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EXHIBIT 10.34
ESCROW AGREEMENT
This Escrow Agreement (this "Agreement") is entered into as of May 8,
1998, by and among TEKGRAF, INC., a Georgia corporation (the "Purchaser"),
TEKGRAF SUB III, INC. ("Acquisition Sub"), NEW ENGLAND COMPUTER GRAPHICS, INC.,
a Massachusetts corporation (the "Company"), A. Xxxxxx Xxxxxxxxx, Xxxxxxx
Xxxxxx, Xxxxxx Xxxx, Xxxxx Xxxxxx, Xxxxx Xxxxxx, Xxxxxx Xxxxxxxx, and Xxxxxx
Xxxxx (collectively, the "Company Shareholders"), Xxxxx Xxxxxx (the "Shareholder
Representative") and First Union National Bank, a national banking association
(the "Escrow Agent").
WHEREAS, the Purchaser and the Company have entered into an Agreement
and Plan of Merger, dated March 25, 1998, by and among the Company, the Company
Shareholders, Acquisition Sub and the Purchaser, as amended by that certain
First Amendment to Agreement and Plan of Merger, dated as of March 30, 1998 (the
"Merger Agreement").
WHEREAS, the Merger Agreement provides that escrow accounts will be
established to secure the Company Shareholders' guaranty with respect to the
Warranted Pre-Tax Profit and the Warranted Tangible Net Asset Value of the
Company (each as defined in the Merger Agreement) on the terms and conditions
set forth herein.
WHEREAS, the parties hereto desire to establish the terms and
conditions pursuant to which such escrow accounts will be established and
maintained.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Defined Terms. Capitalized terms used in this Agreement and not
otherwise defined shall have the meanings given them in the Merger Agreement.
2. Consent of Company Shareholders. By virtue of the Company
Shareholders' approval of the Merger Agreement, the Company Shareholders who may
indirectly or directly receive cash and shares of Purchaser Common Stock
pursuant to the Merger Agreement have, without any further act of any Company
Shareholder, consented to: (a) the establishment of this escrow to secure the
Company Shareholders' guaranty with respect to the Warranted Pre-Tax Profit and
the Warranted Tangible Net Asset Value of the Company in the manner set forth
herein and in the Merger Agreement, (b) the appointment of the Shareholder
Representative as their representatives for purposes of this Agreement and as
attorneys-in-fact and agents for and on behalf of each Company Shareholder, and
the taking by the Shareholder Representative of any and all actions and the
making of any decisions required or permitted to be taken or made by him under
this Agreement, and (c) all of the other terms, conditions and limitations in
this Agreement and the Merger Agreement.
3. Escrow and Warranty.
(a) Escrow of Cash. On the Closing Date, the Purchaser shall
deposit with the Escrow Agent $75,000 of the Cash Consideration. The Escrowed
Cash shall be held as a trust fund and shall not be subject to any lien,
attachment, trustee process or any other judicial process of any creditor of any
party hereto. The Escrow Agent agrees to accept delivery of the Escrowed Cash
and to hold the Escrowed Cash in an interest-bearing escrow account (the "Cash
Escrow Account"), subject to the terms and conditions of this Agreement.
(b) Escrow of Shares. On the Closing Date, the Purchaser shall
deposit with the Escrow Agent a certificate for the number of Escrowed Shares
specified in Section 1.3(e) of the Merger Agreement, issued in the name of the
Escrow Agent or its nominee. The Escrowed Shares shall be held as a trust fund
and shall not be subject to any lien, attachment, trustee process or any other
judicial process of any creditor of any party hereto. The
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Escrow Agent agrees to accept delivery of the Escrowed Shares and to hold the
Escrowed Shares in an escrow account (the "Share Escrow Account"), subject to
the terms and conditions of this Agreement.
(c) Warranty. The Company Shareholders have agreed in Article I of
the Merger Agreement that the Warranted Pre-Tax Profit and the Warranted
Tangible Net Asset Value of the Company shall not be less than the amounts set
forth in Section 1.3(a) of the Merger Agreement. The Escrowed Shares shall be
security for such warranty obligation of the Company Shareholders, subject to
the limitations, and in the manner provided, in this Agreement.
(d) Dividends, Etc. Any securities distributable to the Company
Shareholders in respect of or in exchange for any of the Escrowed Shares,
whether by way of stock dividends, stock splits or otherwise, shall be delivered
to the Escrow Agent, who shall hold such securities in the Share Escrow Account.
Such securities shall be issued in the name of the Escrow Agent or its nominee
and shall be considered Escrowed Shares for purposes hereof. Any cash dividends
distributable to the Company Shareholders in respect of the Escrowed Shares
shall be distributed to the Company Shareholders.
(e) Voting of Shares. The Shareholder Representative shall have
the
right, in his sole discretion, on behalf of the Company Shareholders, to direct
the Escrow Agent in writing as to the exercise of any voting rights pertaining
to the Escrowed Shares, and the Escrow Agent shall comply with any such written
instructions. In the absence of such instructions, the Escrow Agent shall not
vote any of the Escrowed Shares.
(f) Transferability. The respective interests of the
Company Shareholders in the Escrowed Shares shall not be assignable or
transferable, other than by operation of law. Notice of any such assignment or
transfer by operation of law shall be given to the Escrow Agent and the
Purchaser, and no such assignment or transfer shall be valid until such notice
is given.
(g) Transfer of Shares Upon Waiver of Warranty. In the event the
Purchaser elects, pursuant to the provisions of Section 1.3(h) of the Merger
Agreement, to waive the Profit Shortfall Adjustment and the Profit Surplus
Adjustment, the Escrowed Shares shall be transferred, upon receipt of notice by
Escrow Agent from Purchaser of such waiver, into the escrow account created
pursuant to that certain Pledge, Security and Escrow Agreement dated as of even
date herewith, to be treated in all respects as escrow shares thereunder and the
Escrowed Shares in such case shall be distributed to the Company Shareholders
pursuant to the terms thereof.
4. Administration of Cash Escrow Account. The Escrow Agent
shall administer the Cash Escrow Account as follows:
(a) In the event that there is a Net Asset Value Shortfall
(including any Collection Shortfall or Inventory Shortfall that remains unpaid
ten (10) days after demand for payment thereof by Purchaser or Acquisition Sub
to the Company Shareholders), the Purchase Price shall be reduced by the amount
of such Net Asset Value Shortfall. Purchaser or Acquisition Sub shall provide to
the Escrow Agent and the Shareholder Representative written notice of the amount
of such Net Asset Value Shortfall, and such amount, including any interest
accrued thereon (or such lesser amount as is then held in the Cash Escrow
Account), shall be paid to Purchaser by Escrow Agent within three (3) business
days after receipt of such notice.
(b) Any cash remaining in the Cash Escrow Account after payment of
the Net Asset Value Shortfall amount as set forth in subsection (a) above, shall
be distributed to the Company Shareholders pursuant to Section 6(a) hereof.
(c) In the event that the Net Asset Value Shortfall exceeds the
amount of Escrowed Cash available, Purchaser's recovery of cash pursuant to
Section 1.3 of the Merger Agreement shall not be limited to the amount of
Escrowed Cash available.
5. Administration of Share Escrow Account. The Escrow Agent shall
administer the Share Escrow Account as follows:
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(a) In the event that the Warranted Pre-Tax Profit exceeds the
Actual Pre-Tax Profit for the Year (or the Alternative Year, if applicable), the
Purchase Price shall be reduced by the number of Purchaser Shares equal to the
Profit Shortfall Adjustment, subject to the Adjustment Floor. In such event,
Purchaser or Acquisition Sub and the Shareholder Representative shall provide
written notice to the Escrow Agent of the amount of the Profit Shortfall
Adjustment, and the Escrow Agent shall transfer, deliver and assign to Purchaser
such number of Escrowed Shares held in the Share Escrow Account which have a
Fair Market Value equal to the Profit Shortfall Adjustment (or such lesser
number of Purchaser Shares as is then held in the Share Escrow Account). The
Fair Market Value of the Escrowed Shares to be distributed shall be determined
in accordance with Section 7 hereof.
(b) On the first anniversary of the Closing Date (or if the
Alternative Year is elected, at the end of the Alternative Year), the Escrow
Agent shall distribute to the Company Shareholders, in accordance with Sections
6(a) and (b) below, one half of the Escrowed Shares remaining in the Share
Escrow Account not required for redistribution pursuant to Section 5(a) hereof.
Any Escrowed Shares remaining in the Share Escrow Account after payment of the
Profit Shortfall Adjustment amount as set forth in subsection (a) above, shall
be distributed to the Company Shareholders pursuant to Sections 6(a) and (b)
hereof.
(c) In the event that the Profit Shortfall Adjustment exceeds the
number of Escrowed Shares available, Purchaser's recovery of Purchaser Shares
pursuant to Section 1.3 of the Merger Agreement shall not be limited to the
amount of Escrowed Shares available.
6. Release of Escrowed Cash and Escrowed Shares.
(a) Any distribution of all or a portion of the Escrowed Cash or
the Escrowed Shares to the Company Shareholders shall be made in accordance with
the percentages set forth opposite such holders' respective names on Exhibit B
attached hereto; provided, however, that the Escrow Agent shall withhold the
distribution of the portion of the Escrowed Cash or the Escrowed Shares
otherwise distributable to Company Shareholders who have not, according to
written notice provided by the Purchaser to the Escrow Agent, prior to such
distribution, surrendered their respective Certificates pursuant to the terms
and conditions of the Merger Agreement. Any such withheld cash or shares shall
be delivered to the Purchaser instead of to the Company Shareholders, and shall
be delivered by the Purchaser to the Company Shareholders upon surrender of
their Certificates. Distributions of Escrowed Shares to the Company Shareholders
shall be made by mailing stock certificates to such holders at their respective
addresses shown on Exhibit B (or such other address as may be provided in
writing to the Escrow Agent by any such holder).
(b) No fractional Escrowed Shares shall be distributed to
Purchaser or Company Shareholders pursuant to this Agreement. Instead, the
number of shares that Purchaser or each Company Shareholder shall receive shall
be rounded down to the nearest whole number; and the Escrow Agent shall sell
such number of Escrowed Shares as is equal to the aggregate of the fractional
shares that would otherwise be distributed to the Purchaser or the Company
Shareholders, as the case may be, and shall distribute the proceeds of such sale
to the Purchaser or the Company Shareholders otherwise entitled to a fractional
Escrowed Share based upon the fraction of an Escrowed Share to which Purchaser
or each such Company Shareholder is otherwise entitled, as the case may be.
7. Valuation of Escrowed Shares. For purposes of this Agreement, the
Fair Market Value of the Escrowed Shares to be released from the Share Escrow
Account after a final determination of the Profit Shortfall Adjustment shall be
determined based upon the average closing prices of the Purchaser's Common Stock
on the Nasdaq National Market System for the twenty trading days immediately
preceding the date of such final determination.
8. Fees and Expenses of Escrow Agent. The Purchaser and the Company
Shareholders shall compensate Escrow Agent for its services hereunder in
accordance with Schedule A attached hereto and, in addition, shall reimburse
Escrow Agent for all of its reasonable out-of-pocket expenses, including
attorneys' fees, travel expenses, telephone and facsimile transmission costs,
postage (including express mail and overnight delivery charges), copying charges
and the like. All of the compensation and reimbursement obligations set forth in
this Section 8
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shall be payable one-half each by Purchaser and the Company Shareholders,
jointly and severally, upon demand by Escrow Agent. The obligations of Purchaser
and the Company Shareholders under this Section 8 shall survive any termination
of this Escrow Agreement and the resignation or removal of Escrow Agent.
9. Investment of Funds. Escrow Agent shall invest and reinvest the
funds held in the Cash Escrow Account as the Shareholder Representative and the
Purchaser jointly shall direct (subject to applicable minimum investment
requirements) by the furnishing of a joint written direction; provided, however,
that no investment or reinvestment may be made except in the following:
(a) direct obligations of the United States of America or
obligations the principal of and the interest on which are unconditionally
guaranteed by the United States of America;
(b) certificates of deposit issued by any bank, bank and trust
company, or national banking association (including Escrow Agent and its
affiliates), which certificates of deposit are insured by the Federal Deposit
Insurance Corporation or a similar governmental agency;
(c) repurchase agreements with any bank, trust company, or
national banking association (including Escrow Agent and its affiliates); or
(d) any money market fund substantially all of which is invested
in the foregoing investment categories, including any money market fund managed
by Escrow Agent and any of its affiliates.
If Escrow Agent has not received a joint written direction at any time
that an investment decision must be made, Escrow Agent shall invest the
Cash Escrow Account, or such portion thereof as to which no joint
written direction has been received, in investments described in clause
(d) above. Each of the foregoing investments shall be made in the name
of Escrow Agent. No investment shall be made in any instrument or
security that has a maturity of greater than six (6) months.
Notwithstanding anything to the contrary contained herein, Escrow Agent
may, without notice to the Purchaser or the Shareholder Representative,
sell or liquidate any of the foregoing investments at any time if the
proceeds thereof are required for any release of funds permitted or
required hereunder, and Escrow Agent shall not be liable or responsible
for any loss, cost or penalty resulting from any such sale or
liquidation. With respect to any funds received by Escrow Agent for
deposit into the Cash Escrow Account or any joint written direction
received by Escrow Agent with respect to investment of any funds in the
Cash Escrow Account after ten o'clock, a.m., Atlanta, Georgia, time,
Escrow Agent shall not be required to invest such funds or to effect
such investment instruction until the next day upon which banks in
Atlanta, Georgia are open for business.
10. Liability and Authority of Shareholder Representative; Successors
and Assignees.
(a) The Shareholder Representative shall incur no liability to the
Company Shareholders with respect to any action taken or suffered by him in
reliance upon any note, direction, instruction, consent, statement or other
documents believed by him to be genuinely and duly authorized, nor for other
action or inaction except his own willful misconduct or gross negligence. The
Shareholder Representative may, in all questions arising under the Escrow
Agreement, rely on the advice of counsel and for anything done, omitted or
suffered in good faith by the Shareholder Representative based on such advice,
the Shareholder Representatives shall not be liable to the Company Shareholders.
(b) In the event of the death or permanent disability of
Shareholder Representative, or his resignation as a Shareholder Representative,
a successor Shareholder Representative shall be elected by a majority vote of
the Company Shareholders, with each such Company Shareholder (or his or her
successors or assigns) to be given a vote equal to the number of votes
represented by the Escrowed Shares held by such Company Shareholder immediately
prior to the Effective Time. Each successor Shareholder Representative shall
have all of the power, authority, rights and privileges conferred by this
Agreement upon the original Shareholder Representative, and the term
"Shareholder Representative" as used herein shall be deemed to include successor
Shareholder Representatives.
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(c) The Shareholder Representatives shall have full power and
authority to represent the Company Shareholders, and their successors, with
respect to all matters arising under this Agreement and all actions taken by any
Shareholder Representative hereunder shall be binding upon the Company
Shareholder, and their successors, as if expressly confirmed and ratified in
writing by each of them. Without limiting the generality of the foregoing, the
Shareholder Representatives, acting jointly but not singly, shall have full
power and authority to interpret all of the terms and provisions of this
Agreement, to compromise any claims asserted hereunder and to authorize payments
to be made with respect thereto, on behalf of the Company Shareholders and their
successors. All actions to be taken by the Shareholder Representative hereunder
shall be evidenced by, and taken upon, the written direction of a majority
thereof.
11. Amounts Payable by Company Shareholders. The amounts payable by the
Company Shareholders under this Agreement (i.e., the fees and expenses of
arbitrators payable pursuant to Section 18, the fees of the Escrow Agent payable
pursuant to Section 8 and the indemnification obligations pursuant to Sections
16) shall be payable solely as follows. The Purchaser or the Shareholder
Representative shall notify the Escrow Agent of any such amount payable by the
Company Shareholders as soon as they become aware that any such amount is
payable, with a copy of such notice to the Purchaser. On the sixth business day
after the delivery of such notice, the Escrow Agent shall sell such number of
Escrowed Shares (up to the number of Escrowed Shares then available in the
Escrow Account), subject to compliance with all applicable securities laws, as
is necessary to raise such amount, and shall disburse such proceeds to the party
to whom such amount is owed in accordance with the instructions of the
Shareholder Representative; provided that if the Purchaser delivers to the
Escrow Agent (with a copy to the Shareholder Representative), within five
business days after delivery of such notice by the Shareholder Representative, a
written notice contesting the legitimacy or reasonableness of such amount, then
the Escrow Agent shall not sell Escrowed Shares to raise the disputed portion of
such claimed amount, and such dispute shall be resolved by the Purchaser and the
Shareholder Representative in accordance with the procedures set forth in
Section 19.
12. Termination. This Agreement shall terminate upon the distribution
by the Escrow Agent of all of the Escrowed Cash and all of the Escrowed Shares
in accordance with this Agreement; provided that the provisions of Sections 10,
15, 16 and 17 shall survive such termination.
13. Notices. All notices, instructions and other communications given
hereunder or in connection herewith shall be in writing. Any such notice,
instruction or communication shall be sent either (i) by registered or certified
mail, return receipt requested, postage prepaid, or (ii) via a reputable
nationwide overnight courier service, in each case to the address set forth
below. Any such notice, instruction or communication shall be deemed to have
been delivered two business days after it is sent by registered or certified
mail, return receipt requested, postage prepaid, or one business day after it is
sent via a reputable nationwide overnight courier service.
If to the Purchaser and/or the Acquisition Sub:
Tekgraf, Inc.
0000 Xxxx Xxxxxxx Xxxxx
Xxxxx 000
Xxxxxxx, XX 00000
Attn: Xx. Xxxxxxx Xxxxxxx
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If to the Company:
New England Computer Graphics, Inc.
0 Xxxx Xxxxx #0
Xxxxxxxx, Xxxxxxxxxxxxx 00000
If to the Shareholder Representative:
Xxxxx Xxxxxx
0 Xxxx Xxxxx #0
Xxxxxxxx, Xxxxxxxxxxxxx 00000
If to the Escrow Agent:
First Union National Bank
Attn: Corporate Trust - GA9094
000 Xxxxxxxxx Xxxxxx, XX, Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000-0000
Attn: Xx. Xxxxxx X. Xxxxx
Any party may give any notice, instruction or communication in
connection with this Agreement using any other means (including personal
delivery, telecopy or ordinary mail), but no such notice, instruction or
communication shall be deemed to have been delivered unless and until it is
actually received by the party to whom it was sent. Any party may change the
address to which notices, instructions or communications are to be delivered by
giving the other parties to this Agreement notice thereof in the manner set
forth in this Section 13.
14. Resignation and Removal of Escrow Agent. Escrow Agent may resign
from the performance of its duties hereunder at any time by giving ten (10)
days' prior written notice to the Purchaser and the Shareholder Representative
or may be removed, with or without cause, by the Purchaser and the Shareholder
Representative, acting jointly by furnishing a joint written direction to Escrow
Agent, at any time by the giving of ten (10) days' prior written notice to
Escrow Agent. Such resignation or removal shall take effect upon the appointment
of a successor Escrow Agent as provided hereinbelow. Upon any such notice of
resignation or removal, the Purchaser and the Shareholder Representative jointly
shall appoint a successor Escrow Agent hereunder, which shall be a commercial
bank, trust company or other financial institution with a combined capital and
surplus in excess of $5,000,000. Upon the acceptance in writing of any
appointment as Escrow Agent hereunder by a successor Escrow Agent, such
successor Escrow Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Escrow Agent, and the
retiring Escrow Agent shall be discharged from its duties and obligations under
this Escrow Agreement, but shall not be discharged from any liability for
actions taken as Escrow Agent hereunder prior to such succession. After any
retiring Escrow Agent's resignation or removal, the provisions of this Escrow
Agreement shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was Escrow Agent under this Escrow Agreement. The retiring
Escrow Agent shall transmit all records pertaining to the Escrowed Cash and the
Escrowed Shares and shall pay all funds and deliver all shares held by it in the
Cash Escrow Account and the Share Escrow Account to the successor Escrow Agent,
after making copies of such records as the retiring Escrow Agent deems advisable
and after deduction and payment to the retiring Escrow Agent of all fees and
expenses (including court costs and attorneys' fees) payable to, incurred by, or
expected to be incurred by the retiring Escrow Agent in connection with the
performance of its duties and the exercise of its rights hereunder.
15. Liability of Escrow Agent. Escrow Agent shall have no liability or
obligation with respect to the Escrowed Cash or the Escrowed Shares except for
Escrow Agent's willful misconduct or gross negligence. Escrow Agent's sole
responsibility shall be for the safekeeping, investment, and disbursement of the
Escrowed Cash or the Escrowed Shares in accordance with the terms of this Escrow
Agreement. Escrow Agent shall have no implied duties or obligations and shall
not be charged with knowledge or notice of any fact or circumstance not
specifically set forth herein. Escrow Agent may rely upon any instrument, not
only as to its due execution, validity and
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effectiveness, but also as to the truth and accuracy of any information
contained therein, which Escrow Agent shall in good faith believe to be genuine,
to have been signed or presented by the person or parties purporting to sign the
same and to conform to the provisions of this Escrow Agreement. In no event
shall Escrow Agent be liable for incidental, indirect, special, consequential or
punitive damages. Escrow Agent shall not be obligated to take any legal action
or commence any proceeding in connection with the Escrowed Cash or the Escrowed
Shares, any account in which Escrowed Cash or the Escrowed Shares are deposited,
this Escrow Agreement or the Merger Agreement, or to appear in, prosecute or
defend any such legal action or proceeding. Escrow Agent may consult legal
counsel selected by it in the event of any dispute or question as to the
construction of any of the provisions hereof or of any other agreement or of its
duties hereunder, or relating to any dispute involving any party hereto, and
shall incur no liability and shall be fully indemnified from any liability
whatsoever in acting in accordance with the opinion or instruction of such
counsel. Purchaser and the Company Shareholders, jointly and severally, shall
each promptly pay, upon demand, one-half of the reasonable fees and expenses of
any such counsel.
The Escrow Agent is authorized, in its sole
discretion, to comply with orders issued or process entered by any court with
respect to the Escrowed Cash or the Escrowed Shares, without determination by
the Escrow Agent of such court's jurisdiction in the matter. If any portion of
the Escrowed Cash or the Escrowed Shares is at any time attached, garnished or
levied upon under any court order, or in case the payment, assignment, transfer,
conveyance or delivery of any such property shall be stayed or enjoined by any
court order, or in case any order, judgment or decree shall be made or entered
by any court affecting such property or any part thereof, then and in any such
event, the Escrow Agent is authorized, in its sole discretion, to rely upon and
comply with any such order, writ, judgment or decree which it is advised by
legal counsel selected by it is binding upon it without the need for appeal or
other action; and if the Escrow Agent complies with any such order, writ,
judgment or decree, it shall not be liable to any of the parties hereto or to
any other person or entity by reason of such compliance even though such order,
writ, judgment or decree may be subsequently reversed, modified, annulled, set
aside or vacated.
16. Indemnification of Escrow Agent. From and at all times after the
date of this Escrow Agreement, Purchaser and the Company Shareholders, jointly
and severally, shall, to the fullest extent permitted by law and to the extent
provided herein, indemnify and hold harmless Escrow Agent and each director,
officer, employee, attorney, agent and affiliate of Escrow Agent (collectively,
the "Indemnified Parties") against any and all actions, claims (whether or not
valid), losses, damages, liabilities, costs and expenses of any kind or nature
whatsoever (including without limitation reasonable attorneys' fees, costs and
expenses) incurred by or asserted against any of the Indemnified Parties from
and after the date hereof, whether direct, indirect or consequential, as a
result of or arising from or in any way relating to any claim, demand, suit,
action or proceeding (including any inquiry or investigation) by any person,
including without limitation Purchaser and the Company Shareholders, whether
threatened or initiated, asserting a claim for any legal or equitable remedy
against any person under any statute or regulation, including, but not limited
to, any federal or state securities laws, or under any common law or equitable
cause or otherwise, arising from or in connection with the negotiation,
preparation, execution, performance or failure of performance of this Escrow
Agreement or any transactions contemplated herein, whether or not any such
Indemnified Party is a party to any such action, proceeding, suit or the target
of any such inquiry or investigation; provided, however, that no Indemnified
Party shall have the right to be indemnified hereunder for any liability finally
determined by a court of competent jurisdiction, subject to no further appeal,
to have resulted solely from the gross negligence or willful misconduct of such
Indemnified Party. If any such action or claim shall be brought or asserted
against any Indemnified Party, such Indemnified Party shall promptly notify
Purchaser and the Company Shareholders in writing, and Purchaser and the Company
Shareholders shall assume the defense thereof, including the employment of
counsel and the payment of all expenses. Such Indemnified Party shall, in its
sole discretion, have the right to employ separate counsel (who may be selected
by such Indemnified Party in its sole discretion) in any such action and to
participate in the defense thereof, and the fees and expenses of such counsel
shall be paid by such Indemnified Party, except that Purchaser and/or the
Company Shareholders shall be required to pay such fees and expenses if (a)
Purchaser and/or the Company Shareholders agree to pay such fees and expenses,
or (b) Purchaser and/or the Company Shareholders shall fail to assume the
defense of such action or proceeding or shall fail, in the sole discretion of
such Indemnified Party, to employ counsel satisfactory to the Indemnified Party
in any such action or proceeding, (c) Purchaser or the Company Shareholders is
the plaintiff in any such action or proceeding or (d) the named or potential
parties to any such action or proceeding (including any potentially impleaded
parties) include both Indemnified Party and the Company Shareholders and/or
Purchaser, and
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Indemnified Party shall have been advised by counsel that there may be one or
more legal defenses available to it which are different from or additional to
those available to the Company Shareholders or Purchaser. Purchaser and the
Company Shareholders shall be jointly and severally liable to pay fees and
expenses of counsel pursuant to the preceding sentence, except that any
obligation to pay under clause (a) shall apply only to the party so agreeing.
All such fees and expenses payable by the Company Shareholders and/or Purchaser
pursuant to the foregoing sentence shall be paid from time to time as incurred,
both in advance of and after the final disposition of such action or claim. All
of the foregoing losses, damages, costs and expenses of the Indemnified Parties
shall be payable by Purchaser and the Company Shareholders, jointly and
severally, upon demand by such Indemnified Party. The obligations of Purchaser
and the Company Shareholders under this Section 16 shall survive any termination
of this Escrow Agreement, and the resignation or removal of Escrow Agent shall
be independent of any obligation of the Escrow Agent.
The parties agree that neither the payment by Purchaser or the
Company Shareholders of any claim by Escrow Agent for indemnification hereunder
nor the disbursement of any amounts to Escrow Agent from the Cash Escrow Account
or the Share Escrow Account in respect of a claim by Escrow Agent for
indemnification shall impair, limit, modify, or affect, as between Purchaser and
the Company Shareholders, the respective rights and obligations of Purchaser, on
the one hand, and the Company Shareholders, on the other hand, under the
Underlying Agreement.
17. General.
(a) Governing Law, Assigns. This Agreement shall be governed by
and construed in accordance with the internal laws of the State of Georgia
without regard to conflict-of-law principles and shall be binding upon, and
inure to the benefit of, the parties hereto and their respective successors and
assigns.
(b) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(c) Entire Agreement. Except for those provisions of the Merger
Agreement referenced herein, this Agreement constitutes the entire understanding
and agreement of the parties with respect to the subject matter of this
Agreement and supersedes all prior agreements or understandings, written or
oral, between the parties with respect to the subject matter hereof.
(d) Waivers. No waiver by any party hereto of any condition or of
any breach of any provision of this Escrow Agreement shall be effective unless
in writing. No waiver by any party of any such condition or breach, in any one
instance, shall be deemed to be a further or continuing waiver of any such
condition or breach or a waiver of any other condition or breach of any other
provision contained herein.
(e) Amendment. This Agreement may be amended only with the written
consent of the Purchaser, the Escrow Agent and the Shareholder Representative.
18. Arbitration; Attorneys' Fees.
(a) The parties agree to use reasonable efforts to resolve any
dispute arising out of this Agreement, but should a dispute remain unresolved
ten (10) days following notice of the dispute to the other party (but in no
event prior to said ten (10) days, except as specifically provided otherwise
herein), such dispute shall be finally settled by binding arbitration in
Atlanta, Georgia in accordance with the then current Commercial Arbitration
Rules of the American Arbitration Association (the "AAA") or such other
mediation or arbitration service as shall be mutually agreeable to the parties,
and judgment upon the award rendered by the arbitrator shall be final and
binding on the parties and may be entered in any court having jurisdiction
thereof; provided, however, that any party shall be entitled to appeal a
question of law or determination of law to a court of competent jurisdiction;
and provided, further, however, that the parties may first seek appropriate
injunctive relief prior to, and/or in addition to pursuing negotiation or
arbitration. Such arbitration shall be conducted by an arbitrator chosen by
mutual agreement of the parties, or failing such agreement, an arbitrator
appointed by the AAA. There shall be limited discovery prior to the
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arbitration hearing 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 arbitrator upon a showing of good cause.
Depositions shall be conducted in accordance with the Georgia Code of Civil
Procedure and questions of evidence in all hearings shall be resolved in
accordance with the Federal Rules of Evidence. The arbitrator shall be required
to provide in writing to the parties the basis for the award or order of such
arbitrator, and a court reporter shall record all hearings (unless otherwise
agreed to by the parties), with such record constituting the official transcript
of such proceedings.
(b) In the event of arbitration or litigation filed or instituted
between the parties with respect to this Agreement, the prevailing party will be
entitled to receive from the other party all costs, damages and expenses,
including reasonable attorney's fees, incurred by the prevailing party in
connection with that action or proceeding whether or not the controversy is
reduced to judgment or award. The prevailing party will be that party who may be
fairly said by the arbitrator(s) or the court to have prevailed on the major
disputed issues.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the day and year first above written.
PURCHASER
TEKGRAF, INC.
By: /s/ Xxx X. Xxxxxx
---------------------------------
Xxx X. Xxxxxx, President
ACQUISITION SUB:
TEKGRAF SUB II, INC.
By: /s/ Xxxxxxx Xxxxxxx
----------------------------------
Xxxxxxx Xxxxxxx, Chairman
ESCROW AGENT
FIRST UNION NATIONAL BANK
By: /s/ Xxxxxx X. Xxxxx
---------------------------------
Name: Xxxxxx X. Xxxxx
Title: Vice President
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SHAREHOLDER REPRESENTATIVE:
By: /s/ Xxxxx Xxxxxx
--------------------------------------
Xxxxx Xxxxxx
COMPANY:
NEW ENGLAND COMPUTER GRAPHICS, INC.
By: /s/ Xxxxx Xxxxxx (SEAL)
---------------------------------
Xxxxx Xxxxxx, President
COMPANY SHAREHOLDERS:
/s/ A. Xxxxxx Xxxxxxxxx (SEAL)
------------------------------------
A. Xxxxxx Xxxxxxxxx
/s/ Xxxxxxx Xxxxxx (SEAL)
------------------------------------
Xxxxxxx Xxxxxx
/s/ Xxxxxx Xxxx (SEAL)
------------------------------------
Xxxxxx Xxxx
/s/ Xxxxx Xxxxxx (SEAL)
------------------------------------
Xxxxx Xxxxxx
/s/ Xxxxxx Xxxxxxxx (SEAL)
------------------------------------
Xxxxxx Xxxxxxxx
/s/ Xxxxxx Xxxxx (SEAL)
------------------------------------
Xxxxxx Xxxxx
/s/ Xxxxx Xxxxxx (SEAL)
------------------------------------
Xxxxx Xxxxxx
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EXHIBIT B
---------
Company Shareholder NECG Shares Percentage
------------------- ----------- ----------
A. Xxxxxx Xxxxxxxxx 5000 27.33%
C/o Tekgraf, Inc.
000 Xxxx Xxxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Xxxxxxx Xxxxxx 2500 13.66%
C/o Tekgraf, Inc.
000 Xxxxxxxxx Xxxxx Xxxxxxx
Xxxxxx Xxxxx, XX 00000
Xxxxxx Xxxx 2500 13.66%
C/o Tekgraf, Inc.
000 Xxxxxxxxx Xxxxx Xxxxxxx
Xxxxxx Xxxxx, XX 00000
Xxxxx Xxxxxx 3293 18.00%
C/o New England Computer Graphics, Inc.
0 Xxxx Xxxxx #0
Xxxxxxxx, XX 00000
Xxxxx Xxxxxx 4000 21.87%
0000 Xxxx Xxxxxx Xxxx
Xxxxxxxxxx, XX 00000
Xxx Xxxxxxxx 500 2.73%
0000 Xxxxxxxxxx Xxxxx
Xxxxxxxxxxxx, XX 00000
Xxx Xxxxx 500 2.73%
000 Xxxxxxxxx Xxxxx
Xxxxxxx, XX 00000
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