EXHIBIT 2.2
ESCROW AGREEMENT
This Escrow Agreement (this "Agreement") is entered into as of April 1st,
1998, by and among TEKGRAF, INC., a Georgia 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 "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 (the "Merger Agreement") by and among the Company, the Company
Shareholders, Acquisition Sub and the Purchaser.
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
Representatives 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 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 Warranty.
(a) Escrow of Cash. On the Closing Date, the Purchaser shall deposit
with the Escrow Agent $100,000 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 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 Representatives shall have the
right, in their 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 Representatives 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:
(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 Representatives 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 promptly after the Termination Date, and shall be
delivered by the Purchaser to the Company Shareholders to whom such shares
would have otherwise been distributed upon surrender of their respective
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, on the one hand,
and the Company 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.
9. Investment of Funds. Escrow Agent shall invest and reinvest the
funds held in the Cash Escrow Account as the Shareholder Representatives 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 Representatives, 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 Representatives; Successors
and Assignees.
(a) The Shareholder Representatives shall incur no liability to the
Company 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 Shareholder 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 Shareholder Representatives 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 either
Shareholder Representative, or his resignation as a Shareholder Representative,
a successor Shareholder Representative shall be appointed by the other
Shareholder Representative or, absent its appointment, 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 Company 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
Representatives, and the term "Shareholder Representatives" as used herein
shall be deemed to include successor Shareholder Representatives.
(c) The Shareholder Representatives, acting jointly but not singly, 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 Shareholders, 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
Representatives 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 19, the fees of the Escrow Agent
payable pursuant to Section 8 and the indemnification obligations pursuant to
Sections 9(b)) shall be payable solely as follows. The Shareholder
Representatives 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 Representatives; provided that if the Purchaser delivers to the
Escrow Agent (with a copy to the Shareholder Representatives), within five
business days after delivery of such notice by the Shareholder Representatives,
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 Representatives 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, 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 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 Shareholder Representative:
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 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 Representatives
or may be removed, with or without cause, by the Purchaser and the Shareholder
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 Shareholder
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 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.
(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.
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 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. 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 10 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 17
shall survive any termination of this Escrow Agreement and the resignation or
removal of Escrow Agent.
18. 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 Representatives.
19. 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 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 I, INC.
By: /s/ Xxxxxxx Xxxxxxx
___________________________________
Xxxxxxx Xxxxxxx, Chairman
ESCROW AGENT:
FIRST UNION NATIONAL BANK
By: ___________________________________
Name: Xxxxxx X. Xxxxx
Title: Vice President
SHAREHOLDER REPRESENTATIVE:
/s/ Xxxxx Xxxxxx
______________________________________(SEAL)
Xxxxx Xxxxxx
COMPANY:
COMPUTER GRAPHICS TECHNOLOGY, INC.
By: /s/ Xxxxx Xxxxxx
___________________________________
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
Company Shareholder Percentage
Xxxxx Xxxxxx 78%
Xxx Xxxxxxxx 11%
Xxx Xxxxx 11%
