Exhibit 2(b)
SUPPLEMENTAL AGREEMENT
This Supplemental Agreement dated as of June 16, 1998 is among Scan-
Optics, Inc., a Delaware corporation ("Buyer"), and each of ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇") and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇. ("▇▇▇▇▇▇▇" and together
with ▇▇▇▇▇▇▇, "Sellers"). Buyer and Sellers hereby agree as follows.
1. Reference to Purchase Agreement; Definitions. Reference is made
to the Stock Purchase Agreement dated as of May 21, 1998 among Buyer and
Sellers (the "Purchase Agreement"). Except as otherwise provided herein,
capitalized terms used herein and not otherwise defined are used as defined
in the Purchase Agreement as supplemented hereby.
2. Escrow Adjustment Amount. Buyer and Sellers agree that the
Escrow Adjustment Amount is minus $871,020.
3. Agreements of Buyer. In consideration of the agreements of
Sellers contained in this Supplemental Agreement, Buyer hereby agrees that:
3.1. The Company will be a wholly-owned subsidiary of Buyer at
least until the IBML Escrow Release Date, which shall be the earlier of (i)
the full and final performance by the Company of its obligations pursuant
to the United States State Department Contract referred to in Section 4.3
below or (ii) the effective date of any agreement between Buyer and Imaging
Business Machines, L.L.C. ("IBML") pursuant to which IBML will sell
Scanners (such term being used herein as defined in Exhibits B and C to the
Escrow Agreement) to Buyer (a) on substantially the terms set forth in the
IBML Distributor Agreement dated as of July 2, 1996, as amended by the
First Amendment to IBML & SCS Distributor Agreement dated effective January
23, 1998, between IBML and the Company or (b) on such other terms has may
be agreed upon by Buyer and IBML. Buyer will provide Sellers and the
Escrow Agent (such term being used herein as defined in the Escrow
Agreement) with written notice of the IBML Escrow Release Date. Buyer
agrees that, prior to such date, it will cause the Company (1) to use its
best efforts to comply with the terms of the United States ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ # ▇▇-▇▇▇-▇▇▇▇▇ dated February 2, 1998 (the "GSA Contract") between
the Company and the United States General Services Administration (the
"GSA") and (2) to continue, at the GSA's request, to hold Scanners
purchased by the GSA, at no additional charge, until the GSA is ready for
their installation.
3.2. The certificate referred to in Section 2.4(a)(v) of the
Purchase Agreement may state that:
(i) solely as a result of, and to the extent affected by,
secured loans in the aggregate principal amount of $500,000
made by Buyer to the Company, the representations and
warranties of the Sellers in Sections 3.10, 3.16(j),
3.16(k), 3.17(d)(i) & (iii) are not accurate as of the
Closing Date; and
(ii) solely as a result of, and to the extent affected by, a
claim against the Company by Overnite Transportation Company
for $500,000 (the "Overnite Claim"), the representations and
warranties of the Sellers in Sections 3.12, 3.17(d)(iii),
3.17(d)(iv) and 3.17(e) of the Purchase Agreement are
inaccurate, and additional representations and warranties of
the Sellers may be inaccurate.
The condition to closing in Section 7.1(a) is hereby waived solely
with respect to the inaccuracies referred to in clauses (i) and (ii) above.
Any right to indemnification or other remedy based on Sellers' failure to
comply with such condition to closing with respect to the inaccuracies
referred to in clause (i) above is also hereby waived. Sellers acknowledge
and confirm that, notwithstanding the waiver of the condition to closing
with respect to the inaccuracies referred to in clause (ii) above, Buyer
has the right pursuant to the Purchase Agreement to be indemnified by
Sellers with respect to the Overnite Claim.
3.3. As part of their consulting services pursuant to the Consulting
and Noncompetition Agreements, and subject to Buyer's approval, Sellers may
(i) assist Buyer in its negotiations with IBML regarding sales of Scanners
to Buyer during the term of the GSA Contract and (ii) assist the Company in
its negotiations with Overnite Transportation Company regarding the
Overnite Claim. The resolution of these negotiations shall be on terms
reasonably satisfactory to Buyer and Sellers.
3.4. The conditions to closing in Sections 7.3 and 7.5(b), and the
condition to closing in Section 7.9 regarding offer letters, are hereby
waived.
3.5. Buyer hereby extends until June 30, 1998 the Sellers' option
pursuant to Section 2.5 of the Purchase Agreement to purchase the life
insurance policies described in such Section 2.5.
3.6. Buyer agrees to cause the Company to reimburse ▇▇▇▇▇▇▇ for his
unpaid business expenses accrued prior to the Closing Date in connection
with his employment by the Company; provided, however, that ▇▇▇▇▇▇▇ will
submit to the Company by June 30, 1998 reports of such expenses and
receipts for amounts in excess of $25; and provided, further that such
amounts will be shown as accrued expenses on the Company's financial
statements as of the Closing Date.
4. Agreements of Sellers. The Sellers hereby agree that:
4.1. The condition to closing in Section 8.3 is hereby waived.
4.2. The Escrow Agreement shall be substantially in the form of
Exhibit A hereto, and at the Closing Buyer will deliver to the Escrow Agent
$1,051,316, in addition to the amount required by Section 2.4(b)(ii) of the
Purchase Agreement to be held pursuant to the Escrow Agreement.
Capitalized terms used in this Section 4.2 are used as defined in the
Escrow Agreement. Buyer may draw on (i) the IBML Fund for any Margin
Shortfall specified in a certificate of Buyer in the form of Exhibit B to
the Escrow Agreement and (ii) on the General Fund for any Margin Shortfall
specified in a Certificate of Buyer in the form of Exhibit C to the Escrow
Agreement, in each case in accordance with the terms and conditions of the
Escrow Agreement.
4.3. The Sellers, jointly and severally, agree to pay to the Buyer on
the IBML Escrow Release Date an amount equal to (a) 50% of the aggregate
cost (internal and external) to the Buyer incurred as a result of
maintaining the Company as a subsidiary of the Buyer from the Closing Date
to the IBML Escrow Release Date, as determined in good faith by the Buyer
and specified at least 7 days prior to the IBML Escrow Release Date by
written notice from the Buyer to the Sellers, minus (b) the aggregate
amount of the Gross Margins on the ImageTrac Scanners, if any, sold by the
Company to the GSA, other than the ImageTrac scanners ordered by the GSA
pursuant to the GSA Contract. The "Gross Margin" on any ImageTrac scanner
means (x) the purchase price for such scanner to be paid to the Company by
the GSA minus (y) the purchase price for such scanner to be paid by the
Company to IBML.
4.4. The Sellers hereby grant to Buyer the option to purchase
(directly or through any affiliate of the Buyer designated by it), on or
before July 15, 1998, all of the Sellers' right, title and interest in and
to SCS Europe Limited, an English limited liability company ("SCS Europe"),
exercisable by notice from Buyer to the Sellers. Between the date hereof
and July 15, 1998 (or the closing of such acquisition), Sellers will answer
all reasonable inquires from Buyer regarding SCS Europe and will give Buyer
and its officers and representatives all reasonable access to the officers,
employees and records of SCS Europe.
4.5. The Sellers agree that if Buyer makes a Section 338(h)(10)
election under the IRC with respect to the acquisition contemplated by the
Purchase Agreement, they will also make such election and will agree with
Buyer as to the allocation of the purchase price over the assets of the
Company for purposes of this election. Such allocation shall be determined
by Buyer after the Closing and shall be reasonably acceptable to Sellers.
4.6. Sellers, jointly and severally, will indemnify and hold harmless
the Indemnified Persons for, and will pay to the Indemnified Persons the
amount of, any Damages arising, directly or indirectly, from or in
connection with any misstatement in any Seller's Local Tax Certificate (as
defined in the Escrow Agreement).
5. Confirmation of Purchase Agreement. Except as specifically
supplemented hereby, the Purchase Agreement is hereby confirmed as being in
full force and effect.
6. Governing Law. This Agreement will be governed by the laws of
the State of Connecticut without regard to conflicts of laws principles.
7. Jurisdiction; Service of Process. Any action or proceeding
seeking to enforce any provision of, or based on any right arising out of,
this Agreement may be brought against any of the parties in the courts of
the State of Connecticut, County of Hartford, or, if it has or can acquire
jurisdiction, in the United States District Court for the District of
Connecticut, and each of the parties consents to the jurisdiction of such
courts (and of the appropriate appellate courts) in any such action or
proceeding and waives any objection to venue laid therein. Process in any
action or proceeding referred to in the preceding sentence may be served on
any party anywhere in the world.
8. Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to
constitute one and the same agreement. Executed signature pages from any
such counterpart may be detached and attached to any other such
counterpart, and any counterpart with signature pages executed by all of
the Parties attached shall have the same force and effect as if it had been
executed by all of the Parties.
******************************************
IN WITNESS WHEREOF, the parties have executed and delivered this
Supplemental Agreement as of the date first above written.
SELLERS:
/s/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
SCAN-OPTICS, INC.
/s/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
By /s/▇▇▇▇▇ ▇. ▇▇▇▇▇
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Chairman, Chief Executive
Officer and President
EXHIBIT A
ESCROW AGREEMENT
This Escrow Agreement, dated as of June 16, 1998 (the "Closing Date"),
among Scan-Optics, Inc., a Delaware corporation ("Buyer"), ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇, an individual resident in Birmingham, Alabama ("▇▇▇▇▇▇▇" and a
"Seller"), ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇. an individual resident in Birmingham,
Alabama ("▇▇▇▇▇▇▇" and a "Seller"), and State Street Bank and Trust Company
of Connecticut, N.A., a national banking association, as escrow agent
("Escrow Agent").
This is the Escrow Agreement referred to in the Stock Purchase
Agreement dated May 21, 1998 (the "Purchase Agreement") among Buyer and
Sellers. Capitalized terms used in this agreement without definition shall
have the respective meanings given to them in the Purchase Agreement.
The parties, intending to be legally bound, hereby agree as follows:
1. ESTABLISHMENT OF ESCROW
(a) Buyer is depositing with Escrow Agent an amount equal to
$2,872,902 in immediately available funds (as increased by any earnings
thereon and by any amounts recovered pursuant to the last sentence of
Section 5(j), and as reduced by any disbursements pursuant to Sections 3 or
4, amounts withdrawn under Section 5(j), or losses on investments, the
"Escrow Fund"). Escrow Agent acknowledges receipt thereof.
(b) Escrow Agent hereby agrees to act as escrow agent and to hold,
safeguard and disburse the Escrow Fund pursuant to the terms and conditions
hereof. The Escrow Fund includes (i) $700,000 (the "General Fund"); (ii)
$60,000 (the "Income Tax Fund"); (iii) $1,061,586 (the "Tax Fund") and (iv)
$1,051,316 (the "IBML Fund"), which shall be disbursed by the Escrow Agent
in accordance with Sections 3 and 4.
2. INVESTMENT OF FUNDS
1. Except as Buyer and Sellers may from time to time jointly
instruct Escrow Agent in writing, the Escrow Fund shall be invested
from time to time, to the extent possible, in United States Treasury
bills having a remaining maturity of 30 days, with any remainder being
deposited and maintained in a money market deposit account with Escrow
Agent, until disbursement of the entire Escrow Fund. Escrow Agent is
authorized to liquidate in accordance with its customary procedures
any portion of the Escrow Fund consisting of investments to provide
for payments required to be made under this Agreement; provided,
however that unless otherwise instructed by Buyer and Sellers jointly
in writing, the Escrow Agent shall delay any such payment pending the
maturity of sufficient investments to enable the Escrow Agent to make
such payment with immediately available funds.
3. CLAIMS
(a) From time to time on or before the second anniversary of the
Closing Date, Buyer may give written notice (a "Notice") to Sellers and
Escrow Agent specifying in reasonable detail the nature and dollar amount
of any claim (a "Claim") it may have under Section 10 of the Purchase
Agreement; Buyer may make more than one claim with respect to any
underlying state of facts. If Sellers give written notice to Buyer and
Escrow Agent disputing any Claim (a "Counter Notice") within 30 days
following receipt by Escrow Agent and Sellers of the Notice regarding such
Claim, such Claim shall be resolved as provided in Section 16 hereof. If
no Counter Notice is received by Escrow Agent within such 30-day period,
then the dollar amount of damages claimed by Buyer as set forth in its
Notice shall be deemed established for purposes of this Escrow Agreement
and the Purchase Agreement and, at the end of such 30-day period, Escrow
Agent shall pay to Buyer the dollar amount claimed in the Notice from (and
only to the extent of) the balance then remaining in the General Fund.
Escrow Agent shall not inquire into or consider whether a Claim complies
with the requirements of the Purchase Agreement.
(b) If a Counter Notice is given with respect to a claim, Escrow Agent
shall make payment with respect thereto only in accordance with (i) joint
written instructions of Buyer and Sellers or (ii) a decision of the
arbitrators referred to in Section 16 hereof. The party presenting such
decision to Escrow Agent shall also provide a legal opinion by counsel for
the presenting party satisfactory to Escrow Agent to the effect that such
decision of the arbitrators is final and is binding on the parties. Escrow
Agent shall act on such decision and legal opinion without further
question.
(c) From time to time on or before the first anniversary of the
Closing Date, Sellers may give to Buyer, and at any time, Buyer may give to
Sellers, a copy of written confirmation, from any state listed on Exhibit
A, or from any local Governmental Body within such state, of the amount of
any Taxes (including without limitation all sales, use, franchise and
income taxes and all interest and penalties thereon) owed to such state or
local Governmental Body by Southern Computer Systems, Inc., an Alabama
corporation (the "Company"). Upon receipt of such written confirmation by
Buyer from Sellers (or upon Buyer's giving such written confirmation to
Sellers), Buyer will notify Escrow Agent in writing (each a "Payment
Notice") of the name of such state or local Governmental Body, the amount
of such Taxes owed to such state or local Governmental Body, the portion of
such Taxes which are income or franchise taxes (together with interest and
penalties thereon) (such taxes, interest and penalties being referred to
collectively as "Income Taxes") and the payment instructions for paying
such Taxes to such state or local Governmental Body, and Escrow Agent shall
pay to such state or local Governmental Body the amount of Taxes specified
in such Payment Notice, (i) paying any Income Taxes specified in such
Payment Notice from the Income Tax Fund (then paying any balance remaining
on such Income Taxes from the General Fund), (ii) paying any other Taxes
specified in such Payment Notice as being owed to such state, first from
the portion of the Tax Fund allocated with respect to such state on Exhibit
A (for each state, the "State Allocation"), then any balance remaining from
the General Fund and (iii) paying any other Taxes specified in such Payment
Notice as being owed to such local Governmental Body, first from the
portion of the Tax Fund allocated with respect to local Governmental Bodies
within such state (for each State, the "Local Allocation"), then any
balance remaining from the General Fund.
(d) If the amount of the State Allocation for any state exceeds the
aggregate amount of all Taxes (other than Income Taxes) owed to such state,
Buyer, upon receipt from such state of written confirmation that the
Company, its assets and its successors and assigns have been released from
liability for all Taxes (including without limitation all sales, use,
franchise and income taxes and all interest and penalties thereon) owed to
such state, shall notify Escrow Agent in writing (with a copy to Seller) of
such release and the amount of such excess, and Escrow Agent shall pay to
Sellers (50% to ▇▇▇▇▇▇▇ and 50% to ▇▇▇▇▇▇▇) from the Tax Fund the amount of
such excess.
(e) If the amount of the Local Allocation for any state exceeds the
aggregate amount of all Taxes (other than Income Taxes) owed to all local
Governmental Bodies within such state, then, upon receipt by Buyer (i) from
such local Governmental Bodies of written confirmation that the Company,
its assets and its successors and assigns have been released from liability
for all such Taxes (including all interest and penalties thereon) owed to
such local Governmental Bodies and (ii) from Sellers of a certificate
signed by them stating that the local Governmental Bodies furnishing such
written confirmation are the only local Governmental Bodies within such
state to which the Company owed Taxes as of the Closing Date (each a
"Seller's Local Tax Certificate"), Buyer shall notify Escrow Agent in
writing (with a copy to Sellers) of such release and the amount of such
excess, and Escrow Agent shall pay to Sellers (50% to ▇▇▇▇▇▇▇ and 50% to
▇▇▇▇▇▇▇) from the Tax Fund the amount of such excess.
(f) Promptly upon receipt of a certificate from Buyer in substantially
the form of Exhibit B hereto (a copy of which shall contemporaneously be
sent by Buyer to Sellers), the Escrow Agent shall (i) pay to Buyer from the
IBML Fund the amount (if greater than zero) of the Margin Shortfall
specified on such certificate and (ii) pay to the Sellers from the IBML
Fund (50% to ▇▇▇▇▇▇▇ and 50% to ▇▇▇▇▇▇▇) an amount (if greater than zero)
of the Excess Escrow specified on such certificate.
(g) Promptly upon receipt of a certificate from Buyer in substantially
the form of Exhibit C hereto (a copy of which shall contemporaneously be
sent by Buyer to Sellers), the Escrow Agent shall pay to Buyer from the
General Fund the amount of the Margin Shortfall specified on such
certificate.
4. TERMINATION OF ESCROW
(a) Promptly following the second anniversary of the Closing Date,
Escrow Agent shall pay and distribute the amount then remaining in the
General Fund to Sellers (50% to ▇▇▇▇▇▇▇ and 50% to ▇▇▇▇▇▇▇), unless (i) any
Claims are then pending, in which case an amount equal to the aggregate
dollar amount of such Claims (as shown in the Notices of such Claims) shall
be retained by Escrow Agent in the Escrow Fund (and the balance paid to
Sellers in such proportions) or (ii) Buyer has given notice to Sellers and
Escrow Agent specifying in reasonable detail the nature of any other claim
it may have under Section 10 of the Purchase Agreement with respect to
which it is unable to specify the amount of Damages, in which case their
entire Escrow Fund shall be retained by Escrow Agent, in either case until
it receives joint written instructions of Buyer and Sellers or a final
non-appealable order of a court of competent jurisdiction as contemplated
by Section 3(b).
(b) On the seventh anniversary of the Closing Date, Escrow Agent
shall pay to Sellers (50% to ▇▇▇▇▇▇▇ and 50% to ▇▇▇▇▇▇▇) the amounts then
remaining in the Income Tax Fund and the Tax Fund.
(c) Promptly upon receipt by Escrow Agent of written notice from Buyer
(a copy of which shall be contemporaneously sent by Buyer to Sellers) that
the IBML Escrow Release Date (as defined in the Supplemental Agreement
dated as of June 16, 1998 among Buyer and Sellers) has occurred, Escrow
Agent shall pay to Sellers (50% to ▇▇▇▇▇▇▇ and 50% to ▇▇▇▇▇▇▇) any amount
then remaining in the IBML Fund.
5. DUTIES OF ESCROW AGENT
(a) Escrow Agent shall not be under any duty to give the Escrow Fund
held by it hereunder any greater degree of care than it gives its own
similar property and shall not be required to invest any funds held
hereunder except as directed in this Agreement. Uninvested funds held
hereunder shall not earn or accrue interest.
(b) Escrow Agent shall not be liable, except for its own gross
negligence or willful misconduct and, except with respect to claims based
upon such gross negligence or willful misconduct that are successfully
asserted against Escrow Agent, the Buyer and Sellers hereto shall jointly
and severally indemnify and hold harmless Escrow Agent (and any successor
Escrow Agent) from and against any and all losses, liabilities, claims,
actions, damages and expenses, including reasonable attorneys' fees and
disbursements, arising out of and in connection with this Agreement.
Without limiting the foregoing, Escrow Agent shall in no event be liable in
connection with its investment or reinvestment of any cash held by it
hereunder in good faith, in accordance with the terms hereof, including,
without limitation, any liability for any delays (not resulting from its
gross negligence or willful misconduct) in the investment or reinvestment
of the Escrow Fund, or any loss of interest incident to any such delays.
(c) Escrow Agent shall be entitled to rely upon any order, judgment,
certification, demand, notice, instrument or other writing delivered to it
hereunder without being required to determine the authenticity or the
correctness of any fact stated therein or the propriety or validity of the
service thereof. Escrow Agent may act in reliance upon any instrument or
signature believed by it to be genuine and may assume that the person
purporting to give receipt or advice or make any statement or execute any
document in connection with the provisions hereof has been duly authorized
to do so. Escrow Agent may conclusively presume that the undersigned
representative of any party hereto which is an entity other than a natural
person has full power and authority to instruct Escrow Agent on behalf of
that party unless written notice to the contrary is delivered to Escrow
Agent.
(d) Escrow Agent may act pursuant to the advice of counsel with
respect to any matter relating to this Agreement and shall not be liable
for any action taken or omitted by it in good faith in accordance with such
advice.
(e) Escrow Agent does not have any interest in the Escrow Fund
deposited hereunder but is serving as escrow holder only and having only
possession thereof. Any payments of income from the Escrow Fund shall be
subject to withholding regulations then in force with respect to United
States taxes. The Sellers will provide Escrow Agent with appropriate
Internal Revenue Service Forms W-9 for tax identification number
certification, or non-resident alien certifications. This Section 5(e) and
Section 5(b) shall survive notwithstanding any termination of this
Agreement or the resignation of Escrow Agent.
(f) Escrow Agent makes no representation as to the validity, value,
genuineness or the collectability of any security or other document or
instrument held by or delivered to it.
(g) Escrow Agent shall not be called upon to advise any party as to
the wisdom in selling or retaining or taking or refraining from any action
with respect to any securities or other property deposited hereunder.
(h) Escrow Agent (and any successor Escrow Agent) may at any time
resign as such by delivering the Escrow Fund to any successor Escrow Agent
jointly designated by the other parties hereto in writing, or to any court
of competent jurisdiction, whereupon Escrow Agent shall be discharged of
and from any and all further obligations arising in connection with this
Agreement. The resignation of Escrow Agent will take effect on the earlier
of (i) the appointment of a successor (including a court of competent
jurisdiction) or (ii) the day which is 30 days after the date of delivery
of its written notice of resignation to the other parties hereto. If at
that time Escrow Agent has not received a designation of a successor Escrow
Agent, Escrow Agent's sole responsibility after that time shall be to
retain and safeguard the Escrow Fund until receipt of a designation of
successor Escrow Agent or a joint written disposition instruction by the
other parties hereto or a final non-appealable order of a court of
competent jurisdiction.
(i) In the event of any disagreement between the Buyer and Sellers
hereto resulting in adverse claims or demands being made in connection with
the Escrow Fund or in the event that Escrow Agent is in doubt as to what
action it should take hereunder, Escrow Agent shall be entitled to retain
the Escrow Fund until Escrow Agent shall have received (i) a final
non-appealable order of a court of competent jurisdiction directing
delivery of the Escrow Fund or (ii) a written agreement executed by the
other parties hereto directing delivery of the Escrow Fund, in which event
Escrow Agent shall disburse the Escrow Fund in accordance with such order
or agreement. Any court order shall be accompanied by a legal opinion by
counsel for the presenting party satisfactory to Escrow Agent to the effect
that the order is final and non-appealable. Escrow Agent shall act on such
court order and legal opinion without further question.
(j) Buyer and Sellers shall pay Escrow Agent compensation (as payment
in full) for the services to be rendered by Escrow Agent hereunder in the
amount of $2,000 at the time of execution of this Agreement and $2,000
annually thereafter and agree to reimburse Escrow Agent for all reasonable
expenses, disbursements and advances incurred or made by Escrow Agent in
performance of its duties hereunder (including reasonable fees, expenses
and disbursements of its counsel), and shall pay the reasonable fees of
Escrow Agent's counsel at the time of execution of this Agreement. Any
such compensation, fees and reimbursement to which Escrow Agent is entitled
shall be borne 50% by Buyer, 25% by ▇▇▇▇▇▇▇ and 25% by ▇▇▇▇▇▇▇. Any fees or
expenses of Escrow Agent or its counsel that are not paid as provided for
herein may be taken from any property held by Escrow Agent hereunder, and
any party who paid his or its share of such fees or expenses may recover
from the defaulting party the amount so taken and pay such amount to Escrow
Agent, to be included in the Escrow Funds.
(k) No printed or other matter in any language (including, without
limitation, prospectuses, notices, reports and promotional material) that
mentions Escrow Agent's name or the rights, powers, or duties of Escrow
Agent shall be issued by the other parties hereto or on such parties'
behalf unless Escrow Agent shall first have given its specific written
consent thereto.
(l) The other parties hereto authorize Escrow Agent, for any
securities held hereunder, to use the services of any United States central
securities depository it reasonably deems appropriate, including, without
limitation, the Depositary Trust Company and the Federal Reserve Book Entry
System.
6. LIMITED RESPONSIBILITY
This Agreement expressly sets forth all the duties of Escrow Agent
with respect to any and all matters pertinent hereto. No implied duties or
obligations shall be read into this agreement against Escrow Agent. Escrow
Agent shall not be bound by the provisions of any agreement among the other
parties hereto except this Agreement.
7. OWNERSHIP FOR TAX PURPOSES
Sellers agree that, for purposes of federal and other taxes based on
income, ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ will be treated as the owner of 50% and 50%,
respectively, of the Escrow Fund, and that ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ will report
all income, if any, that is earned on, or derived from, the Escrow Fund as
their income, in such proportions, in the taxable year or years in which
such income is properly includible and pay any taxes attributable thereto.
8. NOTICES
All notices, consents, waivers and other communications under this
Agreement must be in writing and will be deemed to have been duly given
when (a) delivered by hand (with written confirmation of receipt), (b) sent
by telecopier (with written confirmation of receipt) provided that a copy
is mailed by registered mail, return receipt requested, or (c) when
received by the addressee, if sent by a nationally recognized overnight
delivery service (receipt requested), in each case to the appropriate
addresses and telecopier numbers set forth below (or to such other
addresses and telecopier numbers as a party may designate by notice to the
other parties):
Sellers: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
with a copy to: ▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
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▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Buyer: Scan-Optics, Inc.
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▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: Day, ▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
CityPlace I
Hartford, Connecticut 06103-3499
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Escrow Agent: State Street Bank and Trust Company
of Connecticut, ▇.▇.
▇▇▇▇▇▇▇ Square
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▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: ▇▇▇▇ and ▇▇▇▇▇, P.C.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
9. PAYMENTS
Payments from the Escrow Fund pursuant to this Agreement shall be made
as follows, or as specified in written instructions to the Escrow Agent
from the party receiving such payment:
If to Buyer, by wire transfer to:
BankBoston Connecticut
Hartford, Connecticut
ABA No. ▇▇▇▇▇▇▇▇▇
Acct. No. 56029309
Acct. Name: Scan-Optics, Inc.
If to ▇▇▇▇▇▇▇, to:
National Bank of Commerce
Birmingham, Alabama
ABA No. ▇▇▇▇▇▇▇▇▇
Acct. No. 2603611
Acct. Name: ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇
If to ▇▇▇▇▇▇▇, to:
National Bank of Commerce
Birmingham, Alabama
ABA No. ▇▇▇▇▇▇▇▇▇
Acct. No. 01455461407
Acct. Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇. or
▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
10. JURISDICTION; SERVICE OF PROCESS
Any action or proceeding seeking to enforce any provision of, or based
on any right arising out of, this Agreement may be brought against any of
the parties in the courts of the State of Connecticut, County of Hartford,
or, if it has or can acquire jurisdiction, in the United States District
Court for the District of Connecticut, and each of the parties consents to
the jurisdiction of such courts (and of the appropriate appellate courts)
in any such action or proceeding and waives any objection to venue laid
therein. Process in any action or proceeding referred to in the preceding
sentence may be served on any party anywhere in the world.
11. SUCCESSOR ESCROW AGENT
Any corporation or association in which the Escrow Agent may be
converted or merged, or with which it may be consolidated, or to which it
may sell or transfer its corporate trust business and assets as a whole or
substantially as a whole, or any corporation or association resulting from
any such conversion, sale, merger, consolidation or transfer to which it is
a party, shall be and become successor Escrow Agent hereunder and vested
with all of the title to the predecessor, without the execution or filing
of any instrument or any further act, deed or conveyance on the part of any
of the parties hereto, anything herein to the contrary notwithstanding.
12. COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of
which will be deemed to be an original and all of which, when taken
together, will be deemed to constitute one and the same. Executed
signature pages from any such counterpart may be detached and attached to
any other such counterpart, and any such counterpart with signature pages
attached executed by all of the parties hereto shall have the same force
and effect as if it had been executed by all such parties.
13. SECTION HEADINGS
The headings of sections in this Agreement are provided for
convenience only and will not affect its construction or interpretation.
14. WAIVER
The rights and remedies of the parties to this Agreement are
cumulative and not alternative. Neither the failure nor any delay by any
party in exercising any right, power, or privilege under this Agreement or
the documents referred to in this Agreement will operate as a waiver of
such right, power, or privilege, and no single or partial exercise of any
such right, power, or privilege will preclude any other or further exercise
of such right, power, or privilege or the exercise of any other right,
power, or privilege. To the maximum extent permitted by applicable law, (a)
no claim or right arising out of this Agreement or the documents referred
to in this Agreement can be discharged by one party, in whole or in part,
by a waiver or renunciation of the claim or right unless in writing signed
by the other party; (b) no waiver that may be given by a party will be
applicable except in the specific instance for which it is given; and (c)
no notice to or demand on one party will be deemed to be a waiver of any
obligation of such party or of the right of the party giving such notice or
demand to take further action without notice or demand as provided in this
Agreement or the documents referred to in this Agreement.
15. EXCLUSIVE AGREEMENT AND MODIFICATION
This Agreement supersedes all prior agreements among the parties with
respect to its subject matter and constitutes (along with the documents
referred to in this Agreement) a complete and exclusive statement of the
terms of the agreement between the parties with respect to its subject
matter. This Agreement may not be amended except by a written agreement
executed by the Buyer, the Sellers and the Escrow Agent.
16. GOVERNING LAW
This Agreement shall be governed by the laws of the State of
Connecticut, without regard to conflicts of law principles.
17. ARBITRATION
The parties shall attempt to resolve in good faith any dispute which
arises out of or in connection with this Agreement. If the parties cannot
resolve the dispute through negotiations within sixty (60) days, Buyer or
any Seller may submit the dispute to arbitration by filing a notice with
the American Arbitration Association ("AAA") and providing a copy
concurrently to the other parties. Arbitration proceedings shall be
conducted in accordance with the Commercial Arbitration Rules of the AAA.
Arbitration shall take place in Hartford, Connecticut. Unless the parties
otherwise agree, the arbitration shall be conducted before three
arbitrators. Each party shall select one arbitrator from a list provided
by the AAA and the third arbitrator will be selected by the first two
selected arbitrators. The arbitrators shall be empowered to resolve all
disputes and to award any remedies authorized by this Agreement. All
arbitration proceedings, including all evidence and statements, shall be
confidential and shall not be used or disclosed for any other purpose.
Each party shall pay its own attorney's fees and expenses, and all other
expenses of arbitration shall be equally divided between the parties. All
decisions of the arbitrators shall be final, and may be enforced by any
court of competent jurisdiction.
* * * * * *
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first written above.
Buyer:
SCAN-OPTICS, INC.
By:________________________________________
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Chairman, Chief Executive Officer
and President
Sellers:
_______________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
_______________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
Escrow Agent:
STATE STREET BANK AND TRUST COMPANY
OF CONNECTICUT, N.A.
By:_____________________
Name:
Title:
Exhibit A
Tax Fund
State Allocation Local Allocation
AK 0 0
AL 25,151 6,289
AR 1,761 381
AZ 2,260 452
CA 29,714 4,952
CO 14,878 4,959
CT 6,403 1,068
DC 1,018 177
DE 0 0
FL 96,395 16,066
GA 81,793 20,449
HI 336 84
IA 32,698 6,540
ID 294 59
IL 28,704 4,593
IN 6,137 1,228
KS 3,860 3,111
KY 76,259 12,710
LA 2,025 506
MA 24,798 4,960
MD 13,184 2,637
ME 1,545 258
MI 9,887 1,648
MN 6,214 955
MO 10,041 2,376
MS 457 66
MT 0 0
NC 5,419 2
ND 29 5
NE 4,691 938
NH 0 0
NJ 15,496 2,583
NM 139 29
NV 284 44
NY 76,181 19,045
OH 13,923 2,784
OK 8,122 1,805
OR 0 0
PA 57,970 9,662
RI 428 61
SC 1,233 247
SD 1,583 397
TN 109,803 18,300
TX 57,678 9,228
UT 749 157
VA 40,724 11,635
VT 19 3
WA 1,816 279
WI 7,730 1,547
WV 5,191 866
WY 340 86
Totals 885,359 176,226
Total Tax Fund = $1,061,586
EXHIBIT B
FORM OF CERTIFICATE OF MARGIN SHORTFALL
Reference is made to (a) the Escrow Agreement dated as of June __,
1998 among Scan-Optics, Inc., a Delaware corporation (the "Buyer"), ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇. (together, the "Sellers") and State
Street Bank and Trust Company of Connecticut, N.A., a national banking
association, as escrow agent ("the Escrow Agent") and (b) the U.S.
Department of State Contract #GS-35F-4559G dated February 2, 1998 (the "GSA
Contract") between Southern Computer Systems, Inc., an Alabama corporation
(the "Company"), and the United States General Services Administration (the
"GSA").
The Buyer hereby certifies to the Escrow Agent (or any successor
escrow agent pursuant to said Escrow Agreement) and the Sellers that:
[Complete Section A or B]
A. Margin Shortfall on Scanners Purchased
(i) Either the Company or the Buyer has purchased from Imaging
Business Machines, L.L.C. (or its successors or assigns) ("IBML")
[insert number] _________ ImageTrac scanner(s) and other products
(collectively, "Scanners") which have been or will be sold to the
GSA pursuant to the GSA Contract.
(ii) The expected margin per Scanner is $75,094 (the "Expected
Margin"). The number of Scanners specified in clause (i)
multiplied by the Expected Margin equals $_____________ (the
"Total Expected Margin").
(iii) The aggregate purchase price for such Scanners paid or to be paid
by the Company or the Buyer to IBML is $_______________ (the
"IBML Price").
(iv) The aggregate purchase price for such Scanners payable by the GSA
pursuant to the GSA Contract is $________________ (the "GSA
Price").
(v) The GSA Price minus the IBML Price = $________________ (the
"Actual Margin"), which may be a positive or a negative number.
(vi) The Total Expected Margin minus the Actual Margin =
$______________ (the "Margin Shortfall").
(vii) The Total Expected Margin minus the Margin Shortfall =
$________________. Is such amount less than or equal to the
Total Expected Margin? __ Yes __ No. If "yes," such amount is
the Excess Escrow.
OR
B. Margin Shortfall on Failure to Deliver
(i) IBML has refused to deliver [insert number] ________ Scanners (as
defined in Section A) to the Company which were to be sold to the
GSA pursuant to the GSA Contract.
(ii) The number of Scanners specified in clause (i) multiplied by the
Expected Margin (as defined in Section A) equals
$__________________ (the "Margin Shortfall").
IN WITNESS WHEREOF, the undersigned has executed this certificate as
of ______________, 19__.
SCAN-OPTICS, INC.
By:_____________________
Name:
Title:
EXHIBIT C
FORM OF CERTIFICATE OF MARGIN SHORTFALL
Reference is made to (a) the Escrow Agreement dated as of June __,
1998 among Scan-Optics, Inc., a Delaware corporation (the "Buyer"), ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇. (together, the "Sellers") and State
Street Bank and Trust Company of Connecticut, N.A., a national banking
association, as escrow agent ("the Escrow Agent") and (b) the U.S.
Department of State Contract #GS-35F-4559G dated February 2, 1998 (the "GSA
Contract") between Southern Computer Systems, Inc., an Alabama corporation
(the "Company"), and the United States General Services Administration (the
"GSA").
The Buyer hereby certifies to the Escrow Agent (or any successor
escrow agent pursuant to said Escrow Agreement) and the Sellers that:
[Complete Section A or B]
A. Margin Shortfall on Scanners Purchased
(i) Either the Company or the Buyer has purchased from Imaging
Business Machines, L.L.C. (or its successors or assigns) ("IBML")
_________ [insert number] ImageTrac scanner(s) and other products
(collectively, "Scanners") which have been or will be sold to a
government entity (the "Purchaser") entitled to purchase the
Scanners at the GSA Price specified on the Equipment List
included in the GSA Contract (the "GSA Schedule").
(ii) The aggregate purchase price for such Scanners paid or to be paid
by the Company or the Buyer to IBML is $_________________ (the
"IBML Price").
(iii) The aggregate purchase price for such Scanners payable by the
Purchaser pursuant to the GSA Schedule is $________________ (the
"GSA Price").
(iv) The GSA Price divided by 10 = $__________________ (the "Minimum
Margin").
(v) The GSA Price minus the IBML Price = $______________ (the "Actual
Margin"), which may be a positive or a negative number.
(vi) The Minimum Margin minus the Actual Margin = $_____________ (the
"Margin Shortfall").
OR
B. Margin Shortfall on Failure to Deliver
(i) The Company has received an order for Scanners (as defined in
Section A) from a Purchaser (as defined in Section A).
(ii) IBML has refused to deliver ________ [insert number] of such
Scanners to the Company.
(iii) The aggregate purchase price for such Scanners pursuant to the
GSA Schedule is $_________________ (the "GSA Price").
(iv) The GSA Price divided by 10 = $________________ (the "Margin
Shortfall").
IN WITNESS WHEREOF, the undersigned has executed this certificate as
of ______________, 19__.
SCAN-OPTICS, INC.
By:_____________________
Name:
Title:
