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EXHIBIT 10.35
PLEDGE, SECURITY AND ESCROW AGREEMENT
This Pledge, Security and Escrow Agreement (this "Agreement") is
entered into as of May 8, 1998, by and among TEKGRAF, INC., a Delaware
corporation (the "Purchaser"), TEKGRAF SUB III, INC. ("Acquisition Sub"), NEW
ENGLAND COMPUTER GRAPHICS, INC., a Massachusetts corporation (the "Company"), A.
Xxxxxx Xxxxxxxxx, Xxxxxxx Xxxxxx, Xxxxx Xxxxxx, Xxxxxx Xxxxxxxx, Xxxxxx Xxxxx,
Xxxxxx Xxxx, and Xxxxx Xxxxxx (the "Company Shareholders"), and Xxxxx Xxxxxx
(the "Indemnification 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 to Agreement and Plan of Merger, dated as of March
30, 1998 (the "Merger Agreement").
WHEREAS, the Merger Agreement provides that an escrow account will be
established to secure the Company's and the Company Shareholders'
indemnification obligations to the Indemnified Parties under 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 account 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 shares of Purchaser Common Stock pursuant to the
Merger Agreement (the "Indemnifying Shareholders") have, without any further act
of any Company Stockholder, consented to: (a) the establishment of this escrow
to secure the Company Shareholders' indemnification obligations under Article V
of the Merger Agreement in the manner set forth herein and therein, (b) the
appointment of the Indemnification Representative as their representatives for
purposes of this Agreement and as attorneys-in-fact and agents for and on behalf
of each Indemnifying Shareholder, and the taking by the Indemnification
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 Indemnification.
(a) Escrow of Shares. On the Closing Date, the Purchaser shall
deposit with the Escrow Agent a certificate for the number of Purchaser Shares
specified in Section 5.6 of the Merger Agreement (the "Escrow Shares"), issued
in the name of the Escrow Agent or its nominee. In addition, 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 shares of Purchaser common stock held in the escrow account
established by Section 1.3(e) of the Merger Agreement shall be transferred into
the escrow
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account created pursuant to this Escrow Agreement (the "Transferred Shares"), to
be treated in all respects as Escrow Shares hereunder and the Transferred Shares
shall be distributed to the Company Shareholders pursuant to Section 5(a)
hereof. The Escrow 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 Escrow Agent agrees to accept delivery of the
Escrow Shares and to hold the Escrow Shares in an escrow account (the "Escrow
Account"), subject to the terms and conditions of this Agreement.
(b) Indemnification. The Indemnifying Shareholders have agreed in
Article V of the Merger Agreement to indemnify and hold harmless the Indemnified
Parties from and against specified Damages. The Escrow Shares shall be security
for such indemnity obligation of the Indemnifying Shareholders, subject to the
limitations, and in the manner provided, in this Agreement.
(c) Dividends, Etc. Any securities distributable to the
Indemnifying Shareholders in respect of or in exchange for any of the Escrow
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 Escrow
Account. Such securities shall be issued in the name of the Escrow Agent or its
nominee and shall be considered Escrow Shares for purposes hereof. Any cash
dividends distributable to the Indemnifying Shareholders in respect of the
Escrow Shares shall be distributed to the Indemnifying Shareholders.
(d) Voting of Shares. The Indemnification Representative shall
have the right, in his sole discretion, on behalf of the Indemnifying
Shareholders, to direct the Escrow Agent in writing as to the exercise of any
voting rights pertaining to the Escrow 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 Escrow Shares.
(e) Transferability. The respective interests of the Indemnifying
Shareholders in the Escrow 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.
4. Administration of Escrow Account. The Escrow Agent shall
administer the Escrow Account as follows:
(a) If an Indemnified Party has incurred or suffered Damages for
which it is entitled to indemnification under Article V of the Merger Agreement,
the Indemnified Party shall, on or before the date of the expiration of the
representation, warranty, covenant or agreement to which such claim relates,
give written notice of such claim (a "Claim Notice") to the Indemnification
Representative and the Escrow Agent. Each Claim Notice shall state the amount of
claimed Damages (the "Claimed Amount") and the basis for such claim.
(b) Within 20 days after delivery of a Claim Notice, the
Indemnification Representative shall provide to the Indemnified Party, with a
copy to the Escrow Agent, a written response (the "Response Notice") in which
the Indemnification Representative shall: (i) agree that Escrow Shares having a
Fair Market Value (as computed pursuant to Section 6) equal to the full Claimed
Amount may be released from the Escrow Account to the Indemnified Party, (ii)
agree that Escrow Shares having a Fair Market Value equal to part, but not all,
of the Claimed Amount (the "Agreed Amount") may be released from the Escrow
Account to the Indemnified Party or (iii) contest that any of the Escrow Shares
may be released from the Escrow Account to the Indemnified Party. The
Indemnification Representative may contest the release of Escrow Shares having a
Fair Market Value equal to all or a portion of the Claimed Amount only based
upon a good faith belief that all or such portion of the Claimed Amount does not
constitute Damages for which the Indemnified Party is entitled to
indemnification under Article V of the Merger Agreement. If no Response Notice
is delivered by the Indemnification Representative within such 20-day period,
the Indemnification Representative shall be deemed to have agreed that Escrow
Shares having a Fair Market
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value equal to all of the Claimed Amount may be released to the Indemnified
Party from the Escrow Account.
(c) If the Indemnification Representative in the Response Notice
agrees (or is deemed to have agreed) that Escrow Shares having a Fair Market
Value equal to all of the Claimed Amount may be released from the Escrow Account
to the Indemnified Party, the Escrow Agent shall, promptly following the earlier
of the required delivery date for the Response Notice or the delivery of the
Response Notice, transfer, deliver and assign to the Indemnified Party such
number of Escrow Shares held in the Escrow Account which have a Fair Market
Value equal to the Claimed Amount (or such lesser number of Escrow Shares as is
then held in the Escrow Account).
(d) If the Indemnification Representative in the Response Notice
agrees that Escrow Shares having a Fair Market Value equal to part, but not all,
of the Claimed Amount may be released from the Escrow Account to the Indemnified
Party, the Escrow Agent shall promptly following the delivery of the Response
Notice transfer, deliver and assign to the Indemnified Party such number of
Escrow Shares held in the Escrow Account which have a Fair Market Value equal to
the Agreed Amount (or such lesser number of Escrow Shares as is then held in the
Escrow Account). A determination with respect to the remainder of the Claimed
Amount shall be made in accordance with subsection 4(e) below.
(e) If the Indemnification Representative in the Response Notice
contests the release of Escrow Shares having a Fair Market Value equal to all or
part of the Claimed Amount (the "Contested Amount"), the matter shall be settled
by binding arbitration in Atlanta, Georgia. All claims shall be settled by three
arbitrators in accordance with the Commercial Arbitration Rules then in effect
of the American Arbitration Association (the "AAA Rules"). The Indemnification
Representative and the Indemnified Party shall each designate one arbitrator
within 15 days of the delivery of the Indemnification Representative's Response
Notice contesting the Claimed Amount. The Indemnification Representative and the
Indemnified Party shall cause such designated arbitrators mutually to agree upon
and designate a third arbitrator; provided, however, that (i) failing such
agreement within 45 days of delivery of the Indemnification Representative's
Response Notice, the third arbitrator shall be appointed in accordance with the
AAA Rules and (ii) if either the Indemnification Representatives or the
Indemnified Party fail to timely designate an arbitrator, the dispute shall be
resolved by the one arbitrator timely designated. The Indemnifying Shareholders
and the Indemnified Party shall pay the fees and expenses of their respectively
designated arbitrators and shall bear equally the fees and expenses of the third
arbitrator. The Indemnification Representative and the Indemnified Party shall
cause the arbitrators to decide the matter to be arbitrated pursuant hereto
within 60 days after the appointment of the last arbitrator. The arbitrators'
decision shall relate solely to whether the Indemnified Party is entitled to
receive the Contested Amount (or a portion thereof) pursuant to the applicable
terms of the Merger Agreement and this Agreement. The final decision of the
majority of the arbitrators shall be furnished to the Indemnification
Representative, the Indemnified Party and the Escrow Agent in writing and shall
constitute a conclusive determination of the issue in question, binding upon the
Indemnification Representative, the Indemnifying Shareholders, the Indemnified
Party and the Escrow Agent, and shall not be contested by any of them. Such
decision may be used in a court of law only for the purpose of seeking
enforcement of the arbitrators' award. After delivery of a Response Notice that
the Claimed Amount is contested by the Indemnification Representative, the
Escrow Agent shall continue to hold in the Escrow Account a number of Escrow
Shares having a Fair Market Value sufficient to cover the Contested Amount (up
to the number of Escrow Shares then available in the Escrow Account),
notwithstanding the occurrence of the Termination Date (as hereinafter defined),
until (i) delivery of a copy of a settlement agreement executed by the
Indemnified Party and the Indemnification Representative setting forth
instructions to the Escrow Agent as to the release of Escrow Shares, if any,
that shall be made with respect to the Contested Amount or (ii) delivery of a
copy of the final award of the majority of the arbitrators setting forth
instructions to the Escrow Agent as to the release of Escrow Shares, if any,
that shall be made with respect to the Contested Amount. The Escrow Agent shall
thereupon release Escrow Shares from the Escrow Account (to the extent Escrow
Shares are then held in the Escrow Account) in accordance with such agreement or
instructions; provided, however, if the claim related to a third party claim the
amount of which is contested and the subject of litigation, the Escrow
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Agent shall not release the Escrow Shares being held in connection with the
Contested Amount of such third party claim until a final order or other final
resolution or settlement has been entered or reached in the underlying
litigation determining the amount of such claim, whereupon the Escrow Agent
shall release Escrow Shares from the Escrow Account (to the extent Escrow Shares
are then held in the Escrow Account) in accordance with such final order or
final resolution or settlement.
5. Release of Escrow Shares.
(a) In the event that 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, one half of the Transferred Shares
shall be distributed to the Indemnifying Shareholders on the first anniversary
of the Closing Date. Promptly after the Termination Date, the Escrow Agent shall
distribute to the Indemnifying Shareholders all of the Escrow Shares (including
any remaining Transferred Shares) then held in escrow. Notwithstanding the
foregoing, if an Indemnified Party has previously given a Claim Notice which has
not then been resolved in accordance with Section 4, the Escrow Agent shall
retain in the Escrow Account after the Termination Date a number of Escrow
Shares (including Transferred Shares if necessary) having a Fair Market Value
equal to the Claimed Amount covered by any Claim Notice which has not then been
resolved. Any funds so retained in escrow shall be disbursed in accordance with
the terms of the resolution of such claims.
(b) Any distribution of all or a portion of the Escrow Shares to
the Indemnifying 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 Escrow Shares otherwise distributable to Indemnifying
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 shares shall be delivered to the Purchaser promptly after the
Termination Date, and shall be delivered by the Purchaser to the Indemnifying
Shareholders to whom such shares would have otherwise been distributed upon
surrender of their respective Certificates. Distributions to the Indemnifying
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). No fractional
Escrow Shares shall be distributed to Indemnifying Shareholders pursuant to this
Agreement. Instead, the number of shares that each Indemnifying Shareholder
shall receive shall be rounded down to the nearest whole number; and the Escrow
Agent shall sell such number of Escrow Shares as is equal to the aggregate of
the fractional shares that would otherwise be distributed to the Indemnifying
Shareholders and shall distribute the proceeds of such sale to the Indemnifying
Shareholders other-wise entitled to a fractional Escrow Share pro rata based
upon the fraction of an Escrow Shares to which each such Indemnifying
Shareholder is otherwise entitled.
6. Valuation of Escrow Shares. For purposes of this Agreement,
the Fair Market Value of the Escrow Shares to be retained in the Escrow Account
pending a final resolution of a claim shall be determined based upon the average
of the closing prices of the Purchaser Common Stock on the Nasdaq National
Market System for the twenty trading days immediately preceding the date on
which the claim is made. The Fair Market Value of the Escrow Shares to be
released from the Escrow Account after a final determination/resolution of a
claim 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/resolution.
7. Fees and Expenses of Escrow Agent. The Purchaser and the
Company Shareholders as a group shall each pay one-half of the amounts required
to compensate Escrow Agent for its services hereunder and, in addition, shall
each pay one-half of the amounts required to 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 7
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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 7 shall survive any termination
of this Escrow Agreement and the resignation or removal of Escrow Agent.
8. Liability and Authority of Indemnification Representative;
Successors and Assignees.
(a) The Indemnification Representative shall incur no liability to
the Indemnifying Shareholders with respect to any action taken or suffered by
them in reliance upon any note, direction, instruction, consent, statement or
other documents believed by them to be genuinely and duly authorized, nor for
other action or inaction except their own willful misconduct or gross
negligence. The Indemnification 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 Indemnification Representative based on
such advice, the Indemnification Representative shall not be liable to the
Indemnifying Shareholders.
(b) In the event of the death or permanent disability of the
Indemnification Representative, or his resignation as an Indemnification
Representative, a successor Indemnification Representative shall be elected by a
majority vote of the Indemnifying Shareholders, with each such Indemnifying
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 Indemnifying
Shareholder immediately prior to the Effective Time. Each successor
Indemnification Representative shall have all of the power, authority, rights
and privileges conferred by this Agreement upon the original Indemnification
Representative, and the term "Indemnification Representative" as used herein
shall be deemed to include successor Indemnification Representatives.
(c) The Indemnification Representative shall have full power and
authority to represent the Indemnifying Shareholders, and their successors, with
respect to all matters arising under this Agreement and all actions taken by any
Indemnification Representative hereunder shall be binding upon the Indemnifying
Shareholders, and their successors, as if expressly confirmed and ratified in
writing by each of them. Without limiting the generality of the foregoing, the
Indemnification Representative 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 Indemnifying Shareholders and their successors. All actions to be
taken by the Indemnification Representative hereunder shall be evidenced by, and
taken upon, the written direction of a majority thereof.
9. Amounts Payable by Indemnifying Shareholders. The amounts
payable by the Indemnifying Shareholders under this Agreement (i.e., the fees
and expenses of arbitrators payable pursuant to Section 4(e), the fees of the
Escrow Agent payable pursuant to Section 7 and the indemnification obligations
pursuant to Section 13) shall be payable solely as follows. The Purchaser or the
Indemnification Representative shall notify the Escrow Agent of any such amount
payable by the Indemnifying 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 Escrow Shares (up to the number of Escrow 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 Indemnification Representative; provided that if the
Purchaser delivers to the Escrow Agent (with a copy to the Indemnification
Representative), within five business days after delivery of such notice by the
Indemnification Representative, a written notice contesting the legitimacy or
reasonableness of such amount, then the Escrow Agent shall not sell Escrow
Shares to raise the disputed portion of such claimed amount, and such dispute
shall be resolved by the Purchaser and the Indemnification Representative in
accordance with the procedures set forth in Section 4(e).
10. Termination. This Agreement shall terminate upon the later of
the date which is eighteen (18) months after the Date of Closing (the
"Termination Date") or the distribution by the Escrow Agent of
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all of the Escrow Shares in accordance with this Agreement; provided that the
provisions of Sections 4, 5, 7, 8, 9, 12 and 13 shall survive such termination.
11. 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, Xxxxxxx 00000
Attn: Xx. Xxxxxxx Xxxxxxx
If to the Company:
New England Computer Graphics, Inc.
0 Xxxx Xxxxx #0
Xxxxxxxx, Xxxxxxxxxxxxx 00000
Attn: Mr. Xxxxx Xxxxxx
If to the Indemnification Representatives:
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 12.
12. Liability of Escrow Agent.
(a) 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
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not specifically set forth herein. Escrow Agent may rely upon any instrument,
not only as to its due execution, validity and 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.
b. 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.
13. 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
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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 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 13 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.
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 Indemnification
Representative or may be removed, with or without cause, by the Purchaser and
the Indemnification 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 Indemnification
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
Shares and shall deliver all shares held by it in 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. 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
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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.
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(e) Amendment. This Agreement may be amended only with the
written consent of the Purchaser, the Escrow Agent and the Indemnification
Representative.
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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INDEMNIFICATION 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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