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EXHIBIT 12
ESCROW AGREEMENT
This Escrow Agreement (this "Agreement") is entered into as of May 8,
1998, by and among TEKGRAF, INC., a Georgia corporation (the "Purchaser"),
TEKGRAF SUB III, INC. ("Acquisition Sub"), NEW ENGLAND COMPUTER GRAPHICS, INC.,
a Massachusetts corporation (the "Company"), A. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, and ▇▇▇▇▇▇
▇▇▇▇▇ (collectively, the "Company Shareholders"), ▇▇▇▇▇ ▇▇▇▇▇▇ (the
"Shareholder Representative") and First Union National Bank, a national banking
association (the "Escrow Agent").
WHEREAS, the Purchaser and the Company have entered into an Agreement
and Plan of Merger, dated March 25, 1998, by and among the Company, the Company
Shareholders, Acquisition Sub and the Purchaser, as amended by that certain
First Amendment to Agreement and Plan of Merger, dated as of March 30, 1998
(the "Merger Agreement").
WHEREAS, the Merger Agreement provides that escrow accounts will be
established to secure the Company Shareholders' guaranty with respect to the
Warranted Pre-Tax Profit and the Warranted Tangible Net Asset Value of the
Company (each as defined in the Merger Agreement) on the terms and conditions
set forth herein.
WHEREAS, the parties hereto desire to establish the terms and
conditions pursuant to which such escrow accounts will be established and
maintained.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Defined Terms. Capitalized terms used in this Agreement and not otherwise
defined shall have the meanings given them in the Merger Agreement.
2. Consent of Company Shareholders. By virtue of the Company Shareholders'
approval of the Merger Agreement, the Company Shareholders who may
indirectly or directly receive cash and shares of Purchaser Common Stock
pursuant to the Merger Agreement have, without any further act of any
Company Shareholder, consented to: (a) the establishment of this escrow to
secure the Company Shareholders' guaranty with respect to the Warranted
Pre-Tax Profit and the Warranted Tangible Net Asset Value of the Company in
the manner set forth herein and in the Merger Agreement, (b) the appointment
of the Shareholder Representative as their representatives for purposes of
this Agreement and as attorneys-in-fact and agents for and on behalf of each
Company Shareholder, and the taking by the Shareholder Representative of any
and all actions and the making of any decisions required or permitted to be
taken or made by
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him under this Agreement, and (c) all of the other terms, conditions and
limitations in this Agreement and the Merger Agreement.
3. Escrow and Warranty.
(a) Escrow of Cash. On the Closing Date, the Purchaser shall deposit with
the Escrow Agent $75,000 of the Cash Consideration. The Escrowed Cash
shall be held as a trust fund and shall not be subject to any lien,
attachment, trustee process or any other judicial process of any
creditor of any party hereto. The Escrow Agent agrees to accept
delivery of the Escrowed Cash and to hold the Escrowed Cash in an
interest-bearing escrow account (the "Cash Escrow Account"), subject
to the terms and conditions of this Agreement.
(b) Escrow of Shares. On the Closing Date, the Purchaser shall deposit
with the Escrow Agent a certificate for the number of Escrowed Shares
specified in Section 1.3(e) of the Merger Agreement, issued in the
name of the Escrow Agent or its nominee. The Escrowed Shares shall be
held as a trust fund and shall not be subject to any lien,
attachment, trustee process or any other judicial process of any
creditor of any party hereto. The Escrow Agent agrees to accept
delivery of the Escrowed Shares and to hold the Escrowed Shares in an
escrow account (the "Share Escrow Account"), subject to the terms and
conditions of this Agreement.
(c) Warranty. The Company Shareholders have agreed in Article I of the
Merger Agreement that the Warranted Pre-Tax Profit and the Warranted
Tangible Net Asset Value of the Company shall not be less than the
amounts set forth in Section 1.3(a) of the Merger Agreement. The
Escrowed Shares shall be security for such warranty obligation of the
Company Shareholders, subject to the limitations, and in the manner
provided, in this Agreement.
(d) Dividends, Etc. Any securities distributable to the Company
Shareholders in respect of or in exchange for any of the Escrowed
Shares, whether by way of stock dividends, stock splits or otherwise,
shall be delivered to the Escrow Agent, who shall hold such
securities in the Share Escrow Account. Such securities shall be
issued in the name of the Escrow Agent or its nominee and shall be
considered Escrowed Shares for purposes hereof. Any cash dividends
distributable to the Company Shareholders in respect of the Escrowed
Shares shall be distributed to the Company Shareholders.
(e) Voting of Shares. The Shareholder Representative shall have the
right, in his sole discretion, on behalf of the Company Shareholders,
to direct the Escrow Agent in writing as to the exercise of any
voting rights pertaining to the Escrowed Shares, and the Escrow Agent
shall comply with any such written instructions. In the absence of
such instructions, the Escrow Agent shall not vote any of the
Escrowed Shares.
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(f) Transferability. The respective interests of the Company Shareholders
in the Escrowed Shares shall not be assignable or transferable, other
than by operation of law. Notice of any such assignment or transfer by
operation of law shall be given to the Escrow Agent and the Purchaser,
and no such assignment or transfer shall be valid until such notice is
given.
(g) Transfer of Shares Upon Waiver of Warranty. In the event the Purchaser
elects, pursuant to the provisions of Section 1.3(h) of the Merger
Agreement, to waive the Profit Shortfall Adjustment and the Profit
Surplus Adjustment, the Escrowed Shares shall be transferred, upon
receipt of notice by Escrow Agent from Purchaser of such waiver, into
the escrow account created pursuant to that certain Pledge, Security
and Escrow Agreement dated as of even date herewith, to be treated in
all respects as escrow shares thereunder and the Escrowed Shares in
such case shall be distributed to the Company Shareholders pursuant to
the terms thereof.
4. Administration of Cash Escrow Account. The Escrow Agent shall
administer the Cash Escrow Account as follows:
(a) In the event that there is a Net Asset Value Shortfall (including any
Collection Shortfall or Inventory Shortfall that remains unpaid ten
(10) days after demand for payment thereof by Purchaser or Acquisition
Sub to the Company Shareholders), the Purchase Price shall be reduced
by the amount of such Net Asset Value Shortfall. Purchaser or
Acquisition Sub shall provide to the Escrow Agent and the Shareholder
Representative written notice of the amount of such Net Asset Value
Shortfall, and such amount, including any interest accrued thereon (or
such lesser amount as is then held in the Cash Escrow Account), shall
be paid to Purchaser by Escrow Agent within three (3) business days
after receipt of such notice.
(b) Any cash remaining in the Cash Escrow Account after payment of the Net
Asset Value Shortfall amount as set forth in subsection (a) above,
shall be distributed to the Company Shareholders pursuant to Section
6(a) hereof.
(c) In the event that the Net Asset Value Shortfall exceeds the amount of
Escrowed Cash available, Purchaser's recovery of cash pursuant to
Section 1.3 of the Merger Agreement shall not be limited to the amount
of Escrowed Cash available.
5. Administration of Share Escrow Account. The Escrow Agent shall
administer the Share Escrow Account as follows:
(a) In the event that the Warranted Pre-Tax Profit exceeds the Actual
Pre-Tax Profit for the Year (or the Alternative Year, if applicable),
the Purchase Price shall be reduced by the number of Purchaser Shares
equal to the Profit Shortfall Adjustment, subject to the Adjustment
Floor. In such event, Purchaser or Acquisition Sub and the Shareholder
Representative shall provide written notice to the Escrow Agent of the
amount of the Profit Shortfall Adjustment,
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and the Escrow Agent shall transfer, deliver and assign to
Purchaser such number of Escrowed Shares held in the Share Escrow
Account which have a Fair Market Value equal to the Profit
Shortfall Adjustment (or such lesser number of Purchaser Shares as
is then held in the Share Escrow Account). The Fair Market Value of
the Escrowed Shares to be distributed shall be determined in
accordance with Section 7 hereof.
(b) On the first anniversary of the Closing Date (or if the Alternative
Year is elected, at the end of the Alternative Year), the Escrow
Agent shall distribute to the Company Shareholders, in accordance
with Sections 6(a) and (b) below, one half of the Escrowed Shares
remaining in the Share Escrow Account not required for
redistribution pursuant to Section 5(a) hereof. Any Escrowed Shares
remaining in the Share Escrow Account after payment of the Profit
Shortfall Adjustment amount as set forth in subsection (a) above,
shall be distributed to the Company Shareholders pursuant to
Sections 6(a) and (b) hereof.
(c) In the event that the Profit Shortfall Adjustment exceeds the
number of Escrowed Shares available, Purchaser's recovery of
Purchaser Shares pursuant to Section 1.3 of the Merger Agreement
shall not be limited to the amount of Escrowed Shares available.
6. Release of Escrowed Cash and Escrowed Shares.
(a) Any distribution of all or a portion of the Escrowed Cash or the
Escrowed Shares to the Company Shareholders shall be made in
accordance with the percentages set forth opposite such holders'
respective names on Exhibit B attached hereto; provided, however,
that the Escrow Agent shall withhold the distribution of the
portion of the Escrowed Cash or the Escrowed Shares otherwise
distributable to Company Shareholders who have not, according to
written notice provided by the Purchaser to the Escrow Agent, prior
to such distribution, surrendered their respective Certificates
pursuant to the terms and conditions of the Merger Agreement. Any
such withheld cash or shares shall be delivered to the Purchaser
instead of to the Company Shareholders, and shall be delivered by
the Purchaser to the Company Shareholders upon surrender of their
Certificates. Distributions of Escrowed Shares to the Company
Shareholders shall be made by mailing stock certificates to such
holders at their respective addresses shown on Exhibit B (or such
other address as may be provided in writing to the Escrow Agent by
any such holder).
(b) No fractional Escrowed Shares shall be distributed to Purchaser or
Company Shareholders pursuant to this Agreement. Instead, the
number of shares that Purchaser or each Company Shareholder shall
receive shall be rounded down to the nearest whole number; and the
Escrow Agent shall sell such number of Escrowed Shares as is equal
to the aggregate of the fractional shares that would otherwise be
distributed to the Purchaser or the Company Shareholders, as the
case may be, and shall distribute the proceeds of such sale to the
Purchaser or the Company Shareholders otherwise entitled to a
fractional Escrowed Share based upon the fraction of an Escrowed
Share to which Purchaser or each such Company Shareholder is
otherwise entitled, as the case may be.
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7. Valuation of Escrowed Shares. For purposes of this Agreement, the Fair
Market Value of the Escrowed Shares to be released from the Share
Escrow Account after a final determination of the Profit Shortfall
Adjustment shall be determined based upon the average closing prices of
the Purchaser's Common Stock on the Nasdaq National Market System for
the twenty trading days immediately preceding the date of such final
determination.
8. Fees and Expenses of Escrow Agent. The Purchaser and the Company
Shareholders shall compensate Escrow Agent for its services hereunder
in accordance with Schedule A attached hereto and, in addition, shall
reimburse Escrow Agent for all of its reasonable out-of-pocket
expenses, including attorneys' fees, travel expenses, telephone and
facsimile transmission costs, postage (including express mail and
overnight delivery charges), copying charges and the like. All of the
compensation and reimbursement obligations set forth in this Section 8
shall be payable one-half each by Purchaser and the Company
Shareholders, jointly and severally, upon demand by Escrow Agent. The
obligations of Purchaser and the Company Shareholders under this
Section 8 shall survive any termination of this Escrow Agreement and
the resignation or removal of Escrow Agent.
9. Investment of Funds. Escrow Agent shall invest and reinvest the funds
held in the Cash Escrow Account as the Shareholder Representative and
the Purchaser jointly shall direct (subject to applicable minimum
investment requirements) by the furnishing of a joint written
direction; provided, however, that no investment or reinvestment may be
made except in the following:
a. direct obligations of the United States of America or obligations
the principal of and the interest on which are unconditionally
guaranteed by the United States of America;
b. certificates of deposit issued by any bank, bank and trust company,
or national banking association (including Escrow Agent and its
affiliates), which certificates of deposit are insured by the
Federal Deposit Insurance Corporation or a similar governmental
agency;
c. repurchase agreements with any bank, trust company, or national
banking association (including Escrow Agent and its affiliates); or
d. any money market fund substantially all of which is invested in the
foregoing investment categories, including any money market fund
managed by Escrow Agent and any of its affiliates.
If Escrow Agent has not received a joint written direction at any
time that an investment decision must be made, Escrow Agent shall
invest the Cash Escrow Account, or such portion thereof as to which
no joint written direction has been received, in investments
described in clause (d) above. Each of the foregoing investments
shall be made in the name of Escrow
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Agent. No investment shall be made in any instrument or security
that has a maturity of greater than six (6) months. Notwithstanding
anything to the contrary contained herein, Escrow Agent may,
without notice to the Purchaser or the Shareholder Representative,
sell or liquidate any of the foregoing investments at any time if
the proceeds thereof are required for any release of funds
permitted or required hereunder, and Escrow Agent shall not be
liable or responsible for any loss, cost or penalty resulting from
any such sale or liquidation. With respect to any funds received by
Escrow Agent for deposit into the Cash Escrow Account or any joint
written direction received by Escrow Agent with respect to
investment of any funds in the Cash Escrow Account after ten
o'clock, a.m., Atlanta, Georgia, time, Escrow Agent shall not be
required to invest such funds or to effect such investment
instruction until the next day upon which banks in Atlanta, Georgia
are open for business.
10. Liability and Authority of Shareholder Representative; Successors and
Assignees.
(a) The Shareholder Representative shall incur no liability to the
Company Shareholders with respect to any action taken or suffered
by him in reliance upon any note, direction, instruction, consent,
statement or other documents believed by him to be genuinely and
duly authorized, nor for other action or inaction except his own
willful misconduct or gross negligence. The Shareholder
Representative may, in all questions arising under the Escrow
Agreement, rely on the advice of counsel and for anything done,
omitted or suffered in good faith by the Shareholder Representative
based on such advice, the Shareholder Representatives shall not be
liable to the Company Shareholders.
(b) In the event of the death or permanent disability of Shareholder
Representative, or his resignation as a Shareholder Representative,
a successor Shareholder Representative shall be elected by a
majority vote of the Company Shareholders, with each such Company
Shareholder (or his or her successors or assigns) to be given a
vote equal to the number of votes represented by the Escrowed
Shares held by such Company Shareholder immediately prior to the
Effective Time. Each successor Shareholder Representative shall
have all of the power, authority, rights and privileges conferred
by this Agreement upon the original Shareholder Representative, and
the term "Shareholder Representative" as used herein shall be
deemed to include successor Shareholder Representatives.
(c) The Shareholder Representatives shall have full power and authority
to represent the Company Shareholders, and their successors, with
respect to all matters arising under this Agreement and all actions
taken by any Shareholder Representative hereunder shall be binding
upon the Company Shareholder, and their successors, as if expressly
confirmed and ratified in writing by each of them. Without limiting
the generality of the foregoing, the Shareholder Representatives,
acting jointly but not singly, shall have full power and authority
to interpret all of the terms and provisions of this Agreement, to
compromise any claims asserted hereunder and to authorize payments
to be made with respect thereto, on behalf of the Company
Shareholders and their successors. All actions to be taken by the
Shareholder
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Representative hereunder shall be evidenced by, and taken upon, the
written direction of a majority thereof.
11. Amounts Payable by Company Shareholders. The amounts payable by the
Company Shareholders under this Agreement (i.e., the fees and expenses
of arbitrators payable pursuant to Section 18, the fees of the Escrow
Agent payable pursuant to Section 8 and the indemnification obligations
pursuant to Sections 16) shall be payable solely as follows. The
Purchaser or the Shareholder Representative shall notify the Escrow
Agent of any such amount payable by the Company Shareholders as soon as
they become aware that any such amount is payable, with a copy of such
notice to the Purchaser. On the sixth business day after the delivery
of such notice, the Escrow Agent shall sell such number of Escrowed
Shares (up to the number of Escrowed Shares then available in the
Escrow Account), subject to compliance with all applicable securities
laws, as is necessary to raise such amount, and shall disburse such
proceeds to the party to whom such amount is owed in accordance with
the instructions of the Shareholder Representative; provided that if
the Purchaser delivers to the Escrow Agent (with a copy to the
Shareholder Representative), within five business days after delivery
of such notice by the Shareholder Representative, a written notice
contesting the legitimacy or reasonableness of such amount, then the
Escrow Agent shall not sell Escrowed Shares to raise the disputed
portion of such claimed amount, and such dispute shall be resolved by
the Purchaser and the Shareholder Representative in accordance with the
procedures set forth in Section 19.
12. Termination. This Agreement shall terminate upon the distribution by
the Escrow Agent of all of the Escrowed Cash and all of the Escrowed
Shares in accordance with this Agreement; provided that the provisions
of Sections 10, 15, 16 and 17 shall survive such termination.
13. Notices. All notices, instructions and other communications given
hereunder or in connection herewith shall be in writing. Any such
notice, instruction or communication shall be sent either (i) by
registered or certified mail, return receipt requested, postage
prepaid, or (ii) via a reputable nationwide overnight courier service,
in each case to the address set forth below. Any such notice,
instruction or communication shall be deemed to have been delivered two
business days after it is sent by registered or certified mail, return
receipt requested, postage prepaid, or one business day after it is
sent via a reputable nationwide overnight courier service.
If to the Purchaser and/or the Acquisition Sub:
Tekgraf, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
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If to the Company:
New England Computer Graphics, Inc.
▇ ▇▇▇▇ ▇▇▇▇▇ #▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
If to the Shareholder Representative:
-----------------------
▇ ▇▇▇▇ ▇▇▇▇▇ #▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
If to the Escrow Agent:
First Union National Bank
Attn: Corporate Trust - GA9094
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Any party may give any notice, instruction or communication in
connection with this Agreement using any other means (including
personal delivery, telecopy or ordinary mail), but no such notice,
instruction or communication shall be deemed to have been delivered
unless and until it is actually received by the party to whom it was
sent. Any party may change the address to which notices, instructions
or communications are to be delivered by giving the other parties to
this Agreement notice thereof in the manner set forth in this Section
13.
14. Resignation and Removal of Escrow Agent. Escrow Agent may resign from
the performance of its duties hereunder at any time by giving ten (10)
days' prior written notice to the Purchaser and the Shareholder
Representative or may be removed, with or without cause, by the
Purchaser and the Shareholder Representative, acting jointly by
furnishing a joint written direction to Escrow Agent, at any time by
the giving of ten (10) days' prior written notice to Escrow Agent. Such
resignation or removal shall take effect upon the appointment of a
successor Escrow Agent as provided hereinbelow. Upon any such notice of
resignation or removal, the Purchaser and the Shareholder
Representative jointly shall appoint a successor Escrow Agent
hereunder, which shall be a commercial bank, trust company or other
financial institution with a combined capital and surplus in excess of
$5,000,000. Upon the acceptance in writing of any appointment as Escrow
Agent hereunder by a successor Escrow Agent, such successor Escrow
Agent shall thereupon succeed to and become vested with all the rights,
powers, privileges and duties of the retiring Escrow Agent, and the
retiring Escrow Agent shall be discharged from its duties and
obligations under this Escrow Agreement, but shall not be discharged
from any liability for actions taken as Escrow Agent hereunder prior to
such succession. After any retiring Escrow Agent's resignation or
removal, the provisions of this
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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.
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,
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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
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advised by counsel that there may be one or more legal defenses available to it
which are different from or additional to those available to the Company
Shareholders or Purchaser. Purchaser and the Company Shareholders shall be
jointly and severally liable to pay fees and expenses of counsel pursuant to
the preceding sentence, except that any obligation to pay under clause (a)
shall apply only to the party so agreeing. All such fees and expenses payable
by the Company Shareholders and/or Purchaser pursuant to the foregoing sentence
shall be paid from time to time as incurred, both in advance of and after the
final disposition of such action or claim. All of the foregoing losses,
damages, costs and expenses of the Indemnified Parties shall be payable by
Purchaser and the Company Shareholders, jointly and severally, upon demand by
such Indemnified Party. The obligations of Purchaser and the Company
Shareholders under this Section 16 shall survive any termination of this Escrow
Agreement, and the resignation or removal of Escrow Agent shall be independent
of any obligation of the Escrow Agent.
The parties agree that neither the payment by Purchaser or the Company
Shareholders of any claim by Escrow Agent for indemnification hereunder nor the
disbursement of any amounts to Escrow Agent from the Cash Escrow Account or the
Share Escrow Account in respect of a claim by Escrow Agent for indemnification
shall impair, limit, modify, or affect, as between Purchaser and the Company
Shareholders, the respective rights and obligations of Purchaser, on the one
hand, and the Company Shareholders, on the other hand, under the Underlying
Agreement.
17. General.
(a) Governing Law, Assigns. This Agreement shall be governed by
and construed in accordance with the internal laws of the State of Georgia
without regard to conflict-of-law principles and shall be binding upon, and
inure to the benefit of, the parties hereto and their respective successors and
assigns.
(b) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(c) Entire Agreement. Except for those provisions of the Merger
Agreement referenced herein, this Agreement constitutes the entire
understanding and agreement of the parties with respect to the subject matter
of this Agreement and supersedes all prior agreements or understandings,
written or oral, between the parties with respect to the subject matter hereof.
(d) Waivers. No waiver by any party hereto of any condition or of
any breach of any provision of this Escrow Agreement shall be effective unless
in writing. No waiver by any party of any such condition or breach, in any one
instance, shall be deemed to be a further or
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continuing waiver of any such condition or breach or a waiver
of any other condition or breach of any other provision
contained herein.
(e) Amendment. This Agreement may be amended only with the written
consent of the Purchaser, the Escrow Agent and the Shareholder
Representative.
18. Arbitration; Attorneys' Fees.
(a) The parties agree to use reasonable efforts to resolve any
dispute arising out of this Agreement, but should a dispute
remain unresolved ten (10) days following notice of the dispute
to the other party (but in no event prior to said ten (10)
days, except as specifically provided otherwise herein), such
dispute shall be finally settled by binding arbitration in
Atlanta, Georgia in accordance with the then current Commercial
Arbitration Rules of the American Arbitration Association (the
"AAA") or such other mediation or arbitration service as shall
be mutually agreeable to the parties, and judgment upon the
award rendered by the arbitrator shall be final and binding on
the parties and may be entered in any court having jurisdiction
thereof; provided, however, that any party shall be entitled to
appeal a question of law or determination of law to a court of
competent jurisdiction; and provided, further, however, that
the parties may first seek appropriate injunctive relief prior
to, and/or in addition to pursuing negotiation or arbitration.
Such arbitration shall be conducted by an arbitrator chosen by
mutual agreement of the parties, or failing such agreement, an
arbitrator appointed by the AAA. There shall be limited
discovery prior to the 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:
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TEKGRAF, INC.
By:
-------------------------------------
▇▇▇ ▇. ▇▇▇▇▇▇, President
ACQUISITION SUB:
TEKGRAF SUB III, INC.
By:
-------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Chairman
ESCROW AGENT:
FIRST UNION NATIONAL BANK
By:
-------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Vice President
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SHAREHOLDER REPRESENTATIVE:
------------------------------- (SEAL)
Name:
--------------------------
COMPANY:
NEW ENGLAND COMPUTER GRAPHICS, INC.
By:
--------------------------
▇▇▇▇▇ ▇▇▇▇▇▇, President
COMPANY SHAREHOLDERS:
------------------------------- (SEAL)
A. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
------------------------------- (SEAL)
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------- (SEAL)
▇▇▇▇▇▇ ▇▇▇▇
------------------------------- (SEAL)
▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------- (SEAL)
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
------------------------------- (SEAL)
▇▇▇▇▇▇ ▇▇▇▇▇
------------------------------- (SEAL)
▇▇▇▇▇ ▇▇▇▇▇▇
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EXHIBIT B
Company Shareholder NECG Shares Percentage
A. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ 5000 27.33%
C/o Tekgraf, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ 2500 13.66%
C/o Tekgraf, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇ 2500 13.66%
C/o Tekgraf, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇ 3293 18.00%
C/o New England Computer Graphics, Inc.
▇ ▇▇▇▇ ▇▇▇▇▇ #▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇ 4000 21.87%
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇ 500 2.73%
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ 500 2.73%
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
108
