ADDITIONAL ESCROW AGREEMENT
This Escrow Agreement is made and entered into as of this 29th
day of September, 1997, by and among XxXxxxxx Xxxxxxxx, Barristers & Solicitors
(the "Escrow Agent"), The ForeFront Group, Inc., a Delaware corporation (the
"Purchaser"), Xxxxx X. Xxxxx, Naveen Seth, Xxxxxxx Xxxxx, Xxxxxx Xxxxx and Jang
Xxxxxxx Xxxxx (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 Xxxxxxx Xxxxx (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.
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 Xxxxxx X. XxXxxx,
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.
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.
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):
(a) If to the Purchaser: (c) If to the Escrow Agent:
The ForeFront Group, Inc. XxXxxxxx Xxxxxxxx
0000 Xxxx Xxx Xxxx, Xxxxx 0000 Barristers & Solicitors
Xxxxxxx, Xxxxx 00000 The Xxxxxxxx
Attention: Xxxxxxx X. Xxxxxx 00 Xxxxx Xx., Xxxxx 0000
Tel: (000)000-0000 Xxxxxx, XX X0X 0X0
Facsimile: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxx
(b) If to the Vendors: Tel: (000) 000-0000
Facsimile: (000) 000-0000
c/o Xxxxx X. Xxxxx
00 Xxxxxx Xx.
Xxxxxx, Xxx. X0X 0X0
Tel: (000)000-0000
Facsimile: (000)000-0000
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.
IN WITNESS WHEREOF, the parties have signed this Agreement on
the day and year first above written.
XXXXXXXX XXXXXXXX
as Escrow Agent
By: "X X Xxxxxxx"
Name: Xxxxxx X. Xxxxxxx
Title: Barrister and Solicitor
THE FOREFRONT GROUP, INC.,
a Delaware corporation
By: "Xxxxx Xxxxxx"
Name: Xxxxx Xxxxxx
Title: President & CEO
THE VENDORS:
"Xxxxx Xxxxx"
Xxxxx X. Xxxxx
"Naveen Seth"
Naveen Seth
"Xxxxxxx Xxxxx"
Xxxxxxx Xxxxx
"Xxxxxx Xxxxx"
Xxxxxx Xxxxx
"X X Xxxxx"
Jang Xxxxxxx Xxxxx
EXHIBIT A
Applicable Securities Cash Escrow Percentages
Xxxxx X. Xxxxx 21.25%
Naveen Seth 21.25%
Xxxxxxx Xxxxx 21.25%
Xxxxxx Xxxxx 21.25%
Jang Xxxxxxx Xxxxx 15%
