Shares in accordance
with Section 2.1 above.
4.6 Taxes. For purposes of federal and state income taxation, the
Escrow Shares shall be treated as owned by the Shareholders and this Agreement
shall be interpreted in a manner to effect the Shareholders' ownership of the
Escrow Shares for such tax purposes.
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<PAGE>
IN WITNESS WHEREOF, the parties have signed this Agreement on the day
and year first above written.
TEXAS COMMERCE BANK, NATIONAL
ASSOCIATION
as Escrow Agent
By: /s/ Jo Anne K. Gulliver
------------------------
Name: Jo Anne K. Gulliver
--------------------
Title: Vice President & Trust Officer
-------------------------------
THE FOREFRONT GROUP, INC.,
a Delaware corporation
By: /s/ Ernest D. Rapp
-------------------
Name: Ernest D. Rapp
---------------
Title: Chief Financial Officer
------------------------
ALLMICRO ACQUISITION CORPORATION,
a Florida corporation
By: /s/ Ernest D. Rapp
-------------------
Name: Ernest D. Rapp
---------------
Title: Treasurer
----------
ALLMICRO, INC.,
a Florida corporation
By: /s/ Michael Kaplan
-------------------
Name: Michael Kaplan
---------------
Title: President
----------
THE SHAREHOLDERS:
/s/ Michael Kaplan
-------------------
Michael Kaplan
/s/ Anita Kaplan
-----------------
Anita Kaplan
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<PAGE>
EXHIBIT A
ESCROW SHARES OWNED BY SHAREHOLDERS
Michael and Anita Kaplan, as tenants by entirety 100,000 shares
<PAGE>
EXHIBIT 99.3
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made as of this
19th day of July 1996, by and among The ForeFront Group, Inc., a Delaware
corporation ("ForeFront") and Michael and Anita Kaplan (the "Shareholders").
RECITALS
--------
WHEREAS, ForeFront has, pursuant to an Agreement and Plan of
Reorganization, dated as of the date hereof (the "Reorganization Agreement"),
with AllMicro, Inc., a Florida corporation ("AllMicro"), AllMicro Acquisition
Corporation, a Florida corporation and a wholly-owned subsidiary of ForeFront,
and the Shareholders agreed to grant the Shareholders certain registration
rights with respect to the "Closing Shares" and "Escrow Shares" (as defined in
the Reorganization Agreement) acquired under the Reorganization Agreement; and
WHEREAS, the obligations of AllMicro and the Shareholders under the
Reorganization Agreement are conditioned upon the execution and delivery of this
Agreement by ForeFront;
NOW, THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, the parties hereby agree as follows:
1. CERTAIN DEFINITIONS
-------------------
As used in this Agreement, the following terms shall have the following
respective meanings:
"Commission" shall mean the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act.
"Common Stock" shall mean the Common Stock, par value $.01 per share, of
ForeFront.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
or any similar federal statute and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Holders" shall mean the Shareholders, and any other holder of Registrable
Securities to whom the registration rights conferred by this Agreement have been
transferred in compliance with Section 2.9 hereof.
"Incremental Registration Expenses" shall mean underwriting discounts and
selling commissions attributable to the Registrable Securities being sold,
incremental state or federal registration and filing fees and state Blue Sky
fees and expenses incurred as a result of a Holder's
<PAGE>
participation in the registration to which such fees and expenses relate, and
the fees and expenses of a Holder's own accountants and experts and counsel to
the Selling Stockholders.
The terms "register," "registered" and "registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
"Registered Securities" shall mean any of the Registrable Securities which
are included in a Registration Statement filed by ForeFront pursuant to Section
2 hereof and which has been declared effective by the Commission.
"Registrable Securities" shall mean (i) the Shares issued to the
Shareholders on the date hereof and (ii) any Common Stock issued as a dividend
or other distribution with respect to or in exchange for or in replacement of
the Shares; provided, however, that Registrable Securities shall not include any
shares of Common Stock which have been previously sold in a registered public
offering under the Securities Act, or shares of Common Stock which would
otherwise be Registrable Securities held by a Holder who is then permitted to
sell such securities pursuant to Rule 144 or Rule 145.
"Registration Expenses" shall mean all expenses incurred by ForeFront in
complying with this Agreement including, without limitation, all registration
and filing fees, exchange listing fees, printing expenses, fees and
disbursements of counsel for ForeFront, state Blue Sky fees and expenses, and
the expenses of any special audits incident to or required by any such
registration, but excluding underwriting discounts and selling commissions
attributable to the Registrable Securities being sold, as well as all expenses
normally incurred by ForeFront in connection with its ordinary business
activities, including, but not limited to, rent and salaries.
"Registration Statement" shall mean a registration statement filed by
ForeFront with the Commission for a public offering and sale of securities of
ForeFront (other than a registration statement on Form S-8 or Form S-4, or their
successors, or any registration statement covering only securities proposed to
be issued in exchange for securities or assets of another corporation).
"Rule 144" shall mean Rule 144 as promulgated by the Commission under the
Securities Act, as such Rule may be amended from time to time, or any similar
successor rule that may be promulgated by the Commission.
"Rule 145" shall mean Rule 145 as promulgated by the Commission under the
Securities Act, as such Rule may be amended from time to time, or any similar
successor rule that may be promulgated by the Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended, or any
similar federal statute and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
2
<PAGE>
"Selling Stockholders" shall mean the Holders of Registrable Securities to
be included in a Registration Statement.
"Shares" shall mean, collectively, the Closing Shares and Escrow Shares.
2. REGISTRATION RIGHTS.
-------------------
2.1 Piggyback Registration. Whenever ForeFront proposes to file a
Registration Statement at any time after the date hereof and prior to five years
after such date, unless a Registration Statement with respect to the Shares has
previously been filed and declared effective by the Commission, it will, at
least 15 days prior to such filing, give written notice to all Holders of
Registrable Securities of its intention to do so and, upon the written request
of a Holder or Holders of Registrable Securities given within 10 days after
ForeFront provides such notice (which request shall state the intended method of
disposition of such Registrable Securities), ForeFront shall (subject to Section
2.2 below) use its best efforts to cause all Registrable Securities that
ForeFront has been requested by such Holder or Holders to register to be
registered under the Securities Act to the extent necessary to permit their sale
or other disposition in accordance with the intended methods of distribution
specified in the request of such Holder or Holders; provided that ForeFront
shall have the right to cancel, postpone or withdraw any registration effected
pursuant to this Section 2.1 without obligation to any Holders of Registrable
Securities. The Holders of Registrable Securities that are registered shall be
responsible for their proportionate share of the Incremental Registration
Expenses related to their Registrable Securities, but shall not be responsible
for any other Registration Expenses.
2.2 Underwriter's Reductions. If the offering to which the proposed
registration under Section 2.1 relates is to be distributed by or through an
underwriter or underwriters, and if in the written opinion of the managing
underwriter the registration of all, or part of, the Registrable Securities that
the Holders have requested to be included and any other shares of Common Stock
sought to be registered by any other stockholder of the Corporation exercising
rights comparable to those of the Holders of Registrable Securities (the "Other
Common Stock"), would materially and adversely affect such public offering, then
ForeFront shall be required to include in the underwriting only that number of
Registrable Securities and Other Common Stock, if any, that the managing
underwriter believes may be sold without causing such material adverse effect,
and such Registrable Securities as shall be excluded from registration by the
managing underwriter of an offering shall not be sold or offered for sale by the
Holder thereof until 120 days after the effective date of the Registration
Statement. In the event of any such determination by the managing underwriter,
(i) the number of Registrable Securities and Other Common Stock requested to be
included in the underwriting shall be reduced pro rata among the holders of the
Registrable Securities and the holders of Other Common Stock requesting such
registration and inclusion in the underwriting and may, in the determination of
such managing underwriter and consistent with pro rata reduction, be reduced to
zero and (ii) such Holder shall be responsible for and pay their proportionate
share of the Incremental Registration Expenses directly related thereto;
provided, however, that in the event the Registrable Securities requested to be
included in the underwriting is reduced to less than 20%
3
<PAGE>
of the aggregate shares sought to be registered by the Shareholders in the
proposed registration, then such Registrable Securities as shall be excluded
from registration shall not be subject to the 120 day lock-up restriction
described in the preceding sentence. If requested by such underwriters, the
Registrable Securities that are subject to the Registration Statement shall be
sold to or through such underwriters at the same price to be paid to ForeFront
or other stockholders owning shares of Other Common Stock included in such
registration if ForeFront or such other stockholders are offering Common Stock.
2.3 Registration Procedures. If and whenever ForeFront is required by
Section 2.1 to use its best efforts to effect the registration of any of the
Registrable Securities under the Securities Act, ForeFront shall:
(i) prepare and file with the Commission any amendments and
supplements to the Registration Statement and the prospectus included in the
Registration Statement as may be necessary to keep the Registration Statement
effective for a period sufficient to effect the sale of the Registrable
Securities, but in any event not more than 90 days from the effective date;
(ii) furnish to each Selling Stockholder such reasonable numbers of
copies of the prospectus, including a preliminary prospectus, in conformity with
the requirements of the Securities Act, and such other documents as the Selling
Stockholder may reasonably request to facilitate the public sale or other
disposition of the Registrable Securities owned by the Selling Stockholder;
provided, however, that the obligation of ForeFront to deliver copies of
prospectuses to such Selling Stockholders shall be subject to the receipt by
ForeFront of reasonable assurances from such Selling Stockholders that they will
comply with the applicable provisions of the Securities Act and of such other
securities laws as may be applicable in connection with any use by them of any
prospectuses; and
(iii) as expeditiously as possible, use its best efforts to register
or qualify the Registrable Shares covered by the Registration Statement under
the securities or Blue Sky laws of such states or jurisdictions as the Selling
Stockholder shall reasonable request, and do any and all other acts and things
that may be necessary or desirable to enable the Selling Stockholder to
consummate the public sale or other disposition in such jurisdictions of the
Registrable Shares owned by the Selling Stockholder; provided, however, that
ForeFront shall not be required in connection with this Section 2.3(iii) to
qualify as a foreign corporation or execute a general consent to service of
process in any jurisdiction.
2.4 Amendments to Prospectus. If ForeFront has delivered preliminary or
final prospectuses to the Selling Stockholder and after having done so,
ForeFront determines that such prospectus should be amended to comply with the
requirements of the Securities Act, ForeFront shall promptly notify the Selling
Stockholder and, if requested, the Selling Stockholder shall immediately cease
making offers of Registrable Securities and return all prospectuses to ForeFront
4
<PAGE>
except for file copies used for archival purposes. ForeFront shall use its best
efforts to promptly provide the Selling Stockholder with revised prospectuses
and, following receipt of the revised prospectuses, the Selling Stockholder
shall be free to resume making offers of the Registrable Securities.
2.5 Obligations of Selling Stockholders. No Registrable Securities shall
be included in a registration under Section 2.1 unless the Holder of such
Registrable Securities (a) completes and executes all questionnaires,
indemnities, underwriting agreements and other documents required under the
terms of any underwriting arrangement relating to such registration or under any
applicable rules and regulations of the Commission provided that such documents
are no more onerous than those executed or completed by ForeFront or any other
stockholder of ForeFront selling stock in such offering, and (b) provides to
ForeFront in writing such information as ForeFront may reasonably require from
such Holder (i) for inclusion in the Registration Statement relating to such
registration, (ii) describing the manner and circumstances of the proposed sale
or transfer of Registrable Securities by such Holder, and (iii) to enable
ForeFront to determine if an exemption provided for in this Agreement from
ForeFront's obligation to include such Registrable Securities in a Registration
Statement may be applicable.
2.6 Indemnification.
(a) To the extent permitted by law, ForeFront will indemnify each
Holder participating in a registration pursuant to this Agreement, each of its
officers and directors and partners, and each person controlling such Holder
within the meaning of Section 15 of the Securities Act, with respect to which
registration, qualification or compliance has been effected pursuant to this
Agreement, and each underwriter, if any, and each person who controls any
underwriter within the meaning of Section 15 of the Securities Act, against all
expenses, claims, losses, damages or liabilities (or actions in respect
thereof), including any of the foregoing incurred in settlement of any
litigation, commenced or threatened, to the extent such expenses, claims,
losses, damages or liabilities arise out of or are based on any untrue statement
(or alleged untrue statement) of a material fact contained in any registration
statement, prospectus, offering circular or other document, or any amendment or
supplement thereto, incident to any such registration, qualification or
compliance, or based on any 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 any violation by ForeFront of the Securities Act or
any rule or regulation promulgated under the Securities Act applicable to
ForeFront in connection with any such registration, qualification or compliance,
and ForeFront will reimburse each such Holder, each of its officers and
directors, and each person controlling such Holder, each such underwriter and
each person who controls any such underwriter, for any legal and any other
expenses reasonably incurred in connection with investigating, preparing or
defending any such claim, loss, damage, liability or action, provided, however,
that the indemnity contained herein shall not apply to amounts paid in
settlement of any claim, loss, damage, liability or expense if settlement is
effected without the consent of ForeFront (which consent shall not unreasonably
be withheld), and provided further, that ForeFront will not be liable in any
such case to the extent that any such claim, loss, damage, liability or expense
arises out of or is based on any untrue statement or omission or alleged untrue
statement or omission, made in reliance upon and in
5
<PAGE>
conformity with written information furnished to ForeFront by such Holder,
controlling person or underwriter specifically for use therein. Notwithstanding
the foregoing, insofar as the foregoing indemnity relates to any such untrue
statement (or alleged untrue statement) or omission (or alleged omission) made
in the preliminary prospectus but eliminated or remedied in the amended
prospectus on file with the Commission at the time the registration statement
becomes effective or in the final prospectus filed with the Commission pursuant
to Rule 424 of the Commission, the indemnity agreement herein shall not inure to
the benefit of any underwriter or (if there is no underwriter) any Holder if a
copy of the final prospectus filed pursuant to Rule 424 was not furnished to the
person or entity asserting the loss, liability, claim or damage at or prior to
the time such furnishing is required by the Securities Act.
(b) To the extent permitted by law, each Holder will, if Registrable
Securities are included in the securities as to which such registration,
qualification or compliance is being effected, indemnify ForeFront, each of its
directors and officers, each underwriter, if any, of ForeFront's securities
covered by such a registration statement, each person who controls ForeFront or
such underwriter within the meaning of Section 15 of the Securities Act, and
each other such Holder, each of its officers and directors and each person
controlling such Holder within the meaning of Section 15 of the Securities Act,
against all claims, losses, damages and liabilities (or actions in respect
thereof) arising out of or based on any untrue statement by such Holder (or
alleged untrue statement) of a material fact contained in any such registration
statement, prospectus, offering circular or other document, or any omission by
such Holder (or alleged omission) to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading, or
any violation by such Holder of any rule or regulation promulgated under the
Securities Act applicable to such Holder and relating to action or inaction
required of such Holder in connection with any such registration, qualification
or compliance, and will reimburse ForeFront, such Holders, such directors,
officers, persons, underwriters or control persons for any legal or other
expenses reasonably incurred in connection with investigating or defending any
such claim, loss, damage, liability or action, in each case to the extent, but
only to the extent, that such untrue statement (or alleged untrue statement) or
omission (or alleged omission) is made in such registration statement,
prospectus, offering circular or other document in reliance upon and in
conformity with written information furnished to ForeFront by such Holder
specifically for use therein; provided, however, that the indemnity contained
herein shall not apply to amounts paid in settlement of any claim, loss, damage,
liability or expense if settlement is effected without the consent of the Holder
(which consent shall not be unreasonably withheld). Notwithstanding the
foregoing, the liability of each Holder under this subsection (b) shall be
limited in an amount equal to the net proceeds from the sale of the shares sold
by such Holder, unless such liability arises out of or is based on willful
conduct by such Holder. In addition, insofar as the foregoing indemnity relates
to any such untrue statement (or alleged untrue statement) or omission (or
alleged omission) made in the preliminary prospectus but eliminated or remedied
in the amended prospectus on file with the Commission at the time the
registration statement becomes effective or in the final prospectus filed
pursuant to Rule 424 of the Commission, the indemnity agreement herein shall not
inure to the benefit of ForeFront, any underwriter or (if there is no
underwriter) any Holder if a copy of the final prospectus filed pursuant to Rule
424 was not furnished to the person or entity asserting the loss, liability,
claim or damage at or prior to the time such furnishing is required by the
Securities Act.
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(c) Each party entitled to indemnification under this Section 2.6 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not unreasonably be
withheld), and the Indemnified Party may participate in such defense at such
party's expense, and provided further that the failure of any Indemnified Party
to give notice as provided herein shall not relieve the Indemnifying Party of
its obligations under this Agreement unless the failure to give such notice is
materially prejudicial to an Indemnifying Party's ability to defend such action
and provided further, that the Indemnifying Party shall not assume the defense
for matters as to which there is a conflict of interest or separate or different
defenses. No Indemnifying Party, in the defense of any such claim or
litigation, shall, except with the consent of each Indemnified Party, 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 to such claim or
litigation. No Indemnified Party shall consent to entry of any judgment or
enter into any settlement without the consent of each Indemnifying Party.
(d) If the indemnification provided for in this Section 2.6 is
unavailable to an Indemnified Party in respect of any losses, claims, damages or
liabilities referred to therein, then each Indemnifying Party, in lieu of
indemnifying such Indemnified Party, shall contribute to the amount paid or
payable by such Indemnified Party as a result of such losses, claims, damages or
liabilities, in such proportion as is appropriate to reflect the relative fault
of ForeFront on the one hand and the Selling Stockholders on the other, in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative fault of ForeFront on the one hand and the Selling
Stockholders on the other shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of material fact or the
omission or alleged omission to state a material fact relates to information
supplied by ForeFront or by the Selling Stockholders and the parties' relevant
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. ForeFront and the Selling Stockholders agree that it
would not be just and equitable if contribution pursuant to this Section 2.6(d)
were based solely upon the number of entities from whom contribution was
requested or by any other method of allocation which does not take account of
the equitable considerations referred to above in this Section 2.6(d). The
amount paid or payable by an Indemnified Party as a result of the losses,
claims, damages and liabilities referred to above in this Section 2.6(d) shall
be deemed to include any legal or other expenses reasonably incurred by such
Indemnified Party in connection with investigating or defending any such action
or claim, subject to the provisions of Section 2.6(c) hereof. Notwithstanding
the provisions of this Section 2.6(d), no Selling Stockholder shall be required
to contribute any amount or make any other payments under this Agreement which
in the aggregate exceed the proceeds received by such Selling Stockholder. No
person guilty of fraudulent misrepresentation (within the meaning of the
Securities Act) shall be entitled to contribution under this Section (d) from
any person who was not guilty of such fraudulent misrepresentation.
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(e) Notwithstanding the foregoing provisions of this Section 2.6, if
pursuant to an underwritten public offering of capital stock of ForeFront, the
Selling Stockholders and the underwriters enter into an underwriting agreement
relating to such offering which contains provisions covering indemnification
among the parties thereto in connection with such offering, the indemnification
provisions of this Section 2.6, to the extent they are in conflict therewith,
shall be deemed inoperative for the purpose of such offering, except as to any
parties to this Agreement who are not parties to such subsequent underwriting
agreement.
2.7 Certain Information.
(a) As a condition to exercising the registration rights provided for
herein, each Holder, with respect to any Registrable Securities included in any
registration, shall furnish ForeFront such information regarding such Holder,
the Registrable Securities and the distribution proposed by such Holder as
ForeFront may request in writing and as shall be required in connection with any
registration, qualification or compliance referred to in Section 2.
(b) The failure of any Holder to furnish the information requested
pursuant to Section 2.7(a) shall not affect the obligation of ForeFront under
Section 2 to the remaining Holder(s) who furnish such information unless, in the
reasonable opinion of counsel to ForeFront or the underwriters, such failure
impairs or may impair the legality of the Registration Statement or the
underlying offering.
(c) Each Holder, with respect to any Registrable Securities included
in any registration, shall cooperate in good faith with ForeFront and its
underwriters, if any, in connection with such registration, including placing
such shares in escrow or custody to facilitate the sale and distribution
thereof.
(d) Each Holder, with respect to any Registrable Securities included
in any registration, shall make no further sales or other dispositions, or
offers therefor, of such shares under such registration statement if, during the
effectiveness of such registration statement, an intervening event should occur
which, in the opinion of counsel to ForeFront, makes the prospectus included in
such registration statement no longer comply with the Securities Act until such
time as such holder has received from ForeFront copies of a new, amended or
supplemented prospectus complying with the Securities Act.
2.8 Rule 144 Reporting. With a view to making available the benefits
of certain rules and regulations of the Commission which may at any time permit
the sale of the Registrable Securities to the public without registration, after
such time as a public market exists for the Common Stock of ForeFront, ForeFront
agrees to use its best lawful efforts to:
(a) Make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act, at all times after
the effective date that ForeFront becomes subject to the reporting requirements
of the Securities Act or the Exchange Act;
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(b) File with the Commission in a timely manner all reports and other
documents required of ForeFront under the Securities Act and the Exchange Act
(at any time after it has become subject to such reporting requirements); and
(c) So long as a Holder owns any Registrable Securities, to promptly
furnish to such Holder forthwith upon request a written statement by ForeFront
as to its compliance with the reporting requirements of said Rule 144 and of the
Securities Act and the Exchange Act, a copy of the most recent annual or
quarterly report of ForeFront, and such other reports and documents of ForeFront
and other information in the possession of or reasonably obtainable by ForeFront
as a Holder may reasonably request in availing itself of any rule or regulation
of the Commission allowing such Holder to sell any such securities without
registration. In addition, if at any time following the effective date of the
first registration of any of ForeFront's securities under the Securities Act
ForeFront shall cease to be subject to the requirements of Section 15(d) of the
Exchange Act, ForeFront will make available to any of the Holders the
information required by Rule 15c2-11(a)(4) of the Exchange Act (or any
corresponding rule hereafter in effect).
2.9 Transfer of Registration Rights. The rights granted under this
Agreement may be assigned by each Shareholder to a transferee or assignee in
connection with any transfer or assignment of Registrable Securities provided
that: (i) such transferee or assignee is a partner or retired partner of any
stockholder which is a partnership, (ii) such transferee or assignee is a member
of the immediate family of such stockholder or a trust for the benefit of any
individual stockholder, or (iii) such transferee or assignee is acquiring no
less than 50,000 shares of Registrable Securities (as presently constituted and
subject to subsequent adjustments for stock splits, stock dividends, reverse
stock splits, and the like); provided further that (i) such transfer may
otherwise be effected in accordance with applicable securities laws, (ii) the
stockholder notifies ForeFront in writing prior to the transfer or assignment
and the assignee or transferee agrees in writing to be bound by the provisions
of this Agreement, and (iii) such transfer is not pursuant to a registration
statement under the Securities Act or Rule 144 promulgated under the Securities
Act.
3. MISCELLANEOUS.
-------------
3.1 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED IN ALL RESPECTS BY
THE INTERNAL LAWS OF THE STATE OF DELAWARE WITHOUT REGARD TO THE CONFLICT OF
LAWS PRINCIPLES THEREOF.
3.2 Successors and Assigns. Except as otherwise provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto.
3.3 Effective Date; Entire Agreement; Amendment. This Agreement shall
constitute the full and entire understanding and agreement between the parties
with regard to the subject hereof, and shall be effective at such time as it has
been signed by ForeFront and the Shareholders. Except as expressly provided
herein, this Agreement, or any provision hereof, may be amended,
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waived, discharged or terminated upon the written consent of ForeFront and the
Holders holding at least two-thirds (2/3) of the then outstanding Registrable
Securities owned by Holders.
3.4 Notices, etc. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by registered or
certified mail, postage prepaid, or otherwise delivered by hand or by messenger
including Federal Express or similar courier service, addressed (a) if to a
Holder, at such Holder's address set forth on the signature page, or at such
other address as such party shall have furnished to ForeFront in writing, or (b)
if to ForeFront, at The ForeFront Group, Inc., 1330 Post Oak Boulevard, Suite
1300, Houston, TX 77056, ATTN.: President, or at such other address as
ForeFront shall have furnished to the other parties hereto.
Each such notice or other communication shall for all purposes of this
Agreement be treated as effective upon receipt, if delivered personally or by
courier, or, if sent by mail, at the earlier of its receipt or 48 hours after
same has been deposited in a regularly maintained receptacle for the deposit of
the United States mail, addressed and mailed as aforesaid.
3.5 Delays or Omissions. Except as expressly provided herein, no delay or
omission to exercise any right, power or remedy accruing to any party to this
Agreement shall impair any such right, power or remedy of such party nor shall
it be construed to be a waiver of any such breach or default, or an acquiescence
therein, or of or in any similar breach or default thereafter occurring; nor
shall any waiver of any single breach or default be deemed a waiver of any other
breach or default theretofore or thereafter occurring. Any waiver, permit,
consent or approval of any kind or character on the part of any party of any
breach or default under this Agreement, or any waiver on the part of any party
of any provisions or conditions of this Agreement, must be in writing and shall
be effective only to the extent specifically set forth in such writing. All
remedies, either under this Agreement or by law or otherwise afforded to any
party to this Agreement, shall be cumulative and not alternative.
3.6 Counterparts. This Agreement may be executed in any number of
counterparts, each of which may be executed by less than all of the parties
hereto, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument.
3.7 Severability. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision.
3.8 Titles and Subtitles. The titles and subtitles used in this Agreement
are used for convenience only and are not considered in construing or
interpreting this Agreement.
IN WITNESS WHEREOF, the undersigned or each of their respective duly
authorized officers or representatives have executed this agreement effective
upon the date first set forth above.
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"ForeFront"
THE FOREFRONT GROUP, INC.
By: /s/ David Sikora
-----------------
Title: President and Chief Executive Officer
-------------------------------------
/s/ Michael Kaplan
----------------------------
Michael Kaplan
/s/Anita Kaplan
----------------------------
Anita Kaplan
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