EXHIBIT 2.3
PLEDGE, SECURITY AND ESCROW AGREEMENT
This Pledge, Security and Escrow Agreement (this "Agreement") is entered
into as of April 1, 1998, by and among TEKGRAF, INC., a Delaware corporation
(the "Purchaser"), TEKGRAF SUB I, INC. ("Acquisition Sub"), COMPUTER GRAPHICS
TECHNOLOGY, INC., a South Carolina corporation (the "Company"), Xxxxx Xxxxxx,
Xxxxxx Xxxxxxxx, Xxxxxx Xxxxx (the "Company Shareholders"), and Xxxxx Xxxxxx
(the "Indemnification Representatives") 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 (the "Merger Agreement") by and among the Company, the Company
Shareholders, Acquisition Sub and the Purchaser.
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 Representatives 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 Representatives of any and all actions and the making of
any decisions required or permitted to be taken or made by them 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 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 Representatives shall have the
right, in their 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
Representatives and the Escrow Agent. Each Claim Notice shall state the amount
of claimed Damages (the "Claimed Amount") and the basis for such claim. The
date which is eighteen (18) months after the Date of Closing.
(b) Within 20 days after delivery of a Claim Notice, the Indemnification
Representatives shall provide to the Indemnified Party, with a copy to the
Escrow Agent, a written response (the "Response Notice") in which the
Indemnification Representatives 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 Representatives 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 Representatives within such 20-day period,
the Indemnification Representatives shall be deemed to have agreed that Escrow
Shares having a Fair Market Value equal to all of the Claimed Amount may be
released to the Indemnified Party from the Escrow Account.
(c) If the Indemnification Representatives in the Response Notice agree
(or are 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 Representatives in the Response Notice agree
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 Representatives in the Response Notice contest
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
Representatives and the Indemnified Party shall each designate one arbitrator
within 15 days of the delivery of the Indemnification Representatives' Response
Notice contesting the Claimed Amount. The Indemnification Representatives 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 Representatives'
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 Representatives 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 Representatives, the Indemnified Party and the
Escrow Agent in writing and shall constitute a conclusive determination of the
issue in question, binding upon the Indemnification Representatives, 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 Representatives, 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,
until (i) delivery of a copy of a settlement agreement executed by the
Indemnified Party and the Indemnification Representatives 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 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, on the one hand,
and the Indemnifying Shareholders, on the other hand, shall each pay one-half
of the fees of the Escrow Agent for the services to be rendered by the Escrow
Agent hereunder.
8. Liability and Authority of Indemnification Representatives;
Successors and Assignees.
(a) The Indemnification Representatives 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 Representatives 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 Representatives based on such
advice, the Indemnification Representatives shall not be liable to the
Indemnifying Shareholders.
(b) In the event of the death or permanent disability of either
Indemnification Representative, or his resignation as an Indemnification
Representative, a successor Indemnification Representative shall be appointed
by the other Indemnification Representative or, absent its appointment, 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 Company 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 Representatives,
and the term "Indemnification Representatives" as used herein shall be deemed
to include successor Indemnification Representatives.
(c) The Indemnification Representatives, acting jointly but not singly,
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 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 Indemnifying Shareholders and their successors. All actions to be taken
by the Indemnification Representatives 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
Sections 8(b)) shall be payable solely as follows. The Indemnification
Representatives 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 Representatives; provided that if the Purchaser delivers to the
Escrow Agent (with a copy to the Indemnification Representatives), within five
business days after delivery of such notice by the Indemnification
Representatives, 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 Representatives in accordance with the
procedures set forth in Section 4(e).
10. Termination. This Agreement shall terminate upon the later of the
Termination Date or the distribution by the Escrow Agent of all of the Escrow
Shares in accordance with this Agreement; provided that the provisions of
Sections 8 and 9 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 Xxxxxxx Xxxxxxxxx Xxxxx, Xxxxx X
Xxxxxxxx, Xxxxxxx 00000
If to the Company:
Computer Graphics Technology, Inc.
0000 Xxxx Xxxxxx Xxxx
Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000
If to the Indemnification Representatives:
Xxxxx Xxxxxx
0000 Xxxx Xxxxxx Xxxx
Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000
If to the Escrow Agent:
First Union National Bank
Attn: Corporate Trust - GA9094
000 Xxxxxxxxx Xxxxxx, XX, Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000-0000
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 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 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. Fees and Expenses of Escrow Agent. 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 14 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 14
shall survive any termination of this Escrow Agreement and the resignation or
removal of Escrow Agent.
15. 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
Representatives or may be removed, with or without cause, by the Purchaser and
the Indemnification Representatives, 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 Representatives 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.
16. 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 Indemnification
Representatives.
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 I, INC.
By: /s/ Xxxxxxx Xxxxxxx
___________________________________
Xxxxxxx Xxxxxxx, Chairman
ESCROW AGENT
FIRST UNION NATIONAL BANK
By: ___________________________________
Name: Xxxxxx X. Xxxxx
Title: Vice President
INDEMNIFICATION REPRESENTATIVE
/s/ Xxxxx Xxxxxx
___________________________________(SEAL)
Xxxxx Xxxxxx
COMPANY:
COMPUTER GRAPHICS TECHNOLOGY, INC.
/s/ Xxxxx Xxxxxx
By: ___________________________________
Xxxxx Xxxxxx, President
COMPANY SHAREHOLDERS:
/s/ Xxxxx Xxxxxx
___________________________________(SEAL)
Xxxxx Xxxxxx
/s/ Xxxxxx Xxxxxxxx
___________________________________(SEAL)
Xxxxxx Xxxxxxxx
/s/ Xxxxxx Xxxxx
___________________________________(SEAL)
Xxxxxx Xxxxx
EXHIBIT B
Indemnifying Shareholder Percentage
Xxxxx Xxxxxx 78%
Xxx Xxxxxxxx 11%
Xxx Xxxxx 11%
