SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
Current Report Filed Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report
(Date of Earliest Event Reported): September 29,1997
THE FOREFRONT GROUP, INC.
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(Exact name of registrant as specified in its charter)
Delaware 0-27438 76-0365256
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(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File Number) Identification No.)
1360 Post Oak Boulevard, Suite 2050, Houston, Texas 77056
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(Address of principal executive offices) (Zip Code)
(713) 961-1101
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(Registrant's telephone number, including Area Code)
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Item 2. Acquisition or Disposition of Assets.
On September 29, 1997, The ForeFront Group, Inc. (the "Company") entered
into an Acquisition Agreement (the "Agreement") with LanProfessional Inc., a
Canadian corporation located in Ottawa, Canada ("LanTec") and each of its
shareholders (the "Shareholders") whereby the Company acquired all of the
outstanding shares of capital stock of LanTec, other than certain Exchangeable
Shares of LanTec which are exchangeable into the shares of the Company
referenced below. The purchase price of the acquisition consisted of (i) 557,413
Exchangeable Shares of LanTec retained by the Shareholders, which are
exchangeable for an equivalent number of shares of the Company's Common Stock,
of which 81,687 shares are subject to cancellation in the event of certain
breaches of representations and covenants by the Shareholders in the Agreement
under and pursuant to the terms of an Escrow Agreement between the Company, the
Shareholders and Texas Commerce Bank, as Escrow Agent and (ii) cash in the
amount of U.S. $1,800,000, of which $50,000 is held in escrow pursuant to the
Escrow Agreement for post closing liabilities, and of which an additional
$326,726 was held in escrow by McCarthy Tetrault, counsel to the Company, as
security for certain post closing obligations of the Shareholders. The purchase
price was determined through negotiations between the Company and the
Shareholders. In connection with this acquisition, the Company entered into
customary employment and non-competition agreements with the two principal
shareholders and founders of LanTec.
LanTec is a developer of computer based training ("CBT")software for
information technology professionals, and has developed the ForeFront MCSE
Self-Study Course TM, and the ForeFront CNE Self-Study Course TM, programs which
provide training for certification to manage MicroSoft Windows NT and Novell
Netware, and the ForeFront A+ Certification Self-Study Course TM, a program that
provides training for the most recognized certification for personal computer
technicians. Prior to the acquisition, each of these products has been published
and marketed by the Company on an exclusive basis in the United States pursuant
to the Licensing and Distribution Agreement between LanTec and ForeFront Direct,
Inc.(the Company's wholly owned direct marketing subsidiary, formerly known as
AllMicro, Inc.) dated August 21, 1995. A number of additional CBT products are
currently under development and scheduled for release over the next 18 months.
The shares of ForeFront Common Stock issuable upon exchange of the
Exchangeable Shares of LanTec are reserved for issuance by ForeFront and its
transfer agent, and will be issued pursuant to available exemptions from
registration. Each of the Shareholders has agreed that the Exchangeable Shares
of LanTec and the shares of ForeFront which may be acquired in exchange therefor
may not be transferred, sold or otherwise distributed for a one year period
following the acquisition.
The Company is not aware of any pre-existing material relationships between
(i) LanTec or its shareholders, on the one hand, and (ii) the Company, any of
the Company's affiliates, directors and officers or any associate of such
directors and officers on the other hand, other than the above-mentioned
Distribution Agreement.
Item 7. Financial Statements and Exhibits
(a) Financial Statements of Business Acquired
It is impractical to provide the required financial statements
for the acquired business at this time. The required financial
statements will be filed within 60 days of the date hereof.
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(b) Pro Forma Financial Information
It is impractical to provide the required pro forma financial
information relative to the acquired business at this time. The
required pro forma financial information will be filed within 60 days
of the date hereof.
(c) Exhibits
Exhibit
Number Description
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10.1 Acquisition Agreement, dated as of September 29, 1997, between
the Company, LanProfessional Inc. and Sunil K. Sethi, Naveen
Seth, Sukhdev Walia, Sunita Uppal and Jang Bhadhur Sethi.
10.2 Escrow Agreement, dated as of September 29, 1997, between
the Company, Texas Commerce Bank, N.A. and Sunil K. Sethi,
Naveen Seth, Sukhdev Walia, Sunita Uppal and Jang Bhadhur
Sethi.
10.3 Lockup Agreement, dated as of September 29, 1997, between
the Company, and Sunil K. Sethi, Naveen Seth, Sukhdev Walia,
Sunita Uppal and Jang Bhadhur Sethi.
10.4 Support Agreement, dated as of September 29, 1997, between
the Company and LanProfessional Inc.
10.5 Exchange Rights Agreement, dated as of September 29, 1997,
between the Company, LanProfessional Inc. and Sunil K.
Sethi, Naveen Seth, Sukhdev Walia, Sunita Uppal and Jang
Bhadhur Sethi.
10.6 Employment Agreement, dated as of September 29, 1997, between
LanProfessional Inc. and Sunil K. Sethi.
10.7 Additional Escrow Agreement, dated as of September 29, 1997,
between the Company, McCarthy Tetrault, Sunil K.
Sethi, Naveen Seth, Sukhdev Walia, Sunita Uppal and Jang
Bhadhur Sethi.
10.8 Form of Registration Rights Agreement, attached as Exhibit J
to the Acquisition Agreement, between the Company and Sunil K.
Sethi, Naveen Seth, Sukhdev Walia, Sunita Uppal and Jang
Bhadhur Sethi.
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Item 9. Sales of Equity Securities Pursuant to Regulation S.
On Septmeber 29, 1997, the Company entered into an Acquisition Agreement
with LanProfessional, Inc. ("LanTec") a Canadian corporation, and its five
shareholders (the "Shareholders"), none of whom is a resident or citizen of the
United States, whereby the Company acquired all of the outstanding shares of
capital stock of LanTec, other than certain Exchangeable Shares (described
herein), and granted the Shareholders certain rights to exchange the
Exchangeable Shares of LanTec for an aggregate of 557,413 shares of Common Stock
of the Company. The rights to exchange the Exchangeable Shares of LanTec were
granted, and the shares of Common Stock of the Company, when issued and
delivered upon exchange of the Exchangeable Shares, will be issued, pursuant to
the exemptions from registration provided by Section 4(2) of, and/or Regulation
D and/or Regulation S promulgated under, the Securities Act of 1933, as amended.
No underwriter was involved in the placement of the securities.
The Exchangeable Shares of LanTec held by the Shareholders are
exchangeable by the Shareholders for shares of Common Stock of the Company at
any time prior to September 29, 2002, in their discretion, on a one for one
basis. In addition, in the event any dividend is declared by the Company, the
holders of the Exchangeable Shares are entitled to receive from LanTec an amount
they would have received had they held the shares of ForeFront Common Stock. In
addition, the Shareholders are entitled to notice from the Company upon certain
corporate events such as a change of control, liquidation, or other
reorganization, in order to provide them with an opportunity to exercise their
exchange rights and acquire the Common Stock of the Company. Any Exchangeable
Shares remaining outstanding on September 29, 2002 will automatically be
exchanged into shares of Common Stock of the Company.
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.
/s/ Jeffrey R. Harder
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Jeffrey R. Harder
Vice President and
General Counsel
ACQUISITION AGREEMENT
BETWEEN
THE FOREFRONT GROUP, INC.,
AND
LANPROFESSIONAL INC.
AND
SUNIL K. SETHI, NAVEEN SETH, SUKHDEV WALIA,
SUNITA UPPAL, AND JANG BHADHUR SETHI
MADE AS OF
September 29, 1997
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TABLE OF CONTENTS
ARTICLE I
INTERPRETATION
Section 1.1 Definitions.....................................................1
Section 1.2 Headings........................................................3
Section 1.3 Extended Meanings...............................................3
Section 1.4 Accounting Principles...........................................3
Section 1.5 Currency........................................................3
Section 1.6 Schedules and Exhibits..........................................3
ARTICLE II
PURCHASE AND SALE
Section 2.1 Purchase and Sale...............................................4
Section 2.2 Closing.........................................................5
Section 2.3 Termination of Agreement........................................5
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.1 Vendors' Representations and Warranties.........................6
Section 3.2 Survival of the Vendors' Representations, Warranties and
Covenants......................................................16
Section 3.3 Purchaser's Representations and Warranties.....................17
Section 3.4 Survival of the Purchaser's Representations, Warranties and
Covenants......................................................17
ARTICLE IV
COVENANTS
Section 4.1 Taxes .........................................................18
Section 4.2 Covenants of the Vendors.......................................18
Section 4.3 Covenants of the Purchaser.....................................18
Section 4.4 Securities Law Compliance......................................18
ARTICLE V
CONDITIONS
Section 5.1 Conditions for the Benefit of the Purchaser....................19
Section 5.2 Conditions for the Benefit of the Vendors......................21
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ARTICLE VI
INDEMNIFICATION AND ESCROW
Section 6.1 Survival of Representations and Warranties.....................22
Section 6.2 Indemnity......................................................22
Section 6.3 Escrow Fund; Procedure.........................................23
Section 6.4 No Third Party Beneficiaries...................................24
ARTICLE VII
GENERAL
Section 7.1 Further Assurances.............................................24
Section 7.2 Time of the Essence............................................24
Section 7.3 Commissions....................................................24
Section 7.4 Fees...........................................................24
Section 7.5 Public Announcements...........................................24
Section 7.6 Benefit of the Agreement.......................................24
Section 7.7 Entire Agreement...............................................25
Section 7.8 Amendments and Waiver..........................................25
Section 7.9 Assignment.....................................................25
Section 7.10 Notices.......................................................25
Section 7.11 Governing Law.................................................26
Section 7.12 Tax Effect of Transaction.....................................26
Section 7.13 Severability..................................................26
Section 7.14 Counterparts..................................................26
Section 7.15 Facsimile Signatures..........................................26
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ACQUISITION AGREEMENT
THIS AGREEMENT made as of September 29, 1997, is between The
ForeFront Group, Inc., a corporation incorporated under the laws of Delaware
(hereinafter referred to as the "Purchaser"), LanProfessional Inc., a
corporation incorporated under the laws of Canada (the "Corporation") and Sunil
K. Sethi, Naveen Seth, Sukhdev Walia, Sunita Uppal, and Jang Bhadhur Sethi
(hereinafter referred to individually as a "Vendor" and collectively as the
"Vendors").
WHEREAS, the Vendors are the beneficial and registered owners
of all of the issued and outstanding shares of the Corporation;
AND WHEREAS, the Purchaser, the Corporation and the Vendors
have agreed to the acquisition by the Purchaser of the Corporation upon and
subject to the terms and conditions hereinafter set forth;
AND WHEREAS, in order to effect such acquisition, the parties
have agreed to effect the reorganization described below in this Recital (the
"Reorganization"), namely:
a) the purchase by the Purchaser and the sale by the Vendors
of 1,800,000 Special Shares of the Corporation (the "Special
Shares") for cash consideration of U.S.$1,800,000 ("Step
One");
b) following Step One, the amendment of the share capital of
the Corporation by articles of amendment as follows;
(i) the creation of an unlimited number of
Exchangeable Shares of the Corporation having the
respective rights, privileges, restrictions and
conditions set forth in Exhibit I annexed hereto,
(ii) the exchange of the issued and outstanding
3,867,052 Class B Shares of the Corporation into
557,413 Exchangeable Shares so that each Vendor owns
that number of Exchangeable Shares as specified
beside each Vendor's name in Part II of Schedule A
hereto,
(iii) the exchange of the Special Shares of the
Corporation into 1,000,000 Class A Shares of the
Corporation, and
(iv) the cancellation, after giving effect to the
exchange described at paragraph (iii) above, of the
class of Class B Shares and the class of Special
Shares of the Corporation ("Step Two");
AND WHEREAS, the Exchangeable Shares will be exchangeable by
the holders for ForeFront Shares (as defined below) on a one-for-one basis.
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NOW THEREFORE, THIS AGREEMENT WITNESSES that, in consideration
of the premises and the covenants and agreements herein contained, the parties
hereto agree as follows:
ARTICLE I
INTERPRETATION
Section 1.1 Definitions. In this Agreement, unless something
in the subject matter or context is inconsistent therewith:
"Additional Escrow Agreement" means the Escrow Agreement made
and entered into between the Vendors, the Purchaser and McCarthy
Tetrault, the Purchaser's special Canadian counsel in the form attached
as Exhibit M hereto;
"Agreement" means this agreement and all amendments made
hereto by written agreement between the Vendors, the Purchaser and the
Corporation;
"Balance Sheet" means the balance sheet of the Corporation as
at the Balance Sheet Date;
"Balance Sheet Date" means June 30, 1997;
"Business Day" means a day other than a Saturday, Sunday or
statutory holiday in Ontario;
"CBCA" means the Canada Business Corporations Act;
"Class B Shares" means 3,867,052 Class B Shares of the
Corporation, being all of the Class B Shares to be issued and
outstanding at the Time of Closing and to be exchanged for Exchangeable
Shares as described in Step Two of the Reorganization;
"Closing Date" means the date of execution of this Agreement
by the parties, or such other date as may be agreed to in writing
between the Vendors and the Purchaser;
"Closing Price" means U.S.$6.9375, being the closing price of
the shares of ForeFront Common Stock on the Nasdaq National Market
System on the Business Day prior to the date hereof;
"Corporation" means LanProfessional Inc., a Canadian
corporation d/b/a LanTec;
"Escrow Agent" means Texas Commerce Bank, N.A., pursuant to
the Escrow Agreement;
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"Escrow Agreement" means the Escrow Agreement made and entered
into between the Vendors, the Purchaser and the Escrow Agent attached
as Exhibit A hereto;
"Escrow Fund" means the cash and Escrowed Shares deposited by
the Vendors in escrow pursuant to the terms of Section 2.1(1)(a) and
(2);
"Escrow Period" means the period commencing on the Closing
Date and ending on the first anniversary of the Closing Date;
"Escrowed Shares" means the Exchangeable Shares to be
delivered to the Escrow Agent as provided in Section 2.1(2) or any
ForeFront Shares issued in exchange therefor;
"Exchange Rights Agreement" means the Exchange Rights
Agreement made and entered into by the Purchaser, the Corporation and
the Vendors attached as Exhibit G hereto;
"Exchangeable Shares" means the 557,143 Exchangeable Shares of
the Corporation having the rights, preferences and limitations set
forth in the Corporation's articles of amendment attached hereto as
Exhibit I;
"Financial Statements" has the meaning set out in Section
3.1(h);
"ForeFront Shares" means the shares of ForeFront Common Stock,
par value $.01 per share, to be issued in exchange for the Exchangeable
Shares pursuant to the terms of the Exchangeable Shares;
"Intellectual Property" means all right, title and interest of
the Corporation in, to and under all (i) trademarks, technology,
know-how, data, copyrights, trade names, service marks, domain names,
web sites, licenses, trade secrets, software programs, and other
intellectual property (collectively, the "Intellectual Property"), (ii)
the right to recover for infringement of any Intellectual Property, and
(iii) all goodwill associated with the business of the Corporation in
connection with which any of the Intellectual Property is used
(collectively, the "Intangible Assets").
"LockUp Agreement" means the LockUp Agreement between the
Purchaser and the Vendors attached as Exhibit B hereto;
"Registration Rights Agreement" means the Registration Rights
Agreement between the Purchaser and the Vendors attached as Exhibit J
hereto;
"Reorganization" has the meaning set out in the Recitals to
this Agreement;
"Special Shares" means 1,800,000 Special Shares of the
Corporation being all of the Special Shares of the Corporation to be
issued and outstanding at the Time of Closing
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and to be purchased by the Purchaser from the Vendors as described in
Step One of the Reorganization;
"Support Agreement" means the Support Agreement between the
Purchaser and the Corporation attached as Exhibit H hereto; and
"Time of Closing" means 3:00 p.m. (Ottawa time) on the Closing
Date.
Section 1.2 Headings. The division of this Agreement into
Articles and Sections and the insertion of headings are for convenience of
reference only and shall not affect the construction or interpretation of this
Agreement. The terms "this Agreement", "hereof", "hereunder" and similar
expressions refer to this Agreement and not to any particular Article, Section
or other portion hereof and include any agreement supplemental hereto. Unless
something in the subject matter or context is inconsistent therewith, references
herein to Articles and Sections are to Articles and Sections of this Agreement.
Section 1.3 Extended Meanings. In this Agreement words
importing the singular number only shall include the plural and vice versa,
words importing the masculine gender shall include the feminine and neuter
genders and vice versa and words importing persons shall include individuals,
partnerships, associations, trusts, unincorporated organizations and
corporations.
Section 1.4 Accounting Principles. Wherever in this Agreement
reference is made to a calculation to be made in accordance with generally
accepted accounting principles, such reference shall be deemed to be to the
generally accepted accounting principles from time to time approved by the
Canadian Institute of Chartered Accountants, or any successor institute,
applicable as at the date on which such calculation is made or required to be
made in accordance with generally accepted accounting principles.
Section 1.5 Currency. All references to currency herein are to
lawful money of Canada, unless otherwise specified.
Section 1.6 Schedules and Exhibits. The following are the
Schedules and Exhibits annexed hereto and incorporated by reference and deemed
to be part hereof:
Schedules
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Schedule A -- Ownership, Distribution and Escrow of Shares and Cash
Schedule B -- Certificates of Continuance and of Amendment
Schedule C -- Financial Statements
Schedule D -- Changes since Balance Sheet
Schedule E -- Tax Accounts, Retail Sales Tax Accounts and Goods and
Services Tax Accounts
Schedule F -- Material Contracts and Commitments
Schedule G -- Leases
Schedule H -- Royalty/Contract Fees
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Schedule I -- Employment Agreements and Employee Information
Schedule J -- Benefit Plans
Schedule K -- Litigation and Claims
Schedule L -- Intellectual Property Rights
Schedule M -- Insurance
Schedule N -- Permits
Schedule O -- Pricing
Schedule P -- Related Party Transactions
Exhibits
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Exhibit A -- Escrow Agreement
Exhibit B -- LockUp Agreement
Exhibit C -- Lease Agreement Amendment
Exhibit D -- Employment Agreement - Naveen Seth
Exhibit E -- Employment Agreement - Sunil Sethi
Exhibit F -- Opinion of Counsel - Vendor's Counsel
Exhibit G -- Exchange Rights Agreement
Exhibit H -- Support Agreement
Exhibit I -- Reorganization Articles of Amendment
Exhibit J -- Registration Rights Agreements
Exhibit K -- Special Resolutions of Holders of Exchangeable Shares
Exhibit L -- Opinion of Vendors' Counsel
Exhibit M -- Additional Escrow Agreement
Exhibit N -- Risk Factors related to ForeFront Shares
ARTICLE II
PURCHASE AND SALE
Section 2.1 Purchase and Sale.
(1) Upon and subject to the terms and conditions
hereof, on the Closing Date, the Reorganization shall be completed in the manner
set forth below:
(a) On the Closing Date, Step One of the
Reorganization shall be completed upon and subject to the terms and conditions
hereof, whereby the Vendors shall sell to the Purchaser and the Purchaser shall
purchase from the Vendors 1,800,000 Special Shares of the Corporation for a
total purchase price of U.S.$1,800,000, payable to the Vendors in the respective
amounts shown in Part II of Schedule A hereto. The number of Special Shares to
be purchased from each Vendor shall be the number of Special Shares specified
beside each Vendor's name in Part I of Schedule A hereto. The purchase price
shall be paid and satisfied by the Purchaser (i) as to U.S.$1,423,274 by
certified cheque or bank draft at the Time of Closing to the Vendors in the
respective amounts shown in Part III of Schedule A hereto or as they may direct
in writing to
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the Purchaser, upon delivery by the Vendors to the Purchaser of certificates for
the Special Shares, (ii) as to U.S.$50,000 by deposit by the Purchaser in escrow
to be held by the Escrow Agent pursuant to the Escrow Agreement in the
respective amounts shown in Part III of Schedule A hereto and (iii) as to
U.S.$100,000 (the "Securities Cash Escrow") to McCarthy Tetrault, the
Purchaser's special Canadian counsel, as security for the costs and expenses of
the Purchaser as described in Section 4.4 and as to U.S.$226,726 to such counsel
as contemplated in Section 5.1(q), such aggregate amount of U.S.$326,726 (the
"Tax Cash Escrow") to be held in escrow in accordance with the terms of the
Additional Escrow Agreement in the respective amounts shown in Part IV of
Schedule A hereto.
(b) On the Closing Date, after completion of
Step One, articles of amendment in the form of Exhibit I shall be filed by the
Corporation to effect Step Two of the Reorganization and the Corporation shall
deliver to the Vendors certificates for the Exchangeable Shares in the
respective numbers shown in Part II of Schedule A hereto upon delivery by the
Vendors to the Corporation of certificates for the Class B Shares. With respect
to each Exchangeable Share, the Vendors shall have the right to exchange such
Exchangeable Share pursuant to this Agreement for one ForeFront Share pursuant
to the terms of the Exchangeable Shares.
(2) On the Closing Date, the Vendors shall deposit in
escrow 81,687 Exchangeable Shares to be held by the Escrow Agent pursuant to the
Escrow Agreement in the respective numbers set out in Part III of Schedule A
hereto.
Section 2.2 Closing. Subject to the right of Vendors,
ForeFront and Purchaser to terminate this Agreement pursuant to Section 2.3
hereof, the closing for the consummation of the purchase and sale contemplated
by this Agreement (the "Closing") shall, unless another date or place is agreed
to in writing by the parties, take place at the offices of McCarthy Tetrault,
located at The Chambers, Suite 1400, 40 Elgin St., Ottawa, Ontario, at 3:00
p.m., Ottawa time, on or before the Closing Date.
Section 2.3 Termination of Agreement. (a) This Agreement may,
by written notice given at or prior to the Closing in the manner hereinafter
provided, be terminated or abandoned:
(1) In the event that the Closing shall not have
occurred on or before October 15, 1997, by any party, unless such parties shall
otherwise agree in writing;
(2) By the Purchaser, if a default or breach shall be
made by the Vendors with respect to the due and timely performance of any of
their covenants and agreements contained herein, or with respect to the
correctness of or due compliance with any of their representations and
warranties contained in Article 3 hereof, and such default has not been cured or
waived;
(3) By the Vendors, if a default or breach shall be
made by the Purchaser with respect to the due and timely performance of any of
their covenants and agreements contained
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herein, or with respect to the correctness of or due compliance with any of its
representations and warranties contained in Article 3 hereof, and such default
has not been cured or waived;
(4) By the Purchaser, in the event that its Board of
Directors does not approve the terms of this Agreement or any related agreement,
in its sole discretion; or
(5) By mutual consent of the parties.
(b) No termination of this Agreement, whether pursuant to this
Section 2.3 or otherwise, shall terminate or impair any claim by any party
against the other based upon any breach hereof, nor shall it terminate any
obligations of any party to the other with respect to confidentiality of
information provided to such party by the other party pursuant to the terms of
that certain Confidentiality Agreement dated July 9, 1997 entered into between
the Corporation and the Purchaser.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.1 Vendors' Representations and Warranties.
The Vendors, jointly and/or severally, represent and warrant
to the Purchaser that:
(a) the Corporation is a corporation duly incorporated,
organized and subsisting under the laws of Canada as
a private company as that term is defined in the
Securities Act (Ontario) with the corporate power to
own, lease or operate all properties and assets now
owned, leased or operated by it and to carry on its
business as now conducted and has made all necessary
filings under all applicable corporate, securities
and taxation laws or any other laws to which the
Corporation is subject;
(b) the authorized capital of the Corporation consists of
an unlimited number of Class A Shares, an unlimited
number of Class B Shares, and an unlimited number of
Special Shares, of which 3,867,052 Class B Shares and
1,800,000 Special Shares have been validly issued and
are outstanding as fully paid and non-assessable, and
of which no Class A Shares are outstanding;
(c) the rights, privileges, restrictions and conditions
attached to the Class A Shares, Class B Shares and
Special Shares of the Corporation are as set out in
Schedule B attached hereto;
(d) each Vendor is and at the Time of Closing will be the
beneficial and registered owner of the respective
number of Special Shares and Class B Shares set out,
respectively adjacent to his or her name, in Part I
of
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Schedule A hereto, free and clear of all liens,
charges, encumbrances and any other rights of others;
(e) the Vendors have good and sufficient power,
authority and right to enter into, deliver and
perform this Agreement (including, without
limitation, each of the related agreements attached
as an exhibit hereto to which such Vendor is a party)
and, at the Time of Closing, to transfer the legal
and beneficial title and ownership of the Special
Shares and the Exchangeable Shares to the Purchaser
free and clear of all liens, charges, encumbrances
and any other rights of others without the necessity
of any of the Vendors obtaining any consent,
approval, authorization or waiver or giving any
notice or otherwise, except for such consents,
approvals, authorizations, waivers and notices which
have been obtained and are unconditional and are in
full force and effect and such notices which have
been given;
(f) other than with respect to the Reorganization
contemplated herein, there is no contract, option or
any other right of another binding upon or which at
any time in the future may become binding upon:
(i) the Vendors to sell, transfer, assign,
pledge, charge, mortgage or in any other way
dispose of or encumber any of the Special
Shares and the Exchangeable Shares other
than pursuant to the provisions of this
Agreement, or
(ii) the Corporation to allot or issue any of the
unissued shares of the Corporation or to
create any additional class of shares;
(g) neither the entering into nor the delivery of this
Agreement nor the completion of the transactions
contemplated hereby by the Vendors will:
(i) constitute a violation of any of the
provisions of the constating documents or
by-laws of the Corporation;
(ii) conflict with, or constitute a breach or
default under, or give rise to any right of
termination, cancellation or acceleration
under, any term or provision of any
agreement or other instrument to which the
Corporation or any Vendor is a party or by
which the Corporation or any Vendor is
bound, or an event which, with notice, lapse
of time, or both, would result in any such
conflict, breach, default or right; or
(iii) constitute a violation of any applicable
law, rule, regulation, judgment, order or
decree applicable or relating to any Vendor
or the Corporation;
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(h) the audited financial statements of the Corporation,
consisting of the Balance Sheet and statements of
income, retained earnings and changes in financial
position for the period ended on the Balance Sheet
Date, together with the report of Payne Forman Kalli,
chartered accountants, thereon and the notes thereto
(hereinafter collectively referred to as the
"Financial Statements"), a copy of which is attached
hereto as Schedule C:
(i) are in accordance with the books and
accounts of the Corporation as at the
Balance Sheet Date,
(ii) are true and correct and present fairly the
financial position of the Corporation as at
the Balance Sheet Date,
(iii) have been prepared in accordance with
generally accepted accounting principles
consistently applied, and
(iv) present fairly all of the assets and
liabilities of the Corporation as at the
Balance Sheet Date including, without
limiting the generality of the foregoing,
all contingent liabilities of the
Corporation as at the Balance Sheet Date;
(i) the financial position of the Corporation is at
least as good as the financial position of the
Corporation as at the Balance Sheet Date, except as
described on Schedule D; the Vendors shall ensure
that the Corporation has a quick ratio of one
(defined as the ratio of cash plus accounts
receivable to current liabilities including tax
liabilities and other long term liabilities created
due to this transaction); the accounts receivable of
the Corporation are good and collectible in the
ordinary course of business; and product returns
shall not exceed U.S.$26,661 on sales of the
Corporation's products by the Purchaser for the three
month period prior to the Closing Date (provided that
the Vendors shall be entitled to conduct an audit if
such returns exceed such amount);
(j) since the Balance Sheet Date the business of the
Corporation has been carried on in its usual and
ordinary course and the Corporation has not entered
into any transaction out of the usual and ordinary
course of business, except as described on Schedule
D;
(k) since the Balance Sheet Date there has been no change
in the affairs, business, prospects, operations or
condition of the Corporation, financial or otherwise,
whether arising as a result of any legislative or
regulatory change, revocation of any licence or right
to do business, fire, explosion, accident, casualty,
labor dispute, flood, drought, riot, storm,
condemnation,
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<PAGE>
act of God, public force or otherwise, except changes
occurring in the usual and ordinary course of
business which have not materially adversely affected
the affairs, business, prospects, operations or
condition of the Corporation, financial or otherwise
except as described on Schedule D;
(l) the Corporation is the owner with a good and
marketable title, free and clear of all liens,
charges, encumbrances and any other rights of others,
of all assets shown or reflected on the Balance
Sheet, except only such of the assets of the
Corporation as have been disposed of in the usual and
ordinary course of business since the Balance Sheet
Date, and of all assets acquired by the Corporation
since the Balance Sheet Date;
(m) all machinery and equipment owned or used by the
Corporation has been properly maintained and is in
good working order for the purposes of ongoing
operation, subject to ordinary wear and tear for
machinery and equipment of comparable age;
(n) the tangible assets owned or used by the
Corporation (i) are in good operating condition,
order and repair, subject to ordinary wear and tear,
and have been maintained in accordance with standard
industry practice, (ii) are adequate for the purposes
for which they are being used and are capable of
being used in the business as presently being
conducted without present need for repair or
replacement except in the ordinary course of the
business, and (iii) in the aggregate provide the
capacity to enable the Corporation to engage in
commercial operation on a continuous basis (subject
to normal maintenance and repair outages in the
ordinary course). All real and tangible personal
property held by the Corporation under lease is held
under a valid and binding lease agreement that is in
full force and effect. The Corporation is not in
default, and no notice of alleged default has been
received by the Corporation, under any such lease and
no lessor is in default or alleged to be in default
thereunder.
(o) all of the inventories of the Corporation are of
merchantable quality and reasonably fit for their
usual purpose;
(p) there are no outstanding orders, notices or similar
requirements relating to the Corporation issued by
any building, environmental, fire, health, labor or
police authorities or from any other federal,
provincial or municipal authority and there are no
matters under discussion with any such authorities
relating to orders, notices or similar requirements;
(q) except as described on Schedule D, no single capital
expenditure in excess of $1,000 or capital
expenditures in the aggregate in excess of $10,000
have been made or authorized by the Corporation since
the Balance Sheet Date;
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<PAGE>
(r) except as described on Schedule D, no dividends have
been declared or paid on or in respect of any shares
of the Corporation and no other distribution on any
of its securities or shares has been made by the
Corporation since the Balance Sheet Date and all
dividends which to the date hereof have been declared
or paid by the Corporation have been duly and validly
declared or paid;
(s) the Corporation does not have any liability,
obligation or commitment for the payment of income
taxes, corporation taxes or any other taxes or duties
of whatever nature or kind, or interest or penalties
with respect thereto, except such as are disclosed in
the Financial Statements or such taxes or duties not
yet due or for which a filing or declaration related
thereto is not yet required to be made as have arisen
since the Balance Sheet Date in the usual and
ordinary course of business and for which adequate
provision in the accounts of the Corporation has been
made, and the Corporation is not in arrears with
respect to any required withholdings or installment
payments of any tax or duty of any kind and has not
filed any waiver for a taxation year of the
Corporation under the Income Tax Act (Canada) or any
other legislation imposing tax on the Corporation;
(t) the tax accounts of the Corporation as disclosed
in Schedule E attached hereto are true and complete
in all material respects and provide the
undepreciated capital cost of all assets of the
Corporation; the Vendors have made available to the
Purchaser, to the extent requested by the Purchaser,
all tax reports and returns of the Corporation for
all periods ending prior to the date hereof. No
Vendor has received notice of any tax deficiency
outstanding, proposed or assessed against or
allocable to the Corporation, nor has any Vendor
executed any waiver of any statute of limitations on
the assessment or collection of any tax or executed
or filed under the Income Tax Act (Canada) or any
other governmental body any agreement now in effect
extending the period for assessment or collection of
any taxes against the Corporation. There are no tax
liens upon, pending against or, to the knowledge of
Vendors, threatened against any asset;
(u) there are no outstanding liabilities against the
Corporation except trade debts incurred in the usual
and ordinary course of business;
(v) the Corporation is not a party to any contract or
commitment outside the usual and ordinary course of
business and is not a party to any contract or
commitment extending for a period of time longer than
one month or involving expenditures by the
Corporation in the aggregate in excess of $10,000,
except such contracts or commitments as are listed in
Schedule F attached hereto;
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<PAGE>
(w) the Corporation is not in default or breach of any
contract or commitment to which it is a party and
there exists no condition, event or act which, with
the giving of notice or lapse of time or both would
constitute such a default or breach and all such
contracts and commitments are in good standing and in
full force and effect without amendment thereto and
the Corporation is entitled to all benefits
thereunder;
(x) the Corporation is not a party to or bound by any
guarantee, indemnification, surety or similar
obligation;
(y) the Corporation is not a party to any lease or
agreement in the nature of a lease for real or
personal property, whether as lessor or lessee,
except as are listed in Schedule G;
(z) the Corporation does not have any subsidiaries or
agreements, options or commitments to acquire any
shares or securities of any corporation or to acquire
or lease any business operations, real property or
assets;
(aa) there is no agreement, option, understanding or
commitment, or any right or privilege capable of
becoming an agreement, for the purchase from the
Corporation of its business or any of its assets
other than in the usual and ordinary course of
business;
(bb) the Corporation is not a party to or bound by any
contract or commitment to pay any royalty, licence
fee, consulting fee, contractor fee or management
fee, except as disclosed on Schedule H;
(cc) the Corporation does not have any employment contract
(verbal or written) with any person whomsoever except
such contracts as are listed in Schedule I attached
hereto and such Schedule truly and correctly sets out
whether such contracts are in writing and the annual
salary and the length of employment of each of the
employees of the Corporation;
(dd) the Corporation is not bound by or a party to:
(i) any collective bargaining agreement, or
(ii) any benefit plan including, without limiting
the generality of the foregoing, any pension
plan maintained by or on behalf of the
Corporation for any of its employees, except
such agreements and plans as are listed in
Schedule J attached hereto;
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<PAGE>
(ee) all benefit plans listed in Schedule J attached
hereto have been duly registered where required by,
and are in good standing under, all applicable
legislation including, without limiting the
generality of the foregoing, the Income Tax Act
(Canada) and the Pension Benefits Act (Ontario) and
all required employer contributions under any such
plans have been made and the applicable funds have
been funded in accordance with the terms thereof of
the plans and no past service funding liabilities
exist thereunder; Schedule J sets out in detail the
benefit plans which have been registered and the
amounts, if any, of employer contributions made to
date;
(ff) no trade union, council of trade unions,
employee bargaining agency or affiliated bargaining
agent:
(i) holds bargaining rights with respect to any
of the Corporation's employees by way of
certification, interim certification,
voluntary recognition, designation or
successor rights,
(ii) has applied to be certified as the
bargaining agent of any of the Corporation's
employees, or
(iii) has applied to have the Corporation declared
a related employer pursuant to Section 1(4)
of the Labor Relations Act (Ontario);
(gg) except as identified in Schedule D hereto and except
for remuneration paid to employees in the usual and
ordinary course of business and made at current rates
of remuneration no payments have been made or
authorized since the Balance Sheet Date by the
Corporation to officers, directors or employees of
the Corporation;
(hh) no director, former director, officer, shareholder or
employee of the Corporation or any person not dealing
at arm's length within the meaning of the Income Tax
Act (Canada) with any such person is indebted to the
Corporation, except such indebtedness as is disclosed
in Schedule F attached hereto;
(ii) there are no claims, actions, suits or
proceedings (whether or not purportedly on behalf of
the Corporation) pending or threatened against or
adversely affecting, or which could adversely affect,
the Corporation or any of its assets, officers,
directors, shareholders or employees, or before or by
any federal, provincial, municipal or other
governmental court, department, commission, board,
bureau, agency or instrumentality, domestic or
foreign, whether or not insured, and which might
involve the possibility of any judgment or liability
against the Corporation, except such actions, suits
or proceedings as are disclosed in Schedule K
attached hereto;
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<PAGE>
(jj) the Corporation is not conducting its business
in any jurisdiction other than the Province of
Ontario;
(kk) the Corporation is conducting its business in
compliance with all applicable laws, rules,
regulations, notices, approvals and orders of Canada
and of the Province of Ontario and all municipalities
thereof in which its business is carried on, is not
in breach of any such laws, rules, regulations,
notices, approvals or orders and is duly licensed,
registered or qualified, and duly possesses all
permits and quotas, in the Province of Ontario and
all municipalities thereof in which the Corporation
carries on its business to enable its business to be
carried on as now conducted and its assets to be
owned, leased and operated, and all such licences,
registrations, qualifications, permits and quotas are
valid and subsisting and in good standing and none of
the same contains or is subject to any term,
provision, condition or limitation which has or may
have a material adverse effect on the operation of
its business or which may adversely change or
terminate such licence, registration, qualification,
permit or quota by virtue of the completion of the
transactions contemplated hereby;
(ll) the operation of the Corporation on any lands from
which it conducts the operations of its business is
not subject to any restriction or limitation and is
not in contravention of any law or regulation or of
any decree or order of any court or other body having
jurisdiction;
(mm) attached hereto as Schedule L is a list of all
registered trade marks, trade names, patents and
copyrights, of all unregistered trade marks, trade
names and copyrights and of all patent applications,
trade mark registration applications and copyright
registration applications, both domestic and foreign,
owned or made by the Corporation or otherwise used in
or necessary for the Corporation to conduct its
business;
(nn) all trade marks, trade names, patents and copyrights,
both domestic and foreign, used in or required for
the proper carrying on of the Corporation's business
are validly and beneficially owned by the Corporation
with the sole and exclusive right to use the same and
are in good standing and duly registered in all
appropriate offices to preserve the right thereof and
thereto;
(oo) the Intellectual Property includes (but is not
limited to) all of the items listed in Schedule L
hereto. The Corporation owns all right title and
interest to the Intellectual Property except for
those indicated as "licensed" in Schedule L. Schedule
L also sets forth all license agreements with respect
to any of the foregoing as to which the Corporation
is licensor or licensee. There are no pending or, to
the knowledge of any Vendor, threatened infringement
claims against the Corporation by any person with
respect to any of the items listed on Schedule L nor
has any such item been declared
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<PAGE>
invalid or been limited by any court or agreement.
Subject to any required third party consents which
have been obtained and are in full force and effect
or will be obtained and in full force and effect on
the Closing Date, the Intellectual Property will
afford Purchaser at all times after the Closing Date
the rights to use all technology, proprietary
information, know-how, patents, designs, inventions,
trademarks, copyrights, trade names and service marks
owned by the Corporation or others necessary for the
conduct of the business as presently being conducted.
To the best of Vendors' knowledge, information and
belief, the use of the Intellectual Property will
not, and the conduct of the Corporation does not,
infringe upon the trade marks, trade names, patents
or copyrights, domestic or foreign, of any other
person;
(pp) attached hereto as Schedule M is a true and complete
list of all insurance policies maintained by the
Corporation that also specifies the insurer, the
amount of the coverage, the type of insurance, the
policy number and any pending claims thereunder;
(qq) four of the Vendors, namely, Sunil K. Sethi, Naveen
Seth, Sunita Uppal and Sukhdev Walia, are resident
persons of Canada and the remaining Vendor, namely,
Jang Bhadhar Sethi, is a non-resident person within
the meaning of section 116 of the Income Tax Act
(Canada);
(rr) Schedules F and G hereto contains a list of all
contracts, leases, agreements and instruments
material to the business or requiring the performance
by the Corporation of any material obligations of the
Corporation after the date hereof except (i)
employment agreements and contracts for miscellaneous
services, in each case terminable at will without any
liability, (ii) purchase orders and contracts with
suppliers and customers entered into in the ordinary
course of business, and (iii) miscellaneous
contracts, leases, agreements and instruments (with
persons unaffiliated with the Vendors) involving
liabilities under all such contracts, leases,
agreements and instruments of not more than Five
Thousand Dollars ($5,000), individually or Twenty
Five Thousand Dollars ($25,000) in the aggregate. The
Vendors have heretofore delivered, or made available,
to Purchaser or its counsel complete copies of all
contracts, leases, agreements and instruments listed
in Schedules F and G. There are no existing defaults
by the Corporation or to the knowledge of any Vendor,
other parties, under any of the contracts, leases,
agreements and instruments comprising the Scheduled
Leases and Contracts;
(ss) The Corporation possesses all the permits listed in
Schedule N hereto, copies of all of which have been
delivered to the Purchaser. Such permits constitute
all the permits necessary under law or otherwise for
the Corporation to conduct the business as now being
conducted and to own or
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<PAGE>
operate the assets in the manner in which they are
now being operated and used. Each of such permits and
the Corporation's rights with respect thereto is
valid and subsisting, in full force and effect, and
enforceable by the Corporation. The Corporation is in
compliance in all material respects with the terms of
such permits. None of such permits have been, or to
the knowledge of any Vendor, are threatened to be,
revoked, canceled, suspended or modified.
(tt) attached hereto as Schedule O is a complete and
accurate list by customer name of the Corporation's
standard prices and any applicable discounts.
(uu) neither the Corporation nor any officer,
employee or agent of the Corporation nor any other
person acting on its behalf, has, directly or
indirectly, within the past five (5) years, given or
agreed to give any gift or similar benefit to any
customer, supplier, government employee or other
person who is or may be in a position to help or
hinder the business of the Corporation (or to assist
the Corporation in connection with any actual or
proposed transaction) which (1) might subject the
Corporation to any damage or penalty in any civil,
criminal or governmental litigation or proceeding,
(2) if not given in the past, might have had a
material adverse effect on the assets, business or
operations of the Corporation as reflected in the
Financial Statements, or (3) if not continued in the
future, might materially adversely effect the assets,
business operations or prospects of the Corporation
or which might subject the Corporation to a lawsuit
or penalty in a private or governmental litigation or
proceeding;
(vv) none of the Vendors or associates of any Vendor nor
any affiliate of the Corporation, directly or
indirectly, owns any interest in (excepting not more
than a 5% holding for investment purposes in
securities of publicly held and traded companies), or
is an officer, director, employer or consultant of or
otherwise receives remuneration from, any person
which is, or is engaged in business as, a competitor,
lessor, lessee, customer or supplier of the
Corporation except as disclosed on Schedule P;
(ww) Disclosure.
(1) Vendors have fully provided the Purchaser or its
representatives with all the information that they have
requested for deciding whether to consummate the purchase of
the Corporation pursuant to the terms and conditions of this
Agreement.
(2) No representation or warranty of Vendors
contained in this Agreement or any Schedule attached hereto
contains any untrue statement. No representation or warranty
of Vendors contained in this Agreement or any Schedule
attached hereto omits to state a material fact necessary in
order to make the statements herein or therein, in light of
the circumstances under which they were
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<PAGE>
made, not misleading, provided, however, that notwithstanding
any provision to the contrary herein, Purchaser shall be
entitled only to rely on the latest version of information
furnished to the Purchaser by Vendors which supersedes
previous information furnished to the Purchaser.
(xx) Investment Representations.
(1) The ForeFront Shares to be received by Vendors
pursuant to the transactions contemplated by this Agreement
will be acquired for investment for their own accounts, not as
a nominee or agent and not with a view to the sale or
distribution of any part thereof, and the Vendors have no
present intention of selling, granting participations in, or
otherwise distributing the same. The Vendors do not have any
contract, undertaking, agreement, or arrangement with any
person to sell, transfer, or grant participations to such
person, or to any third person, with respect to any of the
ForeFront Shares.
(2) The Vendors understand that the ForeFront Shares
to be delivered pursuant to the transactions contemplated by
this Agreement are not registered under the Securities Act of
1933, as amended (the "1933 Act") or under the Securities Act
(Ontario) (the "Ontario Act"), on the basis that the offer and
sale provided for in this Agreement and the issuance of
securities hereunder is exempt from registration under the
1933 Act, and that Purchaser's reliance on such exemption is
predicated on the Vendors' representations set forth herein.
(3) The Vendors understand that the ForeFront Shares
to be delivered pursuant to this Agreement and the Exchange
Rights Agreement may not be sold, transferred, or otherwise
disposed of without registration under the 1933 Act or the
filing of a prospectus under the Ontario Act, or an exemption
therefrom, and in no instance prior to the expiration of one
year from the date of delivery to them, and that in the
absence of an effective registration statement or an available
exemption that such securities must be held in accordance with
applicable rules relating thereto.
(4) The Vendors have such knowledge and experience in
financial and business matters as to be capable of evaluating
the merits and risks of their investment in the ForeFront
Shares and have the ability to bear the economic risks of such
investment, including, without limitation, the risk factors
set forth in Exhibit N attached hereto. The Vendors have had
access to and an opportunity to inspect relevant business,
financial and other corporate information and data of the
Purchaser. All information which the Vendors have requested
from the Purchaser concerning the Purchaser and each of its
business and affairs has been made available to them,
including the SEC Documents as defined in Section 3.3(g). The
Vendors have had, during the course of the transaction and
prior to the Closing, the opportunity to ask questions of, and
receive answers from, the Purchaser concerning
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<PAGE>
the Purchaser and each of its business and affairs and
ForeFront Shares and to obtain additional information (to the
extent the Purchaser possessed such information or could
acquire it without unreasonable effort or expense) necessary
to verify the accuracy of any information furnished to them.
(5) The Vendors represent and warrant that they have
not, since the execution of the Letter of Intent dated August
15, 1997 for this transaction, bought or sold any shares of
ForeFront Common Stock, nor have any of their spouses or
family members or other contacts who may have knowledge of
this transaction, to the best of their knowledge.
Section 3.2 Survival of Vendors's Representations, Warranties
and Covenants.
(1) The representations and warranties of the Vendors
set forth in Section 3.1 shall survive the completion of the transactions herein
provided for and, notwithstanding such completion:
(a) the representations and warranties of the Vendors relating
to the tax liability of the Corporation, shall, unless such representations and
warranties prove to be false as a result of any misrepresentation made or fraud
committed in filing a return or supplying information for the purposes of the
Income Tax Act (Canada) or any other legislation imposing tax on the
Corporation, continue in full force and effect for the benefit of the Purchaser
until the expiration of the last of the limitation periods contained in the
Income Tax Act (Canada) and any other legislation imposing tax on the
Corporation subsequent to the expiration of which an assessment, reassessment or
other form or recognized document assessing liability for tax, interest or
penalties thereunder for the period ended on the Balance Sheet Date cannot be
issued to the Corporation;
(b) the representations and warranties of the Vendors relating
to the tax liability of the Corporation, which prove to be false as a result of
any misrepresentation made or fraud committed in filing a return or in supplying
information for the purposes of the Income Tax Act (Canada) or any other
legislation imposing tax on the Corporation shall continue in full force and
effect for the benefit of the Purchaser and be unlimited as to duration; and
(c) the remaining representations and warranties of the
Vendors set forth in Section 3.1 shall continue in full force and effect for the
benefit of the Purchaser for a period of one year from the Closing Date.
(2) The covenants of the Vendors set forth in this
Agreement shall survive the completion of the transactions herein provided for
and, notwithstanding such completion, shall continue in full force and effect
for the benefit of the Purchaser in accordance with the terms thereof.
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<PAGE>
Section 3.3 Purchaser's Representations and Warranties.
The Purchaser represents and warrants to the Vendors that:
(a) the Purchaser is a corporation duly organized, validly
existing and in good standing under the laws of the state of Delaware and is
qualified to transact business and is in good standing as a foreign corporation
in the jurisdictions where it is required to qualify in order to conduct its
businesses as presently conducted. The Purchaser has the corporate power and
authority to own, lease or operate all properties and assets now owned, leased
or operated by it and to carry on its businesses as now conducted;
(b) the Purchaser may execute, deliver and perform this
Agreement without the necessity of the Purchaser obtaining any consent,
approval, authorization or waiver or giving any notice or otherwise, except for
such consents, approvals, authorizations, waivers and notices which have been
obtained and are unconditional and are in full force and effect and such notices
which have been given;
(c) the execution, delivery and performance of this Agreement
do not and will not:
(1) constitute a violation of the
certificate of incorporation, as amended, or
the bylaws, as amended, as the case may be,
of the Purchaser;
(2) constitute a violation of any statute,
judgment, order, decree or regulation or
rule of any court, governmental authority or
arbitrator applicable or relating to the
Purchaser; or
(3) constitute a default under any contract to
which the Purchaser is a party except where
such default would not have a material
adverse effect upon the Purchaser or the
ability of the Purchaser to perform its
obligations under this Agreement;
(d) this Agreement has been duly authorized, executed and
delivered by the Purchaser. This Agreement constitutes the legal, valid and
binding obligation of the Purchaser, enforceable in accordance with its terms,
except as may be limited by bankruptcy, reorganization, insolvency and similar
laws of general application relating to or affecting the enforcement of rights
of creditors;
(e) the authorized stock of the Purchaser consists of
20,000,000 shares of Common Stock, $.01 par value, of which 6,500,850 shares
were issued and outstanding as of the date hereof, and 5,000,000 shares of
undesignated Preferred Stock, $.01 par value, none of which were issued and
outstanding as of the date hereof. All such shares have been duly authorized and
all such issued and outstanding shares have been validly issued and are fully
paid and nonassessable;
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<PAGE>
(f) the ForeFront Shares will be duly authorized and when
issued, will be validly issued, fully paid, and non-assessable and will be free
of any liens and encumbrances except as set forth herein or in the Exchange
Rights Agreement or the Support Agreement and except for liens or encumbrances
created by the Vendors.
(g) the Purchaser has furnished the Vendors with a true and
complete copy of all of its filings with the Securities and Exchange Commission
(the "SEC") since December 31, 1996 (the "SEC Documents"). The SEC Documents
comply in all respects with the Securities Act of 1933, as amended, the
Securities Exchange Act of 1934, as amended, and the rules and regulations of
the SEC (together the "SEC Laws"). The Purchaser has, since its inception,
complied in all material respects with the filing requirements of the SEC Laws.
None of the SEC Documents contains any material untrue statement or omits to
state a material fact necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. The SEC
Documents contain an audited consolidated balance sheet of the Purchaser as of
December 31, 1996 and the related consolidated statements of income and cash
flow for the year then ended and the Purchaser's unaudited consolidated balance
sheet as of March 31, 1997 and June 30, 1997 and the related unaudited
consolidated statements of income and cash flow for the three month period then
ended (collectively, the "Purchaser's Financials"). The Purchaser's Financials
are correct in all material respects and have been prepared in accordance with
United States generally accepted accounting principles applied on a basis
consistent throughout the periods indicated and consistent with each other. The
Purchaser's Financials present fairly the financial condition and operating
results and cash flows of the Purchaser as of the dates and during the periods
indicated therein, subject, in the case of unaudited statements, to normal
year-end adjustments, which will not be material in amount or significance,
individually or in the aggregate;
(h) Since the date of the balance sheet included in the
Purchaser's most recently filed report on Form 10-Q, other than the sale of the
Verona Technology to Hewlett-Packard Company, the Purchaser has conducted its
business in the ordinary course and there has not occurred: (i) any material
adverse change in the financial condition, liabilities, assets, business, or
prospects of the Purchaser, (ii) any amendments or changes in the Articles of
Incorporation or Bylaws of the Purchaser, (iii) any damage to, destruction or
loss of any assets of the Purchaser that materially and adversely affects the
financial condition, business or prospects of the Purchaser or any of its
subsidiaries, (iv) any sale of a material amount of property of the Purchaser,
except in the ordinary course of business; or (v) any material acquisition of
other corporations or businesses;
(i) There is no action, suit, proceeding, claim, arbitration
or investigation pending, or as to which the Purchaser has received any notice
of assertion nor, to the Purchaser's knowledge, is there a reasonable basis to
expect such notice of assertion, against the Purchaser which would materially
affect the Purchaser or that in any manner challenges or seeks to prevent,
enjoin, alter or materially delay any of the transactions contemplated by this
Agreement; and
(j) The Purchaser does not have any material liability,
obligation, expense, claim, deficiency, guaranty or endorsement of any type,
whether accrued, absolute, contingent,
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matured, unmatured or other (whether or not required to be reflected in
financial statements in accordance with United States generally accepted
accounting principles), which individually or in the aggregate (i) has not been
reflected in the SEC Documents and the financial statements contained therein or
(ii) has not arisen in the ordinary course of the Purchaser's business since the
date of the Purchaser's most recently filed report on Form 10-Q.
Section 3.4 Survival of the Purchaser's Representations,
Warranties and Covenants.
(1) The representations and warranties of
the Purchaser set forth in Section 3.3 shall survive the completion of the
transactions herein provided for and, notwithstanding such completion, shall
continue in full force and effect for the benefit of the Vendors for a period of
one year from the Closing Date.
(2) The covenants of the Purchaser set forth
in this Agreement shall survive the completion of the transactions herein
provided for and, notwithstanding such completion, shall continue in full force
and effect for the benefit of the Vendors in accordance with the terms thereof.
ARTICLE IV
COVENANTS
Section 4.1 Taxes.
The Purchaser does not assume and shall not be liable for any
taxes under the Income Tax Act (Canada) or any other taxes whatsoever which may
be or become payable by the Vendors including, without limiting the generality
of the foregoing, any taxes resulting from or arising as a consequence of the
transactions herein contemplated, and the Vendors shall indemnify and save
harmless the Purchaser from and against all such taxes.
Section 4.2 Covenants of the Vendors.
(a) The Vendors shall ensure that the representations and
warranties of the Vendors set out in Section 3.1 over which the Vendors have
reasonable control are true and correct at the Time of Closing and that the
conditions of closing for the benefit of the Purchaser set out in Section 5.1(1)
over which the Vendors have reasonable control have been performed or complied
with by the Time of Closing.
(b) The Vendors shall permit the Purchaser, through its agents
and representatives, to make such reasonable investigation prior to the Time of
Closing of the assets of the Corporation and of its financial and legal
condition as the Purchaser consider necessary or advisable to familiarize
themselves with such assets and other matters and the Vendors shall supply any
and all documents and records of the Corporation to the Purchaser and its agents
and representatives as they may reasonably require. The Vendors shall also
permit the inspection of the assets of the Corporation prior to the Time of
Closing by such federal, provincial or municipal authorities as the Purchaser
may require. Such investigations and inspections shall not, however,
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<PAGE>
affect or mitigate the Vendors' covenants, representations and warranties
hereunder which shall continue in full force and effect.
(c) The Vendors shall execute the Registration Rights
Agreement in the form attached hereto as Exhibit J, at such time as requested by
the Purchaser, in the event that the Purchaser is required to file a
registration statement relating to the ForeFront Shares pursuant to the terms of
Section 4.3 hereof.
(d) Sunil K. Sethi and Naveen Seth agree that they will use
best efforts to obtain the consent of all employees of the Corporation who are
not currently bound by such an agreement to enter into agreements not to compete
with the Corporation for the six months period following termination of the
employment.
(e) It is contemplated that following the Closing, the
Corporation may be continued under the Business Corporations Act (Ontario)
and/or amalgamated with a wholly-owned subsidiary of the Purchaser to whom the
Purchaser may transfer all of the Class A Shares. The Vendors, as holders of the
Exchangeable Shares, but subject to the provisions of Sections 4.1 and 4.2 of
Exhibit I attached hereto, shall consent to such continuation and/or
amalgamation in the manner set forth in the Exhibits attached as K-1 and K-2
hereto and shall do all other things and take all other actions as may be
necessary or appropriate therefor. The Corporation is hereby authorized to
insert the dates in and attach the applicable articles to such special
resolutions. Notwithstanding the foregoing and Section 4.3 of the terms of the
Exchangeable Shares as set out in Exhibit I hereto, the Corporation shall not
implement any continuation or amalgamation or, without the consent of the
Vendors, any other amendment to the articles of the Corporation, if such
continuation or amalgamation or other amendment, as the case may be, will result
in adverse tax consequences to the Vendors based on the provisions of the Income
Tax Act (Canada) in effect on the date of this Agreement.
Section 4.3 Covenants of the Purchaser.
(a) The Purchaser shall ensure that the representations and
warranties of the Purchaser set out in Section 3.3 over which the Purchaser has
reasonable control are true and correct at the Time of Closing and that the
conditions of closing for the benefit of the Vendors set out in Section 5.2(1)
over which the Purchaser has reasonable control have been performed or complied
with by the Time of Closing.
(b) The Purchaser shall, at all times following the issue of
the ForeFront Shares and following the expiration of the LockUp Period, use good
faith to cooperate with the Vendors to ensure that the ForeFront Shares shall be
eligible for resale under an available exemption from registration under United
States securities laws, including removing any legends which are no longer
applicable upon written request from the Vendors, and providing necessary legal
opinions to the transfer agent on a timely basis. Should the parties determine,
either before or after the issue of the ForeFront Shares and the expiration of
the LockUp Period, that there are no available exemptions from registration
relating to the resale of the ForeFront Shares, then in such instance
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<PAGE>
the Purchaser on ten (10) days prior notice from any Vendor shall execute the
Registration Rights Agreement in the form attached hereto as Exhibit J, and
subject to execution by the Vendors, prepare and file a registration statement
pursuant to the terms thereof at least thirty (30) days prior to the expiration
or earlier termination of the LockUp Period.
(c) So long as the Vendors shall hold any Exchangeable Shares,
the Purchaser will furnish to the Vendors all information provided by the
Purchaser from time to time to the holders of ForeFront Stock contemporaneously
as such information is provided to such holders.
(d) The Purchaser shall file a notification for listing of the
ForeFront Shares on the NASDAQ National Market System and shall cause such
filing to be accepted prior to any exchange of Exchangeable Shares for ForeFront
Shares.
Section 4.4 Securities Law Compliance.
(a) The Vendors covenant and agree to apply for within 15 days of the
Closing Date and to use their reasonable best efforts to obtain within 120 days
of the Closing Date, all necessary consents, receipts, approvals or orders from
the Ontario Securities Commission (the "OSC") to ensure that each of the
transactions contemplated in this Agreement, the terms of the Exchangeable
Shares, the Exchange Rights Agreement and the Support Agreement may be completed
in accordance with the Securities Act (Ontario) and the regulations thereunder,
and the policies and rules of the OSC, for compliance with such laws,
regulations, policies and rules as required in connection with the transactions.
(b) The Vendors acknowledge and agree that as set forth in Sections
3.1(xx) of this Agreement, the Purchaser has provided to them all information
requested by them as necessary for the investment decision made by them to grant
the Retraction Call Right, Redemption Call Right and Liquidation Call Right as
defined in the Exchange Rights Agreement, and the Vendors hereby waive any and
all rights, whether statutory or common law, which they may have to rescind the
transaction arising out of any failure of the Vendors, the Corporation or the
Purchaser to obtain any consent, receipt, approval or order deemed necessary
from the OSC.
(c) The Vendors shall indemnify and save harmless the Purchaser and the
Corporation from all costs and expenses which either or both may incur as a
result of having to comply with the provisions of any ruling or order issued by
the OSC as contemplated in Section 4.4(a), other than with respect to the
performance by the Purchaser of any obligations of the Purchaser expressly set
forth herein or in the Exchange Rights Agreement or the Support Agreement. As
security for such costs and expenses, the Vendors shall place in escrow the sum
of U.S.$100,000 with the Purchaser's counsel, McCarthy Tetrault, pursuant to the
Additional Escrow Agreement as contemplated in Section 2.1(1)(a)(iii) hereof.
(d) In the event that for any reason, other than the failure of the
Purchaser to perform its obligations hereunder and under the Exchange Rights
Agreement or the Support Agreement, the transactions contemplated herein are
rescinded, the Vendors shall indemnify and save harmless
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<PAGE>
the Purchaser from all costs incurred by the Purchaser in negotiating and
completing the transactions contemplated herein.
ARTICLE V
CONDITIONS
Section 5.1 Conditions for the Benefit of the Purchaser.
(1) The completion of the transactions
contemplated herein is subject to the following conditions which are for the
exclusive benefit of the Purchaser to be performed or complied with at or prior
to the Time of Closing:
(a) the representations and warranties of the Vendors set
forth in Section 3.1 shall be true and correct at the Time of Closing with the
same force and effect as if made at and as of such time;
(b) the Vendors shall have performed or complied with all of
the terms, covenants and conditions of this Agreement to be performed or
complied with by the Vendors at or prior to the Time of Closing;
(c) the Purchaser shall be furnished with such certificates,
affidavits or statutory declarations of the Corporation and of the Vendors or of
officers of the Corporation and of the Vendors as the Purchaser and its counsel
may reasonably think necessary in order to establish that the terms, covenants
and conditions contained in this Agreement to have been performed or complied
with by the Vendors or by the Corporation, as the case may be, at or prior to
the Time of Closing have been performed and complied with and that the
representations and warranties of the Vendors herein given are true and correct
at the Time of Closing;
(d) no material damage by fire or other hazard to the assets
of the Corporation shall have occurred from the date hereof to the Time of
Closing;
(e) all directors and officers of the Corporation
specified by the Purchaser shall resign;
(f) the Vendors and all directors and officers of the
Corporation shall release the Corporation from any and all possible claims
against the Corporation arising from any act, matter or thing arising at or
prior to the Time of Closing;
(g) all necessary steps and proceedings shall have been taken
to permit the Purchased Shares to be duly and regularly transferred to and
registered in the name of the Purchaser;
(h) the parties shall have entered into the Escrow Agreement
in the form of Exhibit A hereto and U.S.$50,000 and 81,687 Exchangeable Shares,
in the respective amounts
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<PAGE>
and numbers for each Vendor set out in Part III of Schedule A hereto (the
"Escrowed Exchangeable Shares") shall have been delivered to the Escrow Agent by
the Vendors as collateral for the indemnification obligations of the Vendors
contained in Article VI of this Agreement, pursuant to the terms of the Escrow
Agreement.;
(i) the existing lease agreement for the current premises
occupied by the Corporation shall be amended pursuant to the terms provided on
the Lease Agreement Amendment attached as Exhibit C hereto.
(j) there shall be an employment agreement entered into
between each of Naveen Seth and Sunil Sethi and the Corporation substantially in
the forms attached hereto as Exhibit D and E, respectively, in full substitution
for any existing employment agreements with such individuals;
(k) the Vendors shall cause 1213360 Ontario Ltd. to repay the
existing loan of $85,000 to the Corporation;
(l) the guaranty by the Corporation and the financing
statement filed against the Corporation relating to the purchase by 1213360
Ontario Ltd. of the premises leased by the Corporation shall be released and
terminated to Purchaser's reasonable satisfaction;
(m) the Vendors shall have delivered to the Purchaser
favorable opinions of the Vendors' counsel substantially in the form attached
hereto as Exhibit F;
(n) the Board of Directors of the Purchaser, in its sole
discretion, shall have approved the closing of the proposed transaction;
(o) no material change shall have occurred between the
execution of this Agreement and the Closing in the Corporation's business or
otherwise, which would adversely affect the value of the proposed transaction to
the Purchaser;
(p) the form and legality of all matters incidental to the
completion of the transactions contemplated herein shall be subject to the
approval of the Purchaser's counsel;
(q) Jang Badhur Sethi, who is a non-resident person within the
meaning of Section 116 of the Income Tax Act (Canada), shall, subject, as
provided in the Additional Escrow Agreement, to a holdback of U.S.$226,726
payable to that Vendor, furnish to the Purchaser a certificate on Form T2068,
not later than October 30, 1997 having a "certificate limit" of not less than
such amount;
(r) the Vendors, as holders of the Exchangeable Shares shall
have signed and delivered to the Corporation and the Purchaser the special
resolutions of the Corporation in the forms of Exhibit K-1 and K-2 hereto;
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<PAGE>
(s) the Reorganization shall have been completed and the only
issued and outstanding shares of the Corporation shall be the Class A Shares
owned by the Purchaser and the Exchangeable Shares owned by the Vendors; and
(t) the parties shall have entered into the LockUp Agreement
in the form of Exhibit B hereto.
(2) In case any term or covenant of the Vendors
or condition to be performed or complied with for the benefit of the Purchaser
at or prior to the Time of Closing shall not have been performed or complied
with at or prior to the Time of Closing, the Purchaser may, without limiting any
other right that it may have, at its sole option, either:
(a) rescind this Agreement by notice to the Vendors, and in
such event the Purchaser shall be released from all obligations
hereunder; or
(b) waive compliance with any such term, covenant or condition
in whole or in part on such terms as may be agreed upon without
prejudice to any of its rights of rescission in the event of
non-performance of any other term, covenant or condition in whole or in
part.
Section 5.2 Conditions for the Benefit of the Vendors.
(1) The completion of the transactions
contemplated herein is subject to the following conditions which are for the
exclusive benefit of the Vendors to be performed or complied with at or prior to
the Time of Closing:
(a) the representations and warranties of the Purchaser set
forth in Section 3.3 shall be true and correct at the Time of Closing with the
same force and effect as if made at and as of such time;
(b) the Purchaser shall have performed or complied with all of
the terms, covenants and conditions of this Agreement to be performed or
complied with by the Purchaser at or prior to the Time of Closing;
(c) the Vendors shall be furnished with such certificates,
affidavits or statutory declarations of the Purchaser or of officers of the
Purchaser as the Vendors or the Vendors' counsel may reasonably think necessary
in order to establish that the terms, covenants and conditions contained in this
Agreement to have been performed or complied with by the Purchaser at or prior
to the Time of Closing have been performed and complied with and that the
representations and warranties of the Purchaser herein given are true and
correct at the Time of Closing;
(d) the Purchaser shall have entered into the Exchange Rights
Agreement and the Support Agreement in the forms of Exhibit G and H hereto,
respectively;
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<PAGE>
(e) the form and legality of all matters incidental to the
transactions contemplated herein shall be subject to the approval of the
Vendors' counsel; and
(f) the Reorganization shall have been completed.
(2) In case any term or covenant of the
Purchaser or condition to be performed or complied with for the benefit of the
Vendors at or prior to the Time of Closing shall not have been performed or
complied with at or prior to the Time of Closing, the Vendors may, without
limiting any other right that the Vendors may have, at its sole option, either:
(a) rescind this Agreement by notice to the Purchaser, and in
such event the Vendors shall be released from all obligations
hereunder; or
(b) waive compliance with any such term, covenant or
condition in whole or in part on such terms as may be agreed
upon without prejudice to any of its rights of rescission in
the event of non-performance of any other term, covenant or
condition in whole or in part.
ARTICLE VI
INDEMNIFICATION AND ESCROW
Section 6.1 Survival of Representations and Warranties. All
representations, warranties and (except as provided by the following sentence)
covenants of the Vendors or any authorized representative thereof contained in
this Agreement or in any schedule or exhibit hereto, or in any certificate,
document or other instrument delivered in connection herewith, shall terminate
and cease to be of further force and effect as of the expiration of the
applicable period set forth in Section 3.2 (the "Escrow Period"). Those
covenants that expressly contemplate or involve actions to be taken or
obligations in effect after the Closing shall survive in accordance with their
terms.
Section 6.2 Indemnity. (a) The Vendors shall indemnify and
save harmless the Purchaser, the Corporation and the officers and directors of
the Purchaser and the Corporation from and against all liabilities (whether
accrued, actual, contingent or otherwise), claims and demands whatsoever
including, without limiting the generality of the foregoing, liabilities, claims
and demands for income, sales, excise or other taxes, of or in connection with
the Corporation existing or incurred as at or subsequent to the Balance Sheet
Date and up to the Closing Date which are not disclosed in the Financial
Statements, have not arisen in the usual and ordinary course of the
Corporation's business since the Balance Sheet Date or have arisen in the usual
and ordinary course of the Corporation's business since the Balance Sheet Date
but for which adequate provision in the Corporation's accounts has not been
made.
(b) The Vendors agree to (jointly and severally) indemnify and
hold the Purchaser and the Corporation and each of the officers, directors,
shareholders, affiliates,
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<PAGE>
employees and agents of the Purchaser and the Corporation (collectively, the
"Indemnitees") harmless from any and all damages, losses, liabilities (joint or
several), payments, obligations, penalties, claims, litigation, demands,
judgments, suits, proceedings, costs, disbursements or expenses (including
without limitation, reasonable fees, disbursements and expenses of attorneys) of
any kind or nature whatsoever (collectively, the "Damages"), directly or
indirectly resulting from, relating to or arising out of:
(1) any breach of or inaccuracy in any
representation or warranty of Vendors contained in Section 3.1;
(2) any breach or non-performance, by any
Vendor of any covenant or agreement of Vendors contained in this Agreement or in
any related document; and
(3) the terms of Section 6.2(a) or 4.1 hereof.
Section 6.3 Escrow Fund; Procedure. (a) The Vendors shall have
the right to vote, and to receive dividends declared on, any Escrowed Shares
during the period the Exchangeable Shares are held in escrow. The Escrowed
Shares are not subject to forfeiture or return in the event of any Vendor's
death or bankruptcy, or the failure of any Vendor to continue employment with
the Corporation.
(b) If a claim by a third party is made against any Indemnitee
or in the event that an Indemnitee determines, in good faith, that an event has
occurred which gives rise to a claim for Damages (together, a "Claim"), and if
such Indemnitee intends to seek indemnity with respect thereto under this
Article VI, the Indemnitee shall notify Vendors of such Claim in writing. Such
notice must be given no later than thirty (30) days after the assertion or
determination of such Claim but in no event more than ten days after the
expiration of the Escrow Period. Indemnitee shall include in its notice to
Vendors the basis for the Claim, the amount of the resulting Damages and the
amount of cash and if applicable, the number of Escrowed Shares which it intends
to retain and cancel in order to satisfy such Damages. For purposes of
determining the number of Escrowed Shares to be retained and canceled, any Claim
should be satisfied from all of the Escrowed Shares on a pro rata basis, and the
number of such Escrowed Shares shall be equal to the number resulting upon the
division of the amount of the Claim by the Closing Price regardless of the
actual fair market value of the Common Stock at the time of such determination
hereunder. For such purposes, the amount of the Claim or any portion thereof in
Canadian dollars shall be converted at the noon rate published by the Bank of
Canada on the last Business Day prior to the payment of such Claim. If any
Vendor wishes to dispute the validity of any Claim or the amount of Damages for
any Claim, it must give the Indemnitee requesting indemnification written notice
of such dispute and the basis therefore, within thirty (30) days of receiving
the Indemnitee's notice. If the parties are unable to resolve any such dispute,
the matter shall be submitted to binding arbitration, the costs of which shall
be borne equally by the parties. Any such arbitration shall be conducted by an
independent firm mutually agreeable to the parties with expertise in matters of
this kind, and shall be in a mutually agreeable location.
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<PAGE>
(c) Any cash or Escrowed Shares held by the Escrow Agent at
the expiration of the Escrow Period which have not been applied against any
Damages as provided herein, or which do not represent Damages for Claims whose
validity or amount is still in dispute, shall be delivered to the Vendors
promptly following the expiration of the Escrow Period. Any portion of the
Escrow Fund withheld pending resolution of a dispute, shall be delivered or
returned and canceled, as may be determined, upon final resolution of the
dispute.
(d) The Purchaser shall be entitled to control the defense of
any Claim brought against the Purchaser or any Indemnitee, in its sole
discretion, and to settle any such Claim without the consent of Vendors,
provided however that Vendors shall be entitled to participate in any such
defense at its expense.
(e) Notwithstanding anything hereinabove to the contrary, the
aggregate liability of the Vendors under this Article VI, other than in the
event of fraud by the Vendors, shall not exceed the amount which is 10% of the
sum of (i) U.S.$1,800,000, and (ii) the number of Exchangeable Shares receivable
by the Vendors under Section 2.1 hereof multiplied by the Closing Price.
Section 6.4 No Third Party Beneficiaries. The foregoing
indemnification is given solely for the purpose of protecting the parties to
this Agreement and the Indemnitees and shall not be deemed extended to, or
interpreted in a manner to confer any benefit, right or cause of action upon,
any other Person.
ARTICLE VII
GENERAL
Section 7.1 Further Assurances. Each of the parties shall from
time to time execute and deliver all such further documents and instruments and
do all acts and things as the other party may, either before or after the
Closing Date, reasonably require to effectively carry out or better evidence or
perfect the full intent and meaning of this Agreement.
Section 7.2 Time of the Essence. Time shall be of the essence
of this Agreement.
Section 7.3 Commissions. The Vendors shall indemnify and save
harmless the Purchaser from and against any claims whatsoever for any commission
or other remuneration payable or alleged to be payable to any person in respect
of the transactions contemplated herein, whether such person purports to act or
have acted for the Vendors or the Purchaser in connection with the transactions
contemplated herein.
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<PAGE>
Section 7.4 Fees. Each of the parties hereto shall pay their
respective legal and accounting costs and expenses incurred in connection with
the preparation, execution and delivery of this Agreement and all documents and
instruments executed pursuant hereto and any other costs and expenses whatsoever
and howsoever incurred.
Section 7.5 Public Announcements. No public announcement or
press release concerning the transactions contemplated herein shall be made by
the Vendors without the prior consent and approval of the Purchaser.
Section 7.6 Benefit of the Agreement. This Agreement shall
enure to the benefit of and be binding upon the respective heirs, executors,
administrators, successors and permitted assigns of the parties hereto.
Section 7.7 Entire Agreement. This Agreement constitutes the
entire agreement between the parties hereto with respect to the subject matter
hereof and cancels and supersedes any prior understandings and agreements
between the parties hereto with respect thereto. There are no representations,
warranties, terms, conditions, undertakings or collateral agreements, express,
implied or statutory, between the parties other than as expressly set forth in
this Agreement.
Section 7.8 Amendments and Waiver. No modification of or
amendment to this Agreement shall be valid or binding unless set forth in
writing and duly executed by all of the parties hereto and no waiver of any
breach of any term or provision of this Agreement shall be effective or binding
unless made in writing and signed by the party purporting to give the same and,
unless otherwise provided, shall be limited to the specific breach waived.
Section 7.9 Assignment. This Agreement may not be assigned by
the Vendors without the written consent of the Purchaser but may be assigned by
the Purchaser without the consent of the Vendors to an affiliate of the
Purchaser, provided that such affiliate enters into a written agreement with the
Vendors to be bound by the provisions of this Agreement in all respects and to
the same extent as the Purchaser is bound and provided that the Purchaser shall
continue to be bound by all the obligations hereunder as if such assignment had
not occurred and perform such obligations to the extent that such affiliate
fails to do so.
Section 7.10 Notices. Any demand, notice or other
communication to be given in connection with this Agreement shall be given in
writing and shall be given by personal delivery, by registered mail or by
electronic means of communication addressed to the recipient as follows:
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To the Vendors:
Sunil K. Sethi
10 Baslaw Dr.
Ottawa, Ontario KIG 5J8
Facsimile: (613) 736-9614
With a copy to:
Donald G. McLeod
1447 Woodroffe Ave.
Nepean, Ontario K2G 1W1
Facsimile: (613) 225-0921
To the Purchaser and the Corporation:
The ForeFront Group, Inc.
1360 Post Oak Blvd., Suite 2050
Houston, Texas 77056
(713) 961-1149 (facsimile)
Attention: David Sikora, President
With a copy to:
Jeffrey R. Harder, V.P. and General Counsel
1360 Post Oak Blvd., Suite 2050
Houston, Texas 77056
(713) 961- 4530 (facsimile)
or to such other address, individual or electronic communication number as may
be designated by notice given by either party to the other. Any demand, notice
or other communication given by personal delivery shall be conclusively deemed
to have been given on the day of actual delivery thereof and, if given by
registered mail, on the third Business Day following the deposit thereof in the
mail and, if given by electronic communication, on the day of transmittal
thereof if given during the normal business hours of the recipient and on the
Business Day during which such normal business hours next occur if not given
during such hours on any day. If the party giving any demand, notice or other
communication knows or ought reasonably to know of any difficulties with the
postal system which might affect the delivery of mail, any such demand, notice
or other communication shall not be mailed but shall be given by personal
delivery or by electronic communication.
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<PAGE>
Section 7.11 Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the Province of Ontario and the
laws of Canada applicable therein.
Section 7.12 Tax Effect of Transaction. Neither the Vendors
nor the Purchaser have made nor do any of them make herein any representation or
warranty as to the tax consequences of the Transaction to any party. It is
understood and agreed that each party has looked to its own advisors for advice
and counsel as to such tax effects.
Section 7.13 Severability. In the event that any provision
contained in this Agreement shall be determined to be invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and the remaining
provisions of this Agreement shall not, at the election of the party for whose
benefit the provision exists, be in any way impaired.
Section 7.14 Counterparts. This Agreement may be executed in
any number of counterparts, and each such counterpart hereof shall be deemed to
be an original instrument, but all such counterparts together shall constitute
but one Agreement.
Section 7.15 Facsimile Signatures. The signature of any party
to this Agreement may be evidenced on this Agreement and any other agreement or
instrument contemplated herein by facsimile. Without prejudice to the
effectiveness of such facsimile signature, such party agrees to forward promptly
following the transmission by facsimile of such party's signature, such
agreement or instrument bearing an original signature to the other parties
hereto.
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<PAGE>
IN WITNESS WHEREOF the parties have executed this Agreement.
THE FOREFRONT GROUP, INC.
By: /s/ David Sikora
Name: David Sikora
Title: President & CEO
LANPROFESSIONAL INC.
By: /s/ Naveen Seth
Name: Naveen Seth
Title: VP Operations
/s/ Sunil Sethi
SUNIL K. SETHI
/s/ Naveen Seth
NAVEEN SETH
/s/ Sukhdev Walia
SUKHDEV WALIA
/s/ Sunita Uppal
SUNITA UPPAL
/s/ J B Sethi
JANG BHADHUR SETHI
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<PAGE>
SCHEDULE A
PART I
<TABLE>
<CAPTION>
Vendor Special Shares Class B Shares
- ------ -------------- --------------
<S> <C> <C>
Sunil K. Sethi 382,490 1,147,590
Naveen Seth 382,490 1,147,590
Sukhdev Walia 382,490 580,885
Sunita Uppal 382,490 580,885
Jang Bhadhur Sethi 270,040 410,102
------- -------
Totals: 1,800,000 3,867,052
</TABLE>
PART II
<TABLE>
<CAPTION>
Vendor Total Consideration Cash Exchangeable Shares
- ------ ------------------- ---- -------------------
<S> <C> <C> <C>
Sunil K. Sethi US$1,530,080 US$382,490 165,418
Naveen Seth US$1,530,080 US$382,490 165,418
Sukhdev Walia US$963,375 US$382,490 83,731
Sunita Uppal US$963,375 US$382,490 83,731
Jang Bhadhur Sethi US$680,143 US$270,040 59,115
------------- ------------ -------
Totals: US$5,667,052 US$1,800,000 557,413
</TABLE>
<PAGE>
PART III
<TABLE>
<CAPTION>
Escrowed Exchangeable
Vendor Cash at Closing Escrowed Cash Shares
- ------ --------------- ------------- ---------------------
<S> <C> <C> <C>
Sunil K. Sethi US$350,615 US$10,625 24,242
Naveen Seth US$350,615 US$10,625 24,242
Sukhdev Walia US$350,615 US$10,625 12,270
Sunita Uppal US$350,615 US$10,625 12,270
Jang Bhadhur Sethi US$20,814 US$7,500 8,663
------------ --------- ------
Totals: US$1,423,274 US$50,000 81,687
</TABLE>
PART IV
<TABLE>
<CAPTION>
Vendor Securities Cash Escrow Tax Cash Escrow
- ------ ---------------------- ---------------
<S> <C> <C>
Sunil K. Sethi US$21,250 --
Naveen Seth US$21,250 --
Sukhdev Walia US$21,250 --
Sunita Uppal US$21,250 --
Jang Bhadhur Sethi US15,000 US$226,726
---------- ----------
Totals: US$100,000 US$226,726
</TABLE>
ESCROW AGREEMENT
This Escrow Agreement is made and entered into as of this 29th
day of September, 1997, by and among Texas Commerce Bank, National Association
(the "Escrow Agent"), The ForeFront Group, Inc., a Delaware corporation
("ForeFront"), Sunil K. Sethi, Naveen Seth, Sukhdev Walia, Sunita Uppal and Jang
Bhadhur Sethi (individually, a "Shareholder" and, collectively, the
"Shareholders").
W I T N E S S E T H:
WHEREAS, ForeFront and the Shareholders have entered into an
Acquisition Agreement, dated as of the date hereof (collectively, with all
amendments, schedules, exhibits and certificates referred to therein, the
"Acquisition Agreement"), which provides for the acquisition by ForeFront of all
of the outstanding Special Shares of capital stock of Lan Professional Inc., a
Canadian corporation, ("LanTec") held by the Shareholders (the "Acquisition");
and
WHEREAS, the Acquisition Agreement provides that on the
effective date of the Acquisition, a portion of the purchase price, including
cash and Exchangeable Shares of LanTec (the "Exchangeable Shares") held by the
Shareholders as a result of the Acquisition, which Exchangeable Shares are
exchangeable for shares of ForeFront Common Stock, par value $.01 per share
("ForeFront Common Stock"), 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 Acquisition Agreement and herein, the parties agree
as follows:
ARTICLE I
Establishment of Escrow Fund
1.1 Escrow. Subject to Section 2.1, the Escrow Agent shall
initially hold in escrow (i) the sum of Fifty Thousand U.S. Dollars
(U.S.$50,000) (the "Cash Escrow", as said amount may increase or decrease as a
result of the investment and reinvestment thereof, and as said amount may be
reduced by charges thereto and (ii) 81,687 Exchangeable Shares of LanTec, owned
by the Shareholders in the respective amount set forth on Exhibit A hereto
adjacent to each Shareholder's name (the "Escrow Shares"), which shall be held
and distributed by the Escrow Agent in accordance with the terms and conditions
of Article II of this Agreement. 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. Together, the Cash Escrow and the Escrow Shares constitute the Escrow
Fund.
Subject to and in accordance with the terms and conditions hereof,
Escrow Agent agrees that it shall receive, hold in escrow, invest and reinvest
and release or distribute the Cash Escrow.
<PAGE>
It is hereby expressly stipulated and agreed that all interest and other
earnings on the Cash Escrow shall become a part of the Cash Escrow for all
purposes, and that all losses resulting from the investment or reinvestment
thereof from time to time and all amounts charged thereto to compensate or
reimburse the Escrow Agent from time to time for amounts owing to it hereunder
shall from the time of such loss or charge no longer constitute part of the
Escrow Fund.
1.2 Investment of Cash Escrow. Escrow Agent shall invest and
reinvest the Cash Escrow in the Vista 100% U.S. Treasury Securities Money Market
Fund, unless otherwise instructed in writing by ForeFront. Such written
instructions, if any, referred to in the foregoing sentence shall specify the
type and identity of the investments to be purchased and/or sold and shall also
include the name of the broker dealer, if any, which ForeFront directs the
Escrow Agent to use in respect of such investment, any particular settlement
procedures required, if any (which settlement procedures shall be consistent
with industry standards and practices), and such other information as Escrow
Agent may require. Escrow Agent shall not be liable for failure to invest or
reinvest funds absent sufficient written direction. Unless Escrow Agent is
otherwise directed in such written instructions, Escrow Agent may use a broker
dealer of its own selection, including a broker dealer owned by or affiliated
with Escrow Agent or any of its affiliates. It is expressly agreed and
understood by the parties hereto that Escrow Agent shall not in any way
whatsoever be liable for losses on any investments, including, but not limited
to, losses from market risks due to premature liquidation or resulting from
other actions taken pursuant to this Escrow Agreement.
Receipt, investment and reinvestment of the Cash Escrow shall be
confirmed by Escrow Agent as soon as practicable by account statement, and any
discrepancies in any such account statement shall be noted by ForeFront to
Escrow Agent within 30 calendar days after receipt thereof. Failure to inform
Escrow Agent in writing of any discrepancies in any such account statement
within said 30 day period shall conclusively be deemed confirmation of such
account statement in its entirety. For purposes of this paragraph, (a) each
account statement shall be deemed to have been received by the party to whom
directed on the earlier to occur of (i) actual receipt thereof and (ii) three
business days, as hereinafter defined, after the deposit thereof in the United
States mail, postage prepaid, and (b) the term business day shall mean any day
of the year, excluding Saturday, Sunday and any other day on which national
banks are required or authorized to close in Houston, Texas.
1.3 ForeFront Common Stock. Escrow Agent shall, on written notice from a
Shareholder requesting such action, which notice shall be acknowledged by
ForeFront in writing, deliver the Exchangeable Shares requested by the
Shareholder in such notice to ForeFront for exchange into an equivalent number
of shares of ForeFront Common Stock in the name of such Shareholder, and accept
and hold in escrow under terms of this Agreement the ForeFront Common Stock
representing the shares acquired by the Shareholder on exchange of the
Exchangeable Shares specified in the notice.
<PAGE>
ARTICLE II
Application of Escrow Fund
2.1 Distribution of Escrow Fund. The Escrow Fund shall serve
as collateral for the indemnity obligations of the Shareholders under the
Acquisition Agreement. Any claim by ForeFront, or any other person entitled to
indemnification under the Acquisition Agreement (herein an "indemnified person")
for indemnification against the Shareholders shall be conducted in accordance
with the terms of this Section 2.1. If ForeFront or any other such person shall
have any claim against the Shareholders, it or such other person 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 such person and the
Escrow Agent within thirty days following receipt of notice of claim, advising
it and the Escrow Agent that they do not consent to the delivery of any of the
Escrow Funds out of escrow for application to such claims. If no such notice is
timely provided by the Shareholders to ForeFront, such other person, if
applicable, and the Escrow Agent, the Escrow Agent shall, within five business
days after the expiration of the prior notice period, deliver to ForeFront out
of escrow (i) that amount of the Cash Escrow as is necessary to satisfy the
claim, and (ii) to the extent that all of the Cash Escrow has been exhausted, an
amount equal to the lesser of: (a) the number of the Escrow Shares (in whole
shares) equal to the amount of the claim or claims thus to be satisfied divided
by $6.9375 per share, or (b) all of the Escrow Shares. If the Shareholders
advise ForeFront, or such other person, if applicable, and the Escrow Agent
within the foregoing thirty day period that they object to such application of
the Escrow Fund after a claim has been made, the Escrow Agent shall hold the
Escrow Fund in escrow until the rights of the Shareholders and ForeFront and
such other person with respect thereto have been agreed upon or otherwise
determined in accordance with the terms of this Agreement.
Upon the anniversary date of this Agreement, the Escrow Agent
shall within 15 days following the receipt of written notice from the
Shareholders, a copy of which notice shall be given to ForeFront concurrent
therewith, distribute to (i) the Shareholders all of the Cash Escrow remaining
in the Escrow Fund, in accordance with the applicable percentages specified on
Exhibit A hereto, less the value of any pending claims then being asserted, and
(ii) each Shareholder, or such other person as the Shareholder may designate in
writing, all of the Escrow Shares originally deposited in the escrow for such
Shareholders 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) equal to the amount of any pending claims
asserted by ForeFront divided by $6.9375 per share (after taking into account
the amount of Cash Escrow remaining in the Escrow Fund), 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, and
<PAGE>
provided further, that in the event that ForeFront shall notify the Escrow Agent
that it objects to such release, then the dispute shall be resolved in
accordance with Section 2.3.
The Cash Escrow and 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) together with the amount of Cash
Escrow then remaining in the Escrow Fund over the amount of the remaining
aggregate claims as determined above. Any claims which (i) are disputed by the
Shareholders and subsequently result in ForeFront or an indemnified person, and
the Shareholders agreeing upon the resolution thereof, or which are finally
determined by arbitration as provided in Section 2.3 hereof, and (ii) result in
ForeFront or such indemnified person incurring an expense which is subject to
indemnification by the Shareholders, shall be settled by delivery of such
portion of the Cash Escrow and Escrow Shares to ForeFront in accordance with the
provisions above, upon written evidence of such disposition or agreement
provided to the Escrow Agent.
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 LanTec or 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 LanTec or ForeFront affecting holders of LanTec Exchangeable
Shares or 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.
2.3 Arbitration. Any controversy involving a claim by
ForeFront on the Escrow Fund shall be finally settled by arbitration in Houston,
Texas 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.
<PAGE>
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 Cash Escrow and 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 Cash Escrow and Escrow Shares to the Escrow
Agent, the Escrow Agent shall be entitled to an initial fee of $3,500 for the
first twelve month period following the date hereof, and an annual fee of $3,000
per year thereafter.
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 Cash Escrow and 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.
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 Fund or the rights of any of the parties hereto to
such Escrow Fund, 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
<PAGE>
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 ten 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:
The ForeFront Group, Inc.
1360 Post Oak Blvd, Suite 2050
Houston, Texas 77056
Attention: Jeffrey R. Harder
Tel: (713)961-1101
Facsimile: (713) 961-4530
(b) If to the Shareholders:
Sunil K. Sethi
10 Baslaw Dr.
Ottawa, Ont. K1G 5J8
Tel: (613)736-5326
Facsimile: (613)736-9614
(c) If to the Escrow Agent:
<PAGE>
Texas Commerce Bank, N.A.
600 Travis Street, Suite 1150
Houston, Texas 77002
Attention: Corporate Trust, Greg Campbell
Tel: (713)216-6029
Facsimile: (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 Fund has 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 Shareholder and this
Agreement shall be interpreted in a manner to effect the Shareholder's ownership
of the Escrow Shares for such tax purposes.
4.7 Term. This Agreement shall terminate at the expiration of
one year from the effective date, unless any claim for indemnification is not
settled or is otherwise pending, in which event this Agreement shall continue
until all such claims or disputes have been finally resolved.
<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/ Greg Campbell
Name: Greg Campbell
Title: Trust Officer
The ForeFront Group, Inc.,
a Delaware corporation
By: /s/ David Sikora
Name: David Sikora
Title: President & CEO
The Shareholders:
/s/ Sunil Sethi
Sunil K. Sethi
/s/ Naveen Seth
Naveen Seth
/s/ Sukhdev Walia
Sukhdev Walia
/s/ Sunita Uppal
Sunita Uppal
/s/ J B Sethi
Jang Bhadhur Sethi
<PAGE>
EXHIBIT A
Applicable Cash Number of
Escrow Percentages Exchangeable Shares
Sunil K. Sethi 21.25% 24,242
Naveen Seth 21.25% 24,242
Sukhdev Walia 21.25% 12,270
Sunita Uppal 21.25% 12,270
Jang Bhadhur Sethi 15% 8,663
Total: 81,687
LOCKUP AGREEMENT
This Lockup Agreement having an effective date of September 29, 1997
("Agreement"), is entered into by and between Mr. Sunil K. Sethi, Mr. Naveen
Seth, Mr. Sukhdev Walia, Ms. Sunita Uppal and Mr. Jang Bhadhur Sethi (together,
the "Shareholders"), and The ForeFront Group, Inc., a Delaware corporation (the
"Company").
WHEREAS, the Company, LanProfessional Inc. (the "Subsidiary") and the
Shareholders are parties to that certain Acquisition Agreement dated the date
hereof (the "Acquisition Agreement") whereby the Shareholders have agreed to
sell and transfer to the Company all of the outstanding special shares of the
Subsidiary in exchange for cash.
WHEREAS, pursuant to the Acquisition Agreement, the Vendors have
received Exchangeable Shares of the Subsidiary which may be exchanged for shares
of the Company pursuant to the Exchangeable Share Provisions;
WHEREAS, the Shareholders have agreed as part of the Acquisition
Agreement, to enter into this Agreement with respect to the outstanding common
stock of the Company and the Exchangeable Shares of the Subsidiary owned by them
as a result of such transaction;
WHEREAS, the Company and the Shareholders believe that the success of
the Company requires the active interest and support of its major shareholders
and therefore desire to promote the best interests of the Company and their
mutual interests by agreeing to limit their ability to transfer by sale or
otherwise the shares of Common Stock of the Company and the Exchangeable Shares
of the Subsidiary owned by the Shareholders as defined below.
NOW THEREFORE, for and in consideration of the above stated premises
and the mutual covenants hereinafter set forth, and for other good and valuable
consideration, the parties hereby agree as follows:
SECTION 1. DEFINITIONS.
"Change of Control" shall mean the acquisition by any Person or Persons
of fifty percent (50%) or more of the combined voting power of the Company's
then outstanding equity securities having the right to vote at elections of
directors as a result of a merger, consolidation, recapitalization, sale of
assets, or any other combination of the above, as a result of which a majority
of the board of directors of the Company is replaced by directors who were not
nominated and approved by the board of directors.
"Common Stock" means the Common Stock, $.01 U.S. par value, of the
Company and/or the Subsidiary.
"Effective Date" means the date set out at the outset of this
Agreement.
<PAGE>
"Exchangeable Shares" means the Exchangeable Shares of the Subsidiary
owned by Shareholders.
"Lockup Shares" shall mean all shares of Exchangeable Shares and Common
Stock to which all right, title and interest are owned by the Shareholders,
jointly or individually, as of the Effective Date of this Agreement or which are
acquired by the Shareholders, or any of them, at any time during the Term of
this Agreement, including any Exchangeable Shares and Common Stock now owned by
any Shareholder and his spouse as community property or as separate property.
All references herein to such stock owned by a Shareholder includes the
community property interest of such Shareholder's spouse in such stock and all
obligations of a Shareholder under this Agreement include like obligations on
the part of the spouse. The termination of the marital relationship of any
Shareholder and his or her spouse for any reason shall not have the effect of
removing any stock of the Company otherwise subject to this Agreement from the
coverage hereof.
"Person" shall include an individual, a corporation, a partnership, a
trust or any other organization or entity.
"Sale" "sell" or "sold" shall mean and include, either directly or
indirectly, any sale, contract to sell, or other disposition of Lockup Shares,
including but not limited to a disposition by gift, pledge, or other form of
intervivos transfer, voluntary or involuntary, provided however, that such
definition shall not include the exercise by any Shareholder of options or
warrants to acquire Common Stock of the Company, other than an exchange of
Exchangeable Shares of the Subsidiary for Common Stock of the Company as
provided in the Exchange Rights Agreement or the Exchangeable Share provisions.
"Shareholder(s)" shall mean the parties named as Shareholders above,
and their respective heirs, legal representatives, administrators and
successors.
"Term" shall mean the period from the Effective Date of this Agreement
through and including the expiration of its term, as provided in Section 11.
SECTION 2. LIMITATION ON SALE OF LOCKUP SHARES. Each Shareholder,
severally and not jointly, agrees that, from and after the Effective Date and up
to and including the expiration of the Term of this Agreement, no Lockup Shares
shall be Sold by such Shareholder under any circumstances.
SECTION 3. EVENTS OF TERMINATION. This Agreement shall also terminate
upon a Change of Control of the Company. A dissolution or liquidation of the
Company shall not be deemed to be a Change of Control for purposes of this
Agreement; provided however, that a dissolution or liquidation of the Company
within one year following the sale of all or substantially all of the assets of
the Company in exchange for stock or securities shall be considered a Change of
Control of the Company.
<PAGE>
SECTION 4. TRANSFEREES BOUND. The provisions of Section 2 above shall
not apply to a transfer by Sale by a Shareholder of some or all of his Lockup
Shares to his spouse, his lineal descendants (natural or adopted), his parents,
his grandparents, or his siblings, or to an intervivos trust established on
behalf of any such persons or to a corporation which shall at all times be
controlled by the transferor. Any such transferees shall receive and hold the
Lockup Shares subject to the terms of this Agreement, and there shall be no
further transfer of such Lockup Shares, except in accordance with the terms of
this Agreement. Any transferees of Lockup Shares, regardless of the method by
which said transferees acquired said Lockup Shares and provided that the
transfer is not void under Section 2 herein, shall be subject to the terms of
this Agreement, and shall, prior to the receipt of any such Lockup Shares, agree
in writing to be bound by the terms hereof. Any purported transfer which does
not comply with such provision shall be null and void.
SECTION 5. LEGEND ON STOCK CERTIFICATE. The Company shall cause to
appear on all stock certificates representing the Lockup Shares a conspicuous
legend in such form as the Board of Directors may determine, stating that such
shares are subject to an agreement which restricts the transferability of the
shares and the termination date of the agreement, and otherwise circumscribes
the rights which may be exercised by the Shareholders thereof. The Company
shall, upon written request of the Shareholders, remove the legend after the
termination of this Agreement.
SECTION 6. SPECIFIC ENFORCEMENT. In view of the inadequacy of money
damages, if any Shareholder or other Person shall fail to comply with the
provisions of Section 2 hereof, the Company shall be entitled, to the extent
permitted by applicable law, to injunctive relief in the case of violation, or
attempted or threatened violation, by a Shareholder or other person of any of
the provisions of such Section, or to a decree compelling specific performance
by a Shareholder or other Person of any such provisions, or to any other remedy
legally allowed to them.
SECTION 7. VOID TRANSFERS. If any Lockup Shares shall be Sold otherwise
than in accordance with the terms and conditions of this Agreement, such Sale
shall be void. The Persons who would otherwise have been transferees hereunder
regarding such Lockup Shares shall have an "adverse claim" within the meaning of
such term as used within the Uniform Commercial Code of any state. In addition
to, and without prejudice to any and all other rights or remedies which may be
available to the Company and the Shareholders, the Shareholders agree that the
Company may, but shall have no obligation to, hold and refuse to transfer any
Lockup Shares, or any certificate therefor, tendered to it for transfer if the
transfer violates the provisions of this Agreement.
SECTION 8. REISSUANCE OF STOCK SHARES. The Company shall not transfer
or reissue any of its shares of stock in violation of this Agreement or without
requiring proof of compliance with this Agreement.
SECTION 9. NOTICES. All notices and communications required or
permitted to be given or made under this Agreement shall be in writing and shall
be deemed to have been duly
<PAGE>
given or made when sent by mail, postage prepaid:
If to the Company: David Sikora, President and CEO
The ForeFront Group, Inc.
1360 Post Oak Blvd. Suite 2050
Houston, Texas 77056
If to Shareholders: To the address on the record books
of the Company.
SECTION 10. BINDING FORCE; AMENDMENT; SEVERABILITY. This Agreement
shall be binding on the parties upon execution by the Company and each of the
Shareholders. This Agreement may only be amended, waived, discharged or
terminated by a written agreement of the Company and Shareholders holding at
least two-thirds of the then outstanding Lockup Shares; provided however, that
if any of the rights of a Shareholder are adversely affected by such amendment
separately from the rights of other Shareholders of the same class of Lockup
Shares, then in such instance the written consent of the Shareholder adversely
affected shall be required. The invalidity or unenforceability of any particular
provisions of this Agreement shall not affect the other provisions hereof, and
this Agreement shall be construed in all respects as if such invalid or
unenforceable provisions were omitted.
SECTION 11. TERMINATION. This Agreement shall terminate on the
expiration of one year from the aeffective date hereof, unless it is extended by
the written agreement of the parties.
SECTION 12. MISCELLANEOUS. This Agreement (i) constitutes the entire
agreement and supersedes all prior agreements and understandings, both written
and oral, among the parties with respect to the subject matter hereof, (ii) may
be executed in several counterparts, each of which shall be deemed an original,
and all of which shall constitute one and the same instrument, shall inure to
the benefit of, and be binding upon, the successors, assigns, legatees,
distributees, legal representatives and heirs of each party and is not intended
to confer upon any Person, other than the parties and their permitted successors
and assigns, any rights or remedies hereunder, and (iv) shall be governed in all
respects, including validity, interpretation and effect, by the laws of the
State of Delaware, without respect to the conflict of laws rules. The captions
in this Agreement are for convenience of reference only and shall not affect its
interpretation in any respect.
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the day and year first written above.
THE FOREFRONT GROUP, INC.
By: /s/ David Sikora
Name: David Sikora
Title: President & CEO
SHAREHOLDERS
/s/ Sunil Sethi
Sunil K. Sethi
/s/ Naveen Seth
Naveen Seth
/s/ Sukhdev Walia
Sukhdev Walia
/s/ Sunita Uppal
Sunita Uppal
/s/ J B Sethi
Jang Badhur Sethi
-2-
SUPPORT AGREEMENT
THIS SUPPORT AGREEMENT is entered into as of September 29,
1997, between the ForeFront Group, Inc., a Delaware corporation ("ParentCo"),
and LanProfessional Inc., a corporation incorporated under the laws of Canada
(the "Corporation").
RECITALS
WHEREAS, pursuant to an Acquisition Agreement dated as of
September 29, 1997, by and between ParentCo, the Corporation and the Vendors, as
defined therein, (such agreement as it may be amended or restated is hereinafter
referred to as the "Acquisition Agreement") the parties agreed that on the
closing of the transaction contemplated under the Acquisition Agreement,
ParentCo and the Corporation would execute and deliver a Support Agreement
containing the terms and conditions set forth in an Exhibit to the Acquisition
Agreement together with such other terms and conditions as may be agreed to by
the parties to the Acquisition Agreement acting reasonably.
AND WHEREAS, pursuant to the Acquisition Agreement, the
Corporation issued certain exchangeable shares (the "Exchangeable Shares")
having attached thereto certain rights, privileges, restrictions and conditions
(collectively, the "Exchangeable Share Provisions").
AND WHEREAS, the parties hereto desire to make appropriate
provision and to establish a procedure whereby ParentCo will take certain
actions and make certain payments and deliveries necessary to ensure that the
Corporation will be able to make certain payments and to deliver or cause to be
delivered ParentCo Common Shares in satisfaction of the obligations of the
Corporation under the Exchangeable Share Provisions with respect to the payment
and satisfaction of dividends, Liquidation Amounts, Retraction Prices and
Redemption Prices, all in accordance with the Exchangeable Share Provisions.
NOW, THEREFORE, in consideration of the respective covenants
and agreements provided in this agreement and for other good and valuable
consideration (the receipt and sufficiency of which are hereby acknowledged),
the parties agree as follows:
ARTICLE 1.
DEFINITIONS AND INTERPRETATION
1.1 Defined Terms. Each term denoted herein by initial capital letters and not
otherwise defined herein shall have the meaning attributed thereto in the
Exchangeable Share Provisions or in the Exchange Rights Agreement, unless the
context requires otherwise.
1.2 Interpretation Not Affected by Headings, Etc. The division of this agreement
into articles,
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sections and paragraphs and the insertion of headings are for convenience of
reference only and shall not affect the construction or interpretation of this
agreement.
1.3 Number, Gender, Etc. Words importing the singular number only shall include
the plural and vice versa. Words importing the use of any gender shall include
all genders.
1.4 Date for Any Action. If any date on which any action is required to be taken
under this agreement is not a Business Day, such action shall be required to be
taken on the next succeeding Business Day.
ARTICLE 2.
COVENANTS OF PARENTCO AND THE CORPORATION
2.1 Covenants of ParentCo Regarding Exchangeable Shares. So long as any
Exchangeable Shares are outstanding, and, subject to Section 3.2 of the
Exchangeable Share Provisions, ParentCo will:
(a) not declare or pay any dividend on ParentCo Common Shares
unless (A) the Corporation will have sufficient assets, funds
and other property available to enable the due declaration and
the due and punctual payment in accordance with applicable law
of an equivalent dividend on the Exchangeable Shares and (B)
subsection 2.1(b) shall be complied with in connection with
such dividend;
(b) cause the Corporation to declare simultaneously with the
declaration of any dividend on ParentCo Common Shares an
equivalent dividend on the Exchangeable Shares and, when such
dividend is paid on ParentCo Common Shares, cause the
Corporation to pay simultaneously therewith such equivalent
dividend on the Exchangeable Shares, in each case in
accordance with the Exchangeable Share Provisions;
(c) advise the Corporation sufficiently in advance of the
declaration by ParentCo of any dividend on ParentCo Common
Shares and take all such other actions as are necessary, in
cooperation with the Corporation, to ensure that the
respective declaration date, record date and payment date for
a dividend on the Exchangeable Shares shall be the same as the
record date, declaration date and payment date for the
corresponding dividend on ParentCo Common Shares;
(d) take all such actions and do all such things as are necessary
or desirable to enable and permit the Corporation, in
accordance with applicable law, to pay and otherwise perform
its obligations with respect to the satisfaction of the
Exchangeable Share Consideration representing the Liquidation
Amount in respect of each issued and outstanding Exchangeable
Share upon the liquidation,
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dissolution or winding-up of the Corporation or any other
distribution of the assets of the Corporation for the purpose
of winding up its affairs, including without limitation all
such actions and all such things as are necessary or desirable
to enable and permit the Corporation to cause to be delivered
ParentCo Common Shares to the holders of Exchangeable Shares
in accordance with the provisions of Article 5 of the
Exchangeable Share Provisions;
(e) take all such actions and do all such things as are
necessary or desirable to enable and permit the Corporation,
in accordance with applicable law, to pay and otherwise
perform its obligations with respect to the satisfaction of
the Exchangeable Share Consideration representing the
Retraction Price and the Redemption Price, including without
limitation all such actions and all such things as are
necessary or desirable to enable and permit the Corporation to
cause to be delivered ParentCo Common Shares to the holders of
Exchangeable Shares, upon the retraction or redemption of the
Exchangeable Shares in accordance with the provisions of
Article 6 or Article 7 of the Exchangeable Share Provisions,
as the case may be; and
(f) not prior to the fifth anniversary of the Effective Date
exercise its vote as a shareholder to initiate the voluntary
liquidation, dissolution or winding-up of the Corporation nor
take any action or omit to take any action that is designed to
result in the liquidation, dissolution or winding-up of the
Corporation.
2.2 Reservation of ParentCo Common Shares. ParentCo hereby represents, warrants
and covenants that it has irrevocably reserved for issuance and will at all
times keep available, free from pre-emptive and other rights, out of its
authorized and unissued capital shares such number of ParentCo Common Shares (or
other shares or securities into which ParentCo Common Shares may be reclassified
or changed as contemplated by section 2.6 hereof) (a) as is equal to the sum of
(i) the number of Exchangeable Shares issued and outstanding from time to time
and (ii) the number of Exchangeable Shares issuable upon the exercise of all
rights to acquire Exchangeable Shares outstanding from time to time and (b) as
are now and may hereafter be required to enable and permit the Corporation to
meet its obligations hereunder, under the Exchange Rights Agreement and under
the Exchangeable Share Provisions with respect to which ParentCo may now or
hereafter be required to issue ParentCo Common Shares.
2.3 Notification of Certain Events. In order to assist ParentCo to comply with
its obligations hereunder, the Corporation will give ParentCo notice of each of
the following events at the time set forth below:
(a) in the event of any determination by the Board of Directors of
the Corporation in accordance with the Articles of the
Corporation to institute voluntary liquidation, dissolution or
winding-up proceedings with respect to the Corporation or to
effect any other distribution of the assets of the Corporation
among its shareholders for
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the purpose of winding-up its affairs, at least 20 days prior
to the proposed effective date of such liquidation,
dissolution, winding-up or other distribution;
(b) immediately, upon the earlier of (i) receipt by the
Corporation of notice of, and (ii) the Corporation otherwise
becoming aware of instituted claim, suit, petition or other
proceedings with respect to the involuntary liquidation,
dissolution or winding-up of the Corporation or to effect any
other distribution of the assets of the Corporation among its
shareholders for the purpose of winding-up its affairs;
(c) immediately, upon receipt by the Corporation of a Retraction
Request (as defined in the Exchangeable Share Provisions);
(d) at least 20 days prior to any accelerated Automatic Redemption
Date determined by the Board of Directors of the Corporation
in accordance with the Exchangeable Share Provisions; and
(e) as soon as practicable upon the issuance by the Corporation of
any Exchangeable Shares or rights to acquire Exchangeable
Shares.
2.4 Delivery of ParentCo Common Shares. In furtherance of its obligations
hereunder, upon notice of any event which requires the Corporation to cause to
be delivered ParentCo Common Shares to any holder of Exchangeable Shares,
ParentCo shall forthwith issue and deliver the requisite ParentCo Common Shares
to or to the order of the former holder of the surrendered Exchangeable Shares,
as the Corporation shall direct. All such ParentCo Common Shares shall be duly
issued as fully paid and non-assessable and shall be free and clear of any lien,
claim, encumbrance, security interest or adverse claim or interest.
2.5 Qualification of ParentCo Common Shares. ParentCo shall, at all times
following the issue of the ParentCo Common Shares and expiration of the LockUp
Agreement (as defined in the Acquisition Agreement), use good faith to cooperate
with the Corporation to ensure that the ParentCo Common Shares shall be eligible
for resale under an available exemption from registration under United States
securities laws, including removing any legends which are no longer applicable
upon written request from the Vendors, and providing necessary legal opinions to
the transfer agent on a timely basis. Should the parties determine, either
before or after the issue of the ParentCo Common Shares and the expiration of
the LockUp Agreement, that there are no available exemptions from registration
relating to the resale of the ParentCo Common Shares, then in such instance
ParentCo on ten days written notice from any Vendor shall execute the
Registration Rights Agreement between ParentCo and the Vendors in the form
attached as Exhibit J to the Acquisition Agreement, and subject to execution by
the Vendors, prepare and file a registration statement pursuant to the terms
thereof at least 30 days prior to the expiration or earlier termination of the
LockUp Agreement.
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2.6 Equivalence. ParentCo hereby covenants and agrees to cause the Corporation
to effect the necessary amendments to the Articles of the Corporation to ensure
that the Exchangeable Shares are adjusted to fully reflect the effect of any
stock split, reverse split, stock dividend (including any dividend or
distribution of securities convertible into ParentCo Common Shares),
reorganization, recapitalization or other like change with respect to ParentCo
Common Stock occurring after the Effective Date.
2.7 Tender Offers, Etc. In the event that a tender offer, share exchange offer,
issuer bid, take-over bid or similar transaction with respect to ParentCo Common
Shares (an "Offer") is proposed by ParentCo or is proposed to ParentCo or its
shareholders and is recommended by the Board of Directors of ParentCo, or is
otherwise effected or to be effected with the consent or approval of the Board
of Directors of ParentCo, ParentCo shall, in good faith, take all such actions
and do all such things as are necessary or desirable to enable and permit
holders of Exchangeable Shares to participate in such Offer to the same extent
and on an equivalent basis as the holders of ParentCo Common Shares, without
discrimination, including, without limiting the generality of the foregoing,
ParentCo will use its good faith efforts expeditiously to (and shall, in the
case of a transaction proposed by ParentCo or where ParentCo is a participant in
the negotiation thereof) ensure that holders of Exchangeable Shares may
participate in all such Offers without being required to retract Exchangeable
Shares as against the Corporation (or, if so required, to ensure that any such
retraction shall be effective only upon, and shall be conditional upon, the
closing of the Offer and only to the extent necessary to tender or deposit to
the Offer). If, on the happening of such event, a holder is required to retract
or exchange his or her Exchangeable Shares, such requirement shall be
conditional on ParentCo releasing the holders from the LockUp Agreement, as
defined in the Acquisition Agreement, and on the holders being in the same
position with respect to the sale of ParentCo Common Shares or stock issued in
substitution therefor after the retraction or exchange of Exchangeable Shares as
all other holders of Common Stock of ParentCo or such substituted stock.
2.8 Ownership of Outstanding Shares. Without the prior approval of the
Corporation and the prior approval of the holders of the Exchangeable Shares
given in accordance with Section 10.1 of the Exchangeable Share Provisions,
ParentCo covenants and agrees in favour of the Corporation that, as long as any
outstanding Exchangeable Shares are owned by any person or entity other than
ParentCo or any of its Subsidiaries, ParentCo will be and remain the direct or
indirect beneficial owner of more than 50% of all securities of the Corporation
carrying or entitled to voting rights in any circumstances generally for the
election of directors, in each case other than the Exchangeable Shares.
Notwithstanding the foregoing sentence, ParentCo shall not be in violation of
this section 2.8 if any person or group of persons acquires ParentCo Common
Shares pursuant to any merger of ParentCo in which ParentCo was not the
surviving corporation.
2.9 Due Performance. On and after the Effective Date, ParentCo shall duly and
timely perform all of its obligations under the Acquisition Agreement and
related agreements including any obligations that may arise upon the exercise of
ParentCo's rights under the Exchangeable Share Provisions.
<PAGE>
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ARTICLE 3.
EXCHANGE PUT RIGHT
3.1 Exchange Put Right. Upon and subject to the terms and conditions contained
in the Exchangeable Share Provisions and the Exchange Rights Agreement:
(a) a holder of Exchangeable Shares shall have the right (the
"Exchange Put Right") at any time to require ParentCo to
purchase all or any part of the Exchangeable Shares of the
holder; and
(b) upon the exercise by the holder of the Exchange Put Right, the
holder shall be required to sell to ParentCo, and ParentCo
shall be required to purchase from the holder, that number of
Exchangeable Shares in respect of which the Exchange Put Right
is exercised, in consideration of the payment by ParentCo of
the Exchangeable Share Price applicable thereto and delivery
by or on behalf of ParentCo of the Exchangeable Share
Consideration representing the total applicable Exchangeable
Share Price.
ARTICLE 4.
GENERAL
4.1 Term. This agreement shall come into force and be effective as of the date
hereof and shall terminate and be of no further force and effect at such time as
no Exchangeable Shares (or securities or rights convertible into or exchangeable
for or carrying rights to acquire Exchangeable Shares) are held by any party
other than ParentCo and any of its Subsidiaries.
4.2 Changes in Capital of ParentCo and the Corporation. Notwithstanding the
provisions of section 4.4 hereof, at all times after the occurrence of any event
effected pursuant to Section 2.6 or 2.7 hereof, as a result of which either
ParentCo Common Shares or the Exchangeable Shares or both are in any way
changed, this agreement shall forthwith be amended and modified as necessary in
order that it shall apply with full force and effect, mutatis mutandis, to all
new securities into which ParentCo Common Shares or the Exchangeable Shares or
both are so changed, and the parties hereto shall execute and deliver an
agreement in writing giving effect to and evidencing such necessary amendments
and modifications.
4.3 Severability. If any provision of this agreement is held to be invalid,
illegal or unenforceable, the validity, legality or enforceability of the
remainder of this agreement shall not in any way be affected or impaired thereby
and this agreement shall be carried out as nearly as possible in accordance with
its original terms and conditions.
4.4 Amendments, Modifications, Etc. This agreement may not be amended or
modified except by an agreement in writing executed by the Corporation and
ParentCo and approved by the
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holders of the Exchangeable Shares in accordance with Section 10.1 of the
Exchangeable Share Provisions.
4.5 Ministerial Amendments. Notwithstanding the provisions of Section 4.4
hereof, the parties to this agreement may in writing, at any time and from time
to time, without the approval of the holders of the Exchangeable Shares, amend
or modify this agreement for the purposes of:
(a) adding to the covenants of either or both parties for the
protection of the holders of the Exchangeable Shares;
(b) making such amendments or modifications not inconsistent with
this agreement as may be necessary or desirable with respect
to matters or questions which, in the opinion of the board of
directors of each of the Corporation and ParentCo, it may be
expedient to make, provided that each such board of directors
shall be of the opinion that such amendments or modifications
will not be prejudicial to the interests of the holders of the
Exchangeable Shares; or
(c) making such changes or corrections which, on the advice of
counsel to the Corporation and ParentCo, are required for the
purpose of curing or correcting any ambiguity or defect or
inconsistent provision or clerical omission or mistake or
manifest error; provided that the boards of directors of each
of the Corporation and ParentCo shall be of the opinion that
such changes or corrections will not be prejudicial to the
interests of the holders of the Exchangeable Shares.
4.6 Meeting to Consider Amendments. The Corporation, at the request of ParentCo,
shall call a meeting or meetings of the holders of the Exchangeable Shares for
the purpose of considering any proposed amendment or modification requiring
approval of such shareholders. Any such meeting or meetings shall be called and
held in accordance with the by-laws of the Corporation, the Exchangeable Share
Provisions and all applicable laws.
4.7 Amendments Only in Writing. No amendment to or modification or waiver of any
of the provisions of this agreement otherwise permitted hereunder shall be
effective unless made in writing and signed by both of the parties hereto.
4.8 Enurement. This agreement shall be binding upon and enure to the benefit of
the parties hereto and the holders, from time to time, of Exchangeable Shares
and each of their respective heirs, successors and assigns.
4.9 Notices to Parties. All notices and other communications between the parties
shall be in writing and shall be deemed to have been given if delivered
personally or by confirmed telecopy to the parties at the following addresses
(or at such other address for either such party as shall be specified in like
notice):
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(a) if to ParentCo to:
c/o The ForeFront Group, Inc.
1360 Post Oak Boulevard, Suite 2050
Houston, Texas 77056
Attention: Secretary
Fax: (713) 961-4530
Tel: (713) 961-1101
(b) if to the Corporation to:
c/o The ForeFront Group, Inc.
1360 Post Oak Boulevard,
Suite 2050
Houston, Texas 77056
Attention: Secretary
Fax: (713) 961-4530
Tel: (713) 961-1101
Except as otherwise specifically provided herein, any notice or other
communication given personally shall be deemed to have been given and received
upon delivery thereof and if given by telecopy shall be deemed to have been
given and received on the date of confirmed receipt thereof, unless such day is
not a Business Day, in which case it shall be deemed to have been given and
received upon the immediately following Business Day.
4.10 Counterparts. This agreement may be executed in counterparts, each of which
shall be deemed an original, and all of which taken together shall constitute
one and the same instrument.
4.11 Jurisdiction. This agreement shall be construed and enforced in accordance
with the laws of the Province of Ontario and the laws of Canada applicable
therein.
<PAGE>
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IN WITNESS WHEREOF, ParentCo and the Corporation have caused this
agreement to be signed by their respective officers thereunder duly authorized,
all as of the date first written above.
THE FOREFRONT GROUP, INC.
/S/ David Sikora
By: David Sikora
LANPROFESSIONAL INC.
/s/ David Sikora
By: David Sikora
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EXCHANGE RIGHTS AGREEMENT
THIS EXCHANGE RIGHTS AGREEMENT is entered into as of September
29, 1997, by and between The ForeFront Group, Inc., a Delaware corporation
("ParentCo"), LanProfessional Inc., a corporation incorporated under the laws of
Canada (the "Corporation"), and Sunil K. Sethi, Naveen Seth, Sukhdev Walia,
Sunita Uppal and Jang Bhadhur Sethi (the "Vendors").
WHEREAS, pursuant to an Acquisition Agreement dated as of
September 29, 1997, by and between ParentCo, the Corporation and the Vendors
(hereinafter referred to as the "Acquisition Agreement") the parties agreed that
on the closing of the transaction contemplated under the Acquisition Agreement,
ParentCo, the Corporation and the Vendors would execute and deliver an Exchange
Rights Agreement containing the terms and conditions set forth in an Exhibit to
the Acquisition Agreement together with such other terms and conditions as may
be agreed to by the parties to the Acquisition Agreement acting reasonably.
WHEREAS, pursuant to the Acquisition Agreement, the
Corporation issued to the Vendors certain exchangeable shares (the "Exchangeable
Shares") having attached thereto certain rights, privileges, restrictions and
conditions (collectively, the "Exchangeable Share Provisions").
WHEREAS, ParentCo is to grant to and in favour of the Vendors
the right, in the circumstances set forth herein, to require ParentCo to
purchase from each such Vendor all or any part of the Exchangeable Shares held
by the Vendor.
WHEREAS, the parties desire to make appropriate provision and
to establish a procedure whereby the rights to require ParentCo to purchase
Exchangeable Shares from the Vendors (other than ParentCo and its Subsidiaries)
shall be exercisable by the Vendors from time to time.
NOW, THEREFORE, in consideration of the respective covenants
and agreements provided in this agreement and for other good and valuable
consideration (the receipt and sufficiency of which are hereby acknowledged),
the parties agree as follows:
ARTICLE I
DEFINITIONS AND INTERPRETATION
1.1 Definitions. In this agreement, the following terms shall have the
following meanings:
"Automatic Exchange Rights" means the benefit of the obligation of
ParentCo to effect the automatic exchange of ParentCo Common Shares for
Exchangeable Shares pursuant to Section 3.11 hereof;
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"Board of Directors" means the Board of Directors of the Corporation;
"Business Day" has the meaning provided in the Exchangeable Share
Provisions;
"Exchange Put Right" has the meaning provided in the Exchangeable Share
Provisions;
"Exchange Right" has the meaning provided in Article III hereof;
"Exchange Rights" means the Exchange Right, the Exchange Put Right and
the Automatic Exchange Rights;
"Exchangeable Share Consideration" has the meaning provided in the
Exchangeable Share Provisions;
"Exchangeable Share Price" has the meaning provided in the Exchangeable
Share Provisions;
"Exchangeable Share Provisions" has the meaning provided in the
recitals hereto;
"Exchangeable Shares" has the meaning provided in the recitals hereto;
"Insolvency Event" means the institution by the Corporation of any
proceeding to be adjudicated a bankrupt or insolvent or to be dissolved or
wound-up, or the consent of the Corporation to the institution of bankruptcy,
insolvency, dissolution or winding-up proceedings against it, or the filing of a
petition, answer or consent seeking dissolution or winding-up under any
bankruptcy, insolvency or analogous laws, including without limitation the
Companies Creditors' Arrangement Act (Canada) and the Bankruptcy and Insolvency
Act (Canada), and the failure by the Corporation to contest in good faith any
such proceedings commenced in respect of the Corporation within 30 days of
becoming aware thereof, or the consent by the Corporation to the filing of any
such petition or to the appointment of a receiver, or the making by the
Corporation of a general assignment for the benefit of creditors, or the
admission in writing by the Corporation of its inability to pay its debts
generally as they become due, or the Corporation's not being permitted, pursuant
to liquidity or solvency requirements of applicable law, to redeem any Retracted
Shares pursuant to Section 6.6 of the Exchangeable Share Provisions;
"Liquidation Call Right" has the meaning provided in the Exchangeable
Share Provisions;
"Liquidation Event" has the meaning provided in subsection 3.11(a)
hereof;
"Liquidation Event Effective Time" has the meaning provided in
subsection 3.11(b) hereof;
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"Officer's Certificate" means, with respect to ParentCo or the
Corporation, as the case may be, a certificate signed by any one of the Chairman
of the Board, the Vice-Chairman of the Board (if there be one), the President or
any Vice-President of ParentCo or the Corporation, as the case may be;
"ParentCo Common Share" has the meaning provided in the Exchangeable
Share Provisions;
"ParentCo Successor" has the meaning provided in subsection 4.1(a)
hereof;
"Person" includes an individual, body corporate, partnership, company,
unincorporated syndicate or organization, trust, trustee, executor,
administrator and other legal representative;
"Redemption Call Right" has the meaning provided in the Exchangeable
Share Provisions;
"Retracted Shares" has the meaning provided in Section 3.6 hereof;
"Retraction Call Right" has the meaning provided in the Exchangeable
Share Provisions;
"Subsidiary" has the meaning provided in the Exchangeable Share
Provisions; and
"Support Agreement" means that certain support agreement made as of the
date hereof by and between ParentCo and the Corporation.
1.2 Integration Not Affected by Headings, Etc. The division of this
agreement into articles, sections and paragraphs and the insertion of headings
are for convenience of reference only and shall not affect the construction or
interpretation of this agreement.
1.3 Number, Gender, Etc. Words importing the singular number only shall
include the plural and vice versa. Words importing the use of any gender shall
include all genders.
1.4 Date for Any Action. If any date on which any action is required to
be taken under this agreement is not a Business Day, such action shall be
required to be taken on the next succeeding Business Day.
ARTICLE II
PURPOSE OF AGREEMENT
2.1 The purpose of this agreement is to provide for the grant by
ParentCo to the Vendors of the Exchange Put Right, the Exchange Right and the
Automatic Exchange Rights and the grant by the Vendors to ParentCo of the
Redemption Call Right and the Liquidation Call Right.
<PAGE>
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ARTICLE III
EXCHANGE RIGHT AND AUTOMATIC EXCHANGE
3.1 Grant and Ownership of the Exchange Right. ParentCo hereby grants
to the Vendors:
(a) the Exchange Put Right,
(b) the right (the "Exchange Right"), upon the occurrence and during
the continuance of an Insolvency Event, to require ParentCo to purchase from
each or any Vendor all or any part of the Exchangeable Shares held by the
Vendors, and
(c) the Automatic Exchange Rights,
all in accordance with the provisions of this agreement and the Exchangeable
Share Provisions, as the case may be. ParentCo hereby acknowledges receipt of
$10 and the grant to ParentCo of the Redemption Call Right, Liquidation Call
Right and the Retraction Call Right from each of the Vendors in consideration
for the grant of the Exchange Put Right, the Exchange Right and the Automatic
Exchange Rights by ParentCo to the Vendors.
3.2 Legended Share Certificates. The Corporation will cause each
certificate representing Exchangeable Shares to bear an appropriate legend
notifying the Vendors of:
(a) their right to instruct ParentCo with respect to the exercise of
the Exchange Put Right and the Exchange Right in respect of the Exchangeable
Shares held by a Vendor; and
(b) the Automatic Exchange Rights.
3.3 Purchase Price. The purchase price payable by ParentCo for each
Exchangeable Share to be purchased by ParentCo (a) under the Exchange Put Right
shall be the amount determined under the Exchangeable Share Provisions, and (b)
under the Exchange Right shall be an amount equal to the Exchangeable Share
Price on the last Business Day prior to the day of closing of the purchase and
sale of such Exchangeable Share under the Exchange Right. In connection with
each exercise of the Exchange Right or the Exchange Put Right, ParentCo will
provide to the Vendors an Officer's Certificate setting forth the calculation of
the applicable Exchangeable Share Price for each Exchangeable Share. The
applicable Exchangeable Share Price for each such Exchangeable Share so
purchased may be satisfied only by ParentCo's issuing and delivering or causing
to be delivered to the relevant Vendor, the applicable Exchangeable Share
Consideration representing the total applicable Exchangeable Share Price.
3.4 Exercise Instructions. Subject to the terms and conditions herein
set forth, a Vendor shall be entitled, upon the occurrence and during the
continuance of an Insolvency Event,
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to exercise the Exchange Right with respect to all or any part of the
Exchangeable Shares registered in the name of such Vendor on the books of the
Corporation. To cause the exercise of the Exchange Right, the Vendor shall
deliver to ParentCo, in person or by certified or registered mail, or at such
other place as ParentCo may from time to time designate by written notice to the
Vendors, the certificates representing the Exchangeable Shares which such Vendor
desires ParentCo to purchase, duly endorsed in blank, and accompanied by such
other documents and instruments as may be required to effect a transfer of
Exchangeable Shares under the articles and the by-laws of the Corporation and
such additional documents and instruments as ParentCo may reasonably require,
together with:
(a) a duly signed notice of exercise of the Exchange Right
stating:
(i) that the Vendor thereby exercises the Exchange Right so as
to require ParentCo to purchase from the Vendor the number of Exchangeable
Shares specified therein,
(ii) that such Vendor has good title to and owns all such
Exchangeable Shares to be acquired by ParentCo free and clear of all liens,
claims, encumbrances, security interests and adverse claims or interests; and
(b) payment (or evidence satisfactory to the Corporation and ParentCo
of payment) of the taxes (if any) payable as contemplated by Section 3.7 of this
agreement.
If only a part of the Exchangeable Shares represented by any
certificate or certificates delivered to ParentCo are to be purchased by
ParentCo under the Exchange Right, a new certificate for the balance of such
Exchangeable Shares shall be issued to the Vendor at the expense of the
Corporation.
3.5 Delivery of Exchangeable Share Consideration; Effect of Exercise.
Promptly after receipt by ParentCo of the certificates representing the
Exchangeable Shares which the Vendor desires ParentCo to purchase under the
Exchange Put Right or the Exchange Right (together with such documents and
instruments of transfer and a duly completed form of notice of exercise of the
Exchange Put Right or the Exchange Right), duly endorsed for transfer to
ParentCo, ParentCo shall advise the Corporation of its receipt of the same,
which notice to ParentCo and the Corporation shall constitute exercise of the
Exchange Put Right or the Exchange Right by the Vendor of such Exchangeable
Shares, and ParentCo shall immediately thereafter deliver or cause to be
delivered to the Vendor of such Exchangeable Shares (or to such other persons,
if any, properly designated by such Vendor), the Exchangeable Share
Consideration deliverable in connection with the exercise of the Exchange Put
Right or the Exchange Right; provided, however, that no such delivery shall be
made unless and until the Vendor requesting the same shall have paid (or
provided evidence satisfactory to the Corporation and ParentCo of the payment
of) the taxes (if any) payable as contemplated by Section 3.7 of this agreement.
Immediately upon the giving of notice by the Vendor to ParentCo and the
Corporation of the exercise of the Exchange Put Right or the Exchange Right, as
provided in this Section 3.5, the closing of the
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transaction of purchase and sale contemplated by the Exchange Put Right or the
Exchange Right shall be deemed to have occurred, and the Vendor of such
Exchangeable Shares shall be deemed to have transferred to ParentCo all of its
right, title and interest in and to such Exchangeable Shares and the related
interest in the Exchange Rights, shall cease to be a holder of such Exchangeable
Shares and shall not be entitled to exercise any of the rights of a holder in
respect thereof, other than the right to receive his proportionate part of the
total purchase price therefor, unless such Exchangeable Share Consideration is
not delivered by ParentCo to such Vendor (or to such other persons, if any,
properly designated by such Vendor), within seven Business Days of the date of
the giving of such notice, in which case the rights of the Vendor shall remain
unaffected until such Exchangeable Share Consideration is delivered by ParentCo
and any check included therein is paid. Concurrently with such Vendor ceasing to
be a holder of Exchangeable Shares, the Vendor shall be considered and deemed
for all purposes to be the holder of the ParentCo Common Shares delivered to it
pursuant to the Exchange Put Right or the Exchange Right.
3.6 Exercise of Exchange Right Subsequent to Retraction. In the event
that a Vendor has exercised its right under Article 6 of the Exchangeable Share
Provisions to require the Corporation to redeem any or all of the Exchangeable
Shares held by the Vendor (the "Retracted Shares") and is notified by the
Corporation pursuant to Section 6.6 of the Exchangeable Share Provisions that
the Corporation will not be permitted as a result of liquidity or solvency
requirements of applicable law to redeem all such Retracted Shares, subject to
receipt by the Vendor of written notice to that effect from the Corporation and
provided that ParentCo shall not have exercised the Retraction Call Right with
respect to the Retracted Shares and that the Vendor has not revoked the
retraction request delivered by the Vendor to the Corporation pursuant to
Section 6.1 of the Exchangeable Share Provisions, the retraction request will
constitute and will be deemed to constitute notice from the Vendor to exercise
the Exchange Right with respect to those Retracted Shares which the Corporation
is unable to redeem. In any such event, the Corporation hereby agrees with the
Vendor immediately to notify the Vendor of such prohibition against the
Corporation's redeeming all of the Retracted Shares and immediately to forward
or cause to be forwarded to ParentCo all relevant materials delivered by the
Vendor to the Corporation (including without limitation a copy of the retraction
request delivered pursuant to Section 6.1 of the Exchangeable Share Provisions)
in connection with such proposed redemption of the Retracted Shares, ParentCo
will purchase such shares in accordance with the provisions of this Article III.
3.7 Stamp or Other Transfer Taxes. Upon any sale of Exchangeable Shares
to ParentCo pursuant to the Exchange Put Right, the Exchange Right or the
Automatic Exchange Rights, the share certificate or certificates representing
ParentCo Common Shares to be delivered in connection with the payment of the
total purchase price therefor shall be issued in the name of the Vendor of the
Exchangeable Shares so sold without charge to the Vendor of the Exchangeable
Shares so sold, provided, however, that such Vendor:
<PAGE>
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(a) shall pay (and neither ParentCo nor the Corporation shall be
required to pay) any documentary, stamp, transfer or other similar taxes that
may be payable in respect of any transfer involved in the issuance or delivery
of such shares to a person other than such Vendor; or
(b) shall have established to the satisfaction of ParentCo and the
Corporation that such taxes, if any, have been paid.
3.8 Notice of Insolvency Event. Immediately upon the occurrence of an
Insolvency Event or any event which with the giving of notice or the passage of
time or both would be an Insolvency Event, the Corporation and ParentCo shall
give written notice thereof to the Vendors which notice shall contain a brief
statement of the right of the Vendors with respect to the Exchange Right.
3.9 Qualification of ParentCo Common Shares. ParentCo shall, at all
times following the issue of the ParentCo Common Shares and the expiration of
the LockUp Agreement as defined in the Acquisition Agreement, use good faith to
cooperate with the Vendors to ensure that the ParentCo Common Shares shall be
eligible for resale under an available exemption from registration under United
States securities laws, including removing any legends which are no longer
applicable upon written request from the Vendors, and providing necessary legal
opinions to the transfer agent on a timely basis. Should the parties determine,
either before or after the issue of the ParentCo Common Shares and the
expiration of the LockUp Agreement, that there are no available exemptions from
registration relating to the resale of the ParentCo Common Shares, then in such
instance ParentCo, on ten days written notice from any Vendor, shall execute the
Registration Rights Agreement in the form attached as Exhibit J to the
Acquisition Agreement, and subject to execution by the Vendors, prepare and file
a registration statement pursuant to the terms thereof at least 30 days prior to
the expiration or earlier termination of the LockUp Agreement.
3.10 Reservation of ParentCo Common Shares. ParentCo hereby represents,
warrants and covenants that it has irrevocably reserved for issuance and will at
all times keep available, free from pre-emptive and other rights, out of its
authorized and unissued capital shares such number of ParentCo Common Shares:
(a) as is equal to the sum of
(i) the number of Exchangeable Shares
issued and outstanding from time to
time and
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(ii) the number of Exchangeable Shares
issuable upon the exercise of all
rights to acquire Exchangeable
Shares outstanding from time to time
and
(b) as are now and may hereafter be required to enable and permit the
Corporation to meet its obligations hereunder, under the incorporating documents
of ParentCo, under the Support Agreement and under the Exchangeable Share
Provisions.
3.11 Automatic Exchange on Liquidation of ParentCo.
(a) ParentCo will give each Vendor written notice of each of the
following events (each, a "Liquidation Event") at the time set forth below:
(i) in the event of any determination by the board of
directors of the ParentCo to institute voluntary liquidation, dissolution or
winding-up proceedings with respect to ParentCo or to effect any other
distribution of assets of ParentCo among its shareholders for the purpose of
winding up its affairs, at least 20 days prior to the proposed effective date of
such liquidation, dissolution, winding-up or other distribution; and
(ii) immediately, upon the earlier of
(A) receipt by ParentCo of notice of; and
(B) ParentCo's otherwise becoming aware of
any instituted claim, suit, petition or other proceedings with respect to the
involuntary liquidation, dissolution or winding-up of ParentCo or to effect any
other distribution of assets of ParentCo among its shareholders for the purpose
of winding up its affairs. Such notice shall include a brief description of the
automatic exchange of Exchangeable Shares for ParentCo Common Shares provided
for in Section 3.11(b) below.
(b) In order that the Vendors will be able to participate on a pro rata
basis with the Vendors of ParentCo Common Shares in the distribution of assets
of ParentCo in connection with a Liquidation Event, immediately prior to the
effective time (the "Liquidation Event Effective Time") of a Liquidation Event,
all of the then outstanding Exchangeable Shares shall be automatically exchanged
for ParentCo Common Shares. To effect such automatic exchange, ParentCo shall be
deemed to have purchased each Exchangeable Share outstanding immediately prior
to the Liquidation Event Effective Time and held by Vendors, and each Vendor
shall be deemed to have sold the Exchangeable Shares held by it at such time,
for a purchase price per share equal to the Exchangeable Share Price applicable
at such time. In connection with such automatic exchange, ParentCo will provide
to each Vendor an Officer's Certificate setting forth the calculation of the
purchase price for each Exchangeable Share.
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(c) The closing of the transaction of purchase and sale contemplated by
Section 3.11(b) above shall be deemed to have occurred immediately prior to the
Liquidation Event Effective Time, and each Vendor of Exchangeable Shares shall
be deemed to have transferred to ParentCo all of the Vendor's right, title and
interest in and to such Exchangeable Shares and the related interest in the
Exchange Rights and shall cease to be a Vendor of such Exchangeable Shares, and
ParentCo shall deliver to the Vendor the Exchangeable Share Consideration
deliverable upon the automatic exchange of Exchangeable Shares. Concurrently
with such Vendor's ceasing to be a Vendor of Exchangeable Shares, the Vendor
shall be considered and deemed for all purposes to be the holder of the ParentCo
Common Shares issued to it pursuant to the automatic exchange of Exchangeable
Shares for ParentCo Common Shares, and the certificates held by the Vendor
previously representing the Exchangeable Shares exchanged by the Vendor with
ParentCo pursuant to such automatic exchange shall thereafter be deemed to
represent the ParentCo Common Shares issued to the Vendor by ParentCo pursuant
to such automatic exchange. Upon the request of a Vendor and the surrender by
the Vendor of Exchangeable Share certificates deemed to represent ParentCo
Common Shares, duly endorsed in blank and accompanied by such instruments of
transfer as ParentCo may reasonably require, ParentCo shall deliver or cause to
be delivered to the Vendor certificates representing the ParentCo Common Shares
of which the Vendor is the holder.
(d) ParentCo covenants that it will supply its transfer agent with duly
executed share certificates for the purpose of completing the exercise from time
to time of the Exchange Put Right, the Exchange Right and the Automatic Exchange
Rights, in each case pursuant to Article III hereof.
ARTICLE IV
CERTAIN RIGHTS OF PARENTCO TO ACQUIRE
EXCHANGEABLE SHARES
4.1 ParentCo Liquidation Call Right.
(a) ParentCo shall have the overriding right (the "Liquidation Call
Right"), in the event of and notwithstanding the proposed liquidation,
dissolution or winding-up of the Corporation as referred to in Article 5 of the
Exchangeable Share Provisions, to purchase from all but not less than all, of
the holders of Exchangeable Shares on the Liquidation Date (other than ParentCo
or any Subsidiary thereof) all but not less than all of the Exchangeable Shares
held by each such holder on payment by ParentCo to each holder of the
Exchangeable Share Price applicable on the last Business Day prior to the
Liquidation Date (the "Liquidation Call Purchase Price"), which as provided in
this Section 4.1, shall be fully paid and satisfied by the delivery by or on
behalf of ParentCo of the Exchangeable Share Consideration representing the
Liquidation Call Purchase Price. In the event of the exercise of the Liquidation
Call Right by ParentCo, each holder shall be obligated to sell all the
Exchangeable Shares held by the holder to ParentCo on the Liquidation
<PAGE>
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Date on payment by ParentCo to the holder of the Exchangeable Share
Consideration representing the Liquidation Call Purchase Price for each such
share.
(b) To exercise the Liquidation Call Right, ParentCo must notify the
Corporation and the holders of Exchangeable Shares of ParentCo's intention to
exercise such right at least 20 days before the Liquidation Date in the case of
a voluntary liquidation, dissolution or winding-up of the Corporation and at
least five Business Days before the Liquidation Date in the case of an
involuntary liquidation, dissolution or winding-up of the Corporation. ParentCo
will notify the holders of Exchangeable Shares as to whether or not ParentCo has
exercised the Liquidation Call Right forthwith after the expiry of the date by
which the same may be exercised by ParentCo. If ParentCo exercises the
Liquidation Call Right, on the Liquidation Date, ParentCo will purchase and the
holders will sell all of the Exchangeable Shares then outstanding for the
Exchangeable Share Consideration representing the total Liquidation Call
Purchase Price.
(c) For the purposes of completing the purchase of the Exchangeable
Shares pursuant to the Liquidation Call Right, ParentCo shall deposit with the
Corporation, on or before the Liquidation Date, the Exchangeable Share
Consideration representing the total Liquidation Call Purchase Price. Provided
that such Exchangeable Share Consideration has been so deposited with the
Corporation, on and after the Liquidation Date the right of each holder of
Exchangeable Shares will be limited to receiving such holder's proportionate
share of the Exchangeable Share Consideration representing the total Liquidation
Call Purchase Price payable by ParentCo without interest upon presentation and
surrender by the holder of certificates representing the Exchangeable Shares
held by such holder and the holder shall on and after the Liquidation Date be
considered and deemed for all purposes to be the holder of the ParentCo Common
Share delivered to it. Upon surrender to the Corporation of a certificate or
certificates representing the Exchangeable Shares, together with such other
documents and instruments as may be required to effect a transfer of
Exchangeable Shares under the articles and the by-laws of the Corporation and
such additional documents and instruments as the Corporation may reasonably
require, the holder of such surrendered certificate or certificates shall be
entitled to receive in exchange therefor, and the Corporation on behalf of
ParentCo shall deliver to such holder, the Exchangeable Share Consideration to
which the holder is entitled. If ParentCo does not exercise the Liquidation Call
Right in the manner described above, on the Liquidation Date the holders of the
Exchangeable Shares will be entitled to receive in exchange therefor the
Exchangeable Share Consideration representing the Liquidation Amount otherwise
payable by the Corporation in connection with the liquidation, dissolution or
winding-up of the Corporation pursuant to Article 5 of the Exchangeable Share
Provisions.
4.2 ParentCo Redemption Call Right.
(a) ParentCo shall have the overriding right (the "Redemption Call
Right"), notwithstanding the proposed redemption of the Exchangeable Shares by
the Corporation pursuant to Article 7 of the Exchangeable Share Provisions, to
purchase from all, but not less than all, of the holders of Exchangeable Shares
on the Automatic Redemption Date (other than ParentCo or
<PAGE>
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any Subsidiary thereof) all but not less than all of the Exchangeable Shares
held by each such holder on payment by ParentCo to the holder of the
Exchangeable Share Price applicable on the last Business Day prior to the
Automatic Redemption Date (the "Redemption Call Purchase Price"), which as
provided in this Section 4.2, shall be fully paid and satisfied by the delivery
by or on behalf of ParentCo of the Exchangeable Share Consideration representing
the Redemption Call Purchase Price. In the event of the exercise of the
Redemption Call Right by ParentCo, each holder shall be obligated to sell all
the Exchangeable Shares held by the holder to ParentCo on the Automatic
Redemption Date on payment by ParentCo to the holder of the Exchangeable Share
Consideration representing the Redemption Call Purchase Price for each such
share.
(b) Unless ParentCo delivers written notice to the Vendors and the
Corporation no less than 20 days before the Automatic Redemption Date of its
intention not to exercise the Redemption Call Right, ParentCo will be deemed to
have exercised the Redemption Call Right on the date by which the same may be
exercised by ParentCo. If ParentCo exercises the Redemption Call Right, on the
Automatic Redemption Date, ParentCo will purchase and the holders will sell all
of the Exchangeable Shares then outstanding for the Exchangeable Share
Consideration representing the total Redemption Call Purchase Price.
(c) For the purposes of completing the purchase of the Exchangeable
Shares pursuant to the Redemption Call Right, ParentCo shall deposit with the
Corporation, on or before the Automatic Redemption Date, the Exchangeable Share
Consideration representing the total Redemption Call Purchase Price. Provided
that such Exchangeable Share Consideration has been so deposited with the
Corporation, on and after the Automatic Redemption Date the rights of each
holder of Exchangeable Shares will be limited to receiving such holder's
proportionate share of the Exchangeable Share Consideration representing the
total Redemption Call Purchase Price payable by ParentCo upon presentation and
surrender by the holder of certificates representing the Exchangeable Shares
held by such holder and the holder shall on and after the Automatic Redemption
Date be considered and deemed for all purposes to be the holder of the
Exchangeable Shares delivered to such holder. Upon surrender to the Corporation
of a certificate or certificates representing Exchangeable Shares, together with
such other documents and instruments as may be required to effect a transfer of
Exchangeable Shares under the articles and the by-laws of the Corporation and
such additional documents and instruments as the Corporation may reasonably
require, the holder of such surrendered certificate or certificates shall be
entitled to receive in exchange therefor, and the Corporation shall deliver to
such holder, the Exchangeable Share Consideration to which the holder is
entitled. If ParentCo notifies the Vendors and the Corporation in the manner
described above of its intention not to exercise the Redemption Call Right on
the Automatic Redemption Date the holders of the Exchangeable Shares will be
entitled to receive in exchange therefor the Exchangeable Share Consideration
representing the Redemption Price otherwise payable by the Corporation in
connection with the redemption of the Exchangeable Shares pursuant to Article 7
of the Exchangeable Share Provisions.
<PAGE>
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ARTICLE V
PARENTCO SUCCESSORS
5.1 Certain Requirements in Respect of Combination, Etc. If ParentCo
shall enter into any transaction (whether by way of reconstruction,
reorganization, consolidation, merger, transfer, sale, lease or otherwise)
whereby all or substantially all of its undertaking, property and assets would
become the property of any other Person or, in the case of a merger, of the
continuing corporation resulting therefrom, it shall ensure that:
(a) such other Person or continuing corporation (the "ParentCo
Successor"), by operation of law, becomes, without more, bound by the terms and
provisions of this agreement or, if not so bound, executes, prior to or
contemporaneously with the consummation of such transaction an agreement
supplemental hereto and such other instruments (if any) are necessary or
advisable to evidence the assumption by the ParentCo Successor of liability for
all moneys payable and property deliverable hereunder, the covenant of such
ParentCo Successor to pay and deliver or cause to be delivered the same and its
agreement to observe and perform all the covenants and obligations of ParentCo
under this agreement; and
(b) such transaction shall be upon such terms which substantially
preserve and do not impair in any material respect any of the rights, duties,
powers and authorities of the Vendors hereunder.
5.2 Vesting of Powers in Successor. In the event that Section 5.1
applies, the ParentCo Successor and the Corporation shall execute and deliver
the supplemental agreement provided for in Article VI hereof, and thereupon the
ParentCo Successor shall possess and from time to time may exercise each and
every right and power of ParentCo under this agreement in the name of ParentCo
or otherwise and any act or proceeding by any provision of this agreement
required to be done or performed by the board of directors of ParentCo or any
officers of ParentCo may be done and performed with like force and effect by the
directors or officers of such ParentCo Successor.
5.3 Wholly-owned Subsidiaries. Nothing herein shall be construed as
preventing the amalgamation or merger of any wholly-owned subsidiary of ParentCo
with or into ParentCo or the winding-up, liquidation or dissolution of any
wholly-owned subsidiary of ParentCo provided that all of the assets of such
subsidiary are transferred to ParentCo or another wholly-owned subsidiary of
ParentCo, and any such transactions are expressly permitted by this Article V.
<PAGE>
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ARTICLE VI
AMENDMENTS AND SUPPLEMENTAL AGREEMENTS
6.1 Amendments, Modifications, Etc. Subject to Section 6.2, this
agreement may not be amended, modified or waived except by an agreement in
writing executed by the Corporation and ParentCo and approved by the Vendors in
accordance with Section 10.1 of the Exchangeable Share Provisions. No amendment
to or modification or waiver of any of the provisions of this agreement
otherwise permitted hereunder shall be effective unless made in writing and
signed by all of the parties hereto.
6.2 Changes in Capital of ParentCo and the Corporation. At all times
after the occurrence of any event effected pursuant to Section 2.6 or Section
2.7 of the Support Agreement, as a result of which either ParentCo Common Shares
or the Exchangeable Shares or both are in any way changed, this agreement shall
forthwith be amended and modified as necessary in order that it shall apply with
full force and effect, mutatis mutandis, to all new securities into which
ParentCo Common Shares or the Exchangeable Shares or both are so changed, and
the parties hereto shall execute and deliver a supplemental agreement giving
effect to and evidencing such necessary amendments and modifications.
6.3 Execution of Supplemental Agreements. From time to time the
Corporation (when authorized by a resolution of its board of directors), and
ParentCo (when authorized by a resolution of its board of directors) may,
subject to the provisions of these presents, and they shall, when so directed by
these presents, execute and deliver by their proper officers, agreements or
other instruments supplemental hereto, which thereafter shall form part hereof
to evidence the succession of any ParentCo Successors to ParentCo and the
covenants of and obligations assumed by each such ParentCo Successor in
accordance with the provisions of Article V.
ARTICLE VII
TERM
7.1 Term. This agreement shall continue until there are no Exchangeable
Shares outstanding held by a Vendor.
<PAGE>
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ARTICLE VIII
GENERAL
8.1 Severability. If any provision of this agreement is held to be
invalid, illegal or unenforceable, the validity, legality or enforceability of
the remainder of this agreement shall not in any way be affected or impaired
thereby, and the agreement shall be carried out as nearly as possible in
accordance with its original terms and conditions.
8.2 Enurement. This agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns.
8.3 Notices to Parties. All notices and other communications between
the parties hereunder shall be in writing and shall be deemed to have been given
if delivered personally or by confirmed telecopy to the parties at the following
addresses (or at such other address for such party as shall be specified in like
notice):
(a) if to ParentCo to:
The ForeFront Group, Inc.
1360 Post Oak Boulevard
Suite 2050
Houston, Texas
77056
Attention: Secretary
Fax: (713) 961-4530
Tel: (713) 961-1101
(b) if to the Corporation to:
c/o The ForeFront Group, Inc.
1360 Post Oak Boulevard
Suite 2050
Houston, Texas
77056
Attention: Secretary
Fax: (713) 961-4530
Tel: (713) 961-1101
<PAGE>
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(c) if to the Vendors at their registered addresses on the share
registers of the Corporation.
Except as otherwise specifically provided herein, any notice
or other communication given personally shall be deemed to have been given and
received upon delivery thereof, and if given by telecopy shall be deemed to have
been given and received on the date of receipt thereof unless such day is not a
Business Day in which case it shall be deemed to have been given and received
upon the immediately following Business Day.
8.4 Notice to Vendors. Except as otherwise specicially provided herein,
any and all notices to be given and any documents to be sent to any Vendors may
be given or sent to the address of such Vendor shown on the register of Vendors
of Exchangeable Shares in any manner permitted by the Exchangeable Share
Provisions and shall be deemed to be received (if given or sent in such manner)
at the time specified in such Exchangeable Share Provisions, the provisions of
which Exchangeable Share Provisions shall apply mutatis mutandis to notices or
documents as aforesaid sent to such Vendors.
8.5 Risk of Payments by Post. Whenever payments are to be made or
documents are to be sent to any Vendor, by the Corporation or by ParentCo or by
such Vendor to ParentCo or the Corporation, the making of such payment or
sending of such document sent through the post shall be at the risk of the
Corporation or ParentCo, in the case of payments made or documents sent by the
Corporation or ParentCo, and the Vendor, in the case of payments made or
documents sent by the Vendor.
7.6 Counterparts. This agreement may be executed in counterparts, each
of which shall be deemed an original, but all of which taken together shall
constitute one and the same instrument.
8.7 Jurisdiction. This agreement shall be construed and enforced in
accordance with the laws of the Province of Ontario and the laws of Canada
applicable therein.
<PAGE>
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IN WITNESS WHEREOF, the parties hereby have caused this
agreement to be duly executed as of the date first above written.
THE FOREFRONT GROUP, INC.
By: /s/ David Sikora
LANPROFESSIONAL INC.
By: /s/ David Sikora
/s/ Sunil Sethi
Sunil K. Sethi
/s/ Naveen Seth
Naveen Seth
/s/ Sukhdeve Walia
Sukhdev Walia
/s/ Sunita Uppal
Sunita Uppal
/s/ JB Sethi
Jang Bhadhur Sethi
LANPROFESSIONAL, 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 LanProfessional, Inc., a Canadian corporation ("Company"),
and Sunil K. Sethi, an individual residing in Ottawa, Canada (the "Employee").
W I T N E S S E T H:
WHEREAS, Employee is presently employed by LanProfessional,
Inc. as President;
WHEREAS, concurrent with the execution of this Agreement, The
ForeFront Group, Inc., a Delaware corporation ("ForeFront") has acquired all of
the outstanding shares of LanProfessional, Inc. (the "Transaction") pursuant to
that certain Acquisition Agreement dated the date hereof (the "Acquisition
Agreement");
WHEREAS, pursuant to the Acquisition Agreement, the Company
has agreed to employ the Employee as Chief Technology Officer of the Company,
effective upon closing of the Transaction;
WHEREAS, 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 Company do hereby
agree as follows:
1. EMPLOYMENT, DUTIES and TERM. Employee hereby agrees to be
employed by Company as Chief Technology Officer. Employee shall report to Ernest
Rapp, Chief Financial Officer of Company, and shall be responsible for directing
ForeFront's product development efforts relating to the Computer Based Training
market, as more fully described on Exhibit A hereto, in addition to other
functions that may be required and agreed upon from time to time. While employed
by Company, Employee agrees to devote Employee's full productive efforts to the
business of Company. Employee may have no other sources of active employment
while employed by Company. Employee understands and agrees that this Agreement
and Employee's status as an employee of Company creates a fiduciary duty which
the Employee owes to Company, which duty the Employee promises to fulfill.
This Agreement shall be for an initial term ("Initial Term")
of two years from the date hereof. Notwithstanding the above, Employee's
employment may be terminated by Company 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 Company; (iii) engages in
willful misconduct, gross neglect
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<PAGE>
of Employee's duties, or an activity which constitutes a material conflict of
interest with Employee's job; (iv) is reasonably determined by Company to be
fully disabled and unable to perform Employee's duties; (v) dies; or (vi) has
materially misrepresented Employee's skills, past employment, education, or any
other matter discussed between Company and Employee prior to commencement of
employment hereunder, including without limitation, information supplied to
Company by the Employee in connection with the Transaction. In addition,
Employee may terminate, the Agreement at any time prior to its expiration or
other termination upon 30 days prior written notice to the Company. In such
cases, Employee will receive only Employee's compensation to date of
termination.
2. COMPENSATION.
2.1 Salary. In consideration of the performance of duties
hereunder, Company agrees to pay the Employee a monthly salary of $11,666.67
U.S.D. for the first twelve month period during the Initial Term. Such amount
shall be increased for the second year of the Initial Term by an amount not less
than 10%. Employee shall also be eligible to receive a bonus of up to 25% of
base salary each year during the Initial Term, based upon the achievement of
certain objectives and CBT product deliverables during each year of the Initial
Term, as described on Exhibit A hereto. Company may withhold from any amounts
payable under this Agreement, all Canadian, United States, provincial, city or
other taxes as may be required pursuant to any law or governmental regulation or
ruling or Company's policy, and to remit same when withheld.
2.2 Equity. In consideration of Employee entering into this
Agreement and Employee's performance of duties hereunder, Company agrees to
grant Employee a non-qualified stock option for 75,000 shares of Common Stock of
ForeFront which shares vest and are exercisable as follows: 25% (18,750 shares)
shall vest upon the completion of the first year of employment of the Initial
Term and 1/12 of such amount (6,250 shares) shall vest upon the completion of
each consecutive three (3) month period of continuous employment in the position
described above following such initial year, provided that if Employee's
employment is terminated by Company without cause prior to the expiration of two
years of full time employment with Company, Employee shall become automatically
vested in the shares which would have vested during such two year period had
such termination not occurred. The options shall have an exercise price equal to
the fair market value of ForeFront's Common Stock on the date hereof.
2.3 Benefits. The Employee will also continue to receive other
benefits from time to time normally provided to employees of ForeFront, on the
same terms as ForeFront employees, unless such benefits are not available for
employees residing in Canada. Notwithstanding the above, there shall be no
obligation to commence any benefit plan, or to continue any plan once commenced,
so long as such impacts all other ForeFront employees similarly. Employee shall
be entitled to credit toward ForeFront's vacation policy for all time worked at
LanProfessional, Inc.
2.4 Reimbursement. While employed hereunder, Company agrees to
reimburse the Employee for all reasonable and necessary business expenses in
accordance with Company's expense reimbursement policy, which expenses have been
approved in advance.
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<PAGE>
2.5 Severance. Notwithstanding anything herein to the
contrary, in the event that Company terminates Employee's employment, other than
for cause, at any time after the Initial Term of 2 years, Company agrees to
continue Employee's salary for a period of 14 days or such longer period or may
be required under applicable law; furthermore, should Employee's employment be
terminated during the Initial Term of 2 years as a result of an acquisition of
ForeFront by a third party, this Agreement shall be cancelled, subject to the
payment to Employee of six months salary as severance, and no other amounts
shall be owing to Employee hereunder.
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
Company, except as may be necessary in the ordinary cause of performing the
Employee's duties for Company and only for the benefit of Company. "Confidential
Information" shall mean all of: (a) information pertaining to the design and
development of all commercial products of Company and its affiliates and
subsidiaries that is not generally known within the industry in which Company or
any of its affiliates or subsidiaries 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 Company; (b) ForeFront's and the Company's customer
lists, sales data, pricing formulas, marketing strategies, sales methods and
processes, and other proprietary information acquired by Employee in the
performance of employment duties for Company; and (c) anything which would be
considered "confidential" under Ontario law.
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 Company
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 Company, and the
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<PAGE>
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 Company.
3.4 Disclosure and Assignment of Inventions. The Employee
agrees to make prompt and complete disclosure to Company 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 Company 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 Company or result
from tasks assigned to the Employee by Company or result from use of premises or
equipment owned, leased, or contracted for by Company. The Employee agrees that
Company shall have sole ownership rights to all Inventions and agrees to
cooperate fully, at no expense to the Employee, with Company to secure and
defend Company's said ownership rights. The Employee hereby assigns to Company
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 Company 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 Company, 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;
(b) performance of all the terms of this Agreement by the
Employee and as an employee of Company 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 Company. 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 Company or entering into this Agreement;
(c) as part of the consideration for the offer of employment
extended to the Employee by Company and of the Employee's employment or
continued employment by Company, the Employee has not brought and will not bring
with the Employee to Company or use in the performance of the Employee's
responsibilities at Company 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 Company, 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 Company shall be fulfilled.
-4-
<PAGE>
4. NON-COMPETITION.
4.1 Restrictions While Employed. In consideration of
employment or continued employment, as the case may be, and the compensation
received by the Employee from Company while employed by Company, the Employee
agrees to refrain from working for or providing consulting or other services,
directly or indirectly, in connection with a Conflicting Product anywhere in the
world, whether or not to a Competitive Business (as defined below). "Conflicting
Product" shall mean any commercial product, or any information pertaining to the
design, development and marketing of such product, that provides essentially
similar form, fit and function as, and competes or proposes to compete with, a
commercial product developed by Company.
4.2 Restrictions After Termination. In consideration of
employment or continued employment, as the case may be, the compensation
received by the Employee from Company while employed by Company, the Employee
agrees that until the expiration of twelve months after the termination of the
Employee's employment with Company or three years from the date of this
Agreement, whichever is longer, (the "Restricted Period") he shall not, directly
or indirectly, as principal, agent, employee, employer, consultant, stockholder,
partner or in any other capacity, engage in the development, sale, marketing,
licensing or support of software products that compete with, directly or
indirectly, software products owned or licensed by Company or ForeFront, or any
of their subsidiaries or affiliates, including any products in development or
design at the time of such termination (the "Competitive Business") wherever the
Company or ForeFront, or any of their subsidiaries or affiliates conducts such
business and only for so long as the Company or ForeFront, or any of its
subsidiaries or affiliates is engaged in such business. Notwithstanding anything
to the contrary herein, Employee may, without violating the provisions of this
Section 4.2, (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 Company or any affiliate
thereof; (ii) purchase up to 5% of any privately-held company or more than 5% of
any Public Company (in either case as a passive investor) provided that at the
time of the investment such Employee 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 Employee
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, Employee
may only maintain such relationship if he does not personally directly engage in
such Competitive Business and such entity has annual revenues in excess of $100
million in its most recent fiscal year.
4.3 Other Agreements. In consideration of employment or
continued employment as the case may be, and the compensation received by the
Employee from Company while employed by Company, the Employee hereby further
agrees that Employee will not, during the Restricted Period, (i) solicit, for
himself or others, any person or entity that is or was a customer of ForeFront
or the Company while Employee was employed by Company, for any purpose or
activity that is directly competitive with the business of ForeFront or the
Company or solicit the
-5-
<PAGE>
employment or services of any person who is employed full-time by ForeFront or
the Company 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 ForeFront or the Company as an employee,
officer, director or consultant, or so engaged by ForeFront or the Company
within the then prior six (6) months.
4.4 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 the Company and ForeFront. 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 protection
of the Company and ForeFront 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 Company:
The ForeFront Group, Inc.
1360 Post Oak Boulevard, Suite 2050
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 Province of Ontario, Canada.
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.
-6-
<PAGE>
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.
5.5 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.
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 September _______, 1997 (the "Effective Date").
LANPROFESSIONAL, INC. EMPLOYEE:
By: /s/ David Sikora By: /s/ Sunil Sethi
- -------------------------- -------------------------------
Name: David Sikora Name: Sunil Sethi
- -------------------------- -------------------------------
Title: President Address:
- -------------------------- -------------------------------
-7-
<PAGE>
EXHIBIT A
Job Duties
The Employee's duties shall be:
(1) Evaluation of Computer Based Training Technologies
(i) new products
(ii) development tools
(2) Product Design and Development
(3) Research
(i) CBT engines
(ii) CBT user interfaces
(4) Management of Technical Team including
(i) Graphic Designers
(ii) Compilers
(iii) Course Developers
(iv) evaluation of Human Resource requirements
(v) problem solving
(vi) conflict resolution
Milestones and Objectives
Employee's aggregate possible bonus shall be payable in four equal quarterly
installments, consisting of $8,750.00 each, upon and subject to the satisfactory
delivery of the product deliverable objectives within budget as provided in
Exhibit A-1 attached hereto and incorporated herein.
Any of the products specified in Exhibit A-1 which are not completed and
delivered in a satisfactory condition within the time period and budget
indicated, shall result in the applicable portion of the bonus to be forfeited
by Employee.
-8-
<PAGE>
EXHIBIT B
1. The following is a complete list of all inventions or improvements
relevant to the subject matter of my employment by LanProfessional,
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
All inventions.
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
The "Guide" computer program licensed to the employee by the
University of Minnesota for use by the employee in the research he is
conducting to obtain a postgraduate degree.
Additional sheets attached
The signature below confirms that my continued possession and use of
these materials is authorized.
Name:
----------------------------
-9-
ADDITIONAL ESCROW AGREEMENT
This Escrow Agreement is made and entered into as of this 29th
day of September, 1997, by and among McCarthy Tetrault, Barristers & Solicitors
(the "Escrow Agent"), The ForeFront Group, Inc., a Delaware corporation (the
"Purchaser"), Sunil K. Sethi, Naveen Seth, Sukhdev Walia, Sunita Uppal and Jang
Bhadhur Sethi (individually, a "Vendor" and, collectively, the "Vendors").
W I T N E S S E T H:
WHEREAS, the Purchaser, LanProfessional Inc., a Canadian
corporation (the "Corporation") and the Vendors have entered into an Acquisition
Agreement, dated as of the date hereof (collectively, with all amendments,
schedules, exhibits and certificates referred to therein, the "Acquisition
Agreement"), which provides for the acquisition by the Purchaser of the
Corporation (the "Acquisition"); and
WHEREAS, the Acquisition Agreement provides that on the
effective date of the Acquisition, certain portions of the cash amounts to be
paid by the Purchaser to the Vendors 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 Acquisition Agreement and herein, the parties agree
as follows:
ARTICLE I
Establishment of Escrow Fund
1.1 Escrow. The Escrow Agent shall initially hold in escrow
(i) the sum of One Hundred Thousand U.S. Dollars (U.S.$100,000) (the "Securities
Cash Escrow"), and (ii) the sum of Two Hundred Twenty-Six Thousand, Seven
Hundred Twenty-Six U.S. Dollars (U.S.$226,726) (the "Tax Cash Escrow"), which
shall be held and distributed by the Escrow Agent in accordance with the terms
and conditions of Articles II and III, respectively, of this Agreement, in the
case of the Securities Cash Escrow, for the Vendors in the respective
percentages set forth in Schedule A and in the case of the Tax Cash Escrow, for
Jang Bhadhur Sethi (the "Non-Resident Vendor"). Together, the Securities Cash
Escrow and the Tax Cash Escrow constitute the Escrow Fund.
Subject to and in accordance with the terms and conditions hereof, the
Escrow Agent agrees that it shall receive, hold in escrow, invest and reinvest
and release or distribute the Escrow Fund. It is hereby expressly stipulated and
agreed that all interest and other earnings on the Escrow Fund shall become a
part of the Escrow Fund for all purposes, and that all losses resulting from the
investment or reinvestment thereof from time to time shall from the time of such
loss or charge no longer constitute part of the Escrow Fund.
<PAGE>
1.2 Investment of Cash Escrow Fund. The Escrow Agent shall
invest and reinvest each of the Securities Cash Escrow and the Tax Cash Escrow
in a segregated daily term deposit account opened in the name of the Escrow
Agent with the Toronto Dominion Bank.. It is expressly agreed and understood by
the parties hereto that the Escrow Agent shall not in any way whatsoever be
liable for losses on any investments, including, but not limited to, losses from
market risks due to premature liquidation or resulting from other actions taken
pursuant to this Escrow Agreement. Receipt, investment and reinvestment of the
Escrow Fund shall be confirmed by the Escrow Agent as soon as practicable
following a request by the Vendors.
ARTICLE II
Securities Cash Escrow
2.1 Distribution of Securities Cash Escrow. The Securities
Cash Escrow shall serve as collateral for the obligations of the Vendors as set
forth in Section 4.4(c) of the Acquisition Agreement. Any claims by the
Purchaser for indemnification against the Vendors shall be conducted in
accordance with the terms of this Section 2.1. If the Purchaser shall have any
claims against the Vendors, it shall promptly give written notice thereof to the
Escrow Agent and the Vendors, including in such notice a brief description of
the facts upon which such claims are based and the amount thereof. If the
Vendors object to the allowance of any such claim, they shall give written
notice to the Purchaser and the Escrow Agent within thirty days following
receipt of notice of claim, advising it and the Escrow Agent that they do not
consent to the delivery of any of the Escrow Funds out of escrow for application
to such claim. If no such notice is timely provided by the Vendors to the
Purchaser and the Escrow Agent, the Escrow Agent shall, within five business
days after the expiration of the prior notice period, deliver to the Purchaser
out of escrow that amount of the Cash Escrow as is necessary to satisfy the
claims. If the Vendors advise the Purchaser and the Escrow Agent within the
foregoing 30 day period that they object to such application of the Securities
Cash Escrow after a claim has been made, the Escrow Agent shall hold the
Securities Cash Escrow in escrow until the rights of the Vendors and the
Purchaser with respect thereto have been agreed upon or otherwise determined in
accordance with the terms of this Agreement. Any claims which (i) are disputed
by the Vendors and subsequently result in the Purchaser and the Vendors agreeing
upon the resolution thereof, or which are finally determined by arbitration as
provided in Section 2.2 hereof, and (ii) result in the Purchaser incurring an
expense which is subject to indemnification by the Vendors, shall be settled by
delivery of such portion of the Securities Cash Escrow to the Purchaser in
accordance with the provisions above, upon written evidence of such disposition
or agreement provided to the Escrow Agent.
The Securities Cash Escrow shall be paid to Donald G. McLeod,
Barrister and Solicitor (the "Vendors' Counsel") (i) upon delivery to the Escrow
Agent of a notarial copy of the ruling or order of the Ontario Securities
Commission (the "OSC") granting an exemption from Sections 25 and 53 of the
Securities Act (Ontario) for all trades of securities of the Corporation and the
Purchaser contemplated in the Acquisition Agreement and such ruling or order
shall not result in additional costs or expenses to the Purchaser, as
contemplated in Section 4.4(c) of the Acquisition Agreement, or (ii) upon the
written direction of the Vendors' Counsel and the Purchaser.
<PAGE>
2.2 Arbitration. Any controversy involving a claim by the
Purchaser on the Escrow Fund shall be finally settled by arbitration in Ottawa,
Canada in accordance with the Arbitration Act (Ontario) 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 Vendors and the Purchaser. 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
Tax Cash Escrow
3.1 Distribution of Tax Cash Escrow. The Tax Cash Escrow shall
be paid to the Vendors' Counsel upon receipt not later than October 30, 1997 by
the Escrow Agent from the Vendors' Counsel of the Purchaser's copy of Form T2068
issued by Revenue Canada and having a certificate limit of not less than
U.S.$226,726 or the equivalent in Canadian dollars; failing which, such amount
shall be paid to Revenue Canada promptly by the Escrow Agent for the account of
the Non-Resident Vendor. In the event that prior to October 30, 1997, the
Vendors' Counsel requests and directs in writing to the Escrow Agent partial
payment of any portion of the Tax Cash Escrow to Revenue Canada for the account
of the Non-Resident Vendor in order to facilitate the issue of Form T2068, the
Escrow Agent shall comply promptly with such request and upon the issue of Form
T2068 shall pay any balance of the Tax Cash Escrow to the Vendors' Counsel.
ARTICLE IV
Escrow Agent
4.1 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 legal 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.
4.2 Escrow Agent's Compensation, Expenses and Indemnification.
The Purchaser shall pay to the Escrow Agent compensation in respect of the
Escrow Agent's duties and obligations under this Agreement as may be agreed
between the Purchaser and the Escrow Agent.
<PAGE>
4.3 Resignation. The Escrow Agent may resign at any time by
giving not less than sixty days written notice thereof to each of the Purchaser
and the Vendors.
4.4 Successor Escrow Agent. Upon receipt of the Escrow Agent's
notice of resignation, the Purchaser and the Vendors 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 Fund, 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.
4.5 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 Fund or the rights of any of the parties hereto to
such Escrow Fund, 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
the Purchaser, on the one hand, and the Vendors, on the other hand, agree to pay
one half of all costs, damages, judgments and expenses, including reasonable
legal 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.
4.6 Indemnity. The Vendors and the Purchaser 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 V
Miscellaneous
5.1 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 three
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
5.1):
<PAGE>
(a) If to the Purchaser: (c) If to the Escrow Agent:
The ForeFront Group, Inc. McCarthy Tetrault
1360 Post Oak Blvd, Suite 2050 Barristers & Solicitors
Houston, Texas 77056 The Chambers
Attention: Jeffrey R. Harder 40 Elgin St., Suite 1400
Tel: (713)961-1101 Ottawa, ON K1P 5K6
Facsimile: (713) 961-4530
Attention: Robert D. Chapman
(b) If to the Vendors: Tel: (613) 238-2111
Facsimile: (613) 238-2166
c/o Sunil K. Sethi
10 Baslaw Dr.
Ottawa, Ont. K1G 5J8
Tel: (613)736-5326
Facsimile: (613)736-9614
5.2 Termination. This Agreement shall terminate upon the
mutual written express agreement of the Purchaser and the Vendors. In any event,
this Agreement terminates when all of the Escrow Fund has been distributed
according to its terms.
5.3 Interpretation. The validity, construction, interpretation
and enforcement of this Agreement shall be determined and governed by the laws
of the Province of Ontario. 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.
5.4 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.
5.5 Taxes. For purposes of Canadian federal and provincial
income taxation, the Escrow Fund shall be treated as owned by the Vendors and
this Agreement shall be interpreted in a manner to effect the Vendors' ownership
of the Escrow Fund for such tax purposes.
<PAGE>
IN WITNESS WHEREOF, the parties have signed this Agreement on
the day and year first above written.
MCCARTHY TETRAULT
as Escrow Agent
By: "R D Chapman"
Name: Robert D. Chapman
Title: Barrister and Solicitor
THE FOREFRONT GROUP, INC.,
a Delaware corporation
By: "David Sikora"
Name: David Sikora
Title: President & CEO
THE VENDORS:
"Sunil Sethi"
Sunil K. Sethi
"Naveen Seth"
Naveen Seth
"Sukhdev Walia"
Sukhdev Walia
"Sunita Uppal"
Sunita Uppal
"J B Sethi"
Jang Bhadhur Sethi
<PAGE>
EXHIBIT A
Applicable Securities Cash Escrow Percentages
Sunil K. Sethi 21.25%
Naveen Seth 21.25%
Sukhdev Walia 21.25%
Sunita Uppal 21.25%
Jang Bhadhur Sethi 15%
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is made as of this
___ day of _________, _____, by and among The ForeFront Group, Inc., a Delaware
corporation (the "Company") and Sunil K. Sethi, Naveen Seth, Sukhdev Walia,
Sunita Uppal, and Jang Bhadhur Sethi (collectively referred to hereinafter as
the "Sellers").
Recitals
WHEREAS, the Sellers have, pursuant to an Acquisition Agreement, dated
as of the date hereof (the "Acquisition Agreement"), with the Company and
LanProfessional Inc., a wholly owned subsidiary of the Company (the
"Subsidiary") certain registration rights with respect to the Shares (as defined
herein) acquired under the Acquisition Agreement; and
WHEREAS, the obligations of the Sellers under the Acquisition Agreement
are conditioned upon the execution and delivery of this Agreement by the
Company;
NOW, THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, the parties hereby agree as follows:
VIII 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 the Company.
"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.
"Exchangeable Shares" shall mean the exchangeable shares of
LanProfessional Inc. owned by the Sellers on the date hereof and which may be
exchanged for shares of Common Stock of ForeFront under the terms of the
Exchange Rights Agreement and the Exchangeable Share provisions, as defined in
the Purchase Agreement.
"Holders" shall mean the Sellers, and any other holder of Registrable
Securities to whom the registration rights conferred by this Agreement have been
transferred in compliance with Section 2.13 hereof.
<PAGE>
"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 participation in the
registration to which such fees and expenses relate, and the fees and expenses
of a Holder's own accountants and experts.
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 the Company pursuant to
Section 2 hereof and which has been declared effective by the Commission.
"Registrable Securities" shall mean (i) the Shares and (ii) any Common
Stock issued (or issuable upon the conversion or exercise of any warrant, right
or other security that is 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 all of such securities
within any three (3) month period pursuant to Rule 144 or other available
exemption.
"Registration Expenses" shall mean all expenses incurred by the Company
in complying with this Agreement including, without limitation, all registration
and filing fees, exchange listing fees, printing expenses, fees and
disbursements of counsel for the Company, 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 the Company in connection with its ordinary business
activities, including, but not limited to, rent and salaries.
"Registration Statement" shall mean a registration statement filed by
the Company with the Commission for a public offering and sale of securities of
the Company (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.
<PAGE>
"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.
"Selling Stockholders" shall mean the Holders of Registrable Securities
to be included in a Registration Statement.
"Shares" shall mean the shares of ForeFront Common Stock which have
been or may be acquired by the Sellers upon exchange, redemption or retraction
of the Exchangeable Shares.
2. Registration Rights.
2.1 Mandatory Registration.
(a) On or before the expiration of the Lock Up Agreement (as
defined in the Purchase Agreement) with respect to any Shares, the Company will:
(i) prepare and file with the Commission, a
Registration Statement on Form S-1 (or other appropriate form) with
respect to the Shares, and use its reasonable best efforts to cause
such Registration Statement to become and remain effective for a period
of 24 months;
(ii) prepare and file with the Commission such
amendments and supplements to such Registration Statement and the
prospectus used in connection therewith and use its reasonable best
efforts to cause such amendment and supplement to become effective as
may be necessary to keep such Registration Statement effective for the
period contemplated in (i) above and comply with the provisions of the
Securities Act with respect to the disposition of all Shares covered by
such Registration Statement in accordance with the Holders' intended
method of disposition set forth in such Registration Statement for such
period;
(iii) register or qualify the Shares, by the time the
Registration Statement is declared effective by the Commission, under
all applicable state securities or "Blue Sky" laws of such
jurisdictions as each Underwriter, if any, or Selling Stockholder shall
request in writing, provided, that the Company shall not be obligated
to qualify as a foreign corporation or as a dealer in securities in any
jurisdiction in which it is not so qualified or to subject itself to
taxation in respect of doing business in any jurisdiction in which it
is not otherwise so subject;
(iv) keep each such registration or qualification
effective during the period the Registration Statement is required to
be kept effective, except as otherwise provided in Section 2.2 below;
<PAGE>
(v) upon request by a Holder, do any and all other
acts and things which may be reasonably necessary to enable such
Underwriter, if any, and the Holder to consummate the disposition of
the Shares in each such jurisdiction;
(vi) notify the Holders when the Registration
Statement has become effective and when any post-effective amendments
and supplements thereto become effective;
(vii) in connection with an underwritten offering, if
any, notify each Holder if, between the effective date of the
Registration Statement and the closing of any sale of the Shares, the
representations and warranties of the Company contained in the
underwriting agreement relating to any underwritten offering cease to
be true and correct in all material respects or if the Company receives
any notification with respect to the suspension of the qualification of
the Shares for sale in any jurisdiction or the initiation of any
proceeding for such purpose;
(viii) furnish such number of prospectuses and other
documents incident thereto, including any amendment of or supplement to
the prospectus as the Holders from time to time may reasonably request
during the period of distribution of the Shares;
(ix) otherwise use its reasonable best efforts to
comply with all applicable rules and regulations of the Commission with
respect to the disposition of the Shares covered by such Registration
Statement, and make available to its security Holders, as soon as
reasonably practicable, an earnings statement covering the period of at
least 12 months, but not more than 18 months, beginning with the first
month after the effective date of the Registration Statement, which
earnings statement shall satisfy the provisions of Section 11(a) of the
Securities Act; and
(x) Use its best lawful efforts to cause all
Registrable Securities to be listed on each securities exchange on
which similar securities issued by the Company are then listed; and if
not so listed, use its best lawful efforts to be listed on the NASDAQ
system.
(b) In connection with each registration under this Section,
the Holders will furnish to the Company in writing such information as
reasonably shall be necessary in order to assure compliance with federal and
applicable state securities laws.
(c) Subject to Section 2.2 below, the Company agrees to
supplement or amend the Registration Statement, if required by the Securities
Act and to use its reasonable best efforts to cause each such amendment and
supplement to become effective .
(d) All Registration Expenses incurred in connection with any
registration, qualification or compliance pursuant to Section 2.1 hereof, shall
be borne by the Company.
<PAGE>
(e) The obligations of the Company under this Section 2.1
shall terminate upon the expiration of 24 months from the effective date of a
Registration Statement or the date on which the Shares are no longer included as
Registrable Securities, whichever comes first.
2.2 Interference with Mandatory Registration.
(a) If, after the Registration Statement filed pursuant to
Section 2.1 has been declared effective, a stop order, injunction or other order
or requirement of the Commission or any other governmental agency or court is
issued which suspends the effectiveness of such Registration Statement, (i) the
Company shall promptly notify the Securities Commission of such event, (ii) upon
receipt of notice from the Company, the Holders will discontinue any disposition
of Shares or Registered Securities, respectively, pursuant to that Registration
Statement until receipt of notice from the Company that the suspension of the
effectiveness of the Registration Statement has been withdrawn and (iii) the
Company will use its reasonable best efforts to obtain the withdrawal of such
order or to meet such requirement at the earliest possible time.
(b) If, after the Registration Statement has become effective,
an event occurs as a result of which the Company determines that the
Registration Statement or the related prospectus contains any untrue statement
of a material fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, the Company will
promptly notify the Selling Stockholders, if applicable, and use its reasonable
best efforts to prepare and promptly file a post-effective amendment or a
supplement to the Registration Statement or the related prospectus or promptly
file any other required document so that, as thereafter delivered to purchasers
of the Shares or Registered Securities, such prospectus will not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading.
(c) In order to exercise this right provided in (b) above, the
Company must deliver a certificate in writing to the Holder to the effect that a
delay in such sale is necessary because a sale pursuant to such Registration
Statement in its then-current form would reasonably be expected to constitute a
violation of the federal securities laws. Without limiting Section 2.2(b)
hereof, in no event shall such delay exceed twenty (20) business days; provided,
however, that if, prior to the expiration of such twenty (20) business day
period, the Company delivers a certificate in writing to the Holder to the
effect that a further delay in such sale beyond such twenty (20) business day
trading period is necessary because a sale pursuant to the Registration
Statement in its then-current form would reasonably be expected to constitute a
violation of the federal securities laws, the Company may refuse to permit the
Holders to resell any of the Shares pursuant to the Registration Statement for
an additional period not to exceed ten (10) business days, but in no event shall
any such delay exceed in the aggregate thirty (30) business days, unless the
matter giving rise to the exercise of such right is beyond the Company's
control.
2.3 Selection of Underwriters. With respect to the
registration of the Shares pursuant to Section 2.1 hereof, at any time or from
time to time after the Closing, the Sellers may elect to
<PAGE>
have the Shares sold to one or more persons participating as underwriters for an
underwritten offering. In such event, the Company shall engage one or more
nationally recognized independent investment banking firms reasonably acceptable
to the Holders of a majority of the Shares, as underwriters, at the expense of
the Sellers, and the Company shall enter into and preform its obligations under
an underwriting agreement in customary form, including without limitation
customary indemnification and contribution obligations with such underwriters.
2.4 Piggyback Registration. Whenever the Company proposes to file a
Registration Statement at any time commencing one year after the Closing Date
and prior to five years after such Closing Date, unless a Registration Statement
with respect to the Shares has previously been filed and declared effective by
the Commission and the Selling Stockholder has not been prevented under Section
2.2 or 2.5 from using such Registration Statement to sell all of the Shares
covered by such prior Registration Statement, 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 the Company provides such
notice (which request shall te the intended method of disposition of such
Registrable Securities), the Company shall (subject to Section 2.6 below) use
its best efforts to cause all Registrable Securities that the Company 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 the Company shall have the right to
cancel, postpone or withdraw any registration effected pursuant to this Section
2.4 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.
2.5 Underwriter's Reductions. If the offering to which the proposed
registration under Section 2.4 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
the Company 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 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
(unless they may be sold through the Rule 144 or other exemption 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 based on the number of shares that each has requested be included in
the Registration Statement 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
<PAGE>
zero and (ii) such Holder shall be responsible for and pay their proportionate
share of the Incremental Registration Expenses directly related thereto. 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 the Company or other stockholders owning shares of
Other Common Stock included in such registration if the Company or such other
stockholders are offering Common Stock.
2.6 Registration Procedures. If and whenever the Company is required by
Section 2.4 to use its best efforts to effect the registration of any of the
Registrable Securities under the Securities Act, the Company 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 reasonable
request to facilitate the public sale or other disposition of the
Registrable Securities owned by the Selling Stockholder; provided,
however, that the obligation of the Corporation to deliver copies of
prospectuses to such Selling Stockholders shall be subject to the
receipt by the Company 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 the
Corporation shall not be required in connection with this Section
2.7(iii) to qualify as a foreign corporation or execute a general
consent to service of process in any jurisdiction.
2.7 Amendments to Prospectus. If the Company has delivered preliminary
or final prospectuses to the Selling Stockholder and after having done so, the
Company determines that such prospectus should be amended to comply with the
requirements of the Securities Act, the Company 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 the
Corporation except for file copies used for archival purposes. The Company shall
use its best efforts to promptly provide the Selling Stockholder with revised
prospectuses and, following
<PAGE>
receipt of the revised prospectuses, the Selling Stockholder shall be free to
resume making offers of the Registrable Securities.
2.8 Obligations of Selling Stockholders. No Registrable Securities
shall be included in a registration under Section 2.4 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 the Company or any other
stockholder of the Company selling stock in such offering, and (b) provides to
the Company in writing such information as the Company 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
the Company to determine if an exemption provided for in this Agreement from the
Company's obligation to include such Registrable Securities in a Registration
Statement may be applicable.
2.9 Indemnification.
(a) To the extent permitted by law, the Company 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 the Company of the Securities Act
or any rule or regulation promulgated under the Securities Act applicable to the
Company in connection with any such registration, qualification or compliance,
and the Company 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 the Company (which consent shall not
unreasonably be withheld), and provided further, that the Company 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
conformity with written information furnished to the Company by such Holder or
its controlling person specifically
<PAGE>
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 the
Company, each of its directors and officers, each underwriter, if any, of the
Company's securities covered by such a registration statement, each person who
controls the Company 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 the Company, 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 the Company 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 the Company, 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.
<PAGE>
(c) Each party entitled to indemnification under this Section
2.9 (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 if counsel for the Indemnifying Party actually conducts the
defense, 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 and the indemnity herein provided shall include the cost of such
defense. 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, which
consent shall not be unreasonably withheld or delayed.
(d) If the indemnification provided for in this Section 2.9 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 the Company 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 the Company 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 the Company or by the Selling Stockholders and the parties' relevant
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The Company and the Selling Stockholders agree that
it would not be just and equitable if contribution pursuant to this Section
2.9(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 2.9(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 2.9(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 2.9(c) hereof. Notwithstanding
the provisions of this Section 2.9(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
<PAGE>
Securities Act) shall be entitled to contribution under this Section (d) from
any person who was not guilty of such fraudulent misrepresentation.
(e) Notwithstanding the foregoing provisions of this Section
2.10, if pursuant to an underwritten public offering of capital stock of the
Company, the Selling Stockholders and the underwriters enter into an
underwriting or purchase 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 2.10, 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 or purchase agreement.
2.10 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 the Company such information
regarding such Holder, the Registrable Securities and the distribution proposed
by such Holder as the Company 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 2.11(a) shall not affect the obligation of the
Company under Section 2 to the remaining Holder(s) who furnish such information
unless, in the reasonable opinion of counsel to the Company 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 the Company 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 the Company, makes the prospectus
included in such registration statement no longer comply with the Securities Act
until such time as such holder has received from the Company copies of a new,
amended or supplemented prospectus complying with the Securities Act.
2.11 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 the Company, the
Company agrees to use its best lawful efforts to:
<PAGE>
(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 the Company becomes subject to the reporting
requirements of the Securities Act or the Exchange Act;
(b) File with the Commission in a timely manner all reports
and other documents required of the Company 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
the Company 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 the Company, and such other reports and documents
of the Company and other information in the possession of or reasonably
obtainable by the Company 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 the Company's securities
under the Securities Act the Company shall cease to be subject to the
requirements of Section 15(d) of the Exchange Act, the Company 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).
2.12 Transfer of Registration Rights. The rights granted under this
Agreement may be assigned by each Seller to a transferee or assignee in
connection with any transfer or assignment of Registrable Securities provided
that: (i) 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 a
corporation which shall at all times be controlled by such stockholder, and (ii)
such transferee or assignee is acquiring no less than 25,000 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 the
Company 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.
III 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.
<PAGE>
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 the Company and the Sellers. Except as expressly provided herein,
this Agreement, or any provision hereof, may be amended, waived, discharged or
terminated upon the written consent of the Company and the Holders holding at
least one-half (1/2) 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 the Company in writing, or
(b) if to the Company, at The ForeFront Group, Inc., 1360 Post Oak Boulevard,
Suite 2050, Houston, TX 77056, ATTN.: President, or at such other address as the
Company 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.
<PAGE>
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.
COMPANY
THE FOREFRONT GROUP, INC.
By:
Name:
Title:
SELLERS
Name: Sunil K. Sethi
Address:
-------------------------
Name: Naveen Seth
Address:
-------------------------
Name: Sukhdev Walia
Address:
-------------------------
Name: Sunita Uppal
Address:
-------------------------
Name: Jang Bhadhur Sethi
Address:
