UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) April 1, 1998
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Tekgraf, Inc.
(Exact name of registrant
as specified in its charter)
Georgia 000-23221 58-2033795
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(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification No.)
incorporation)
2979 Pacific Drive, Suite B
Norcross, Georgia 30071
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (770) 441-1107
N/A
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(Former name or former address, if changed since last report)
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ITEM 2. Acquisition or Disposition of Assets.
On April 1, 1998, Tekgraf, Inc., a Delaware corporation (the "Registrant")
acquired Computer Graphics Technology, Inc., a South Carolina corporation
("CGT"), by virtue of the merger of CGT with and into Tekgraf Sub I, Inc., a
Georgia corporation which is a wholly-owned subsidiary of the Registrant
("Acquisition Sub"). The merger was effectuated pursuant to an Agreement and
Plan of Merger (the "Merger Agreement"), dated March 23, 1998, by and among the
Registrant, Acquisition Sub, CGT, and Scott C. Barker, Robert Shumaker and
Thomas Mills (the "CGT Shareholders"). The Registrant delivered an aggregate
of 330,000 unregistered shares of the Registrant's Class A Common Stock and
$500,000 in cash as consideration. These amounts remain subject to adjustment
based on certain net asset value and profitability guarantees made by CGT and
the CGT Shareholders in the Merger Agreement. The guarantees are secured by
$100,000 of the cash consideration and 66,000 of the shares issued, which
amounts were placed in escrow in accordance with an Escrow Agreement by and
among the Registrant, Acquisition Sub, CGT, the CGT Shareholders, Scott C.
Barker (as the Shareholder Representative), and First Union National Bank (as
escrow agent). To secure various other representations, warranties, and
provisions contained in the Merger Agreement, another 66,000 of the shares
issued were placed in escrow pursuant to a Pledge, Security and Escrow
Agreement by and among the Registrant, Acquisition Sub, CGT, the CGT
Shareholders, Scott C. Barker (as the Indemnification Representative), and
First Union National Bank (as escrow agent). Immediately after the merger, the
name of Acquisition Sub was changed to Computer Graphics Technology, Inc.
The purchase price was determined by direct negotiations among the
Registrant, CGT, and the CGT Shareholders in the months preceding the signing
of the Merger Agreement. The Registrant used proceeds from its initial public
offering of Class A Common Stock and Warrants, which occurred in November 1997,
to fund the cash component of the purchase price. The Registrant intends for
the acquisition to be accounted for as a purchase and treated as a tax-free
reorganization under Section 368(a)(2)(D) of the Internal Revenue Code to the
full extent permitted by that Section.
CGT, which is headquartered in Greenville, South Carolina, is a computer
graphics distribution company focused on the southeastern United States. CGT's
assets consist primarily of accounts receivable, inventory and cash. As part of
the merger, Acquisition Sub assumed all the liabilities of CGT, consisting
primarily of accounts payable, a bank note and accrued expenses.
ITEM 7. Financial Statements and Exhibits.
(a) Financial statements of business acquired.
Not applicable.
(b) Pro forma financial information.
Not applicable.
(c) Exhibits.
2.1 Agreement and Plan of Merger, dated March 23, 1998, by and
among Tekgraf, Inc., a Delaware corporation, Tekgraf Sub I,
Inc., a Georgia corporation, and Computer Graphics
Technology, Inc., a South Carolina corporation, and its
shareholders. [Filed as Exhibit 10.22 to the Company's
1998 Annual Report on Form 10-K, filed on March 31, 1998,
and incorporated herein by reference.]**
2.2 Escrow Agreement, dated April 1, 1998, by and among
Tekgraf, Inc., a Delaware corporation, Tekgraf Sub I, Inc.,
a Georgia corporation, Scott C. Barker, Robert Shumaker and
Thomas Mills (as the "Company Shareholders"), Scott C.
Barker (as the "Shareholder Representative"), and First
Union National Bank (as the "Escrow Agent").
2.3 Pledge, Security and Escrow Agreement, dated April 1, 1998,
by and among Tekgraf, Inc., a Delaware corporation, Tekgraf
Sub I, Inc., a Georgia corporation, Scott C. Barker, Robert
Shumaker and Thomas Mills (as the "Company Shareholders"),
Scott C. Barker (as the "Indemnification Representative"),
and First Union National Bank (as the "Escrow Agent").
10.1 Lease Agreement, dated March 1, 1998, by and between Computer
Graphics Technology and Southridge Equities.
21.1 Subsidiary Table.
99.1 Press release dated March 27, 1998.
99.2 Press release dated April 8, 1998.
** The Registrant will furnish supplementally a copy of any omitted schedule
or exhibit to the Securities and Exchange Commission upon request, as provided
in Item 601(b)(2) of Regulation S-K.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
TEKGRAF, INC.
(Registrant)
By: /s/ W. Jeffrey Camp
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W. Jeffrey Camp
Chief Financial Officer
Date: April 15, 1998
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<PAGE>
EXHIBIT INDEX
No. Description
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2.1 Agreement and Plan of Merger, dated March 23, 1998, by
and among Tekgraf, Inc., a Delaware corporation,
Tekgraf Sub I, Inc., a Georgia corporation, and
Computer Graphics Technology, Inc., a South Carolina
corporation, and its shareholders. [Filed as Exhibit
10.22 to the Company's 1998 Annual Report on Form
10-K, filed on March 31, 1998, and incorporated
herein by reference.]**
2.2 Escrow Agreement, dated April 1, 1998, by and among
Tekgraf, Inc., a Delaware corporation, Tekgraf Sub I,
Inc., a Georgia corporation, Scott C. Barker, Robert
Shumaker and Thomas Mills (as the "Company
Shareholders"), Scott C. Barker (as the "Shareholder
Representative"), and First Union National Bank (as
the "Escrow Agent").
2.3 Pledge, Security and Escrow Agreement, dated April 1,
1998, by and among Tekgraf, Inc., a Delaware corpora-
tion, Tekgraf Sub I, Inc., a Georgia corporation,
Scott C. Barker, Robert Shumaker and Thomas Mills
(as the "Company Shareholders"), Scott C. Barker (as
the "Indemnification Representative"), and First Union
National Bank (as the "Escrow Agent").
10.1 Lease Agreement, dated March 1, 1998, by and between
Computer Graphics Technology and Southridge Equities.
21.1 Subsidiary Table.
99.1 Press release dated March 27, 1998.
99.2 Press release dated April 8, 1998.
** The Registrant will furnish supplementally a copy of any omitted schedule
or exhibit to the Securities and Exchange Commission upon request, as provided
in Item 601(b)(2) of Regulation S-K.
EXHIBIT 2.2
ESCROW AGREEMENT
This Escrow Agreement (this "Agreement") is entered into as of April 1st,
1998, by and among TEKGRAF, INC., a Georgia corporation (the "Purchaser"),
TEKGRAF SUB I, INC. ("Acquisition Sub"), COMPUTER GRAPHICS TECHNOLOGY, INC., a
South Carolina corporation (the "Company"), Scott Barker, Robert Shumaker,
Thomas Mills (the "Company Shareholders"), and Scott Barker (the "Shareholder
Representative") and First Union National Bank, a national banking association
(the "Escrow Agent").
WHEREAS, the Purchaser and the Company have entered into an Agreement and
Plan of Merger (the "Merger Agreement") by and among the Company, the Company
Shareholders, Acquisition Sub and the Purchaser.
WHEREAS, the Merger Agreement provides that escrow accounts will be
established to secure the Company Shareholders' guaranty with respect to the
Warranted Pre-Tax Profit and the Warranted Tangible Net Asset Value of the
Company (each as defined in the Merger Agreement) on the terms and conditions
set forth herein.
WHEREAS, the parties hereto desire to establish the terms and conditions
pursuant to which such escrow accounts will be established and maintained.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Defined Terms. Capitalized terms used in this Agreement and not
otherwise defined shall have the meanings given them in the Merger Agreement.
2. Consent of Company Shareholders. By virtue of the Company
Shareholders' approval of the Merger Agreement, the Company Shareholders who
may indirectly or directly receive cash and shares of Purchaser Common Stock
pursuant to the Merger Agreement have, without any further act of any Company
Shareholder, consented to: (a) the establishment of this escrow to secure the
Company Shareholders' guaranty with respect to the Warranted Pre-Tax Profit and
the Warranted Tangible Net Asset Value of the Company in the manner set forth
herein and in the Merger Agreement, (b) the appointment of the Shareholder
Representatives as their representatives for purposes of this Agreement and as
attorneys-in-fact and agents for and on behalf of each Company Shareholder, and
the taking by the Shareholder Representatives of any and all actions and the
making of any decisions required or permitted to be taken or made by them under
this Agreement, and (c) all of the other terms, conditions and limitations in
this Agreement and the Merger Agreement.
3. Escrow and Warranty.
(a) Escrow of Cash. On the Closing Date, the Purchaser shall deposit
with the Escrow Agent $100,000 of the Cash Consideration. The Escrowed Cash
shall be held as a trust fund and shall not be subject to any lien, attachment,
trustee process or any other judicial process of any creditor of any party
hereto. The Escrow Agent agrees to accept delivery of the Escrowed Cash and to
hold the Escrowed Cash in an interest-bearing escrow account (the "Cash Escrow
Account"), subject to the terms and conditions of this Agreement.
(b) Escrow of Shares. On the Closing Date, the Purchaser shall deposit
with the Escrow Agent a certificate for the number of Escrowed Shares specified
in Section 1.3(e) of the Merger Agreement, issued in the name of the Escrow
Agent or its nominee. The Escrowed Shares shall be held as a trust fund and
shall not be subject to any lien, attachment, trustee process or any other
judicial process of any creditor of any party hereto. The Escrow Agent agrees
to accept delivery of the Escrowed Shares and to hold the Escrowed Shares in an
escrow account (the "Share Escrow Account"), subject to the terms and
conditions of this Agreement.
(c) Warranty. The Company Shareholders have agreed in Article I of the
Merger Agreement that the Warranted Pre-Tax Profit and the Warranted Tangible
Net Asset Value of the Company shall not be less than the amounts set forth in
Section 1.3(a) of the Merger Agreement. The Escrowed Shares shall be security
for such warranty obligation of the Company Shareholders, subject to the
limitations, and in the manner provided, in this Agreement.
(d) Dividends, Etc. Any securities distributable to the Company
Shareholders in respect of or in exchange for any of the Escrowed Shares,
whether by way of stock dividends, stock splits or otherwise, shall be
delivered to the Escrow Agent, who shall hold such securities in the Share
Escrow Account. Such securities shall be issued in the name of the Escrow
Agent or its nominee and shall be considered Escrowed Shares for purposes
hereof. Any cash dividends distributable to the Company Shareholders in
respect of the Escrowed Shares shall be distributed to the Company
Shareholders.
(e) Voting of Shares. The Shareholder Representatives shall have the
right, in their sole discretion, on behalf of the Company Shareholders, to
direct the Escrow Agent in writing as to the exercise of any voting rights
pertaining to the Escrowed Shares, and the Escrow Agent shall comply with any
such written instructions. In the absence of such instructions, the Escrow
Agent shall not vote any of the Escrowed Shares.
(f) Transferability. The respective interests of the Company
Shareholders in the Escrowed Shares shall not be assignable or transferable,
other than by operation of law. Notice of any such assignment or transfer by
operation of law shall be given to the Escrow Agent and the Purchaser, and no
such assignment or transfer shall be valid until such notice is given.
(g) Transfer of Shares Upon Waiver of Warranty. In the event the
Purchaser elects, pursuant to the provisions of Section 1.3(h) of the Merger
Agreement, to waive the Profit Shortfall Adjustment and the Profit Surplus
Adjustment, the Escrowed Shares shall be transferred, upon receipt of notice by
Escrow Agent from Purchaser of such waiver, into the escrow account created
pursuant to that certain Pledge, Security and Escrow Agreement dated as of even
date herewith, to be treated in all respects as escrow shares thereunder and
the Escrowed Shares in such case shall be distributed to the Company
Shareholders pursuant to the terms thereof.
4. Administration of Cash Escrow Account. The Escrow Agent shall
administer the Cash Escrow Account as follows:
(a) In the event that there is a Net Asset Value Shortfall (including any
Collection Shortfall or Inventory Shortfall that remains unpaid ten (10) days
after demand for payment thereof by Purchaser or Acquisition Sub to the Company
Shareholders), the Purchase Price shall be reduced by the amount of such Net
Asset Value Shortfall. Purchaser or Acquisition Sub shall provide to the
Escrow Agent and the Shareholder Representatives written notice of the amount
of such Net Asset Value Shortfall, and such amount, including any interest
accrued thereon (or such lesser amount as is then held in the Cash Escrow
Account), shall be paid to Purchaser by Escrow Agent within three (3) business
days after receipt of such notice.
(b) Any cash remaining in the Cash Escrow Account after payment of the
Net Asset Value Shortfall amount as set forth in subsection (a) above, shall be
distributed to the Company Shareholders pursuant to Section 6(a) hereof.
(c) In the event that the Net Asset Value Shortfall exceeds the amount of
Escrowed Cash available, Purchaser's recovery of cash pursuant to Section 1.3
of the Merger Agreement shall not be limited to the amount of Escrowed Cash
available.
5. Administration of Share Escrow Account. The Escrow Agent shall
administer the Share Escrow Account as follows:
(a) In the event that the Warranted Pre-Tax Profit exceeds the Actual
Pre-Tax Profit for the Year (or the Alternative Year, if applicable), the
Purchase Price shall be reduced by the number of Purchaser Shares equal to the
Profit Shortfall Adjustment, subject to the Adjustment Floor. In such event,
Purchaser or Acquisition Sub and the Shareholder Representatives shall provide
written notice to the Escrow Agent of the amount of the Profit Shortfall
Adjustment, and the Escrow Agent shall transfer, deliver and assign to
Purchaser such number of Escrowed Shares held in the Share Escrow Account which
have a Fair Market Value equal to the Profit Shortfall Adjustment (or such
lesser number of Purchaser Shares as is then held in the Share Escrow Account).
The Fair Market Value of the Escrowed Shares to be distributed shall be
determined in accordance with Section 7 hereof.
(b) On the first anniversary of the Closing Date (or if the Alternative
Year is elected, at the end of the Alternative Year), the Escrow Agent shall
distribute to the Company Shareholders, in accordance with Sections 6(a) and
(b) below, one half of the Escrowed Shares remaining in the Share Escrow
Account not required for redistribution pursuant to Section 5(a) hereof. Any
Escrowed Shares remaining in the Share Escrow Account after payment of the
Profit Shortfall Adjustment amount as set forth in subsection (a) above, shall
be distributed to the Company Shareholders pursuant to Sections 6(a) and (b)
hereof.
(c) In the event that the Profit Shortfall Adjustment exceeds the number
of Escrowed Shares available, Purchaser's recovery of Purchaser Shares pursuant
to Section 1.3 of the Merger Agreement shall not be limited to the amount of
Escrowed Shares available.
6. Release of Escrowed Cash and Escrowed Shares.
(a) Any distribution of all or a portion of the Escrowed Cash or the
Escrowed Shares to the Company Shareholders shall be made in accordance with
the percentages set forth opposite such holders' respective names on Exhibit B
attached hereto; provided, however, that the Escrow Agent shall withhold the
distribution of the portion of the Escrowed Cash or the Escrowed Shares
otherwise distributable to Company Shareholders who have not, according to
written notice provided by the Purchaser to the Escrow Agent, prior to such
distribution, surrendered their respective Certificates pursuant to the terms
and conditions of the Merger Agreement. Any such withheld cash or shares shall
be delivered to the Purchaser promptly after the Termination Date, and shall be
delivered by the Purchaser to the Company Shareholders to whom such shares
would have otherwise been distributed upon surrender of their respective
Certificates. Distributions of Escrowed Shares to the Company Shareholders
shall be made by mailing stock certificates to such holders at their respective
addresses shown on Exhibit B (or such other address as may be provided in
writing to the Escrow Agent by any such holder).
(b) No fractional Escrowed Shares shall be distributed to Purchaser or
Company Shareholders pursuant to this Agreement. Instead, the number of shares
that Purchaser or each Company Shareholder shall receive shall be rounded down
to the nearest whole number; and the Escrow Agent shall sell such number of
Escrowed Shares as is equal to the aggregate of the fractional shares that
would otherwise be distributed to the Purchaser or the Company Shareholders, as
the case may be, and shall distribute the proceeds of such sale to the
Purchaser or the Company Shareholders otherwise entitled to a fractional
Escrowed Share based upon the fraction of an Escrowed Share to which Purchaser
or each such Company Shareholder is otherwise entitled, as the case may be.
7. Valuation of Escrowed Shares. For purposes of this Agreement, the
Fair Market Value of the Escrowed Shares to be released from the Share Escrow
Account after a final determination of the Profit Shortfall Adjustment shall be
determined based upon the average closing prices of the Purchaser's Common
Stock on the Nasdaq National Market System for the twenty trading days
immediately preceding the date of such final determination.
8. Fees and Expenses of Escrow Agent. The Purchaser, on the one hand,
and the Company Shareholders, on the other hand, shall each pay one-half of the
fees of the Escrow Agent for the services to be rendered by the Escrow Agent
hereunder.
9. Investment of Funds. Escrow Agent shall invest and reinvest the
funds held in the Cash Escrow Account as the Shareholder Representatives and
the Purchaser jointly shall direct (subject to applicable minimum investment
requirements) by the furnishing of a joint written direction; provided,
however, that no investment or reinvestment may be made except in the
following:
a. direct obligations of the United States of America or
obligations the principal of and the interest on which are
unconditionally guaranteed by the United States of America;
b. certificates of deposit issued by any bank, bank and trust
company, or national banking association (including Escrow Agent and
its affiliates), which certificates of deposit are insured by the
Federal Deposit Insurance Corporation or a similar governmental
agency;
c. repurchase agreements with any bank, trust company, or
national banking association (including Escrow Agent and its
affiliates); or
d. any money market fund substantially all of which is
invested in the foregoing investment categories, including any money
market fund managed by Escrow Agent and any of its affiliates.
If Escrow Agent has not received a joint written direction at
any time that an investment decision must be made, Escrow Agent shall
invest the Cash Escrow Account, or such portion thereof as to which
no joint written direction has been received, in investments
described in clause (d) above. Each of the foregoing investments
shall be made in the name of Escrow Agent. No investment shall be
made in any instrument or security that has a maturity of greater
than six (6) months. Notwithstanding anything to the contrary
contained herein, Escrow Agent may, without notice to the Purchaser
or the Shareholder Representatives, sell or liquidate any of the
foregoing investments at any time if the proceeds thereof are
required for any release of funds permitted or required hereunder,
and Escrow Agent shall not be liable or responsible for any loss,
cost or penalty resulting from any such sale or liquidation. With
respect to any funds received by Escrow Agent for deposit into the
Cash Escrow Account or any joint written direction received by Escrow
Agent with respect to investment of any funds in the Cash Escrow
Account after ten o'clock, a.m., Atlanta, Georgia, time, Escrow Agent
shall not be required to invest such funds or to effect such
investment instruction until the next day upon which banks in
Atlanta, Georgia are open for business.
10. Liability and Authority of Shareholder Representatives; Successors
and Assignees.
(a) The Shareholder Representatives shall incur no liability to the
Company Shareholders with respect to any action taken or suffered by them in
reliance upon any note, direction, instruction, consent, statement or other
documents believed by them to be genuinely and duly authorized, nor for other
action or inaction except their own willful misconduct or gross negligence.
The Shareholder Representatives may, in all questions arising under the Escrow
Agreement, rely on the advice of counsel and for anything done, omitted or
suffered in good faith by the Shareholder Representatives based on such advice,
the Shareholder Representatives shall not be liable to the Company
Shareholders.
(b) In the event of the death or permanent disability of either
Shareholder Representative, or his resignation as a Shareholder Representative,
a successor Shareholder Representative shall be appointed by the other
Shareholder Representative or, absent its appointment, a successor Shareholder
Representative shall be elected by a majority vote of the Company Shareholders,
with each such Company Shareholder (or his or her successors or assigns) to be
given a vote equal to the number of votes represented by the Company Shares
held by such Company Shareholder immediately prior to the Effective Time. Each
successor Shareholder Representative shall have all of the power, authority,
rights and privileges conferred by this Agreement upon the original Shareholder
Representatives, and the term "Shareholder Representatives" as used herein
shall be deemed to include successor Shareholder Representatives.
(c) The Shareholder Representatives, acting jointly but not singly, shall
have full power and authority to represent the Company Shareholders, and their
successors, with respect to all matters arising under this Agreement and all
actions taken by any Shareholder Representative hereunder shall be binding upon
the Company Shareholders, and their successors, as if expressly confirmed and
ratified in writing by each of them. Without limiting the generality of the
foregoing, the Shareholder Representatives, acting jointly but not singly,
shall have full power and authority to interpret all of the terms and
provisions of this Agreement, to compromise any claims asserted hereunder and
to authorize payments to be made with respect thereto, on behalf of the Company
Shareholders and their successors. All actions to be taken by the Shareholder
Representatives hereunder shall be evidenced by, and taken upon, the written
direction of a majority thereof.
11. Amounts Payable by Company Shareholders. The amounts payable by the
Company Shareholders under this Agreement (i.e., the fees and expenses of
arbitrators payable pursuant to Section 19, the fees of the Escrow Agent
payable pursuant to Section 8 and the indemnification obligations pursuant to
Sections 9(b)) shall be payable solely as follows. The Shareholder
Representatives shall notify the Escrow Agent of any such amount payable by the
Company Shareholders as soon as they become aware that any such amount is
payable, with a copy of such notice to the Purchaser. On the sixth business
day after the delivery of such notice, the Escrow Agent shall sell such number
of Escrowed Shares (up to the number of Escrowed Shares then available in the
Escrow Account), subject to compliance with all applicable securities laws, as
is necessary to raise such amount, and shall disburse such proceeds to the
party to whom such amount is owed in accordance with the instructions of the
Shareholder Representatives; provided that if the Purchaser delivers to the
Escrow Agent (with a copy to the Shareholder Representatives), within five
business days after delivery of such notice by the Shareholder Representatives,
a written notice contesting the legitimacy or reasonableness of such amount,
then the Escrow Agent shall not sell Escrowed Shares to raise the disputed
portion of such claimed amount, and such dispute shall be resolved by the
Purchaser and the Shareholder Representatives in accordance with the procedures
set forth in Section 19.
12. Termination. This Agreement shall terminate upon the distribution by
the Escrow Agent of all of the Escrowed Cash and all of the Escrowed Shares in
accordance with this Agreement; provided that the provisions of Sections 10, 16
and 17 shall survive such termination.
13. Notices. All notices, instructions and other communications given
hereunder or in connection herewith shall be in writing. Any such notice,
instruction or communication shall be sent either (i) by registered or
certified mail, return receipt requested, postage prepaid, or (ii) via a
reputable nationwide overnight courier service, in each case to the address set
forth below. Any such notice, instruction or communication shall be deemed to
have been delivered two business days after it is sent by registered or
certified mail, return receipt requested, postage prepaid, or one business day
after it is sent via a reputable nationwide overnight courier service.
If to the Purchaser and/or the Acquisition Sub:
Tekgraf, Inc.
2979 Pacific Concourse Drive, Suite B
Norcross, Georgia 30071
If to the Company:
Computer Graphics Technology, Inc.
1110 West Butler Road
Greenville, South Carolina 29607
If to the Shareholder Representative:
Scott Barker
1110 West Butler Road
Greenville, South Carolina 29607
If to the Escrow Agent:
First Union National Bank
Attn: Corporate Trust - GA9094
999 Peachtree Street, NE, Suite 1100
Atlanta, Georgia 30309-9094
Any party may give any notice, instruction or communication in connection
with this Agreement using any other means (including personal delivery,
telecopy or ordinary mail), but no such notice, instruction or communication
shall be deemed to have been delivered unless and until it is actually received
by the party to whom it was sent. Any party may change the address to which
notices, instructions or communications are to be delivered by giving the other
parties to this Agreement notice thereof in the manner set forth in this
Section 13.
14. Resignation and Removal of Escrow Agent. Escrow Agent may resign
from the performance of its duties hereunder at any time by giving ten (10)
days' prior written notice to the Purchaser and the Shareholder Representatives
or may be removed, with or without cause, by the Purchaser and the Shareholder
Representatives, acting jointly by furnishing a joint written direction to
Escrow Agent, at any time by the giving of ten (10) days' prior written notice
to Escrow Agent. Such resignation or removal shall take effect upon the
appointment of a successor Escrow Agent as provided hereinbelow. Upon any such
notice of resignation or removal, the Purchaser and the Shareholder
Representatives jointly shall appoint a successor Escrow Agent hereunder, which
shall be a commercial bank, trust company or other financial institution with a
combined capital and surplus in excess of $5,000,000. Upon the acceptance in
writing of any appointment as Escrow Agent hereunder by a successor Escrow
Agent, such successor Escrow Agent shall thereupon succeed to and become vested
with all the rights, powers, privileges and duties of the retiring Escrow
Agent, and the retiring Escrow Agent shall be discharged from its duties and
obligations under this Escrow Agreement, but shall not be discharged from any
liability for actions taken as Escrow Agent hereunder prior to such succession.
After any retiring Escrow Agent's resignation or removal, the provisions of
this Escrow Agreement shall inure to its benefit as to any actions taken or
omitted to be taken by it while it was Escrow Agent under this Escrow
Agreement. The retiring Escrow Agent shall transmit all records pertaining to
the Escrowed Cash and the Escrowed Shares and shall pay all funds and deliver
all shares held by it in the Cash Escrow Account and the Share Escrow Account
to the successor Escrow Agent, after making copies of such records as the
retiring Escrow Agent deems advisable and after deduction and payment to the
retiring Escrow Agent of all fees and expenses (including court costs and
attorneys' fees) payable to, incurred by, or expected to be incurred by the
retiring Escrow Agent in connection with the performance of its duties and the
exercise of its rights hereunder.
15. Liability of Escrow Agent.
(a) Escrow Agent shall have no liability or obligation with respect to
the Escrowed Cash or the Escrowed Shares except for Escrow Agent's willful
misconduct or gross negligence. Escrow Agent's sole responsibility shall be
for the safekeeping, investment, and disbursement of the Escrowed Cash or the
Escrowed Shares in accordance with the terms of this Escrow Agreement. Escrow
Agent shall have no implied duties or obligations and shall not be charged with
knowledge or notice of any fact or circumstance not specifically set forth
herein. Escrow Agent may rely upon any instrument, not only as to its due
execution, validity and effectiveness, but also as to the truth and accuracy of
any information contained therein, which Escrow Agent shall in good faith
believe to be genuine, to have been signed or presented by the person or
parties purporting to sign the same and to conform to the provisions of this
Escrow Agreement. In no event shall Escrow Agent be liable for incidental,
indirect, special, consequential or punitive damages. Escrow Agent shall not
be obligated to take any legal action or commence any proceeding in connection
with the Escrowed Cash or the Escrowed Shares, any account in which Escrowed
Cash or the Escrowed Shares are deposited, this Escrow Agreement or the Merger
Agreement, or to appear in, prosecute or defend any such legal action or
proceeding. Escrow Agent may consult legal counsel selected by it in the event
of any dispute or question as to the construction of any of the provisions
hereof or of any other agreement or of its duties hereunder, or relating to any
dispute involving any party hereto, and shall incur no liability and shall be
fully indemnified from any liability whatsoever in acting in accordance with
the opinion or instruction of such counsel. Purchaser and the Company
Shareholders, jointly and severally, shall each promptly pay, upon demand, one-
half of the reasonable fees and expenses of any such counsel.
(b) The Escrow Agent is authorized, in its sole discretion, to comply
with orders issued or process entered by any court with respect to the Escrowed
Cash or the Escrowed Shares, without determination by the Escrow Agent of such
court's jurisdiction in the matter. If any portion of the Escrowed Cash or the
Escrowed Shares is at any time attached, garnished or levied upon under any
court order, or in case the payment, assignment, transfer, conveyance or
delivery of any such property shall be stayed or enjoined by any court order,
or in case any order, judgment or decree shall be made or entered by any court
affecting such property or any part thereof, then and in any such event, the
Escrow Agent is authorized, in its sole discretion, to rely upon and comply
with any such order, writ, judgment or decree which it is advised by legal
counsel selected by it is binding upon it without the need for appeal or other
action; and if the Escrow Agent complies with any such order, writ, judgment or
decree, it shall not be liable to any of the parties hereto or to any other
person or entity by reason of such compliance even though such order, writ,
judgment or decree may be subsequently reversed, modified, annulled, set aside
or vacated.
16. Indemnification of Escrow Agent. From and at all times after the
date of this Escrow Agreement, Purchaser and the Company Shareholders, jointly
and severally, shall, to the fullest extent permitted by law and to the extent
provided herein, indemnify and hold harmless Escrow Agent and each director,
officer, employee, attorney, agent and affiliate of Escrow Agent (collectively,
the "Indemnified Parties") against any and all actions, claims (whether or not
valid), losses, damages, liabilities, costs and expenses of any kind or nature
whatsoever (including without limitation reasonable attorneys' fees, costs and
expenses) incurred by or asserted against any of the Indemnified Parties from
and after the date hereof, whether direct, indirect or consequential, as a
result of or arising from or in any way relating to any claim, demand, suit,
action or proceeding (including any inquiry or investigation) by any person,
including without limitation Purchaser and the Company Shareholders, whether
threatened or initiated, asserting a claim for any legal or equitable remedy
against any person under any statute or regulation, including, but not limited
to, any federal or state securities laws, or under any common law or equitable
cause or otherwise, arising from or in connection with the negotiation,
preparation, execution, performance or failure of performance of this Escrow
Agreement or any transactions contemplated herein, whether or not any such
Indemnified Party is a party to any such action, proceeding, suit or the target
of any such inquiry or investigation; provided, however, that no Indemnified
Party shall have the right to be indemnified hereunder for any liability
finally determined by a court of competent jurisdiction, subject to no further
appeal, to have resulted solely from the gross negligence or willful misconduct
of such Indemnified Party. If any such action or claim shall be brought or
asserted against any Indemnified Party, such Indemnified Party shall promptly
notify Purchaser and the Company Shareholders in writing, and Purchaser and the
Company Shareholders shall assume the defense thereof, including the employment
of counsel and the payment of all expenses. Such Indemnified Party shall, in
its sole discretion, have the right to employ separate counsel (who may be
selected by such Indemnified Party in its sole discretion) in any such action
and to participate in the defense thereof, and the fees and expenses of such
counsel shall be paid by such Indemnified Party, except that Purchaser and/or
the Company Shareholders shall be required to pay such fees and expenses if (a)
Purchaser and/or the Company Shareholders agree to pay such fees and expenses,
or (b) Purchaser and/or the Company Shareholders shall fail to assume the
defense of such action or proceeding or shall fail, in the sole discretion of
such Indemnified Party, to employ counsel satisfactory to the Indemnified Party
in any such action or proceeding, (c) Purchaser or the Company Shareholders is
the plaintiff in any such action or proceeding or (d) the named or potential
parties to any such action or proceeding (including any potentially impleaded
parties) include both Indemnified Party and the Company Shareholders and/or
Purchaser, and Indemnified Party shall have been advised by counsel that there
may be one or more legal defenses available to it which are different from or
additional to those available to the Company Shareholders or Purchaser.
Purchaser and the Company Shareholders shall be jointly and severally liable to
pay fees and expenses of counsel pursuant to the preceding sentence, except
that any obligation to pay under clause (a) shall apply only to the party so
agreeing. All such fees and expenses payable by the Company Shareholders
and/or Purchaser pursuant to the foregoing sentence shall be paid from time to
time as incurred, both in advance of and after the final disposition of such
action or claim. All of the foregoing losses, damages, costs and expenses of
the Indemnified Parties shall be payable by Purchaser and the Company
Shareholders, jointly and severally, upon demand by such Indemnified Party.
The obligations of Purchaser and the Company Shareholders under this Section 16
shall survive any termination of this Escrow Agreement, and the resignation or
removal of Escrow Agent shall be independent of any obligation of the Escrow
Agent.
The parties agree that neither the payment by Purchaser or the Company
Shareholders of any claim by Escrow Agent for indemnification hereunder nor the
disbursement of any amounts to Escrow Agent from the Cash Escrow Account or the
Share Escrow Account in respect of a claim by Escrow Agent for indemnification
shall impair, limit, modify, or affect, as between Purchaser and the Company
Shareholders, the respective rights and obligations of Purchaser, on the one
hand, and the Company Shareholders, on the other hand, under the Underlying
Agreement.
17. Fees and Expenses of Escrow Agent. Purchaser and the Company
Shareholders shall compensate Escrow Agent for its services hereunder in
accordance with Schedule A attached hereto and, in addition, shall reimburse
Escrow Agent for all of its reasonable out-of-pocket expenses, including
attorneys' fees, travel expenses, telephone and facsimile transmission costs,
postage (including express mail and overnight delivery charges), copying
charges and the like. All of the compensation and reimbursement obligations
set forth in this Section 10 shall be payable one-half each by Purchaser and
the Company Shareholders, jointly and severally, upon demand by Escrow Agent.
The obligations of Purchaser and the Company Shareholders under this Section 17
shall survive any termination of this Escrow Agreement and the resignation or
removal of Escrow Agent.
18. General.
(a) Governing Law, Assigns. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of Georgia without
regard to conflict-of-law principles and shall be binding upon, and inure to
the benefit of, the parties hereto and their respective successors and assigns.
(b) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(c) Entire Agreement. Except for those provisions of the Merger
Agreement referenced herein, this Agreement constitutes the entire
understanding and agreement of the parties with respect to the subject matter
of this Agreement and supersedes all prior agreements or understandings,
written or oral, between the parties with respect to the subject matter hereof.
(d) Waivers. No waiver by any party hereto of any condition or of any
breach of any provision of this Escrow Agreement shall be effective unless in
writing. No waiver by any party of any such condition or breach, in any one
instance, shall be deemed to be a further or continuing waiver of any such
condition or breach or a waiver of any other condition or breach of any other
provision contained herein.
(e) Amendment. This Agreement may be amended only with the written
consent of the Purchaser, the Escrow Agent and the Shareholder Representatives.
19. Arbitration; Attorneys' Fees.
(a) The parties agree to use reasonable efforts to resolve any dispute
arising out of this Agreement, but should a dispute remain unresolved ten (10)
days following notice of the dispute to the other party (but in no event prior
to said ten (10) days, except as specifically provided otherwise herein), such
dispute shall be finally settled by binding arbitration in Atlanta, Georgia in
accordance with the then current Commercial Arbitration Rules of the American
Arbitration Association (the "AAA") or such other mediation or arbitration
service as shall be mutually agreeable to the parties, and judgment upon the
award rendered by the arbitrator shall be final and binding on the parties and
may be entered in any court having jurisdiction thereof; provided, however,
that any party shall be entitled to appeal a question of law or determination
of law to a court of competent jurisdiction; and provided, further, however,
that the parties may first seek appropriate injunctive relief prior to, and/or
in addition to pursuing negotiation or arbitration. Such arbitration shall be
conducted by an arbitrator chosen by mutual agreement of the parties, or
failing such agreement, an arbitrator appointed by the AAA. There shall be
limited discovery prior to the arbitration hearing as follows: (a) exchange of
witness lists and copies of documentary evidence and documents related to or
arising out of the issues to be arbitrated, (b) depositions of all party
witnesses, and (c) such other depositions as may be allowed by the arbitrator
upon a showing of good cause. Depositions shall be conducted in accordance
with the Georgia Code of Civil Procedure and questions of evidence in all
hearings shall be resolved in accordance with the Federal Rules of Evidence.
The arbitrator shall be required to provide in writing to the parties the basis
for the award or order of such arbitrator, and a court reporter shall record
all hearings (unless otherwise agreed to by the parties), with such record
constituting the official transcript of such proceedings.
(b) In the event of arbitration or litigation filed or instituted between
the parties with respect to this Agreement, the prevailing party will be
entitled to receive from the other party all costs, damages and expenses,
including reasonable attorney's fees, incurred by the prevailing party in
connection with that action or proceeding whether or not the controversy is
reduced to judgment or award. The prevailing party will be that party who may
be fairly said by the arbitrator(s) or the court to have prevailed on the major
disputed issues.
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the day and year first above written.
PURCHASER:
TEKGRAF, INC.
By: /s/ Dan I. Bailey
____________________________________
Dan I. Bailey, President
ACQUISITION SUB:
TEKGRAF SUB I, INC.
By: /s/ Phillip Aginsky
___________________________________
Phillip Aginsky, Chairman
ESCROW AGENT:
FIRST UNION NATIONAL BANK
By: ___________________________________
Name: Teresa L. Davis
Title: Vice President
SHAREHOLDER REPRESENTATIVE:
/s/ Scott Barker
______________________________________(SEAL)
Scott Barker
COMPANY:
COMPUTER GRAPHICS TECHNOLOGY, INC.
By: /s/ Scott Barker
___________________________________
Scott Barker, President
<PAGE>
COMPANY SHAREHOLDERS:
/s/ Scott Barker
___________________________________(SEAL)
Scott Barker
/s/ Robert Shumaker
___________________________________(SEAL)
Robert Shumaker
/s/ Thomas Mills
___________________________________(SEAL)
Thomas Mills
<PAGE>
EXHIBIT B
Company Shareholder Percentage
Scott Barker 78%
Bob Shumaker 11%
Tom Mills 11%
EXHIBIT 2.3
PLEDGE, SECURITY AND ESCROW AGREEMENT
This Pledge, Security and Escrow Agreement (this "Agreement") is entered
into as of April 1, 1998, by and among TEKGRAF, INC., a Delaware corporation
(the "Purchaser"), TEKGRAF SUB I, INC. ("Acquisition Sub"), COMPUTER GRAPHICS
TECHNOLOGY, INC., a South Carolina corporation (the "Company"), Scott Barker,
Robert Shumaker, Thomas Mills (the "Company Shareholders"), and Scott Barker
(the "Indemnification Representatives") and First Union National Bank, a
national banking association (the "Escrow Agent").
WHEREAS, the Purchaser and the Company have entered into an Agreement and
Plan of Merger (the "Merger Agreement") by and among the Company, the Company
Shareholders, Acquisition Sub and the Purchaser.
WHEREAS, the Merger Agreement provides that an escrow account will be
established to secure the Company's and the Company Shareholders'
indemnification obligations to the Indemnified Parties under the Merger
Agreement on the terms and conditions set forth herein.
WHEREAS, the parties hereto desire to establish the terms and conditions
pursuant to which such escrow account will be established and maintained.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Defined Terms. Capitalized terms used in this Agreement and not
otherwise defined shall have the meanings given them in the Merger Agreement.
2. Consent of Company Shareholders. By virtue of the Company
Shareholders' approval of the Merger Agreement, the Company Shareholders who
may indirectly or directly receive shares of Purchaser Common Stock pursuant to
the Merger Agreement (the "Indemnifying Shareholders") have, without any
further act of any Company Stockholder, consented to: (a) the establishment of
this escrow to secure the Company Shareholders' indemnification obligations
under Article V of the Merger Agreement in the manner set forth herein and
therein, (b) the appointment of the Indemnification Representatives as their
representatives for purposes of this Agreement and as attorneys-in-fact and
agents for and on behalf of each Indemnifying Shareholder, and the taking by
the Indemnification Representatives of any and all actions and the making of
any decisions required or permitted to be taken or made by them under this
Agreement, and (c) all of the other terms, conditions and limitations in this
Agreement and the Merger Agreement.
3. Escrow and Indemnification.
(a) Escrow of Shares. On the Closing Date, the Purchaser shall deposit
with the Escrow Agent a certificate for the number of Purchaser Shares
specified in Section 5.6 of the Merger Agreement (the "Escrow Shares"), issued
in the name of the Escrow Agent or its nominee. In addition, in the event the
Purchaser elects, pursuant to the provisions of Section 1.3(h) of the Merger
Agreement, to waive the Profit Shortfall Adjustment and the Profit Surplus
Adjustment, the shares of Purchaser common stock held in the escrow account
established by Section 1.3(e) of the Merger Agreement shall be transferred into
the escrow account created pursuant to this Escrow Agreement (the "Transferred
Shares"), to be treated in all respects as Escrow Shares hereunder and the
Transferred Shares shall be distributed to the Company Shareholders pursuant to
Section 5(a) hereof. The Escrow Shares shall be held as a trust fund and shall
not be subject to any lien, attachment, trustee process or any other judicial
process of any creditor of any party hereto. The Escrow Agent agrees to accept
delivery of the Escrow Shares and to hold the Escrow Shares in an escrow
account (the "Escrow Account"), subject to the terms and conditions of this
Agreement.
(b) Indemnification. The Indemnifying Shareholders have agreed in
Article V of the Merger Agreement to indemnify and hold harmless the
Indemnified Parties from and against specified Damages. The Escrow Shares
shall be security for such indemnity obligation of the Indemnifying
Shareholders, subject to the limitations, and in the manner provided, in this
Agreement.
(c) Dividends, Etc. Any securities distributable to the Indemnifying
Shareholders in respect of or in exchange for any of the Escrow Shares, whether
by way of stock dividends, stock splits or otherwise, shall be delivered to the
Escrow Agent, who shall hold such securities in the Escrow Account. Such
securities shall be issued in the name of the Escrow Agent or its nominee and
shall be considered Escrow Shares for purposes hereof. Any cash dividends
distributable to the Indemnifying Shareholders in respect of the Escrow Shares
shall be distributed to the Indemnifying Shareholders.
(d) Voting of Shares. The Indemnification Representatives shall have the
right, in their sole discretion, on behalf of the Indemnifying Shareholders, to
direct the Escrow Agent in writing as to the exercise of any voting rights
pertaining to the Escrow Shares, and the Escrow Agent shall comply with any
such written instructions. In the absence of such instructions, the Escrow
Agent shall not vote any of the Escrow Shares.
(e) Transferability. The respective interests of the Indemnifying
Shareholders in the Escrow Shares shall not be assignable or transferable,
other than by operation of law. Notice of any such assignment or transfer by
operation of law shall be given to the Escrow Agent and the Purchaser, and no
such assignment or transfer shall be valid until such notice is given.
4. Administration of Escrow Account. The Escrow Agent shall administer
the Escrow Account as follows:
(a) If an Indemnified Party has incurred or suffered Damages for which it
is entitled to indemnification under Article V of the Merger Agreement, the
Indemnified Party shall, on or before the date of the expiration of the
representation, warranty, covenant or agreement to which such claim relates,
give written notice of such claim (a "Claim Notice") to the Indemnification
Representatives and the Escrow Agent. Each Claim Notice shall state the amount
of claimed Damages (the "Claimed Amount") and the basis for such claim. The
date which is eighteen (18) months after the Date of Closing.
(b) Within 20 days after delivery of a Claim Notice, the Indemnification
Representatives shall provide to the Indemnified Party, with a copy to the
Escrow Agent, a written response (the "Response Notice") in which the
Indemnification Representatives shall: (i) agree that Escrow Shares having a
Fair Market Value (as computed pursuant to Section 6) equal to the full Claimed
Amount may be released from the Escrow Account to the Indemnified Party, (ii)
agree that Escrow Shares having a Fair Market Value equal to part, but not all,
of the Claimed Amount (the "Agreed Amount") may be released from the Escrow
Account to the Indemnified Party or (iii) contest that any of the Escrow Shares
may be released from the Escrow Account to the Indemnified Party. The
Indemnification Representatives may contest the release of Escrow Shares having
a Fair Market Value equal to all or a portion of the Claimed Amount only based
upon a good faith belief that all or such portion of the Claimed Amount does
not constitute Damages for which the Indemnified Party is entitled to
indemnification under Article V of the Merger Agreement. If no Response Notice
is delivered by the Indemnification Representatives within such 20-day period,
the Indemnification Representatives shall be deemed to have agreed that Escrow
Shares having a Fair Market Value equal to all of the Claimed Amount may be
released to the Indemnified Party from the Escrow Account.
(c) If the Indemnification Representatives in the Response Notice agree
(or are deemed to have agreed) that Escrow Shares having a Fair Market Value
equal to all of the Claimed Amount may be released from the Escrow Account to
the Indemnified Party, the Escrow Agent shall, promptly following the earlier
of the required delivery date for the Response Notice or the delivery of the
Response Notice, transfer, deliver and assign to the Indemnified Party such
number of Escrow Shares held in the Escrow Account which have a Fair Market
Value equal to the Claimed Amount (or such lesser number of Escrow Shares as is
then held in the Escrow Account).
(d) If the Indemnification Representatives in the Response Notice agree
that Escrow Shares having a Fair Market Value equal to part, but not all, of
the Claimed Amount may be released from the Escrow Account to the Indemnified
Party, the Escrow Agent shall promptly following the delivery of the Response
Notice transfer, deliver and assign to the Indemnified Party such number of
Escrow Shares held in the Escrow Account which have a Fair Market Value equal
to the Agreed Amount (or such lesser number of Escrow Shares as is then held in
the Escrow Account). A determination with respect to the remainder of the
Claimed Amount shall be made in accordance with subsection 4(e) below.
(e) If the Indemnification Representatives in the Response Notice contest
the release of Escrow Shares having a Fair Market Value equal to all or part of
the Claimed Amount (the "Contested Amount"), the matter shall be settled by
binding arbitration in Atlanta, Georgia. All claims shall be settled by three
arbitrators in accordance with the Commercial Arbitration Rules then in effect
of the American Arbitration Association (the "AAA Rules"). The Indemnification
Representatives and the Indemnified Party shall each designate one arbitrator
within 15 days of the delivery of the Indemnification Representatives' Response
Notice contesting the Claimed Amount. The Indemnification Representatives and
the Indemnified Party shall cause such designated arbitrators mutually to agree
upon and designate a third arbitrator; provided, however, that (i) failing such
agreement within 45 days of delivery of the Indemnification Representatives'
Response Notice, the third arbitrator shall be appointed in accordance with the
AAA Rules and (ii) if either the Indemnification Representatives or the
Indemnified Party fail to timely designate an arbitrator, the dispute shall be
resolved by the one arbitrator timely designated. The Indemnifying
Shareholders and the Indemnified Party shall pay the fees and expenses of their
respectively designated arbitrators and shall bear equally the fees and
expenses of the third arbitrator. The Indemnification Representatives and the
Indemnified Party shall cause the arbitrators to decide the matter to be
arbitrated pursuant hereto within 60 days after the appointment of the last
arbitrator. The arbitrators' decision shall relate solely to whether the
Indemnified Party is entitled to receive the Contested Amount (or a portion
thereof) pursuant to the applicable terms of the Merger Agreement and this
Agreement. The final decision of the majority of the arbitrators shall be
furnished to the Indemnification Representatives, the Indemnified Party and the
Escrow Agent in writing and shall constitute a conclusive determination of the
issue in question, binding upon the Indemnification Representatives, the
Indemnifying Shareholders, the Indemnified Party and the Escrow Agent, and
shall not be contested by any of them. Such decision may be used in a court of
law only for the purpose of seeking enforcement of the arbitrators' award.
After delivery of a Response Notice that the Claimed Amount is contested by the
Indemnification Representatives, the Escrow Agent shall continue to hold in the
Escrow Account a number of Escrow Shares having a Fair Market Value sufficient
to cover the Contested Amount (up to the number of Escrow Shares then available
in the Escrow Account), notwithstanding the occurrence of the Termination Date,
until (i) delivery of a copy of a settlement agreement executed by the
Indemnified Party and the Indemnification Representatives setting forth
instructions to the Escrow Agent as to the release of Escrow Shares, if any,
that shall be made with respect to the Contested Amount or (ii) delivery of a
copy of the final award of the majority of the arbitrators setting forth
instructions to the Escrow Agent as to the release of Escrow Shares, if any,
that shall be made with respect to the Contested Amount. The Escrow Agent
shall thereupon release Escrow Shares from the Escrow Account (to the extent
Escrow Shares are then held in the Escrow Account) in accordance with such
agreement or instructions; provided, however, if the claim related to a third
party claim the amount of which is contested and the subject of litigation, the
Escrow Agent shall not release the Escrow Shares being held in connection with
the Contested Amount of such third party claim until a final order or other
final resolution or settlement has been entered or reached in the underlying
litigation determining the amount of such claim, whereupon the Escrow Agent
shall release Escrow Shares from the Escrow Account (to the extent Escrow
Shares are then held in the Escrow Account) in accordance with such final order
or final resolution or settlement.
5. Release of Escrow Shares.
(a) In the event that Purchaser elects, pursuant to the provisions of
Section 1.3(h) of the Merger Agreement, to waive the Profit Shortfall
Adjustment and the Profit Surplus Adjustment, one half of the Transferred
Shares shall be distributed to the Indemnifying Shareholders on the first
anniversary of the Closing Date. Promptly after the Termination Date, the
Escrow Agent shall distribute to the Indemnifying Shareholders all of the
Escrow Shares (including any remaining Transferred Shares) then held in escrow.
Notwithstanding the foregoing, if an Indemnified Party has previously given a
Claim Notice which has not then been resolved in accordance with Section 4, the
Escrow Agent shall retain in the Escrow Account after the Termination Date a
number of Escrow Shares (including Transferred Shares if necessary) having a
Fair Market Value equal to the Claimed Amount covered by any Claim Notice which
has not then been resolved. Any funds so retained in escrow shall be disbursed
in accordance with the terms of the resolution of such claims.
(b) Any distribution of all or a portion of the Escrow Shares to the
Indemnifying Shareholders shall be made in accordance with the percentages set
forth opposite such holders' respective names on Exhibit B attached hereto;
provided, however, that the Escrow Agent shall withhold the distribution of the
portion of the Escrow Shares otherwise distributable to Indemnifying
Shareholders who have not, according to written notice provided by the
Purchaser to the Escrow Agent, prior to such distribution, surrendered their
respective Certificates pursuant to the terms and conditions of the Merger
Agreement. Any such withheld shares shall be delivered to the Purchaser
promptly after the Termination Date, and shall be delivered by the Purchaser to
the Indemnifying Shareholders to whom such shares would have otherwise been
distributed upon surrender of their respective Certificates. Distributions to
the Indemnifying Shareholders shall be made by mailing stock certificates to
such holders at their respective addresses shown on Exhibit B (or such other
address as may be provided in writing to the Escrow Agent by any such holder).
No fractional Escrow Shares shall be distributed to Indemnifying Shareholders
pursuant to this Agreement. Instead, the number of shares that each
Indemnifying Shareholder shall receive shall be rounded down to the nearest
whole number; and the Escrow Agent shall sell such number of Escrow Shares as
is equal to the aggregate of the fractional shares that would otherwise be
distributed to the Indemnifying Shareholders and shall distribute the proceeds
of such sale to the Indemnifying Shareholders other-wise entitled to a
fractional Escrow Share pro rata based upon the fraction of an Escrow Shares to
which each such Indemnifying Shareholder is otherwise entitled.
6. Valuation of Escrow Shares. For purposes of this Agreement, the Fair
Market Value of the Escrow Shares to be retained in the Escrow Account pending
a final resolution of a claim shall be determined based upon the average of the
closing prices of the Purchaser Common Stock on the Nasdaq National Market
System for the twenty trading days immediately preceding the date on which the
claim is made. The Fair Market Value of the Escrow Shares to be released from
the Escrow Account after a final determination/resolution of a claim shall be
determined based upon the average closing prices of the Purchaser's Common
Stock on the Nasdaq National Market System for the twenty trading days
immediately preceding the date of such final determination/resolution.
7. Fees and Expenses of Escrow Agent. The Purchaser, on the one hand,
and the Indemnifying Shareholders, on the other hand, shall each pay one-half
of the fees of the Escrow Agent for the services to be rendered by the Escrow
Agent hereunder.
8. Liability and Authority of Indemnification Representatives;
Successors and Assignees.
(a) The Indemnification Representatives shall incur no liability to the
Indemnifying Shareholders with respect to any action taken or suffered by them
in reliance upon any note, direction, instruction, consent, statement or other
documents believed by them to be genuinely and duly authorized, nor for other
action or inaction except their own willful misconduct or gross negligence.
The Indemnification Representatives may, in all questions arising under the
Escrow Agreement, rely on the advice of counsel and for anything done, omitted
or suffered in good faith by the Indemnification Representatives based on such
advice, the Indemnification Representatives shall not be liable to the
Indemnifying Shareholders.
(b) In the event of the death or permanent disability of either
Indemnification Representative, or his resignation as an Indemnification
Representative, a successor Indemnification Representative shall be appointed
by the other Indemnification Representative or, absent its appointment, a
successor Indemnification Representative shall be elected by a majority vote of
the Indemnifying Shareholders, with each such Indemnifying Shareholder (or his
or her successors or assigns) to be given a vote equal to the number of votes
represented by the Company Shares held by such Indemnifying Shareholder
immediately prior to the Effective Time. Each successor Indemnification
Representative shall have all of the power, authority, rights and privileges
conferred by this Agreement upon the original Indemnification Representatives,
and the term "Indemnification Representatives" as used herein shall be deemed
to include successor Indemnification Representatives.
(c) The Indemnification Representatives, acting jointly but not singly,
shall have full power and authority to represent the Indemnifying Shareholders,
and their successors, with respect to all matters arising under this Agreement
and all actions taken by any Indemnification Representative hereunder shall be
binding upon the Indemnifying Shareholders, and their successors, as if
expressly confirmed and ratified in writing by each of them. Without limiting
the generality of the foregoing, the Indemnification Representatives, acting
jointly but not singly, shall have full power and authority to interpret all of
the terms and provisions of this Agreement, to compromise any claims asserted
hereunder and to authorize payments to be made with respect thereto, on behalf
of the Indemnifying Shareholders and their successors. All actions to be taken
by the Indemnification Representatives hereunder shall be evidenced by, and
taken upon, the written direction of a majority thereof.
9. Amounts Payable by Indemnifying Shareholders. The amounts payable by
the Indemnifying Shareholders under this Agreement (i.e., the fees and expenses
of arbitrators payable pursuant to Section 4(e), the fees of the Escrow Agent
payable pursuant to Section 7 and the indemnification obligations pursuant to
Sections 8(b)) shall be payable solely as follows. The Indemnification
Representatives shall notify the Escrow Agent of any such amount payable by the
Indemnifying Shareholders as soon as they become aware that any such amount is
payable, with a copy of such notice to the Purchaser. On the sixth business
day after the delivery of such notice, the Escrow Agent shall sell such number
of Escrow Shares (up to the number of Escrow Shares then available in the
Escrow Account), subject to compliance with all applicable securities laws, as
is necessary to raise such amount, and shall disburse such proceeds to the
party to whom such amount is owed in accordance with the instructions of the
Indemnification Representatives; provided that if the Purchaser delivers to the
Escrow Agent (with a copy to the Indemnification Representatives), within five
business days after delivery of such notice by the Indemnification
Representatives, a written notice contesting the legitimacy or reasonableness
of such amount, then the Escrow Agent shall not sell Escrow Shares to raise the
disputed portion of such claimed amount, and such dispute shall be resolved by
the Purchaser and the Indemnification Representatives in accordance with the
procedures set forth in Section 4(e).
10. Termination. This Agreement shall terminate upon the later of the
Termination Date or the distribution by the Escrow Agent of all of the Escrow
Shares in accordance with this Agreement; provided that the provisions of
Sections 8 and 9 shall survive such termination.
11. Notices. All notices, instructions and other communications given
hereunder or in connection herewith shall be in writing. Any such notice,
instruction or communication shall be sent either (i) by registered or
certified mail, return receipt requested, postage prepaid, or (ii) via a
reputable nationwide overnight courier service, in each case to the address set
forth below. Any such notice, instruction or communication shall be deemed to
have been delivered two business days after it is sent by registered or
certified mail, return receipt requested, postage prepaid, or one business day
after it is sent via a reputable nationwide overnight courier service.
If to the Purchaser and/or the Acquisition Sub:
Tekgraf, Inc.
2979 Pacific Concourse Drive, Suite B
Norcross, Georgia 30071
If to the Company:
Computer Graphics Technology, Inc.
1110 West Butler Road
Greenville, South Carolina 29607
If to the Indemnification Representatives:
Scott Barker
1110 West Butler Road
Greenville, South Carolina 29607
If to the Escrow Agent:
First Union National Bank
Attn: Corporate Trust - GA9094
999 Peachtree Street, NE, Suite 1100
Atlanta, Georgia 30309-9094
Any party may give any notice, instruction or communication in connection
with this Agreement using any other means (including personal delivery,
telecopy or ordinary mail), but no such notice, instruction or communication
shall be deemed to have been delivered unless and until it is actually received
by the party to whom it was sent. Any party may change the address to which
notices, instructions or communications are to be delivered by giving the other
parties to this Agreement notice thereof in the manner set forth in this
Section 12.
12. Liability of Escrow Agent.
(a) Escrow Agent shall have no liability or obligation with respect to
the Escrowed Cash or the Escrowed Shares except for Escrow Agent's willful
misconduct or gross negligence. Escrow Agent's sole responsibility shall be
for the safekeeping, investment, and disbursement of the Escrowed Cash or the
Escrowed Shares in accordance with the terms of this Escrow Agreement. Escrow
Agent shall have no implied duties or obligations and shall not be charged with
knowledge or notice of any fact or circumstance not specifically set forth
herein. Escrow Agent may rely upon any instrument, not only as to its due
execution, validity and effectiveness, but also as to the truth and accuracy of
any information contained therein, which Escrow Agent shall in good faith
believe to be genuine, to have been signed or presented by the person or
parties purporting to sign the same and to conform to the provisions of this
Escrow Agreement. In no event shall Escrow Agent be liable for incidental,
indirect, special, consequential or punitive damages. Escrow Agent shall not
be obligated to take any legal action or commence any proceeding in connection
with the Escrowed Cash or the Escrowed Shares, any account in which Escrowed
Cash or the Escrowed Shares are deposited, this Escrow Agreement or the Merger
Agreement, or to appear in, prosecute or defend any such legal action or
proceeding. Escrow Agent may consult legal counsel selected by it in the event
of any dispute or question as to the construction of any of the provisions
hereof or of any other agreement or of its duties hereunder, or relating to any
dispute involving any party hereto, and shall incur no liability and shall be
fully indemnified from any liability whatsoever in acting in accordance with
the opinion or instruction of such counsel. Purchaser and the Company
Shareholders, jointly and severally, shall each promptly pay, upon demand, one-
half of the reasonable fees and expenses of any such counsel.
(b) The Escrow Agent is authorized, in its sole discretion, to comply
with orders issued or process entered by any court with respect to the Escrowed
Cash or the Escrowed Shares, without determination by the Escrow Agent of such
court's jurisdiction in the matter. If any portion of the Escrowed Cash or the
Escrowed Shares is at any time attached, garnished or levied upon under any
court order, or in case the payment, assignment, transfer, conveyance or
delivery of any such property shall be stayed or enjoined by any court order,
or in case any order, judgment or decree shall be made or entered by any court
affecting such property or any part thereof, then and in any such event, the
Escrow Agent is authorized, in its sole discretion, to rely upon and comply
with any such order, writ, judgment or decree which it is advised by legal
counsel selected by it is binding upon it without the need for appeal or other
action; and if the Escrow Agent complies with any such order, writ, judgment or
decree, it shall not be liable to any of the parties hereto or to any other
person or entity by reason of such compliance even though such order, writ,
judgment or decree may be subsequently reversed, modified, annulled, set aside
or vacated.
13. Indemnification of Escrow Agent. From and at all times after the
date of this Escrow Agreement, Purchaser and the Company Shareholders, jointly
and severally, shall, to the fullest extent permitted by law and to the extent
provided herein, indemnify and hold harmless Escrow Agent and each director,
officer, employee, attorney, agent and affiliate of Escrow Agent (collectively,
the "Indemnified Parties") against any and all actions, claims (whether or not
valid), losses, damages, liabilities, costs and expenses of any kind or nature
whatsoever (including without limitation reasonable attorneys' fees, costs and
expenses) incurred by or asserted against any of the Indemnified Parties from
and after the date hereof, whether direct, indirect or consequential, as a
result of or arising from or in any way relating to any claim, demand, suit,
action or proceeding (including any inquiry or investigation) by any person,
including without limitation Purchaser and the Company Shareholders, whether
threatened or initiated, asserting a claim for any legal or equitable remedy
against any person under any statute or regulation, including, but not limited
to, any federal or state securities laws, or under any common law or equitable
cause or otherwise, arising from or in connection with the negotiation,
preparation, execution, performance or failure of performance of this Escrow
Agreement or any transactions contemplated herein, whether or not any such
Indemnified Party is a party to any such action, proceeding, suit or the target
of any such inquiry or investigation; provided, however, that no Indemnified
Party shall have the right to be indemnified hereunder for any liability
finally determined by a court of competent jurisdiction, subject to no further
appeal, to have resulted solely from the gross negligence or willful misconduct
of such Indemnified Party. If any such action or claim shall be brought or
asserted against any Indemnified Party, such Indemnified Party shall promptly
notify Purchaser and the Company Shareholders in writing, and Purchaser and the
Company Shareholders shall assume the defense thereof, including the employment
of counsel and the payment of all expenses. Such Indemnified Party shall, in
its sole discretion, have the right to employ separate counsel (who may be
selected by such Indemnified Party in its sole discretion) in any such action
and to participate in the defense thereof, and the fees and expenses of such
counsel shall be paid by such Indemnified Party, except that Purchaser and/or
the Company Shareholders shall be required to pay such fees and expenses if (a)
Purchaser and/or the Company Shareholders agree to pay such fees and expenses,
or (b) Purchaser and/or the Company Shareholders shall fail to assume the
defense of such action or proceeding or shall fail, in the sole discretion of
such Indemnified Party, to employ counsel satisfactory to the Indemnified Party
in any such action or proceeding, (c) Purchaser or the Company Shareholders is
the plaintiff in any such action or proceeding or (d) the named or potential
parties to any such action or proceeding (including any potentially impleaded
parties) include both Indemnified Party and the Company Shareholders and/or
Purchaser, and Indemnified Party shall have been advised by counsel that there
may be one or more legal defenses available to it which are different from or
additional to those available to the Company Shareholders or Purchaser.
Purchaser and the Company Shareholders shall be jointly and severally liable to
pay fees and expenses of counsel pursuant to the preceding sentence, except
that any obligation to pay under clause (a) shall apply only to the party so
agreeing. All such fees and expenses payable by the Company Shareholders
and/or Purchaser pursuant to the foregoing sentence shall be paid from time to
time as incurred, both in advance of and after the final disposition of such
action or claim. All of the foregoing losses, damages, costs and expenses of
the Indemnified Parties shall be payable by Purchaser and the Company
Shareholders, jointly and severally, upon demand by such Indemnified Party.
The obligations of Purchaser and the Company Shareholders under this Section 13
shall survive any termination of this Escrow Agreement, and the resignation or
removal of Escrow Agent shall be independent of any obligation of the Escrow
Agent.
The parties agree that neither the payment by Purchaser or the
Company Shareholders of any claim by Escrow Agent for indemnification hereunder
nor the disbursement of any amounts to Escrow Agent from the Cash Escrow
Account or the Share Escrow Account in respect of a claim by Escrow Agent for
indemnification shall impair, limit, modify, or affect, as between Purchaser
and the Company Shareholders, the respective rights and obligations of
Purchaser, on the one hand, and the Company Shareholders, on the other hand,
under the Underlying Agreement.
14. Fees and Expenses of Escrow Agent. Purchaser and the Company
Shareholders shall compensate Escrow Agent for its services hereunder in
accordance with Schedule A attached hereto and, in addition, shall reimburse
Escrow Agent for all of its reasonable out-of-pocket expenses, including
attorneys' fees, travel expenses, telephone and facsimile transmission costs,
postage (including express mail and overnight delivery charges), copying
charges and the like. All of the compensation and reimbursement obligations
set forth in this Section 14 shall be payable one-half each by Purchaser and
the Company Shareholders, jointly and severally, upon demand by Escrow Agent.
The obligations of Purchaser and the Company Shareholders under this Section 14
shall survive any termination of this Escrow Agreement and the resignation or
removal of Escrow Agent.
15. Resignation and Removal of Escrow Agent. Escrow Agent may resign
from the performance of its duties hereunder at any time by giving ten (10)
days' prior written notice to the Purchaser and the Indemnification
Representatives or may be removed, with or without cause, by the Purchaser and
the Indemnification Representatives, acting jointly by furnishing a joint
written direction to Escrow Agent, at any time by the giving of ten (10) days'
prior written notice to Escrow Agent. Such resignation or removal shall take
effect upon the appointment of a successor Escrow Agent as provided
hereinbelow. Upon any such notice of resignation or removal, the Purchaser and
the Indemnification Representatives jointly shall appoint a successor Escrow
Agent hereunder, which shall be a commercial bank, trust company or other
financial institution with a combined capital and surplus in excess of
$5,000,000. Upon the acceptance in writing of any appointment as Escrow Agent
hereunder by a successor Escrow Agent, such successor Escrow Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring Escrow Agent, and the retiring Escrow Agent shall be
discharged from its duties and obligations under this Escrow Agreement, but
shall not be discharged from any liability for actions taken as Escrow Agent
hereunder prior to such succession. After any retiring Escrow Agent's
resignation or removal, the provisions of this Escrow Agreement shall inure to
its benefit as to any actions taken or omitted to be taken by it while it was
Escrow Agent under this Escrow Agreement. The retiring Escrow Agent shall
transmit all records pertaining to the Escrowed Shares and shall deliver all
shares held by it in the Share Escrow Account to the successor Escrow Agent,
after making copies of such records as the retiring Escrow Agent deems
advisable and after deduction and payment to the retiring Escrow Agent of all
fees and expenses (including court costs and attorneys' fees) payable to,
incurred by, or expected to be incurred by the retiring Escrow Agent in
connection with the performance of its duties and the exercise of its rights
hereunder.
16. General.
(a) Governing Law, Assigns. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of Georgia without
regard to conflict-of-law principles and shall be binding upon, and inure to
the benefit of, the parties hereto and their respective successors and assigns.
(b) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(c) Entire Agreement. Except for those provisions of the Merger
Agreement referenced herein, this Agreement constitutes the entire
understanding and agreement of the parties with respect to the subject matter
of this Agreement and supersedes all prior agreements or understandings,
written or oral, between the parties with respect to the subject matter hereof.
(d) Waivers. No waiver by any party hereto of any condition or of any
breach of any provision of this Escrow Agreement shall be effective unless in
writing. No waiver by any party of any such condition or breach, in any one
instance, shall be deemed to be a further or continuing waiver of any such
condition or breach or a waiver of any other condition or breach of any other
provision contained herein.
(e) Amendment. This Agreement may be amended only with the written
consent of the Purchaser, the Escrow Agent and the Indemnification
Representatives.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the day and year first above written.
PURCHASER
TEKGRAF, INC.
By: /s/ Dan I. Bailey
____________________________________
Dan I. Bailey, President
ACQUISITION SUB:
TEKGRAF SUB I, INC.
By: /s/ Phillip Aginsky
___________________________________
Phillip Aginsky, Chairman
ESCROW AGENT
FIRST UNION NATIONAL BANK
By: ___________________________________
Name: Teresa L. Davis
Title: Vice President
INDEMNIFICATION REPRESENTATIVE
/s/ Scott Barker
___________________________________(SEAL)
Scott Barker
COMPANY:
COMPUTER GRAPHICS TECHNOLOGY, INC.
/s/ Scott Barker
By: ___________________________________
Scott Barker, President
COMPANY SHAREHOLDERS:
/s/ Scott Barker
___________________________________(SEAL)
Scott Barker
/s/ Robert Shumaker
___________________________________(SEAL)
Robert Shumaker
/s/ Thomas Mills
___________________________________(SEAL)
Thomas Mills
<PAGE>
EXHIBIT B
Indemnifying Shareholder Percentage
Scott Barker 78%
Bob Shumaker 11%
Tom Mills 11%
EXHIBIT 10.1
STATE OF SOUTH CAROLINA )
) LEASE AGREEMENT
COUNTY OF GREENVILLE )
THIS AGREEMENT made and entered into this 1st day of March, 1998, by and
between SOUTHRIDGE EQUITIES, a South Carolina Partnership, of the County of
Greenville, State of South Carolina, hereinafter called LESSOR and COMPUTER
GRAPHICS TECHNOLOGY, hereinafter called LESSEE.
W I T N E S S E T H :
1. PREMISES. Lessor, for and in consideration of the covenants hereinafter
contained and made on the part of the Lessee, does hereby demise and lease unto
Lessee, and Lessee does hereby lease from Lessor, certain premises situated in
the County of Greenville and State of South Carolina described as follows:
Suites A, B & C
Southridge Business Park
1110 W. Butler Road
Greenville, South Carolina 29607
Which property and improvements, a plan for which is attached hereto as
Exhibit A, and made a part hereof improved or to be improved by an office and
or storage area containing 9,000 square feet, and are hereinafter referred to
as the demised premises. Said demised premises are a part of the SOUTHRIDGE
BUSINESS PARK: a legal description of said center being attached hereto as
Exhibit B, and made a part hereof.
2. LEASE TERM. Lessee shall have and hold the demised premises for a term of
three (3) years commencing on the 1st day of October, 1997, and expiring on the
31st day of September, 2000.
3. RENT. Lessee's liability for rent shall start on the commencement date of
this Lease, above set, and shall be payable in equal monthly installments of
Four Thousand Five Hundred Four and 50/100 Dollars ($4,504.50).
Lessee covenants and agrees to pay to Lessor monthly rental as stated
above to the office of Caine Company, Inc., P.O. Box 2287, Greenville, SC
29602, payable in advance on the first day of each calendar month, during the
entire term of this Lease, without deduction or set-off, except as herein above
noted. In the event that the commencement date of said rent shall be on a day
other than the first of the month, the first rental payment and last rental
payment, if applicable, shall be adjusted for the proportionate fraction of the
month.
(a) Penalty - In the event that any monthly installment of rent is not
received by Lessor on or before the tenth day from which said rent is due,
Lessee agrees to pay to Lessor, as a penalty each month during which the
installment remains unpaid, an additional sum equal to 10% of the amount due
and not received.
(b) Holdover - In the event that Lessee fails to vacate the premises by
the final date of the Lease term, Lessee shall be obligated for an additional
month's rent for each month, whether whole or in part, beyond term during which
Lessee fails to vacate. Rent for such holdover period shall be Lessee's last
prevailing monthly rate multiplied by a factor of 1.25 (125%). All terms and
conditions of the Lease Agreement shall remain in force during any holdover
period.
4. USE. Premises shall be used by Lessee for its business or profession and
for no other purpose whatsoever without the prior written consent of Lessor.
Lessee will, at Lessee's sole expense, promptly comply with and carry out all
orders, requirements, or conditions now or hereafter imposed upon Lessee by the
ordinances, laws and/or regulations of the Federal, State, or Local
Governmental authorities, as may apply, in which said premises are located,
whether required of Lessor or otherwise, insofar as they are occasioned by or
required in the conduct of the business of the Lessee.
5. UTILITIES. Lessee agrees to pay all charges for electricity, gas,
heating, fuel, and any other charges for utilities used in the premises. In no
event shall Lessor be liable for any interruption or failure in the supply of
any utilities or services to the premises.
6. COMMON EXPENSES. Lessee agrees that in the light of the nature of the
entire development of which the premises are a part, it will be desirable to
generally maintain the parking area and the other common way areas of the
entire project. The Lessee shall be responsible for its prorated share of the
cost of common area maintenance in and about the center. The Lessee shall, on
a monthly basis, pay as additional rent its prorated share for common area
expenses.
The cost of operating and maintaining Southridge Business Park shall
include but not limited to water, sewer, landscaping maintenance, rubbish
removal, parking lot and driveway maintenance and repair, common area lighting,
security, property management, painting, snow removal and other repairs and
maintenance items required to properly maintain and properly supervise the
maintenance of the Center.
The Lessor shall estimate the annual Common Area Maintenance at the
beginning of the Lease Commencement Date and Lessee agrees to pay its prorated
monthly share of the Common Area Expenditures' (as calculated using the formula
set forth in Section 10, (Prorated Share), simultaneously with the payment of
the Lessee's rent each month, and shall be treated as such hereafter; Lessee's
share of Common Area Maintenance is estimated to be Two Hundred Sixty-Two and
50/100 Dollars ($262.50) per month during the first year of this Lease. Common
Area Maintenance may be adjusted from time to time to reflect a more accurate
accounting of actual expenditures and Lessor shall have final judgement of what
items shall be classified as Common Area Expense. Within ninety (90) days of
the end of the year, Lessor shall provide written evidence to Lessee of the
amount of Common Area Expenditures and Lessee's prorated share of Common Area
Expenditure during the previous year. In the event Lessee's payment during
such prior year exceeds Lessee's actual prorated share of expenses, such over
shall act as a credit for the following rent payment to be made by Lessee. In
the event Lessee's payments are less than the actual Common Area Expenditures,
Lessee shall pay its prorated share within thirty (30) days after written
notice of Lessor of the amount of such prorated share.
7. TAXES. The Lessor shall pay in the first instance all real estate
property taxes which may be levied or assessed by any lawful authority against
the land and improvements. If the amount of real estate property taxes levied
or assessed against the land or building which the leased premises form a part
shall in any year exceed the amount of such taxes during the first year which
shall be designated as 1989, the Lessee shall pay as additional rent its pro-
rated share of such increased taxes based upon the ration of the square feet of
leased premises to the total number of square feet in the entire building. It
is agreed that the leased premises contain 9,000 square feet, and the rentable
area of the entire property is 30,000 square feet; the leased premises, then,
is 30% of the entire property.
Presentation of paid tax receipts, upon request, will be deemed sufficient
evidence of additional rents due, which will be payable by separate check along
with the following month's rent. In the event rent taxes are ever imposed,
Lessee shall pay such taxes.
8. INSURANCE.
(a) Lessor agrees to maintain standard fire and extended coverage
insurance for the property and specifically covering the facility in which the
demised premises are located which coverage shall be for the sole benefit of
Lessor and under its sole control. Lessee shall reimburse Lessor upon request
for Lessee's Pro-Rata Share of any increase in the cost of said insurance
coverage resulting from rate increases.
It is agreed that the Lessee shall pay its pro-rata share of increased
insurance premiums over the base of 1989.
Presentation of paid insurance premiums, upon request, will be deemed
sufficient evidence of additional premiums due. The Lessee's pro-rata share
shall be computed in the same manner and using the same formula as that used
for computing increased tax payments as outlined in Section 10 (Prorated
Share). Lessee shall also, at its sole expense, reimburse Lessor for any
increase in the cost of insurance occasioned by Lessee's use of the demised
premises, including materials stored therein and whether intentional or
otherwise, Lessee shall pay to Lessor as additional rent, upon demand, the
amount for which it is obligated. In the event that such amount is not paid
within twenty (20) days after the date of Lessor's invoice to Lessee the unpaid
amount shall bear interest at the rate of ten percent (10%) per annum for the
date of such invoice until paid.
(b) Lessee will indemnify Lessor and Lessor's agents and save them
harmless from and against any and all claims, actions, damages, liability and
expense, including attorney fees in connection with loss of life, personal
injury and/or damage to property arising from or out of the occupancy or use by
Lessee of the leased premises or any part thereof, or occasioned wholly or in
part by any act or omission of Lessee, its agents, contractors, or employees.
(c) All personal property in said premises shall be and remain at
Lessee's sole risk, and Lessor shall not be liable for any damage to, or loss
of such personal property arising from any acts of negligence of any other
persons (nor from the leaking of the roof, or from the bursting, leaking or
overflowing of water, sewer, or steam pipes, or from heating or plumbing
fixtures, or from electric wires or fixtures, or from any other cause
whatsoever, nor shall the Lessor be liable for any injury to the person of the
Lessee or other persons in said premises) the Lessee expressly agreeing to save
the Lessor harmless in all cases. Lessee shall carry at its own expense and
pay all premiums for insurance to cover its personal property, trade fixtures
and merchandise contained within the structure, and Lessee will further deposit
the policy or policies of such insurance or certificates thereof, with Lessor
or its Agent.
(d) Lessee will, at Lessee's sole expense, during the full term of this
agreement or any renewal or extension thereof, carry in a standard company, for
the protection of himself and Lessor, comprehensive public liability insurance,
including property damage, with limits of at lease; bodily injury $250,000.00
person, $500,000.00 each occurrence and property damage $100,000.00 each
occurrence. Said insurance policy to name the Lessor as an additional insured,
and the insurance policy or certificate from Lessee's insurance company to be
deposited with Lessor or its Agent, and such policy shall provide that it shall
not be cancelled for any reason unless and until Lessor or its Agent is given
fifteen (15) days notice in writing by the insurance company. If Lessee shall
not comply with its covenants made in this Section 9, Lessor may at its option,
cause insurance as aforesaid to be issued, and in such event Lessee agrees to
pay the premium for such insurance promptly upon Lessor's demand.
(e) Insofar as and to the extent the following provision may be effective
without invalidating or making it impossible to secure insurance coverage
obtainable from responsible insurance companies doing business in the
jurisdiction where Southridge Business Park is located (even though extra
premium may result therefrom) Lessor and Lessee mutually agree that with
respect to any loss which is covered by insurance then being carried by them,
respectively, the one carrying such insurance and suffering said loss releases
the other of and from any and all claims with respect to such loss; and they
further mutually agree that their respective insurance companies shall have no
right of subrogation against the other on account thereof.
(f) Lessee covenants and agrees that it will not do or permit anything to
be done in or upon the leased premises or bring in anything or keep anything
therein which may prevent the obtaining of any insurance on the leased premises
or the building or any property therein, including, but without limitation,
fire, extended coverage and public liability insurance.
9. PRORATED SHARE.
(a) Calculation. Southridge Business Park may, from time to time, add
new facilities causing Lessee's prorated share to decrease. As each new
facility or any portion thereof, is certified for occupancy, it shall be added
to the whole against which Lessee's demised premises shall be compared. This
comparison shall be made on December 31st each year and a schedule prepared
disclosing the results of same. Lessee's prorated share shall be calculated by
using its leased space (Paragraph 1, Premises) as the numerator and the total
space at Southridge Business Park available for occupancy, according to the
then prevailing schedule of same, as the denominator; from which the resulting
percentage figure shall represent Lessee's current prorated share. At the
commencement of this Lease, said numerator is 9,000 and said denominator is
30,000, resulting in Lessee's prorated share of thirty percent (30%). Lessee
will be responsible for the number of months the space is occupied during the
period calculated.
(b) Billing. Lessor agrees to advise Lessee in a timely manner of
Lessee's obligations as herein elsewhere provided. Common Area Expenses shall
be paid monthly; adjustments, if any, shall be made within ninety (90) days
following the reconciliation of Lessor's financial records for its fiscal year.
Tax and insurance increases, if any, shall be invoiced within thirty (30) days
following Lessor's receipt of its own invoice disclosing such increase. All
records of such indebtedness shall be available to Lessee upon advance request
and during normal business hours.
10. POSSESSION. Lessee shall have sole and actual possession of the demised
premises from the date agreed upon herein, free and clear of all tenancies,
whether oral or written. If this Leases is executed prior to the premises
being ready for occupancy and Lessor is unable to acquire and deliver
possession of the premises to the Lessee by the anticipated date of
commencement of this Lease, Lessee hereby agrees to waive any claim for damages
including, but not limited to, any incidental or consequential damages due to
such delay, and Lessor waives any rentals due until possession is delivered to
Lessee. If this Lease requires Lessee to prepare the demised premises for
Lessee's own occupancy by a specified Lease commencement date and Lessee is
unable or fails to comply for any reason, Lessee will, nevertheless, pay rent
in accordance with the Lease dates set forth in this agreement. By occupying
the demised premises Lessee shall be conclusively deemed to have accepted the
same as complying fully with Lessor's covenants and obligations.
11. SUBLETTING AND ASSIGNMENT. Lessee may not transfer nor assign this Lease,
nor let nor sublet the whole or any part of said premises without the written
consent of Lessor, which consent shall not be unreasonably withheld or delayed.
In the event of any assignment or sublease, Lessee shall remain liable for the
payment of all rent required to be paid hereunder and the performance of all
terms, covenants and conditions herein undertaken by Lessee.
12. GOOD ORDER AND REPAIR. Lessee will keep said premises in good order and
condition, clean at all times, inside and out, and surrender same at the
expiration of the term herein or any renewal or extension thereof in the same
order in which they are received, subject to usual wear and tear and to
Lessor's obligations herein, if any.
Repairs and Maintenance by Lessee: The Lessee agrees to keep and maintain
the premises at its sole expense in a good state of condition and repair except
those items referred to in Paragraph B below. The Lessee also agrees to
maintain, repair and replace all fixtures pertaining to the heating, air
conditioning, ventilating, electrical, plumbing, and sprinkler system (if any),
on or within the demised premises, in good order and repair at its sole
expense.
A. Lessee is responsible for maintaining contract for the HVAC system.
Lessee agrees to provide Lessor with verification of inspections and
maintenance of the system.
B. Notice of Defect: Lessee will at once report to Lessor any defective
condition known to Lessee which Lessor is required to repair. Failure to
report such defects shall make Lessee responsible to Lessor for any liability
incurred by Lessor by reason of such defect. The Lessor agrees to maintain the
structural components of the building to include the roof, exterior walls,
(exclusive of glass doors, and door mountings) and foundations. Lessor is
under no obligation to inspect the premises to find defects.
13. HAZARDOUS MATERIALS. Lessee shall not use or permit to be brought into
the Demised Premises or the Real Estate any inflammatory or explosive substance
or other article deemed hazardous to person or property, nor shall Lessee do or
permit to be done any act or thing which will invalidate or be in conflict with
fire or other insurance policies covering the building or the operation
thereof, or the Demised Premises, or any part of either. Lessee shall not do
or permit to be done anything in or upon the Demised Premises or bring or keep
anything therein which shall not comply with all rules, orders, regulations or
requirements of the Board of Fire Underwriters or any similar organization
(Lessee shall at all time comply with all such rules, orders, regulations or
requirement), or which shall increase the insurance premiums or the rate of
insurance on the building, its appurtenances or contents. If by reason of the
failure of Lessee to comply with the provisions of this paragraph or of other
provisions of this Lease, or by reason of Lessee's use or occupancy of the
Demised Premises, any insurance premium shall at any time be increased, Lessee
shall reimburse Lessor for all such increase in premium; provided, however,
that receipt of such reimbursement form Lessee shall not be deemed a waiver of
Lessee's default under this paragraph, and Lessor shall not be estopped form
enforcing his other remedies against Lessee on account of such default.
14. ALTERATIONS AND TITLE TO IMPROVEMENTS. Lessee shall not make any
alterations, additions, or improvements to the demised premises without first
obtaining the written consent of Lessor. All of such alterations, additions
and improvements constructed by Lessee during the term of this Lease and any
renewal and extension thereof, shall be and remain the property of Lessee or
Subtenant, as the case may be, at all times during the term of this Lease and
any extensions or renewals thereof. Lessee shall, on the last day of the term
or upon any earlier termination of this Lease, well and truly surrender and
deliver up the demised premises and all improvements thereon to the possession
and use of Lessor without fraud or delay and in good order, condition and
repair, except for reasonable wear and tear after the last necessary repair,
replacement, restoration or renewal made by Lessee, pursuant to his obligations
hereunder, free and clear of all liens and encumbrances, without any payment or
allowance whatever by Lessor. Provided, however, at the option of the Lessor,
Lessor may require Lessee at the final termination of this lease to remove any
and all of the improvements made to the premises. Lessee shall pay or cause to
be paid to Lessor the cost of repairing any damage arising from such removal
and restoration of the demised premises to their original condition prior to
the execution of this Lease.
Any and all extraordinary expenses and costs of any nature whatsoever
attributable to the installation, maintenance and/or removal of telephone
equipment, computer equipment and the like shall be Lessee's sole expense.
15. FURNITURE AND FIXTURES. Where furnished by or at the expense of Lessee or
any Subtenant, at or prior to the termination of this Lease, provided however
that the removal thereof will not injure the Subtenant at or prior to the
termination of this Lease, provided however that the removal thereof will not
injure the demised premises or necessitate changes in or repairs to the same,
Lessee shall pay or cause to be paid to Lessor the cost of repairing any damage
arising from such removal and restoration of the demised premises to the
condition prior to such removal.
Lessor shall not be responsible for any loss or damage occurring to any
property owned by Lessee or any Subtenant. Any personal property of Lessee or
any Subtenant which shall remain in the demised premises after the termination
of this Lease and the removal of the Lessee of such Subtenant from the demised
premises, may, at the option of the Lessor, be deemed to have been abandoned by
Lessee or such Subtenant and either may be retained by Lessor as its property
or be disposed of, without accountability, in such manner as Lessor may see
fit. The provisions of this paragraph shall survive the termination of this
Lease.
16. LIENS AND ENCUMBRANCES. Lessee shall have no authority, expressed or
implied, to encumber or subject the interest of the Lessor in the demised
premises to any mechanics', material men's, or other liens of any nature
whatsoever and shall indemnify and keep indemnified Lessor against all such
liens, charges and encumbrances, including legal counsel fees reasonably
incurred in and about the defense of any suit in discharging said premises from
any liens, judgements or encumbrances caused by Lessee.
17. INSPECTION. Lessee shall permit Lessor or his Agent to enter the demised
premises at all reasonable times for the purpose of inspecting same, or in the
event of fire or other property damage, or for the purpose of making any
repairs Lessor considers necessary or desirable and performing any work therein
that may be necessary by reason of Lessee's failure to make any such repair or
perform any such work. Nothing herein shall imply any duty upon the part of
Lessor to do any such work; and performance thereof by Lessor shall not
constitute a waiver of Lessee's default in failing to perform the same. Lessor
shall not be liable for inconvenience, annoyance, disturbance, loss of business
or other damage of Lessee or any Subtenant by reason of making such repairs or
the performance of any such work.
18. SIGNS. Lessor reserves the right to establish sign standards including,
but not limited to, selecting a project sign theme, lettering styles, colors,
materials and mounting locations and methods, and Lessee hereby agrees to
conform to said standards upon notice by Lessor. Cost of such signage to be
borne by Lessee.
19. KEYS. Lessor will provide Lessee with two (2) keys to the demised
premises upon the commencement of this Lease. Lessee agrees to account for all
keys provided or duplicated and to return all keys to Lessor promptly at the
end of the Lease term. Lessee agrees to provide Lessor with name and phone
number of person or persons to be contacted in the event of a fire, emergency,
repairs and other urgencies.
20. DEFAULT. Lessee agrees to pay the reserved rent at the time, in the
amount and in the manner aforesaid without any notice, bill, reminder or demand
from Lessor or Lessor's Agent. Each of the following shall be deemed a default
by Lessee and a breach of this Lease namely:
(a) If Lessee fails to pay any installment of rent or to pay any
additional rent, which failure persists for ten (10) days after the
date due; or
(b) If Lessee fails to observe or perform any of the other terms,
covenants or conditions of this Lease other than paying rents when
due, which failure persists after the expiration of ten (10) days
from the date Lessor or Lessor's Agent gives notice to Lessee calling
attention to the existence of such failure; or
(c) If Lessee is declared bankrupt or insolvent by judicial decree; or
(d) If Lessee takes the benefit of any federal reorganization or
composition proceedings; or
(e) If Lessee makes a general assignment for benefit of creditors; or
(f) If Lessee's leasehold interest in this Lease is sold under any
process of law; or
(g) If a trustee in bankruptcy or a receiver is appointed or elected for
the Lessee; or
(h) If Lessee abandons the premises; or
(i) If any material man's, mechanic's, or other lien if filed against the
leased premises in connection with any improvements, alterations, or
additions made by Lessee and Lessee permits the lien or liens to
stand against the leased premises, not securing the discharge of said
premises from such liens by filing an appropriate bond pursuant to
applicable law. Should Lessee file a bond and elect to contest the
lien or liens, no default shall be in effect pending final legal
determination of the disputed lien.
In the event of any default by Lessee as hereinabove provided, Lessor at
any time thereafter may, at its option, give Lessee written notice of intention
to end the term of this Lease and immediately thereupon the term of this Lease
shall expire and Lessee will then quit and surrender the demised premises to
Lessor, but Lessee shall remain liable as hereinafter provided.
Upon such termination by Lessor, Lessor or its Agent shall have the right
to enter the premises, by force if necessary without being liable for trespass,
forcible entry or other tort, to re-take possession of the premises, remove all
persons and personal property of the Lessee and to place a "For Rent" or "For
Lease" sign in full public view. Lessee agrees to grant to Lessor a lien (in
addition to the statutory lien or right to distress that may exist) on all of
Lessee's personal property in or around the premises to secure payment of rent
and the performance of this Lease which is in default, and Lessee shall be
liable for all attorney's fees and all other expenses incurred by Lessor in
enforcing any of the obligations of this Lease.
21. LESSOR'S RIGHT OF RE-ENTRY OR TO DECLARE FULL RENTAL DUE. In the event of
a default by Lessee, Lessor may, in addition to any other right or remedies it
may have, at Lessor's option:
(a) declare the full rental for the entire term immediately due and
payable without prejudice to any other remedies in law or equity
available to Lessor; and/or
(b) have the immediate right to re-enter and take possession of the
demised premises and to hold said premises with the full right to
recover form the Lessee all past due rents and any and all damages,
including attorney's fees, as a result of a default. Lessor, on re-
entry, may remove all persons and personal property of the Lessee to
a public warehouse or elsewhere at the cost and for the account of
the Lessee.
22. RIGHT TO RE-LET. In the event of a default by Lessee, Lessor may elect to
re-enter the demised premises and attempt to re-let said premises. Lessor's
only responsibility shall be to offer the premises for rent and make the usual
and normal efforts to re-let said premises. Lessee shall be liable to Lessor
for any deficiency between the amount of rental received, if any, and the
amount which Lessee is obligated to pay under the terms of this Lease and for
any other damages, including attorney's fees, suffered by Lessor. Lessor's
right to re-let is in addition to any other remedies available to Lessor.
23. RIGHT TO TERMINATE. In addition to Lessor's right to re-enter and re-let
the premises, Lessor may elect, at its option, upon a default by Lessee, to
terminate this Lease Agreement. In such event, this Lease shall be regarded as
cancelled as of the date of Lessor's notice to Lessee of Lessor's election to
terminate the Lease as provided hereinabove. Lessee shall remain liable to
Lessor for all rentals, charges and payments accrued to the time of such
termination.
The Lessor's right to terminate this Lease is in lieu of, and not in
addition to, any other rights or causes of action that Lessor may have against
the Lessee because of a default by Lessee. If Lessor does not elect to
terminate the Lease as above provided, then Lessor may utilize and pursue such
other rights as it may have against Lessee under the other terms of this Lease,
the laws of the United States, the State of South Carolina and Greenville City
and County as may be applicable.
24. REMEDIES CUMULATIVE. No mention in this Lease of any specific right of
remedy shall preclude Lessor from exercising any other right or from having any
other remedy or from maintaining any action to which it may otherwise be
entitled either at Law or in equity; and the failure of Lessor to insist in any
one or more instances upon a strict performance of a covenant of this Agreement
or to exercise any option or right herein contained shall not be construed as a
waiver or relinquishment for the future of such covenant, right, or option, but
the same shall remain in full force and effect unless the contrary is expressed
in writing by Lessor.
25. DAMAGE OR DESTRUCTION OF PREMISES.
(a) In the event of the partial destruction of the demised premises, or
any part thereof, by fire, storm, Act of God, unavoidable accidents,
or other casualty, Lessor shall speedily and as soon as practicable
after such destruction, and should such damage or destruction to the
said premises, or any part thereof, make it necessary for the entire
suspension of the business of Lessee, then during the time required
for repairing and restoring said premises as aforesaid, Lessee shall
not be chargeable with any payment of rent hereunder, but the said
rental charge shall cease during said period required for repairing
and restoring and shall again commence when the premises shall have
been repaired and restored as hereinabove set forth.
(b) In the event of total destruction of said premises by fire, storm,
Act of God, unavoidable accident, or the public enemy, Lessor
reserves the right of either terminating this Lease or restoring the
premises to substantially their condition just prior to such damage
or destruction and in the event Lessor shall elect to reconstruct
said premises, then and in that event Lessee is to be advised in
writing by Lessor and/or its agent, within a period of thirty (30)
days after said damage or destruction, that it shall and will
speedily and as soon as practicable repair and restore the premises
to the condition above set forth, and during the premises to the
condition above set forth, and during the time required for repairing
and restoring the premises as aforesaid, Lessee shall not be
chargeable with any payment of rent hereunder, but the said rental
charge shall cease during the period required for restoring and shall
again commence when the premises shall have been repaired and
restored as hereinabove set forth. In the event of full abatement of
rent aforesaid, the term of this Lease shall be automatically
extended for a period equal to the time of such abatement.
(c) Lessee shall notify Lessor or its Agent without delay in the event of
any fire or other casualty, hereinabove described and still fit for
occupancy, Lessor shall repair the damage speedily and as soon as
practicable and Lessee shall continue to pay rent and uphold all
other provisions of this Lease. Lessee agrees not to claim any
compensation from Lessor because of any inconvenience, annoyances or
business interruption arising from the damage, repair, rebuilding or
alteration of any portion of the demised premises or adjacent
premises or other areas of the Center.
(d) However, if the leased premises shall be substantially damaged or
destroyed by fire, storm, Act of God, unavoidable accidents or other
casualty within the past year of the term of this Lease, Lessor shall
have the right to terminate this Lease, provided that Lessor gives
Lessee notice thereof not later than thirty (30) days after Lessor
exercises said right of termination, this Lease and the terms hereof
shall cease and come to an end as of the date said damage of
destruction.
26. CONDEMNATION. In the event the whole or any part of the demised premises,
or the whole or any part of the property of which said premises are a part,
shall be acquired or condemned by eminent domain for any public or quasi-public
use or purpose, Lessee shall have no claim nor interest in any award of damages
or other compensation for such taking.
In the event Lessor in his sole discretion determines that such taking of
the demised premises is not sufficient to render the remaining portion thereof
unsuitable for its continued use or occupancy for the purpose of the Lease,
said Lease shall terminate on the date that possession is taken by public
authorities.
In the event Lessor in his sole discretion determines that such taking of
the demised premises is not sufficient to render the remaining portion thereof
unusable for its continued use or occupancy for the purpose of this Lease,
Lessor shall restore said building for use and the rent shall be adjusted
prorata based on the then remaining area of the altered building.
27. SUBORDINATION. Lessee agrees that this Lease shall be subordinate and
subject to any mortgages now or hereafter placed upon the demised premises or
the whole or any part of the property of which said premises are a part, and to
any and all advances to be made thereunder, and to the interest thereon, and
all renewals, replacements, modifications, and extensions thereof. Lessee
shall, without charge, at any time and from time to time, within ten (10) days
after request by Lessor, duly execute, acknowledge and deliver to Lessor, or
any other person or firm specified by Lessor, any Lease Subordination Agreement
or Estoppel Agreement requested by Lessor.
28. ZONING. Lessee acknowledges that the use of the demised premises is
subject to any applicable regulations, zoning ordinances, including Planned
Development Districts, if applicable, of any Governmental authority, the Lessee
agrees to be bound by all terms and conditions imposed by such Governmental
authority including any traffic restrictions, use restrictions and other
conditions which plan approval is conditioned upon and all present and future
zoning laws, ordinances, resolutions and regulations of any appropriate
Governmental authority.
29. QUIET POSSESSION. It is understood and agreed that subject to the terms
of this Lease and to all underlying leases, if any, and to all covenants,
restrictions, easements, liens and mortgages of record that Lessee, paying the
rent hereby reserved, and performing and observing the several covenants
hereof, may peacefully hold and enjoy the said premises throughout the duration
of this Lease without any interruptions by the Lessor, his heirs, or assigns,
or any person lawfully claiming through him.
30. LESSOR NOT A PARTNER. It is expressly understood that Lessor shall not be
construed or held to be a partner, joint venturer or associate of Lessee in the
conduct of his business; it is expressly understood that the relationship
between the parties hereto is and shall remain at all times that of Lessor and
Lessee.
31. PARKING. The Lessee, its employees, visitors and guest are authorized to
make reasonable use of the parking facilities which form part of the Real
Estate at the sole risk of each driver and user of said facility. Lessee shall
cooperate with the Lessor in limiting the visitors to the approximate
proportionate share in relation to the Demised Premises. The parking facility
shall not be used for the storage of abandoned or defective vehicles or for any
other purpose except transient parking. Neither Lessee nor Lessee's employees,
officers, agents, guests, invitees or other persons visiting the Demised
Premises shall have any rights to any particular parking space or spaces, and
no special markings or signs may be placed on any parking spaces by Lessee.
32. WINDUP. If during the last month of the term of this Lease or any renewal
or extension of the said term Lessee shall have removed all or substantially
all of the Lessee's property from the premises, Lessor may, prior to the
expiration or termination of the term of the Lease, without releasing Lessee
from any obligations to repair or restore the demised premises or to pay the
rent in full, and without any elimination or abatement thereof, immediately
enter upon and alter, renovate and redecorate the premises.
33. FIRE EXTINGUISHERS. Lessee agrees to supply and maintain at its own
expense any fire extinguishers, or other fire prevention equipment required by
law, rules, ordinances, and regulations of any city, county, or state in which
the herein demised premises are located, and/or required by any underwriters
association, bureau, or any other similar body having jurisdiction involving
said premises.
34. SUCCESSOR AND ASSIGNS. This Agreement and the covenants and conditions
herein contained, shall enure to the benefit of and be binding upon Lessor, its
successors and assigns, and shall enure to the benefit of Lessee and only such
assigns of Lessee to whom the assignment of Lessee has been consented to by
Lessor. If all or any part of the Lessor's interest in this Lease or in the
Center shall be held or owned (directly, indirectly or beneficially) by or for
any individual, partnership, tenancy-in-common, joint venture, corporation or
trust it is agreed that no such owner, joint tenant, beneficiary, trustee
shareholder or corporate entity shall be personally responsible or liable with
respect to any of the covenants, conditions or provisions of this Lease to be
performed by the Lessor.
In the event of a default by Lessor under this Lease, Lessee agrees that
in all events Lessor's Liability shall be limited to the actual equity interest
of Lessor in the Center.
35. JOINT AND SEVERAL LIABILITY. In the event that two or more individuals,
corporations, partnerships or other business associations (or any combination
of two or more thereof) shall sign this Lease Agreement as Lessee, the
liability of such individual, corporation, partnership, or other business
association the members which are, by virtue of statute or general law, subject
to personal liability then, and in the event, the liability of each such member
shall be deemed to be joint and several.
36. TIME. Time is of the essence of this Agreement.
37. NOTICES. All notices required to be given hereunder shall be in writing
and shall be mailed by registered mail, postage prepaid to:
(a) Notice to Lessor - Richard W. Bailey
Caine Company, Inc.
Post Office Box 2287
Greenville, SC 29602
(b) Notice to Lessee - Computer Graphics Technology
Attn: Scott Barker
1110 W. Butler Rd., Suites A, B, C
Greenville, SC 29607
38. PAYMENTS. No payment by Lessee or receipt by Lessor of a lesser amount
than the rent (or other sum) herein stipulated shall be deemed to be other than
rent nor shall any such payment, endorsement or statement on any check or any
letter accompanying any check or payment be deemed an accord and satisfaction.
Lessor may accept such check or payment without prejudice to its right to
recover the balance due or pursue any other remedy in this Lease provided.
39. WRITTEN AGREEMENT. This Lease and Exhibits, Rules and Regulations and
Riders, if any, attached hereto and forming a part hereof, set forth all the
covenants, promises, agreements, conditions or understandings, either oral or
written, between them other than are herein set forth. Except as herein
otherwise provided, no subsequent alteration, amendment, change or addition to
this Lease shall be binding upon Lessor or Lessee unless reduced to writing and
signed by both parties.
40. SEVERABILITY. If any term or provision of this Lease, or the application
thereof to any person or circumstance shall, to any extent, be invalid or
unenforceable, the remainder of this Lease or the application of such term or
provision to person whose circumstances other than those as to which it is held
invalid or unenforceable, shall not be affected thereby.
41. CAPTIONS. The captions appearing in this Lease and are inserted only as a
matter of convenience and shall in no way affect this Lease. Any gender used
herein shall be deemed to refer to any other gender more grammatically
applicable to the party to whom such use of gender relates. The use of
singular herein shall be deemed to include the plural and, conversely, the
plural shall be deemed to include the singular.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
LESSOR
SOUTHRIDGE EQUITIES
/s/ Deborah M. Whitfield /s/ Richard W. Bailey
________________________ BY: _________________________________
Witness RICHARD W. BAILEY
________________________
Witness
LESSEE
COMPUTER GRAPHICS TECHNOLOGY
/s/ Scott Barker
________________________ BY: _________________________________
Witness
______________________ TITLE: President
Witness
<PAGE>
EXHIBIT B
LEGAL DESCRIPTION
ALL that piece, parcel or tract of land containing 38.88 acres, more or less
situate, lying and being on the northern side of Mauldin Road (also known as
West Butler Road) near the Town of Mauldin in Greenville County, South
Carolina, being shown on a property survey for Tandem Development, Inc. and
others made by Arbor Engineering, Inc. dated May 6, 1987 and having according
to said survey the following metes and bounds to-wit:
BEGINNING at an iron pin at the edge of Mauldin Road right-of-way (said pin
being 200 feet, more or less east from the intersection of Mauldin Road and
Maple Creek Circle) and running thence N. 4-43 W., 33.83 feet to an iron pin;
thence N 6-27W., 159.56 feet to an iron pin; thence N. 6-48 W., 151.52 feet to
an iron pin; thence N. 6-36 W., 211.87 feet to an iron pin; thence N. 6-33 W.,
498.74 feet to an iron pin; thence N. 6-30 W., 192 feet to an iron pin; thence
turning and running n. 55-25 E., 170 feet to an iron pin; thence N. 47-25 E.,
130 feet to an iron pin; thence N. 47-25 E., 80 feet to an iron pin; thence
N. 32-03 E., 81.743 feet to an iron pin; thence S. 86-06 E., 62.79 feet to an
iron pin; thence running with an arc, the chord of which is N. 24-57 E., 50
feet to an iron pin; thence N. 35-03 W., 53.38 feet to an iron pin; thence
N. 57-22 E., 70 feet to an iron pin; thence N. 77-35 E., 80 feet to an iron
pin; thence N. 3-52 W., 28.28 feet to an iron pin; thence N. 25-00 W., 75 feet
to an iron pin; thence N. 68-11 E., 105 feet to an iron pin; thence S. 82-
05 E., 135 feet to an iron pin; thence N. 81-47 E., 100 feet to an iron pin;
thence N. 81-47 E., 90 feet to an iron pin; thence N. 57-19 E., 105 feet to a
tack in Old Stone; thence turning and running with property now or formerly of
Avery Smith, S. 0-23 E., 1966.15 feet to an iron pin on the northern edge of
Mauldin Road right-of-way; thence running with the edge of said Mauldin Road,
S. 80-39 W., 860.91 feet to an iron pin, the point of BEGINNING.
ALSO, an easement across a 9.04 acre parcel lying north of the above described
38.88 acres, now owned by Mauldin Road Properties for the purpose of tying into
a sanitary sewer line which crosses said parcel for the benefit of the 38.88
acres, which easement is described more fully in Deed Book 1210, Page 707,
incorporated herein by reference.
EXHIBIT 21.1
Subsidiaries of the Registrant
Prisym Technologies, Inc. of Georgia, a Georgia corporation
G&R Marketing, Inc., an Illinois corporation
Microsouth, Inc., a Georgia corporation
tekgraf, inc., a Texas corporation
Computer Graphics Distributing Company, a Maryland corporation
Intelligent Products Marketing, Inc., a California corporation
IG Distributing, Inc., a California corporation
Computer Graphics Technology, Inc., a Georgia corporation
Tekgraf Sub II, Inc., a Georgia corporation
Tekgraf Sub III, Inc., a Georgia corporation
EXHIBIT 99.1
Friday March 27, 6:07 pm Eastern Time
Company Press Release
Tekgraf, Inc., Announces 1997 Fourth Quarter and Year-End Results
ATLANTA--(BUSINESS WIRE)--March 27, 1998--Tekgraf, Inc. (NASDAQ: TKGFA ), a
value-added, wholesale distributor of advanced computer graphics products and a
manufacturer and distributor of premium computers, mass storage systems and
computer peripherals, today announced its financial results for the fourth
quarter and the year ended December 31, 1997.
Tekgraf reported a loss of $723,000, or $0.17 per share (basic and diluted) for
the fourth quarter and a loss of $393,000, or $0.15 per share (basic and
diluted) for the year ended December 31, 1997.
The announcement marked Tekgraf's first report of year-end operating results on
a consolidated basis since the Company completed its June 1997 acquisitions
(G&R Marketing, Inc., Microsouth, Inc., tekgraf, Inc., Computer Graphics
Distributing Company, Intelligent Products Marketing, Inc., and IG
Distribution, Inc.) and its initial public offering on November 10, 1997 that
raised $12.6 million. Comparative figures for 1996 have not been presented, as
they are not directly comparable to 1997 due to the significance of the
acquisitions and the public offering described above.
The fourth quarter results reflect significant SG&A expenses, due to the costs
associated with operating as a public company and the infrastructure costs of
integrating the acquisitions. In addition, they reflect moderate provisions
attributable to inventory and accounts receivable and the amortization of
goodwill associated with the above acquisitions.
The results of the fourth quarter, as previously announced in December, were
further adversely impacted by the slowdown in sales in the market for computer
products in that quarter. "Despite the slowdown in sales in the last quarter,
we are pleased with Tekgraf's progress toward the accomplishment of our long-
term strategic objectives," said Phillip Aginsky, Tekgraf chairman.
Aginsky also added that Tekgraf continues to move forward on the acquisition of
three computer graphics wholesale distribution companies. Definitive agreements
have been signed but the closing of the acquisitions is subject to the
satisfactory completion of due diligence, the receipt of necessary regulatory
approvals, and other standard conditions to closing. Management believes that
the acquisitions will better position Tekgraf to strengthen its national
distribution network.
Additionally, Tekgraf has entered into a distribution alliance with Epson
America, Inc., to distribute the new Epson Stylus Pro 5000 digital color
proofing system. Tekgraf is also actively pursuing additional distribution
alliances with other nationally recognized manufacturers to further increase
its ability to offer enterprise wide products and support to its customers.
Tekgraf, Inc. (NASDAQ: TKGFA - news), headquarters in Atlanta, Ga., is a value-
added wholesale distributor of advanced computer graphics products and a
manufacturer and distributor of premium computers, mass storage systems and
computer peripherals. The Tekgraf Graphics Division provides sales, marketing
and technical support of high-end computer graphics technologies through
reseller channels. The Tekgraf Technology Division is engaged in the
manufacture, sale, distribution and support of the Crescent Computer line of
Intel-based NT workstations and network servers. Additional information on
Tekgraf may be obtained by visiting the company Web site at
http://www.tekgraf.com.
Tekgraf, Inc.
Three Months Ended
December 31
Summary of Operations 1997
Net Sales $ 17,744,000
Cost of Goods Sold 15,116,000
Loss from Operations (1,028,000)
Net Loss $ (723,000)
Common Stock
Average Shares Outstanding 4,308,000
Basic and Diluted Loss
Per Average Share $ (0.17)
Tekgraf, Inc.
Year Ended
December 31
Summary of Operations 1997
Net Sales $ 48,732,000
Cost of Goods Sold 41,250,000
Income (loss) from Operations (201,000)
Net Income (Loss) $ (393,000)
Common Stock
Average Shares Outstanding 2,581,000
Basic and Diluted Loss
Per Average Share $ (0.15)
This press release contains statements that constitute forward-looking
statements within the meaning of the Safe Harbor provisions of the Private
Securities Litigation Reform Act of 1995, as amended. These statements appear
in a number of places in this press release and include all statements that are
not historical statement of fact. The words "may," "would," "could," "will,"
"progress toward," "move forward," "actively pursuing," "increase," "expect,"
"estimate," "anticipate," "believes," "intends," "plans," and similar
expressions and variations thereof are intended to identify forward-looking
statements. Investors are cautioned that such statements are not guarantees of
future performance and involve various risks and uncertainties, many of which
are beyond the Company's control. Actual results may differ materially from
those discussed in the forward-looking statements as a result of factors
described below. These risks include, but are not limited to, competitive
market pressures, material changes in customer demand, availability of labor,
the Company's ability to perform contracts, governmental policies adverse to
the computer industry, economic and competitive conditions, and other risks
outside the control of the Company, as well as those factors discussed in
detail in the Company's filings with the Securities and Exchange Commission,
including the "Risk Factors" section of the Company's registration statement on
Form S-1 (Registration No. 333-33449).
- ------------------------------------------------------------------------
Contact:
Tekgraf
Jeff Camp, CFO
770/441-1107
or
For Tekgraf
Kristi Kovalak, 404/266-2600
[email protected]
or
Bob Wice, 404/266-2600
[email protected]
EXHIBIT 99.2
TEKGRAF ACQUIRES COMPUTER GRAPHICS TECHNOLOGY
Media Contacts:
Duffey Communications, Inc.
Bob Wice, 404/266-2600, [email protected],
Fonda Berosini, 404/266-2600, [email protected]
FOR IMMEDIATE RELEASE
April 8, 1998 (ATLANTA) -- Tekgraf, Inc., (NASDAQ: TKGFA) announced today that
it has completed the acquisition of Computer Graphics Technology (CGT), based
in Greenville, S.C., effective April 1, 1998. As part of the agreement Tekgraf
exchanged a combination of unregistered shares of Class A common stock and
cash, subject to adjustment, for all the outstanding common stock of CGT. CGT
had 1997 unaudited revenues of approximately $11 million. The company is a
regional computer graphics products distributor and will be incorporated into
Tekgraf's Graphics Division operations.
"We are pleased that we were able to complete this transaction so smoothly,"
commented Phillip Aginsky, chairman of Tekgraf. "The acquisition of CGT
represents a major step in moving us forward towards our long-term strategic
goals and in positioning Tekgraf to better serve our reseller and manufacturer
partners." Aginsky also added, "Tekgraf continues to move ahead with the
acquisitions of two other regional wholesale distributors of computer graphics
products, for which definitive agreements have been signed. Additionally, we
are actively pursuing distribution alliances with compatible manufacturers."
Tekgraf's Graphics Division provides sales, marketing and technical support of
high-end computer graphics technologies through reseller channels. The
acquisition gives them an expanded market reach in the Southeast that will
strengthen the company's relationship with resellers and provide manufacturers
with a singular opportunity to implement national distribution solutions.
Tekgraf is positioned to provide extensive reseller and manufacturer benefits
based on its strategically located product demonstration and distribution
centers in Chicago, Washington, D.C., San Francisco, Atlanta, Houston, and now,
Greenville, S.C. The integration of CGT further increases Tekgraf's national
staff of trained sales and technical personnel who specialize in graphics
solutions and services sold through resellers.
"We are very excited to be a part of the Tekgraf organization," said Scott
Barker, CGT president. "Tekgraf is uniquely positioned to be a major force in
the graphics industry. With our commitment to sales and technical expertise,
and our ability to help our resellers create demand for our products, Tekgraf
will be the distribution choice for years to come. As a result of the
acquisition, we will soon be offering additional products and enhanced support
and services to our customer base in the Southeast."
"The Southeast is very a strong market for our products. And Scott Barker and
his staff have a solid, professional sales organization with a high level of
expertise in pre-press applications," said Bill Rychel, Tekgraf Graphics
Division president. "The integration of CGT into Tekgraf strengthens our
commitment to provide high-end, advanced computer graphics products in that
part of the country."
Formed in 1988, CGT is a value-added distribution company in the Southeast with
major emphasis in the graphics, digital photography and pre-press markets. They
distribute color scanners, digital cameras, color-calibrated monitors and other
graphics equipment and software from such companies as AGFA, Scitex, Barco,
QMS, and others.
Tekgraf, Inc., (NASDAQ: TKGFA) headquartered in Atlanta, Ga., is a value-added
wholesale distributor of advanced computer graphics products, and a
manufacturer of custom personal computers. After the completion of several
mergers in 1997, the company reincorporated in Delaware under the name Tekgraf,
Inc., and effected an initial public offering in November of that year. The
Tekgraf Graphics Division provides sales, marketing and technical support of
high-end computer graphics technologies through reseller channels. The
Technology Division is primarily engaged in the manufacture, sale, distribution
and support of the Crescent Computer line of Intel-based NT workstations and
network servers.
This press release contains statements that constitute forward-looking
statements within the meaning of the Safe Harbor provisions of the Private
Securities Litigation Reform Act of 1995, as amended. These statements appear
in a number of places in this press release and include all statements that are
not historical statement of fact. The words "may," "would," "could," "will,"
"progress toward," "move forward," "actively pursuing," "increase," "expect,"
"estimate," "anticipate," "believes," "intends," "plans," and similar
expressions and variations thereof are intended to identify forward-looking
statements. Investors are cautioned that such statements are not guarantees of
future performance and involve various risks and uncertainties, many of which
are beyond the Company's control. Actual results may differ materially from
those discussed in the forward-looking statements as a result of factors
described below. These risks include, but are not limited to, competitive
market pressures, material changes in customer demand, availability of labor,
the Company's ability to perform contracts, governmental policies adverse to
the computer industry, economic and competitive conditions, and other risks
outside the control of the Company, as well as those factors discussed in
detail in the Company's filings with the Securities and Exchange Commission,
including the "Risk Factors" section of the Company's registration statement on
Form S-1 (Registration No. 333-33449).
Editors Note: Brand or product names are trademarks or registered trademarks
of their respective holders.
