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EXHIBIT 13
PLEDGE, SECURITY AND ESCROW AGREEMENT
This Pledge, Security and Escrow Agreement (this "Agreement") is
entered into as of May 8, 1998, by and among TEKGRAF, INC., a Delaware
corporation (the "Purchaser"), TEKGRAF SUB III, INC. ("Acquisition Sub"), NEW
ENGLAND COMPUTER GRAPHICS, INC., a Massachusetts corporation (the "Company"),
A. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇, and ▇▇▇▇▇ ▇▇▇▇▇▇ (the "Company Shareholders"), and ▇▇▇▇▇
▇▇▇▇▇▇ (the "Indemnification Representative") and First Union National Bank, a
national banking association (the "Escrow Agent").
WHEREAS, the Purchaser and the Company have entered into an Agreement
and Plan of Merger, dated March 25, 1998, by and among the Company, the Company
Shareholders, Acquisition Sub and the Purchaser, as amended by that certain
First Amendment to Agreement to Agreement and Plan of Merger, dated as of March
30, 1998 (the "Merger Agreement").
WHEREAS, the Merger Agreement provides that an escrow account will be
established to secure the Company's and the Company Shareholders'
indemnification obligations to the Indemnified Parties under the Merger
Agreement on the terms and conditions set forth herein.
WHEREAS, the parties hereto desire to establish the terms and
conditions pursuant to which such escrow account will be established and
maintained.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Defined Terms. Capitalized terms used in this Agreement and not
otherwise defined shall have the meanings given them in the Merger
Agreement.
2. Consent of Company Shareholders. By virtue of the Company Shareholders'
approval of the Merger Agreement, the Company Shareholders who may
indirectly or directly receive shares of Purchaser Common Stock
pursuant to the Merger Agreement (the "Indemnifying Shareholders")
have, without any further act of any Company Stockholder, consented to:
(a) the establishment of this escrow to secure the Company
Shareholders' indemnification obligations under Article V of the Merger
Agreement in the manner set forth herein and therein, (b) the
appointment of the Indemnification Representative as their
representatives for purposes of this Agreement and as attorneys-in-fact
and agents for and on behalf of each Indemnifying Shareholder, and the
taking by the Indemnification Representative of any and all actions and
the making of any decisions required or permitted to be taken or
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made by him under this Agreement, and (c) all of the other terms, conditions
and limitations in this Agreement and the Merger Agreement.
3. Escrow and Indemnification.
(a) Escrow of Shares. On the Closing Date, the Purchaser shall
deposit with the Escrow Agent a certificate for the number of Purchaser Shares
specified in Section 5.6 of the Merger Agreement (the "Escrow Shares"), issued
in the name of the Escrow Agent or its nominee. In addition, in the event the
Purchaser elects, pursuant to the provisions of Section 1.3(h) of the Merger
Agreement, to waive the Profit Shortfall Adjustment and the Profit Surplus
Adjustment, the shares of Purchaser common stock held in the escrow account
established by Section 1.3(e) of the Merger Agreement shall be transferred into
the escrow account created pursuant to this Escrow Agreement (the "Transferred
Shares"), to be treated in all respects as Escrow Shares hereunder and the
Transferred Shares shall be distributed to the Company Shareholders pursuant to
Section 5(a) hereof. The Escrow Shares shall be held as a trust fund and shall
not be subject to any lien, attachment, trustee process or any other judicial
process of any creditor of any party hereto. The Escrow Agent agrees to accept
delivery of the Escrow Shares and to hold the Escrow Shares in an escrow
account (the "Escrow Account"), subject to the terms and conditions of this
Agreement.
(b) Indemnification. The Indemnifying Shareholders have agreed in
Article V of the Merger Agreement to indemnify and hold harmless the
Indemnified Parties from and against specified Damages. The Escrow Shares shall
be security for such indemnity obligation of the Indemnifying Shareholders,
subject to the limitations, and in the manner provided, in this Agreement.
(c) Dividends, Etc. Any securities distributable to the
Indemnifying Shareholders in respect of or in exchange for any of the Escrow
Shares, whether by way of stock dividends, stock splits or otherwise, shall be
delivered to the Escrow Agent, who shall hold such securities in the Escrow
Account. Such securities shall be issued in the name of the Escrow Agent or its
nominee and shall be considered Escrow Shares for purposes hereof. Any cash
dividends distributable to the Indemnifying Shareholders in respect of the
Escrow Shares shall be distributed to the Indemnifying Shareholders.
(d) Voting of Shares. The Indemnification Representative shall
have the right, in his sole discretion, on behalf of the Indemnifying
Shareholders, to direct the Escrow Agent in writing as to the exercise of any
voting rights pertaining to the Escrow Shares, and the Escrow Agent shall
comply with any such written instructions. In the absence of such instructions,
the Escrow Agent shall not vote any of the Escrow Shares.
(e) Transferability. The respective interests of the Indemnifying
Shareholders in the Escrow Shares shall not be assignable or transferable,
other than by operation of law. Notice of any such assignment or transfer by
operation of law shall be given to the Escrow
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Agent and the Purchaser, and no such assignment or transfer shall be valid
until such notice is given.
4. Administration of Escrow Account. The Escrow Agent shall
administer the Escrow Account as follows:
(a) If an Indemnified Party has incurred or suffered Damages for
which it is entitled to indemnification under Article V of the Merger
Agreement, the Indemnified Party shall, on or before the date of the expiration
of the representation, warranty, covenant or agreement to which such claim
relates, give written notice of such claim (a "Claim Notice") to the
Indemnification Representative and the Escrow Agent. Each Claim Notice shall
state the amount of claimed Damages (the "Claimed Amount") and the basis for
such claim.
(b) Within 20 days after delivery of a Claim Notice, the
Indemnification Representative shall provide to the Indemnified Party, with a
copy to the Escrow Agent, a written response (the "Response Notice") in which
the Indemnification Representative shall: (i) agree that Escrow Shares having a
Fair Market Value (as computed pursuant to Section 6) equal to the full Claimed
Amount may be released from the Escrow Account to the Indemnified Party, (ii)
agree that Escrow Shares having a Fair Market Value equal to part, but not all,
of the Claimed Amount (the "Agreed Amount") may be released from the Escrow
Account to the Indemnified Party or (iii) contest that any of the Escrow Shares
may be released from the Escrow Account to the Indemnified Party. The
Indemnification Representative may contest the release of Escrow Shares having
a Fair Market Value equal to all or a portion of the Claimed Amount only based
upon a good faith belief that all or such portion of the Claimed Amount does
not constitute Damages for which the Indemnified Party is entitled to
indemnification under Article V of the Merger Agreement. If no Response Notice
is delivered by the Indemnification Representative within such 20-day period,
the Indemnification Representative shall be deemed to have agreed that Escrow
Shares having a Fair Market Value equal to all of the Claimed Amount may be
released to the Indemnified Party from the Escrow Account.
(c) If the Indemnification Representative in the Response Notice
agrees (or is deemed to have agreed) that Escrow Shares having a Fair Market
Value equal to all of the Claimed Amount may be released from the Escrow
Account to the Indemnified Party, the Escrow Agent shall, promptly following
the earlier of the required delivery date for the Response Notice or the
delivery of the Response Notice, transfer, deliver and assign to the
Indemnified Party such number of Escrow Shares held in the Escrow Account which
have a Fair Market Value equal to the Claimed Amount (or such lesser number of
Escrow Shares as is then held in the Escrow Account).
(d) If the Indemnification Representative in the Response Notice
agrees that Escrow Shares having a Fair Market Value equal to part, but not
all, of the Claimed Amount may be released from the Escrow Account to the
Indemnified Party, the Escrow Agent shall promptly
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following the delivery of the Response Notice transfer, deliver and assign to
the Indemnified Party such number of Escrow Shares held in the Escrow Account
which have a Fair Market Value equal to the Agreed Amount (or such lesser
number of Escrow Shares as is then held in the Escrow Account). A determination
with respect to the remainder of the Claimed Amount shall be made in accordance
with subsection 4(e) below.
(e) If the Indemnification Representative in the Response Notice
contests the release of Escrow Shares having a Fair Market Value equal to all
or part of the Claimed Amount (the "Contested Amount"), the matter shall be
settled by binding arbitration in Atlanta, Georgia. All claims shall be settled
by three arbitrators in accordance with the Commercial Arbitration Rules then
in effect of the American Arbitration Association (the "AAA Rules"). The
Indemnification Representative and the Indemnified Party shall each designate
one arbitrator within 15 days of the delivery of the Indemnification
Representative's Response Notice contesting the Claimed Amount. The
Indemnification Representative and the Indemnified Party shall cause such
designated arbitrators mutually to agree upon and designate a third arbitrator;
provided, however, that (i) failing such agreement within 45 days of delivery
of the Indemnification Representative's Response Notice, the third arbitrator
shall be appointed in accordance with the AAA Rules and (ii) if either the
Indemnification Representatives or the Indemnified Party fail to timely
designate an arbitrator, the dispute shall be resolved by the one arbitrator
timely designated. The Indemnifying Shareholders and the Indemnified Party
shall pay the fees and expenses of their respectively designated arbitrators
and shall bear equally the fees and expenses of the third arbitrator. The
Indemnification Representative and the Indemnified Party shall cause the
arbitrators to decide the matter to be arbitrated pursuant hereto within 60
days after the appointment of the last arbitrator. The arbitrators' decision
shall relate solely to whether the Indemnified Party is entitled to receive the
Contested Amount (or a portion thereof) pursuant to the applicable terms of the
Merger Agreement and this Agreement. The final decision of the majority of the
arbitrators shall be furnished to the Indemnification Representative, the
Indemnified Party and the Escrow Agent in writing and shall constitute a
conclusive determination of the issue in question, binding upon the
Indemnification Representative, the Indemnifying Shareholders, the Indemnified
Party and the Escrow Agent, and shall not be contested by any of them. Such
decision may be used in a court of law only for the purpose of seeking
enforcement of the arbitrators' award. After delivery of a Response Notice that
the Claimed Amount is contested by the Indemnification Representative, the
Escrow Agent shall continue to hold in the Escrow Account a number of Escrow
Shares having a Fair Market Value sufficient to cover the Contested Amount (up
to the number of Escrow Shares then available in the Escrow Account),
notwithstanding the occurrence of the Termination Date (as hereinafter
defined), until (i) delivery of a copy of a settlement agreement executed by
the Indemnified Party and the Indemnification Representative setting forth
instructions to the Escrow Agent as to the release of Escrow Shares, if any,
that shall be made with respect to the Contested Amount or (ii) delivery of a
copy of the final award of the majority of the arbitrators setting forth
instructions to the Escrow Agent as to the release of Escrow Shares, if any,
that shall be made with respect to the Contested Amount. The Escrow Agent shall
thereupon release Escrow Shares from the Escrow Account (to the
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extent Escrow Shares are then held in the Escrow Account) in accordance with
such agreement or instructions; provided, however, if the claim related to a
third party claim the amount of which is contested and the subject of
litigation, the Escrow Agent shall not release the Escrow Shares being held in
connection with the Contested Amount of such third party claim until a final
order or other final resolution or settlement has been entered or reached in
the underlying litigation determining the amount of such claim, whereupon the
Escrow Agent shall release Escrow Shares from the Escrow Account (to the extent
Escrow Shares are then held in the Escrow Account) in accordance with such
final order or final resolution or settlement.
5. Release of Escrow Shares.
(a) In the event that Purchaser elects, pursuant to the provisions
of Section 1.3(h) of the Merger Agreement, to waive the Profit Shortfall
Adjustment and the Profit Surplus Adjustment, one half of the Transferred
Shares shall be distributed to the Indemnifying Shareholders on the first
anniversary of the Closing Date. Promptly after the Termination Date, the
Escrow Agent shall distribute to the Indemnifying Shareholders all of the
Escrow Shares (including any remaining Transferred Shares) then held in escrow.
Notwithstanding the foregoing, if an Indemnified Party has previously given a
Claim Notice which has not then been resolved in accordance with Section 4, the
Escrow Agent shall retain in the Escrow Account after the Termination Date a
number of Escrow Shares (including Transferred Shares if necessary) having a
Fair Market Value equal to the Claimed Amount covered by any Claim Notice which
has not then been resolved. Any funds so retained in escrow shall be disbursed
in accordance with the terms of the resolution of such claims.
(b) Any distribution of all or a portion of the Escrow Shares to
the Indemnifying Shareholders shall be made in accordance with the percentages
set forth opposite such holders' respective names on Exhibit B attached hereto;
provided, however, that the Escrow Agent shall withhold the distribution of the
portion of the Escrow Shares otherwise distributable to Indemnifying
Shareholders who have not, according to written notice provided by the
Purchaser to the Escrow Agent, prior to such distribution, surrendered their
respective Certificates pursuant to the terms and conditions of the Merger
Agreement. Any such withheld shares shall be delivered to the Purchaser
promptly after the Termination Date, and shall be delivered by the Purchaser to
the Indemnifying Shareholders to whom such shares would have otherwise been
distributed upon surrender of their respective Certificates. Distributions to
the Indemnifying Shareholders shall be made by mailing stock certificates to
such holders at their respective addresses shown on Exhibit B (or such other
address as may be provided in writing to the Escrow Agent by any such holder).
No fractional Escrow Shares shall be distributed to Indemnifying Shareholders
pursuant to this Agreement. Instead, the number of shares that each
Indemnifying Shareholder shall receive shall be rounded down to the nearest
whole number; and the Escrow Agent shall sell such number of Escrow Shares as
is equal to the aggregate of the fractional shares that would otherwise be
distributed to the Indemnifying Shareholders and shall distribute the proceeds
of such sale to the Indemnifying Shareholders
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other-wise entitled to a fractional Escrow Share pro rata based upon
the fraction of an Escrow Shares to which each such Indemnifying
Shareholder is otherwise entitled.
6. Valuation of Escrow Shares. For purposes of this Agreement, the Fair
Market Value of the Escrow Shares to be retained in the Escrow Account
pending a final resolution of a claim shall be determined based upon
the average of the closing prices of the Purchaser Common Stock on the
Nasdaq National Market System for the twenty trading days immediately
preceding the date on which the claim is made. The Fair Market Value of
the Escrow Shares to be released from the Escrow Account after a final
determination/resolution of a claim shall be determined based upon the
average closing prices of the Purchaser's Common Stock on the Nasdaq
National Market System for the twenty trading days immediately
preceding the date of such final determination/resolution.
7. Fees and Expenses of Escrow Agent. The Purchaser and the Company
Shareholders as a group shall each pay one-half of the amounts required
to compensate Escrow Agent for its services hereunder and, in addition,
shall each pay one-half of the amounts required to reimburse Escrow
Agent for all of its reasonable out-of-pocket expenses, including
attorneys' fees, travel expenses, telephone and facsimile transmission
costs, postage (including express mail and overnight delivery charges),
copying charges and the like. All of the compensation and reimbursement
obligations set forth in this Section 7 shall be payable one-half each
by Purchaser and the Company Shareholders, jointly and severally, upon
demand by Escrow Agent. The obligations of Purchaser and the Company
Shareholders under this Section 7 shall survive any termination of this
Escrow Agreement and the resignation or removal of Escrow Agent.
8. Liability and Authority of Indemnification Representative; Successors
and Assignees.
(a) The Indemnification Representative shall incur no liability to the
Indemnifying Shareholders with respect to any action taken or
suffered by them in reliance upon any note, direction, instruction,
consent, statement or other documents believed by them to be
genuinely and duly authorized, nor for other action or inaction
except their own willful misconduct or gross negligence. The
Indemnification Representative may, in all questions arising under
the Escrow Agreement, rely on the advice of counsel and for
anything done, omitted or suffered in good faith by the
Indemnification Representative based on such advice, the
Indemnification Representative shall not be liable to the
Indemnifying Shareholders.
(b) In the event of the death or permanent disability of the
Indemnification Representative, or his resignation as an
Indemnification Representative, a successor Indemnification
Representative shall be elected by a majority vote of the
Indemnifying Shareholders, with each such Indemnifying Shareholder
(or his or her successors or assigns) to be given a vote equal to
the number of votes represented by the Escrowed Shares held by such
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Indemnifying Shareholder immediately prior to the Effective Time. Each
successor Indemnification Representative shall have all of the power,
authority, rights and privileges conferred by this Agreement upon the original
Indemnification Representative, and the term "Indemnification Representative"
as used herein shall be deemed to include successor Indemnification
Representatives.
(c) The Indemnification Representative shall have full power and
authority to represent the Indemnifying Shareholders, and their successors,
with respect to all matters arising under this Agreement and all actions taken
by any Indemnification Representative hereunder shall be binding upon the
Indemnifying Shareholders, and their successors, as if expressly confirmed and
ratified in writing by each of them. Without limiting the generality of the
foregoing, the Indemnification Representative shall have full power and
authority to interpret all of the terms and provisions of this Agreement, to
compromise any claims asserted hereunder and to authorize payments to be made
with respect thereto, on behalf of the Indemnifying Shareholders and their
successors. All actions to be taken by the Indemnification Representative
hereunder shall be evidenced by, and taken upon, the written direction of a
majority thereof.
9. Amounts Payable by Indemnifying Shareholders. The amounts
payable by the Indemnifying Shareholders under this Agreement (i.e., the fees
and expenses of arbitrators payable pursuant to Section 4(e), the fees of the
Escrow Agent payable pursuant to Section 7 and the indemnification obligations
pursuant to Section 13) shall be payable solely as follows. The Purchaser or
the Indemnification Representative shall notify the Escrow Agent of any such
amount payable by the Indemnifying Shareholders as soon as they become aware
that any such amount is payable, with a copy of such notice to the Purchaser.
On the sixth business day after the delivery of such notice, the Escrow Agent
shall sell such number of Escrow Shares (up to the number of Escrow Shares then
available in the Escrow Account), subject to compliance with all applicable
securities laws, as is necessary to raise such amount, and shall disburse such
proceeds to the party to whom such amount is owed in accordance with the
instructions of the Indemnification Representative; provided that if the
Purchaser delivers to the Escrow Agent (with a copy to the Indemnification
Representative), within five business days after delivery of such notice by the
Indemnification Representative, a written notice contesting the legitimacy or
reasonableness of such amount, then the Escrow Agent shall not sell Escrow
Shares to raise the disputed portion of such claimed amount, and such dispute
shall be resolved by the Purchaser and the Indemnification Representative in
accordance with the procedures set forth in Section 4(e).
10. Termination. This Agreement shall terminate upon the later
of the date which is eighteen (18) months after the Date of Closing (the
"Termination Date") or the distribution by the Escrow Agent of all of the
Escrow Shares in accordance with this Agreement; provided that the provisions
of Sections 4, 5, 7, 8, 9, 12 and 13 shall survive such termination.
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11. Notices. All notices, instructions and other communications
given hereunder or in connection herewith shall be in writing. Any such notice,
instruction or communication shall be sent either (i) by registered or
certified mail, return receipt requested, postage prepaid, or (ii) via a
reputable nationwide overnight courier service, in each case to the address set
forth below. Any such notice, instruction or communication shall be deemed to
have been delivered two business days after it is sent by registered or
certified mail, return receipt requested, postage prepaid, or one business day
after it is sent via a reputable nationwide overnight courier service.
If to the Purchaser and/or the Acquisition Sub:
Tekgraf, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
If to the Company:
New England Computer Graphics, Inc.
▇ ▇▇▇▇ ▇▇▇▇▇ #▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Mr. ▇▇▇▇▇ ▇▇▇▇▇▇
If to the Indemnification Representatives:
--------------------------
▇ ▇▇▇▇ ▇▇▇▇▇ #▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
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
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address to which notices, instructions or communications are to be
delivered by giving the other parties to this Agreement notice
thereof in the manner set forth in this Section 12.
12. Liability of Escrow Agent.
(a) Escrow Agent shall have no liability or obligation with respect to
the Escrowed Cash or the Escrowed Shares except for Escrow Agent's
willful misconduct or gross negligence. Escrow Agent's sole
responsibility shall be for the safekeeping, investment, and
disbursement of the Escrowed Cash or the Escrowed Shares in
accordance with the terms of this Escrow Agreement. Escrow Agent
shall have no implied duties or obligations and shall not be
charged with knowledge or notice of any fact or circumstance not
specifically set forth herein. Escrow Agent may rely upon any
instrument, not only as to its due execution, validity and
effectiveness, but also as to the truth and accuracy of any
information contained therein, which Escrow Agent shall in good
faith believe to be genuine, to have been signed or presented by
the person or parties purporting to sign the same and to conform to
the provisions of this Escrow Agreement. In no event shall Escrow
Agent be liable for incidental, indirect, special, consequential or
punitive damages. Escrow Agent shall not be obligated to take any
legal action or commence any proceeding in connection with the
Escrowed Cash or the Escrowed Shares, any account in which Escrowed
Cash or the Escrowed Shares are deposited, this Escrow Agreement or
the Merger Agreement, or to appear in, prosecute or defend any such
legal action or proceeding. Escrow Agent may consult legal counsel
selected by it in the event of any dispute or question as to the
construction of any of the provisions hereof or of any other
agreement or of its duties hereunder, or relating to any dispute
involving any party hereto, and shall incur no liability and shall
be fully indemnified from any liability whatsoever in acting in
accordance with the opinion or instruction of such counsel.
Purchaser and the Company Shareholders, jointly and severally,
shall each promptly pay, upon demand, one-half of the reasonable
fees and expenses of any such counsel.
(b) The Escrow Agent is authorized, in its sole discretion, to comply
with orders issued or process entered by any court with respect to
the Escrowed Cash or the Escrowed Shares, without determination by
the Escrow Agent of such court's jurisdiction in the matter. If any
portion of the Escrowed Cash or the Escrowed Shares is at any time
attached, garnished or levied upon under any court order, or in
case the payment, assignment, transfer, conveyance or delivery of
any such property shall be stayed or enjoined by any court order,
or in case any order, judgment or decree shall be made or entered
by any court affecting such property or any part thereof, then and
in any such event, the Escrow Agent is authorized, in its sole
discretion, to rely upon and comply with any such order, writ,
judgment or decree which it is advised by legal counsel selected by
it is binding upon it without the need for appeal or other action;
and if the Escrow Agent complies with any such order, writ,
judgment or decree, it shall not be liable to any of the parties
hereto or to any other person or entity by reason of such
compliance even though such order, writ, judgment or decree may be
subsequently reversed, modified, annulled, set aside or vacated.
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13. Indemnification of Escrow Agent. From and at all times after
the date of this Escrow Agreement, Purchaser and the Company Shareholders,
jointly and severally, shall, to the fullest extent permitted by law and to the
extent provided herein, indemnify and hold harmless Escrow Agent and each
director, officer, employee, attorney, agent and affiliate of Escrow Agent
(collectively, the "Indemnified Parties") against any and all actions, claims
(whether or not valid), losses, damages, liabilities, costs and expenses of any
kind or nature whatsoever (including without limitation reasonable attorneys'
fees, costs and expenses) incurred by or asserted against any of the
Indemnified Parties from and after the date hereof, whether direct, indirect or
consequential, as a result of or arising from or in any way relating to any
claim, demand, suit, action or proceeding (including any inquiry or
investigation) by any person, including without limitation Purchaser and the
Company Shareholders, whether threatened or initiated, asserting a claim for
any legal or equitable remedy against any person under any statute or
regulation, including, but not limited to, any federal or state securities
laws, or under any common law or equitable cause or otherwise, arising from or
in connection with the negotiation, preparation, execution, performance or
failure of performance of this Escrow Agreement or any transactions
contemplated herein, whether or not any such Indemnified Party is a party to
any such action, proceeding, suit or the target of any such inquiry or
investigation; provided, however, that no Indemnified Party shall have the
right to be indemnified hereunder for any liability finally determined by a
court of competent jurisdiction, subject to no further appeal, to have resulted
solely from the gross negligence or willful misconduct of such Indemnified
Party. If any such action or claim shall be brought or asserted against any
Indemnified Party, such Indemnified Party shall promptly notify Purchaser and
the Company Shareholders in writing, and Purchaser and the Company Shareholders
shall assume the defense thereof, including the employment of counsel and the
payment of all expenses. Such Indemnified Party shall, in its sole discretion,
have the right to employ separate counsel (who may be selected by such
Indemnified Party in its sole discretion) in any such action and to participate
in the defense thereof, and the fees and expenses of such counsel shall be paid
by such Indemnified Party, except that Purchaser and/or the Company
Shareholders shall be required to pay such fees and expenses if (a) Purchaser
and/or the Company Shareholders agree to pay such fees and expenses, or (b)
Purchaser and/or the Company Shareholders shall fail to assume the defense of
such action or proceeding or shall fail, in the sole discretion of such
Indemnified Party, to employ counsel satisfactory to the Indemnified Party in
any such action or proceeding, (c) Purchaser or the Company Shareholders is the
plaintiff in any such action or proceeding or (d) the named or potential
parties to any such action or proceeding (including any potentially impleaded
parties) include both Indemnified Party and the Company Shareholders and/or
Purchaser, and Indemnified Party shall have been advised by counsel that there
may be one or more legal defenses available to it which are different from or
additional to those available to the Company Shareholders or Purchaser.
Purchaser and the Company Shareholders shall be jointly and severally liable to
pay fees and expenses of counsel pursuant to the preceding sentence, except
that any obligation to pay under clause (a) shall apply only to the party so
agreeing. All such fees and expenses payable by the Company Shareholders and/or
Purchaser pursuant to the foregoing sentence shall be paid from time to time as
incurred, both in advance of and after the
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final disposition of such action or claim. All of the foregoing losses,
damages, costs and expenses of the Indemnified Parties shall be payable by
Purchaser and the Company Shareholders, jointly and severally, upon demand by
such Indemnified Party. The obligations of Purchaser and the Company
Shareholders under this Section 13 shall survive any termination of this Escrow
Agreement, and the resignation or removal of Escrow Agent shall be independent
of any obligation of the Escrow Agent.
The parties agree that neither the payment by Purchaser or
the Company Shareholders of any claim by Escrow Agent for indemnification
hereunder nor the disbursement of any amounts to Escrow Agent from the Cash
Escrow Account or the Share Escrow Account in respect of a claim by Escrow
Agent for indemnification shall impair, limit, modify, or affect, as between
Purchaser and the Company Shareholders, the respective rights and obligations
of Purchaser, on the one hand, and the Company Shareholders, on the other hand,
under the Underlying Agreement.
14. Resignation and Removal of Escrow Agent. Escrow Agent may
resign from the performance of its duties hereunder at any time by giving ten
(10) days' prior written notice to the Purchaser and the Indemnification
Representative or may be removed, with or without cause, by the Purchaser and
the Indemnification Representative, acting jointly by furnishing a joint
written direction to Escrow Agent, at any time by the giving of ten (10) days'
prior written notice to Escrow Agent. Such resignation or removal shall take
effect upon the appointment of a successor Escrow Agent as provided
hereinbelow. Upon any such notice of resignation or removal, the Purchaser and
the Indemnification Representative jointly shall appoint a successor Escrow
Agent hereunder, which shall be a commercial bank, trust company or other
financial institution with a combined capital and surplus in excess of
$5,000,000. Upon the acceptance in writing of any appointment as Escrow Agent
hereunder by a successor Escrow Agent, such successor Escrow Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring Escrow Agent, and the retiring Escrow Agent shall be
discharged from its duties and obligations under this Escrow Agreement, but
shall not be discharged from any liability for actions taken as Escrow Agent
hereunder prior to such succession. After any retiring Escrow Agent's
resignation or removal, the provisions of this Escrow Agreement shall inure to
its benefit as to any actions taken or omitted to be taken by it while it was
Escrow Agent under this Escrow Agreement. The retiring Escrow Agent shall
transmit all records pertaining to the Escrowed Shares and shall deliver all
shares held by it in the Share Escrow Account to the successor Escrow Agent,
after making copies of such records as the retiring Escrow Agent deems
advisable and after deduction and payment to the retiring Escrow Agent of all
fees and expenses (including court costs and attorneys' fees) payable to,
incurred by, or expected to be incurred by the retiring Escrow Agent in
connection with the performance of its duties and the exercise of its rights
hereunder.
15. General.
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(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.
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(e) Amendment. This Agreement may be amended only with the written
consent of the Purchaser, the Escrow Agent and the Indemnification
Representative.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as
of the day and year first above written.
PURCHASER
TEKGRAF, INC.
By:
-------------------------------------
▇▇▇ ▇. ▇▇▇▇▇▇, President
ACQUISITION SUB:
TEKGRAF SUB I, INC.
By:
-------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Chairman
ESCROW AGENT
FIRST UNION NATIONAL BANK
By:
-------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Vice President
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INDEMNIFICATION REPRESENTATIVE
------------------------------- (SEAL)
Name:
--------------------------
COMPANY:
NEW ENGLAND COMPUTER GRAPHICS, INC.
By:
---------------------------
▇▇▇▇▇ ▇▇▇▇▇▇, President
COMPANY SHAREHOLDERS:
------------------------------- (SEAL)
A. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
------------------------------- (SEAL)
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------- (SEAL)
▇▇▇▇▇▇ ▇▇▇▇
------------------------------- (SEAL)
▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------- (SEAL)
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
------------------------------- (SEAL)
▇▇▇▇▇▇ ▇▇▇▇▇
------------------------------- (SEAL)
▇▇▇▇▇ ▇▇▇▇▇▇
122
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EXHIBIT B
Company Shareholder NECG Shares Percentage
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ 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%
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
123