SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/A
(Mark One)
/x/ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
/ / TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number 0-27438
The ForeFront Group, Inc.
- -----------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Delaware 76-0365256
- -----------------------------------------------------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1330 Post Oak Blvd., Suite 1300
Houston, Texas 77056
- -----------------------------------------------------------------
(Address of principal executive offices)
Issuer's telephone number: (713) 961-1101
Check whether the issuer (1) filed all reports required to
be filed by Section 13 or 15(d) of the Exchange Act during the
past 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes /X/ No / /
Number of shares of the issuer's Common Stock outstanding as
of November 4, 1996: 6,371,130
<PAGE>
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, thereunto duly authorized.
The ForeFront Group, Inc.
Date: November 14, 1996 By: /s/ David Sikora
David Sikora
President and Chief Executive
Officer
Date: November 14, 1996 By: /s/ Ernest D. Rapp
Ernest D. Rapp
Chief Financial Officer
(Principal Financial and
Accounting Officer)
-12-
<PAGE>
EXHIBIT INDEX
Number Exhibit
2.1 Agreement and Plan of Reorganization among the Company, AllMicro
Acquisition Corporation, AllMicro, Inc. and the Shareholders
listed on the execution pages thereto, dated July 19, 1996
(incorporated by reference to the exhibit attached to the Company's
Current Report on Form 8-K as filed with the Securities and Exchange
Commission on August 6, 1996).
10.1 Employment Agreement between the Company and Michael Kaplan, dated
July 22, 1996.
10.2 The Company's 1996 Non-Qualified Stock Option Plan
11.1 Statement regarding computation of net loss per share
27 Financial Data Schedule
AllMicro, Inc.
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement"), effective the
date indicated on the signature page hereto (the "Effective Date"),
is entered into by and between AllMicro, Inc., a Florida
corporation ("AllMicro") and Michael Kaplan, an individual residing
in Florida (the "Employee").
W I T N E S S E T H:
WHEREAS, Employee is presently employed by AllMicro in
the capacity specified in Exhibit A;
WHEREAS, effective upon the consummation of the merger
(the "Merger") of AllMicro Acquisition Corporation with and into
AllMicro, AllMicro will become a wholly owned subsidiary of The
ForeFront Group, Inc., a Delaware corporation ("ForeFront");
WHEREAS, following the Merger AllMicro wishes to employ
the Employee to perform certain duties on its behalf on the terms
and conditions, and for the consideration, hereafter set forth, and
the Employee wishes to accept such employment and perform such
duties on such terms and conditions and for such consideration;
NOW, THEREFORE, in consideration of the mutual promises,
covenants and obligations contained herein, the Employee and
AllMicro do hereby agree as follows:
1. EMPLOYMENT, DUTIES and TERMINATION. Employee is
hereby employed by AllMicro for the initial period indicated on
Exhibit A hereto, effective upon the closing of the Merger. After
the expiration of the initial period indicated on Exhibit A, the
Employee's employment hereunder shall continue but either party may
terminate this Agreement, with or without cause, on two (2) weeks'
notice delivered to the other (except upon a termination "for cause"
as set out below, which shall require only the notification as
hereafter indicated). Employee shall be employed initially for the
position, and generally to perform such duties, as are set forth on
Exhibit A hereto, which may change at the direction of AllMicro in
its sole determination. While employed by AllMicro, Employee
agrees to devote Employee's full productive efforts to the business
of AllMicro. Employee may have no other sources of active
employment while employed by AllMicro. Employee shall initially
report to the person indicated on Exhibit A. Employee's employment
may be terminated by AllMicro at any time if the Employee: (i) is
convicted of or pleads nolo contendere to a felony offense or a
crime of moral turpitude; (ii) materially breaches this Agreement
and fails to cure such breach within thirty (30) days of notice of
such breach by AllMicro; (iii) engages in willful misconduct, gross
neglect of Employee's duties, or an activity which constitutes a
material conflict of interest with Employee's job; or (iv) has
materially misrepresented Employee's skills,
-1-
<PAGE>
past employment, education, or any other matter discussed between
AllMicro and Employee prior to commencement of employment
hereunder, including without limitation, information supplied to
AllMicro by the Employee in Employee's employment application. In
such cases, Employee will receive only Employee's compensation to
date of termination. Employee understands and agrees that this
Agreement and Employee's status as an employee of AllMicro creates
a fiduciary duty which the Employee owes to AllMicro, which duty
the Employee promises to fulfill.
2. COMPENSATION.
2.1 Salary. In consideration of the performance of
duties hereunder, AllMicro agrees to (i) pay the Employee a monthly
salary as indicated on Exhibit A, and (ii) grant Employee a non-
qualified stock option for the number of shares as is set out on
Exhibit A hereto, exercisable at a per share price equal to $12.375
and which vest and are exercisable at a rate equal to 1/24 of the
total amount thereof for each month that Employee performs services
to Forefront after the date hereof. Notwithstanding the above, in
the event that Employee is terminated without cause by ForeFront or
AllMicro prior to the expiration of the initial term, vesting of
options shall continue after the Effective Date. AllMicro may
withhold from any amounts payable under this Agreement, all
federal, state, city or other taxes as may be required pursuant to
any law or governmental regulation or ruling or AllMicro's policy.
2.2 Benefits. The Employee will also receive other
benefits from time to time normally provided to employees of
AllMicro, although there shall be no obligation to commence any
benefit plan, or to continue any plan once commenced.
2.3 Reimbursement. While employed hereunder, AllMicro
agrees to reimburse the Employee for all reasonable and necessary
business expenses in accordance with AllMicro's expense
reimbursement policy, which expenses have been approved in advance.
3. PROPRIETARY RELATIONSHIP.
3.1 Disclosure of Confidential Information. No
Confidential Information or anything directly related to it shall
be used by the Employee for the benefit of the Employee or any
third party, nor shall such Confidential Information be disclosed
to a third party, without the prior written consent of AllMicro,
except as may be necessary in the ordinary cause of performing the
Employee's duties for AllMicro and only for the benefit of
AllMicro. "Confidential Information" shall mean all of: (a)
information pertaining to the design and development of all
commercial products of AllMicro that is not generally known within
the industry in which AllMicro or any of its affiliates is engaged
and that is disclosed to, learned by or developed by the Employee
in the performance of his duties during Employee's employment by
AllMicro; (b) AllMicro's customer lists, sales data, pricing
formulas, marketing strategies, and other proprietary information
acquired by Employee in the performance of employment duties
hereunder; and (c) anything which would be considered "confidential"
under Florida law.
-2-
<PAGE>
3.2 Exemption. Confidential Information shall not
include information that:
(a) at the time of its disclosure, is publicly
available through no fault of the Employee;
(b) at the time of its disclosure, is, without
fault of the receiving party, part of the public
domain;
(c) subsequent to its disclosure hereunder, is
obtained by the Employee from a third party not
subject to a contractual or fiduciary obligation
for confidentiality to the disclosing party; or
(d) is required to be disclosed under court or
governmental order, rule or regulation.
3.3 Return of Data. In the event of the termination of
employment of the Employee for any reason, the Employee will
deliver to AllMicro all documents, notebooks, designs,
specifications, customer lists, drawings, software, manuals,
reports, plans and other data of any nature containing Confidential
Information or relating to the business of AllMicro, and the
Employee will not deliver to anyone else any of such documents or
data or any reproduction of such documents or data containing
Confidential Information or relating to the business of AllMicro.
3.4 Disclosure and Assignment of Inventions. The
Employee agrees to make prompt and complete disclosure to AllMicro
of every Invention. "Inventions" shall mean all improvements,
discoveries, inventions, whether patentable or not, copyrightable
works, copyrights, trade secrets, formulae, processes, techniques,
and other developments and advances which are related to or useful
in the actual or anticipated business of AllMicro and that are
developed, conceived or reduced to practice or learned by the
Employee, either alone or jointly with others, during Employee's
employment by AllMicro or result from tasks assigned to the
Employee by AllMicro or result from use of premises or equipment
owned, leased, or contracted for by AllMicro. The Employee agrees
that AllMicro shall have sole ownership rights to all Inventions
and agrees to cooperate fully, at no expense to the Employee, with
AllMicro to secure and defend AllMicro's said ownership rights.
The Employee hereby assigns to AllMicro any rights the Employee may
acquire in any such Inventions.
3.5 No Conflict. The Employee represents and warrants
that: (a) as a matter of record, the Employee has identified on
Exhibit B attached hereto all inventions or improvements relevant
to the subject matter of Employee's employment by AllMicro which
have been made or conceived or first reduced to practice by the
Employee alone or jointly with others prior to Employee's
engagement by AllMicro, which the Employee desires to remove from
the operation of this Agreement; and the employee covenants that
such list is complete. If there is no such list on Exhibit B, the
Employee represents that the Employee has made no such inventions
and improvements at the time of signing this Agreement;
-3-
<PAGE>
(b) performance of all the terms of this Agreement
by the Employee and as an employee of AllMicro does not and,
to the best of the Employee's present knowledge and belief,
will not breach any agreement or duty to keep in confidence
proprietary information acquired by the Employee in confidence
or in trust prior to the Employee's employment by AllMicro.
The Employee has not entered into, and will not enter into,
any agreement either written or oral in conflict herewith.
The Employee is not at the present time restricted from being
employed by AllMicro or entering into this Agreement;
(c) as part of the consideration for the offer of
employment extended to the Employee by AllMicro and of the
Employee's employment or continued employment by AllMicro, the
Employee has not brought and will not bring with the Employee
to AllMicro or use in the performance of the Employee's
responsibilities at AllMicro any materials or documents of a
former employer which are not generally available to the
public, unless the Employee has obtained written authorization
from the former employer for their possession and use; and
(d) in the Employee's employment with AllMicro, the
Employee is not to breach any obligation of confidentiality or
duty that the Employee has to former employers and the
Employee agrees that all such obligations during the
Employee's employment with AllMicro shall be fulfilled.
4. NON-SOLICITATION.
4.1 Non-Solicitation. In consideration of employment
or continued employment as the case may be, and the compensation
received by the Employee from AllMicro while employed by AllMicro,
the Employee hereby further agrees that Employee will not, during
the period Employee is employed by AllMicro, and until the
expiration of the earlier to occur of the third anniversary of the
Closing of the Reorganization Agreement and 12 months after the
termination of the Employee's employment with ForeFront or
AllMicro, (i) solicit, for himself or others, any person or entity
that is or was a customer of AllMicro while Employee was employed
by AllMicro, for any purpose or activity that is directly
competitive with the business of AllMicro, or solicit the
employment or services of any person who is employed full-time by
AllMicro or (ii) solicit, recruit or hire, or assist any person,
firm, corporation, association or other entity in the solicitation,
recruitment or hiring of, any person then engaged by AllMicro as an
employee, officer, director or consultant, or so engaged by
AllMicro within the then prior six (6) months.
4.2 Severability of Provisions. The Employee hereby
acknowledges and agrees that the scope of the foregoing covenants
are reasonable and necessary to protect the interests of AllMicro.
While the restrictions set forth in this Article 4 are considered
by the parties to be reasonable in all circumstances, it is
recognized that restrictions of the nature in question may fail for
technical reasons unforeseen, and accordingly it is hereby agreed
that if any of such restrictions shall be adjudged to be void as
going beyond what is reasonable in all the circumstances for the
-4-
<PAGE>
protection of AllMicro or for any other reason but would be valid
if part of the wording thereof were deleted or the periods (if any)
thereof reduced or the range of activities or area dealt with
thereby reduced in scope, such restrictions shall apply with such
modifications as may be necessary to make them valid and effective
and such provisions shall be modified accordingly.
5. MISCELLANEOUS.
5.1 Notice. For purposes of this Agreement, notices and
all other communications provided for or permitted herein shall be
in writing and shall be deemed to have been duly given when
personally delivered or when mailed by United States registered or
certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to AllMicro:
AllMicro, Inc.
c/o The ForeFront Group, Inc.
1330 Post Oak Boulevard, Suite 1300
Houston, Texas 77056
Attn: The President
If to the Employee, at the address identified on the
signature page hereof, or to such other address as either
party may furnish to the other in writing in accordance
herewith, except that notices of changes of address shall be
effective only upon receipt.
5.2 Applicable Law. This Agreement shall be construed
and enforced in accordance with the laws of the State of Florida.
AllMicro and the Employee agree that personal jurisdiction and
venue shall be proper with the state or federal courts situated in
Pinellas County, Florida, to hear disputes arising under this
Agreement.
5.3 No Waiver. No failure by either party hereto at any
time to give notice of any breach by the other party of, or to
require compliance with, any condition or provision of this
Agreement shall be deemed a waiver of similar or dissimilar
provisions or conditions at the same or at any prior or subsequent
time.
5.4 Severability. If a court of competent jurisdiction
determines that any provision of this Agreement is invalid or
unenforceable, then the invalidity or unenforceability of that
provision shall not affect the validity or enforceability of any
other provision of this Agreement, and all other provisions shall
remain in full force and effect. Further, such provisions shall be
reformed and construed to the extent permitted by law so that it
would be valid, legal and enforceable to the maximum extent
possible.
-5-
<PAGE>
5.5 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original, but
both of which together will constitute one and the same Agreement.
5.6 Headings. The article and section headings have
been inserted for purposes of convenience and shall not be used for
interpretive purposes.
5.7 Entire Agreement. This Agreement constitutes the
entire agreement of the parties with regard to the subject matter
hereof, and contains all the covenants, promises, representations,
warranties and agreements between the parties with respect to the
subject matter hereof. Each party to this Agreement acknowledges
that no representation, inducement, promise or agreement, oral or
written, has been made by either party, or by anyone acting on
behalf of either party, that is not embodied herein, and that no
agreement, statement or promise relating to the subject matter
hereof that is not contained in this Agreement hereto shall be
valid or binding. All of the foregoing notwithstanding, any and
all information contained in Employee's employment application, or
represented to AllMicro by Employee either verbally or in writing,
concerning Employee, including without limitation Employee's past
or present employment, skills, education, and other such matters,
are deemed to be material representations to AllMicro, and are
incorporated herein by reference and made a part hereof for all
purposes.
5.8 Amendments. No amendment or modification to this
Agreement will be effective unless it is in writing and signed by
duly authorized representatives of both parties.
5.9 Further Assurances. The parties agree to execute
such further instruments and to take such further action as may
reasonably be necessary to carry out the intent of this Agreement.
5.10 Survival. The provisions of Articles 3 and 4 herein
shall survive any termination of this Agreement.
IN WITNESS WHEREOF, the parties have caused this
Agreement to be executed effective as of July 22, 1996 (the
"Effective Date").
AllMicro, Inc. Employee:
By: /s/ David Sikora By: /s/ Micheal Kaplan
Name: David Sikora Name: Michael Kaplan
Title: Chairman Address: P.O. Box 10091
Clearwater, FL 34617
-6-
<PAGE>
EXHIBIT A
Employee: Michael Kaplan
Position: President, AllMicro, Inc.
Reports to: David Sikora
Duties: Direct Sales Management
Initial period of Employment: 2 years
Gross Monthly Salary: $ 20,833
Options: shares
-7-
<PAGE>
Exhibit B
1. The following is a complete list of all inventions
or improvements relevant to the subject matter of my employment by
AllMicro, Inc. (the "Company") which have been made or conceived or
first conceived or first reduced to practice by me alone or jointly
with others prior to my engagement by the Company:
- -------- No inventions or improvements
- -------- See below
- -------------------------------------------------------------------
- -------------------------------------------------------------------
- -------------------------------------------------------------------
- -------- Additional sheets attached
2. I propose to bring to my employment the following
materials and documents of a former employer which are not
generally available to the public, which materials and documents
may be used in my employment:
- -------- No materials
- -------- See below
- -------------------------------------------------------------------
- -------------------------------------------------------------------
- -------------------------------------------------------------------
- -------- Additional sheets attached
The signature below confirms that my continued possession
and use of these materials is authorized.
/s/ Michael Kaplan
Name: Michael Kaplan
-8-
THE FOREFRONT GROUP, INC.
1996 NON-QUALIFIED
STOCK OPTION PLAN
1. Purposes of the Plan. The purposes of this 1996
Non-Qualified Stock Option Plan are to attract and retain the best
available personnel in The ForeFront Group, Inc. (the "Company"),
and any Subsidiary, to provide additional incentive to Employees
and Consultants of the Company and any Subsidiary and to promote
the success of the Company's and any Subsidiary's business.
Options granted under this Plan will be non-qualified stock
options, and not subject to the applicable provisions of Section
422 of the Code, as amended, and the regulations promulgated
thereunder.
2. Definitions. As used herein, the following
definitions shall apply:
(a) "Administrator" means the Board or any of its
Committees, as applicable, that is administering the Plan
pursuant to Section 4 of the Plan.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as
amended.
(d) "Committee" means the Committee appointed by the
Board of Directors in accordance with paragraph (a) of Section
4 of the Plan.
(e) "Company" means The ForeFront Group, Inc., a Delaware
corporation.
(f) "Consultant" means any consultant or advisor to the
Company or any Subsidiary.
(g) "Continuous Status as an Employee" means the absence
of any interruption or termination of the employment
relationship by the Company or any Subsidiary. Continuous
Status as an Employee shall not be considered interrupted in
the case of: (i) any leave of absence approved by the Board,
including sick leave, military leave, or any other personal
leave; or (ii) in the case of transfers between locations of
the Company or between the Company, its Subsidiaries or its
successor.
(h) "Employee" means any person employed by the Company
or any Subsidiary of the Company.
(i) "Exchange Act" means the Securities Exchange Act of
1934, as amended.
-1-
<PAGE>
(j) "Fair Market Value" means, as of any date, the value
of Stock determined as follows:
(i) If the Stock is listed on any established stock
exchange or a national market system including without
limitation the National Market System of the National
Association of Securities Dealers, Inc. Automated
Quotation ("NASDAQ") System, its Fair Market Value shall
be the closing sales price for such stock (or the closing
bid, if no sales were reported, as quoted on such system
or exchange or the exchange with the greatest volume of
trading in Stock for the last market trading day prior to
the time of determination) as reported in the Wall Street
Journal or such other source as the Administrator deems
reliable;
(ii) If the Stock is quoted on the NASDAQ System
(but not on the National Market System thereof) or
regularly quoted by a recognized securities dealer but
selling prices are not reported, its Fair Market Value
shall be the mean between the high and low asked prices
for the Stock; or
(iii) In the absence of an established market
for the Stock, the Fair Market Value thereof shall be
determined in good faith by the Administrator.
(k) "Incentive Stock Option" means an Option intended to
qualify as an incentive stock option within the meaning of
Section 422 of the Code.
(l) "Nonqualified Stock Option" means an Option not
intended to qualify as an Incentive Stock Option.
(m) "Option" means a stock option granted pursuant to the
Plan.
(n) "Optioned Stock" means the Stock subject to an
Option.
(o) "Optionee" means an Employee or Consultant who
receives an Option.
(p) "Plan" means this 1996 Non-Qualified Stock Option
Plan.
(q) "Share" means a share of the Stock, as adjusted in
accordance with Section 12 of the Plan.
(r) "Stock" means the Common Stock, par value $.01 per
share, of the Company;
(s) "Subsidiary" means a "subsidiary corporation,"
whether now or hereafter existing, as defined in Section
424(f) of the Code.
-2-
<PAGE>
3. Stock Subject to the Plan. Subject to the
provisions of Section 12 of the Plan, the maximum number of shares
of Stock which may be optioned and sold under the Plan is 1,250,000
shares. The shares may be authorized, but unissued, or reacquired
Stock.
If an Option should expire or become unexercisable for
any reason without having been exercised in full, the unpurchased
Shares which were subject thereto shall, unless the Plan shall have
been terminated, become available for future grant under the Plan.
4. Administration of the Plan.
(a) The Plan shall be administered by (A) the Board or
(B) a Committee designated by the Board, which Committee shall be
constituted in such a manner as to satisfy the legal requirements
relating to the administration of stock option plans, if any, of
corporate and securities laws applicable to the Company and of the
Code (the "Applicable Laws"). Once appointed, such Committee shall
continue to serve in its designated capacity until otherwise
directed by the Board. From time to time the Board may increase
the size of the Committee and appoint additional members thereof,
remove members (with or without cause) and appoint new members in
substitution therefor, fill vacancies, however caused, and remove
all members of the Committee and thereafter directly administer the
Plan, all to the extent permitted by the Applicable Laws.
(b) Powers of the Administrator. Subject to the
provisions of the Plan and in the case of a Committee, the specific
duties delegated by the Board to such Committee, the Administrator
shall have the authority, in its discretion:
(i) to determine the Fair Market Value of the Stock, in
accordance with Section 2(j) of the Plan;
(ii) to select Consultants and Employees to whom Options
may from time to time be granted hereunder;
(iii) to determine whether and to what extent Options
are granted hereunder;
(iv) to determine the number of shares of Stock to be
covered by each such award granted hereunder;
(v) to approve forms of agreement for use under the
Plan;
(vi) to determine the terms and conditions, not
inconsistent with the terms of the Plan, of any award granted
hereunder (including, but not limited to, the per share
exercise price for the Shares to be issued pursuant to the
exercise of an Option and any restriction or limitation, or
any vesting acceleration or waiver of forfeiture restrictions
regarding any Option or other award and/or the shares of Stock
relating thereto, based in each case on such factors as the
Administrator shall determine, in its sole discretion);
-3-
<PAGE>
(vii) to determine whether and under what
circumstances an Option may be bought-out for cash under
subsection 9(f);
(viii) to determine whether, to what extent and under
what circumstances Stock and other amounts payable with
respect to an award under this Plan shall be deferred either
automatically or at the election of the participant (including
providing for and determining the amount, if any, of any
deemed earnings on any deferred amount during any deferral
period); and
(ix) to reduce the exercise price of any Option to the
then current Fair Market Value if the Fair Market Value of the
Stock covered by such Option shall have declined since the
date the Option was granted.
(c) Effect of Committee's Decision. All decisions,
determinations and interpretations of the Administrator shall be
final and binding on all Optionees and any other holders of any
Options. Neither the Board, the Committee nor any member thereof
shall be liable for any act, omission, interpretation, construction
or determination made in connection with the Plan in good faith,
and the members of the Board and of the Committee shall be entitled
to indemnification and reimbursement by the Company in respect of
any claim, loss, damage or expense (including counsel fees) arising
therefrom to the full extent permitted by law.
5. Eligibility.
(a) Nonqualified Stock Options may be granted to
Employees and Consultants. An Employee or Consultant who has been
granted an Option may, if he is otherwise eligible, be granted an
additional Option or Options.
(b) Each Option shall be designated in a written option
agreement.
(c) The Plan shall not confer upon any Optionee any
right with respect to continuation of employment or consulting
relationship with the Company, nor shall it interfere in any way
with his right or the Company's right to terminate his employment
or consulting relationship at any time, with or without cause,
unless otherwise agreed in writing by the Company and such
Optionee.
6. Term of Plan. The Plan shall become effective upon
its adoption by the Board of Directors. It shall continue in
effect until June 30, 2006 unless extended by the Board or sooner
terminated under Section 14 of the Plan. No grants of Options will
be made pursuant to the Plan after June 30, 2006.
7. Term of Option. Unless stated otherwise in an
Option Agreement, the term of each Option shall be 10 years from
the date of grant.
-4-
<PAGE>
8. Option Exercise Price and Consideration.
(a) The per share exercise price for the Shares to be
issued pursuant to exercise of an Option shall be such price as is
determined by the Administrator, but shall be subject to the
following:
(b) The consideration to be paid for the Shares to be
issued upon exercise of an Option, including the method of payment,
shall be determined by the Administrator and may consist entirely
of (1) cash, (2) check, (3) promissory note, (4) other shares of
the Company's capital stock which (x) in the case of shares of the
Company's capital stock acquired upon exercise of an Option either
have been owned by the Optionee for more than six months on the
date of surrender or were not acquired, directly or indirectly,
from the Company, and (y) have a Fair Market Value on the date of
surrender equal to the aggregate exercise price of the Shares as to
which said Option shall be exercised, (5) authorization for the
Company to retain from the total number of Shares as to which the
Option is exercised that number of Shares having a Fair Market
Value on the date of exercise equal to the exercise price for the
total number of Shares as to which the Option is exercised, (6)
delivery of a properly executed exercise notice together with
irrevocable instructions to a broker to promptly deliver to the
Company the amount of sale or loan proceeds required to pay the
exercise price, (7) any combination of the foregoing methods of
payment, or (8) such other consideration and method of payment for
the issuance of Shares to the extent permitted under applicable
laws.
9. Exercise of Option.
(a) Procedure for Exercise; Rights as a Stockholder.
Any Option granted hereunder shall be exercisable at such times and
under such conditions as determined by the Administrator, including
performance criteria with respect to the Company and/or the
Optionee, and as shall be permissible under the terms of the Plan.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised, and the
Optionee deemed to be a stockholder of the Shares being purchased
upon exercise, when written notice of such exercise has been given
to the Company in accordance with the terms of the Option by the
person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been
received by the Company. Full payment may, as authorized by the
Board, consist of any consideration and method of payment allowable
under Section 8(b) of the Plan.
Exercise of an Option in any manner shall result in a
decrease in the number of Shares which thereafter may be available,
both for purposes of the Plan and for sale under the Option, by the
number of Shares as to which the Option is exercised.
(b) Termination of Employment. In the event of
termination of an Optionee's relationship as a Consultant (unless
such termination is for purposes of becoming an Employee of the
Company) or Continuous Status as an Employee, such Optionee may,
but only within ninety (90)
-5-
<PAGE>
days (or such other period of time as is determined by the Board),
after the date of such termination (but in no event later than the
expiration date of the term of such Option as set forth in the
Option Agreement), exercise his Option to the extent that Optionee
was entitled to exercise it at the date of such termination. To
the extent that Optionee was not entitled to exercise the Option at
the date of such termination, or if Optionee does not exercise such
Option to the extent so entitled within the time specified herein,
the Option shall terminate.
(c) Disability of Optionee. Notwithstanding the
provisions of Section 9(b) above, in the event of termination of an
Optionee's relationship as a Consultant or Continuous Status as an
Employee as a result of his total and permanent disability (as
defined in Section 22(e)(3) of the Code), Optionee may, but only
within twelve (12) months from the date of such termination (but in
no event later than the expiration date of the term of such Option
as set forth in the Option Agreement), exercise the Option to the
extent otherwise entitled to exercise it at the date of such
termination. To the extent that Optionee was not entitled to
exercise the Option at the date of termination, or if Optionee does
not exercise such Option to the extent so entitled within the time
specified herein, the Option shall terminate.
(d) Death of Optionee. In the event of the death of an
Optionee, the Option may be exercised, at any time within twelve
(12) months following the date of death (but in no event later than
the expiration date of the term of such Option as set forth in the
Option Agreement), by the Optionee's estate or by a person who
acquired the right to exercise the Option by bequest or
inheritance, but only to the extent the Optionee was entitled to
exercise the Option at the date of death. To the extent that
Optionee was not entitled to exercise the Option at the date of
termination, or if the Optionee's estate (or such other person who
acquired the right to exercise the Option) does not exercise such
Option to the extent so entitled within the time specified herein,
the Option shall terminate.
(e) Buyout Provisions. The Administrator may at any
time offer to buy out for a payment in cash or Shares, an Option
previously granted, based on such terms and conditions as the
Administrator shall establish and communicate to the Optionee at
the time that such offer is made.
10. Non-Transferability of Options. The Option may not
be sold, pledged, assigned, hypothecated, transferred, or disposed
of in any manner other than by will or by the laws of descent or
distribution and may be exercised, during the lifetime of the
Optionee, only by the Optionee.
11. Stock Withholding to Satisfy Withholding Tax
Obligations. At the discretion of the Administrator, Optionees may
satisfy withholding obligations as provided in this paragraph.
When an Optionee incurs tax liability in connection with an Option,
which tax liability is subject to tax withholding under applicable
tax laws, and the Optionee is obligated to pay the Company an
amount required to be withheld under applicable tax laws, the
Optionee may satisfy the withholding tax obligation by electing to
have the Company withhold from the Shares to be issued upon
exercise
-6-
<PAGE>
of the Option, that number of Shares having a Fair Market Value
equal to the amount required to be withheld. The Fair Market Value
of the Shares to be withheld shall be determined on the date that
the amount of tax to be withheld is to be determined (the "Tax
Date").
All elections by an Optionee to have Shares withheld for
this purpose shall be made in writing in a form acceptable to the
Administrator and shall be subject to the following restrictions:
(a) the election must be made on or prior to the
applicable Tax Date;
(b) once made, the election shall be irrevocable as to
the particular Shares of the Option as to which the election
is made; and
(c) all elections shall be subject to the consent or
disapproval of the Administrator.
In the event the election to have Shares withheld is made
by an Optionee and the Tax Date is deferred under Section 83 of the
Code because no election is filed under Section 83(b) of the Code,
the Optionee shall receive the full number of Shares with respect
to which the Option is exercised but such Optionee shall be
unconditionally obligated to tender back to the Company the proper
number of Shares on the Tax Date.
12. Changes in the Company's Capital Structure. The
existence of outstanding Options shall not affect in any way the
right or power of the Company or its stockholders to make or
authorize any or all adjustments, recapitalizations,
reorganizations or other changes in the Company's capital structure
or its business, or any merger or consolidation of the Company, or
any issue of bonds, debentures, preferred or prior preference stock
ahead of or affecting the Stock or the rights thereof, or the
dissolution or liquidation of the Company, or any sale or transfer
of all or any part of its assets or business, or any other
corporate act or proceeding, whether of a similar character or
otherwise.
If the Company shall effect a subdivision or
consolidation of shares or other capital readjustment, the payment
of a stock dividend, or other increase or reduction of the number
of shares of the Stock outstanding, without receiving compensation
therefor in money, services or property, then (a) the number,
class, and per share price of shares of Stock subject to
outstanding Options hereunder shall be appropriately adjusted in
such a manner as to entitle an Optionee to receive upon exercise of
an Option, for the same aggregate cash consideration, the same
total number and class of shares as he would have received had he
exercised his Option in full immediately prior to the event
requiring the adjustment; and (b) the number and class of shares of
Stock then reserved for issuance under the Plan shall be adjusted
by substituting for the total number and class of shares of Stock
then reserved that number and class of shares of stock that would
have been received by the owner of an equal number of outstanding
shares of each class of Stock as the result of the event requiring
the adjustment.
-7-
<PAGE>
Unless otherwise expressly provided in an Option
Agreement (as defined in Section 17), upon a Corporate Change (as
defined below), notwithstanding any other term of this Plan, any
and all outstanding Options not fully vested and exercisable shall
vest in full and be immediately exercisable, and any other
restrictions on such Options including, without limitation,
requirements concerning the achievement of specific goals shall
terminate.
As used in this Plan, a "Corporate Change" shall be deemed
to have occurred upon, and shall mean (A) the acquisition after
August 14, 1995 by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a
"Person"), of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 80% or more of either (i)
the then outstanding shares of Stock of the Company (the
"Outstanding Company Common Stock") or (ii) the combined voting
power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors (the
"Outstanding Company Voting Securities"); provided, however, that
the following transactions shall not constitute a Corporate Change:
(u) any acquisition by virtue of the conversion of preferred stock
of the Company outstanding on August 14, 1995, (v) customary
transactions with and between underwriters and selling group
members with respect to a bona fide public offering of securities,
(w) any acquisition directly from the Company (excluding an
acquisition by virtue of the exercise of a conversion privilege),
(x) any acquisition by the Company, (y) any acquisition by any
employee benefit plan(s) (or related trust(s)) sponsored or
maintained by the Company or any corporation controlled by the
Company or (z) any acquisition by any entity pursuant to a
reorganization, merger or consolidation, if, immediately following
such reorganization, merger or consolidation the conditions
described in clauses (i), (ii) and (iii) of clause B of this
paragraph are satisfied; or (B) the approval by the stockholders of
the Company of a reorganization, merger or consolidation, in each
case, unless immediately following such reorganization, merger or
consolidation (i) more than 60% of, respectively, the then
outstanding shares of common stock (or other equivalent securities)
of the entity resulting from such reorganization, merger or
consolidation and the combined voting power of the then outstanding
voting securities of such entity entitled to vote generally in the
election of directors (or other similar governing body) is then
beneficially owned, directly or indirectly, by all or substantially
all of the individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and the
Outstanding Company Voting Securities immediately prior to such
reorganization, merger or consolidation in substantially the same
proportions as their ownership, immediately prior to such
reorganization, merger or consolidation, of the Outstanding Company
Common Stock and Outstanding Company Voting Securities, as the case
may be, (ii) no Person (excluding the Company, any employee benefit
plan(s) (or related trust(s)) of the Company and/or its
subsidiaries or such entity resulting from such reorganization,
merger or consolidation and any Person beneficially owning,
immediately prior to such reorganization, merger or consolidation,
directly or indirectly, 80% or more of the Outstanding Company
Common Stock or Outstanding Company Voting Securities, as the case
may be) beneficially owns, directly or indirectly, 80% or more of,
respectively, the then outstanding shares of common stock (or other
equivalent securities) of the entity resulting from such
reorganization, merger or consolidation or the combined voting
power of the then outstanding voting securities of such entity
entitled to vote generally in the election of directors (or other
similar governing body)
-8-
<PAGE>
and (iii) at least a majority of the members of the board of
directors (or other similar governing body) of the entity resulting
from such reorganization, merger or consolidation were members of
the Incumbent Board (as defined below) at the time of the execution
of the initial agreement providing for such reorganization, merger
or consolidation. The "Incumbent Board" shall mean individuals who
as of July 19, 1996, constitute the Company's Board of Directors;
provided, however, that any individual becoming a director
subsequent to such date whose election, or nomination for election
by the Company's stockholders, was approved by a vote of at least
a majority of the directors then comprising the Incumbent Board
shall be considered as though such individual were a member of the
Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a result of
either (i) an actual or threatened election contest (as such terms
are used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act), or an actual or threatened solicitation of proxies
or consents by or on behalf of a Person other than the Company's
Board of Directors or (ii) a plan or agreement to replace a
majority of the members of the Board of Directors then comprising
the Incumbent Board.
Except as hereinbefore expressly provided, the issue by
the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, for cash or
property, or for labor or services either upon direct sale or upon
the exercise of rights or warrants to subscribe therefor, or upon
conversion of shares or obligations of the Company convertible into
such shares or other securities, shall not affect, and no
adjustment by reason thereof shall be made with respect to, the
number, class, or price of shares of Stock then subject to
outstanding Options.
13. Time of Granting Options. The date of grant of an
Option shall, for all purposes, be the date on which the
Administrator makes the determination granting such Option, or such
other date as is determined by the Administrator. Notice of the
determination shall be given to each Employee or Consultant to whom
an Option is so granted within a reasonable time after the date of
such grant.
14. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any
time amend, alter, suspend or discontinue the Plan, but no
amendment, alteration, suspension or discontinuation shall be made
which would impair the rights of any Optionee under any grant
theretofore made, without his or her consent.
(b) Effect of Amendment or Termination. Any such
amendment or termination of the Plan shall not affect Options
already granted and such Options shall remain in full force and
effect as if this Plan had not been amended or terminated, unless
mutually agreed otherwise between the Optionee and the Board, which
agreement must be in writing and signed by the Optionee and the
Company.
15. Conditions Upon Issuance of Shares. Shares shall
not be issued pursuant to the exercise of an Option unless the
exercise of such Option and the issuance and delivery of such
-9-
<PAGE>
Shares pursuant thereto shall comply with all relevant provisions
of law, including, without limitation, the Securities Act of 1933,
as amended, the Exchange Act, the rules and regulations promulgated
thereunder, and the requirements of any stock exchange upon which
the Shares may then be listed, and shall be further subject to the
approval of counsel for the Company with respect to such
compliance.
As a condition to the exercise of an Option, the Company
may require the person exercising such Option to represent and
warrant at the time of any such exercise that the Shares are being
purchased only for investment and without any present intention to
sell or distribute such Shares if, in the opinion of counsel for
the Company, such a representation is required by any of the
aforementioned relevant provisions of law.
16. Reservation of Shares. The Company, during the term
of this Plan, will at all times reserve and keep available such
number of Shares as shall be sufficient to satisfy the requirements
of the Plan.
The inability of the Company to obtain authority from any
regulatory body having jurisdiction, which authority is deemed by
the Company's counsel to be necessary to the lawful issuance and
sale of any Shares hereunder, shall relieve the Company of any
liability in respect of the failure to issue or sell such Shares as
to which such requisite authority shall not have been obtained.
17. Agreements. Options shall be evidenced by written
agreements ("Option Agreement") in such form as the applicable
Administrator shall approve from time to time.
18. Information to Optionees. The Company shall provide
to each Optionee, during the period for which such Optionee has one
or more Options outstanding, copies of all annual reports and other
information which are generally provided to all stockholders of the
Company. The Company shall not be required to provide such
information to persons whose duties in connection with the Company
assure their access to equivalent information.
19. Governing Law; Construction. All rights and
obligations under the Plan shall be governed by, and the Plan shall
be construed in accordance with, the laws of the State of Delaware
without regard to the principles of conflicts of laws. Titles and
headings to Sections herein are for purposes of reference only, and
shall in no way limit, define or otherwise affect the meaning or
interpretation of any provisions of the Plan.
-10-
EXHIBIT 11.1
THE FOREFRONT GROUP, INC.
STATEMENT REGARDING COMPUTATION OF NET LOSS PER SHARE
<TABLE>
<CAPTION>
For the Three Months Ended
September 30,
1995 1996
------------ -----------
<S> <C> <C>
Weighted average shares outstanding 3,501,927 6,119,516
Effect of preferred stock, common stock,
options and warrants issued in twelve
months preceding the Company's initial
public offering 817,538 ---
------------ -----------
Shares used in computing net loss per share 4,319,465 6,119,516
============ ===========
Net loss $ (216,962) $(2,685,804)
============ ===========
Net loss per share $ (0.05) $ (0.44)
============ ===========
For the Nine Months Ended
September 30,
1995 1996
------------ -----------
Weighted average shares outstanding 3,487,195 5,949,484
Effect of preferred stock, common stock,
options and warrants issued in twelve
months preceding the Company's initial
public offering 817,538 ---
------------ -----------
Shares used in computing net loss per share 4,304,733 5,949,484
============ ===========
Net loss $ (116,556) $(5,638,056)
============ ===========
Net loss per share $ (0.03) $ (0.95)
============ ===========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-QSB
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<S> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1996 DEC-31-1996
<PERIOD-START> JAN-01-1996 JAN-01-1996 JAN-01-1996
<PERIOD-END> MAR-31-1996 JUN-30-1996 SEP-30-1996
<CASH> 4,753,031 11,615,039 8,600,991
<SECURITIES> 7,998,417 0 0
<RECEIVABLES> 486,871 1,109,236 1,408,176
<ALLOWANCES> 5,000 24,000 54,000
<INVENTORY> 136,042 215,353 343,277
<CURRENT-ASSETS> 13,399,562 13,012,501 10,691,807
<PP&E> 549,263 883,898 1,147,797
<DEPRECIATION> 177,768 211,980 270,882
<TOTAL-ASSETS> 13,847,616 13,818,412 11,718,648
<CURRENT-LIABILITIES> 1,219,904 2,052,602 3,030,260
<BONDS> 0 0 0
0 0 62,265
0 0 0
<COMMON> 59,632 61,976 0
<OTHER-SE> 12,561,390 11,668,989 8,595,748
<TOTAL-LIABILITY-AND-EQUITY> 13,847,616 13,818,412 11,718,648
<SALES> 2,735,875 5,807,504 9,386,290
<TOTAL-REVENUES> 2,753,163 5,863,784 9,457,534
<CGS> 506,087 1,098,326 1,805,601
<TOTAL-COSTS> 3,180,281 9,136,668 15,528,012
<OTHER-EXPENSES> 0 0 0
<LOSS-PROVISION> 0 19,000 30,000
<INTEREST-EXPENSE> 0 0 0
<INCOME-PRETAX> (262,401) (2,952,252) (5,638,056)
<INCOME-TAX> 0 0 0
<INCOME-CONTINUING> (262,401) (2,952,252) (5,638,056)
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> (262,401) (2,952,252) (5,638,056)
<EPS-PRIMARY> (.05) (.50) (.95)
<EPS-DILUTED> (.05) (.50) (.95)
</TABLE>
