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"), Xxxxx X. Xxxxx, Xxxxxx Xxxx, Xxxxxxx Xxxxx, Xxxxxx Xxxxx and Jang
Xxxxxxx Xxxxx (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.
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.
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
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.
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
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.
0000 Xxxx Xxx Xxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Xxxxxxx X. Xxxxxx
Tel: (000)000-0000
Facsimile: (000) 000-0000
(b) If to the Shareholders:
Xxxxx X. Xxxxx
00 Xxxxxx Xx.
Xxxxxx, Xxx. X0X 0X0
Tel: (000)000-0000
Facsimile: (000)000-0000
(c) If to the Escrow Agent:
Texas Commerce Bank, N.A.
000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Corporate Trust, Xxxx Xxxxxxxx
Tel: (000)000-0000
Facsimile: (000) 000-0000
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.
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/ Xxxx Xxxxxxxx
Name: Xxxx Xxxxxxxx
Title: Trust Officer
The ForeFront Group, Inc.,
a Delaware corporation
By: /s/ Xxxxx Xxxxxx
Name: Xxxxx Xxxxxx
Title: President & CEO
The Shareholders:
/s/ Xxxxx Xxxxx
Xxxxx X. Xxxxx
/s/ Naveen Seth
Naveen Seth
/s/ Xxxxxxx Xxxxx
Xxxxxxx Xxxxx
/s/ Xxxxxx Xxxxx
Xxxxxx Xxxxx
/s/ X X Xxxxx
Jang Xxxxxxx Xxxxx
EXHIBIT A
Applicable Cash Number of
Escrow Percentages Exchangeable Shares
Xxxxx X. Xxxxx 21.25% 24,242
Naveen Seth 21.25% 24,242
Xxxxxxx Xxxxx 21.25% 12,270
Xxxxxx Xxxxx 21.25% 12,270
Jang Xxxxxxx Xxxxx 15% 8,663
Total: 81,687
