<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. 1)
Tekgraf, Inc.
(Name of Issuer)
Class A Common Stock, Par Value $.001 Per Share
(Title of Class of Securities)
879102101
(CUSIP Number)
William M. Rychel
980 Corporate Woods Parkway
Vernon Hills, IL 60061
Telephone: (847) 913-5888
(Name, Address and Telephone Number of Person Authorized to Receive Notices
and Communications)
December 3, 1999
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13b-1(b)(3) or (4), check the following box [ ].
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities,
and for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 ("Act") or otherwise subject to the liabilities of that section of
the Act but shall be subject to all other provisions of the Act (however, see
the Notes).
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SCHEDULE 13D
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------
1 NAMES OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Beverly Nerenberg
- -------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [X]
(b) [ ]
- -------------------------------------------------------------------------------
3 SEC USE ONLY
- -------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
OO
- -------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ]
- -------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
U.S.A.
- -------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES
BENEFICIALLY ----------------------------------------------------
OWNED BY 8 SHARED VOTING POWER
EACH
REPORTING 89,549
PERSON WITH ----------------------------------------------------
9 SOLE DISPOSITIVE POWER
----------------------------------------------------
10 SHARED DISPOSITIVE POWER
89,549
- -------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
125,765
- -------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [X]
- -------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
3.9%
- -------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IN
- -------------------------------------------------------------------------------
</TABLE>
2
<PAGE> 3
SCHEDULE 13D
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------
1 NAMES OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
A. Lowell Nerenberg
- -------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [X]
(b) [ ]
- -------------------------------------------------------------------------------
3 SEC USE ONLY
- -------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
OO
- -------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ]
- -------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
U.S.A.
- -------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES
BENEFICIALLY ----------------------------------------------------
OWNED BY 8 SHARED VOTING POWER
EACH
REPORTING 89,549
PERSON WITH ----------------------------------------------------
9 SOLE DISPOSITIVE POWER
----------------------------------------------------
10 SHARED DISPOSITIVE POWER
89,549
- -------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
125,765
- -------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [X]
- -------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
3.9%
- -------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IN
- -------------------------------------------------------------------------------
</TABLE>
3
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SCHEDULE 13D
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------
1 NAMES OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Thomas A. Gust
- -------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [X]
(b) [ ]
- -------------------------------------------------------------------------------
3 SEC USE ONLY
- -------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
OO
- -------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ]
- -------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
U.S.A.
- -------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES
BENEFICIALLY ----------------------------------------------------
OWNED BY 8 SHARED VOTING POWER
EACH
REPORTING 398,733
PERSON WITH ----------------------------------------------------
9 SOLE DISPOSITIVE POWER
398,733
----------------------------------------------------
10 SHARED DISPOSITIVE POWER
- -------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
416,841
- -------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [X]
- -------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
11.6%
- -------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IN
- -------------------------------------------------------------------------------
</TABLE>
4
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SCHEDULE 13D
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------
1 NAMES OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
William M. Rychel
- -------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [X]
(b) [ ]
- -------------------------------------------------------------------------------
3 SEC USE ONLY
- -------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
SC
- -------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ]
- -------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
U.S.A.
- -------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES
BENEFICIALLY 1,191,800
OWNED BY ----------------------------------------------------
EACH 8 SHARED VOTING POWER
REPORTING
PERSON WITH 694,199
----------------------------------------------------
9 SOLE DISPOSITIVE POWER
1,191,800
----------------------------------------------------
10 SHARED DISPOSITIVE POWER
- -------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,209,908
- -------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [X]
- -------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
29.0%
- -------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IN
- -------------------------------------------------------------------------------
</TABLE>
5
<PAGE> 6
SCHEDULE 13D
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------
1 NAMES OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Rosa Sabato
- -------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [X]
(b) [ ]
- -------------------------------------------------------------------------------
3 SEC USE ONLY
- -------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
OO
- -------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ]
- -------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
U.S.A.
- -------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES
BENEFICIALLY
OWNED BY ----------------------------------------------------
EACH 8 SHARED VOTING POWER
REPORTING
PERSON WITH 4,250
----------------------------------------------------
9 SOLE DISPOSITIVE POWER
4,250
----------------------------------------------------
10 SHARED DISPOSITIVE POWER
- -------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
4,250
- -------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [X]
- -------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
0.1%
- -------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IN
- -------------------------------------------------------------------------------
</TABLE>
6
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SCHEDULE 13D
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------
1 NAMES OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Martyn L. Cooper
- -------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [X]
(b) [ ]
- -------------------------------------------------------------------------------
3 SEC USE ONLY
- -------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
OO
- -------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ]
- -------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
U.S.A.
- -------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES
BENEFICIALLY
OWNED BY ----------------------------------------------------
EACH 8 SHARED VOTING POWER
REPORTING
PERSON WITH 69,500
----------------------------------------------------
9 SOLE DISPOSITIVE POWER
69,500
----------------------------------------------------
10 SHARED DISPOSITIVE POWER
- -------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
69,500
- -------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [X]
- -------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
2.1%
- -------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IN
- -------------------------------------------------------------------------------
</TABLE>
7
<PAGE> 8
SCHEDULE 13D
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------
1 NAMES OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
J. Thomas Woolsey
- -------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [X]
(b) [ ]
- -------------------------------------------------------------------------------
3 SEC USE ONLY
- -------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
OO
- -------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ]
- -------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
U.S.A.
- -------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES
BENEFICIALLY
OWNED BY ----------------------------------------------------
EACH 8 SHARED VOTING POWER
REPORTING
PERSON WITH 132,167
----------------------------------------------------
9 SOLE DISPOSITIVE POWER
132,167
----------------------------------------------------
10 SHARED DISPOSITIVE POWER
- -------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
132,167
- -------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [X]
- -------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
4.0%
- -------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IN
- -------------------------------------------------------------------------------
</TABLE>
8
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ITEM 1. SECURITY AND ISSUER
This Amendment to Schedule 13D (the "Amendment") relates to the
Class A Common Stock, par value $.001 (the "Class A Stock") of Tekgraf, Inc.
(the "Issuer"), the principal executive offices of which are located at 645
Hembree Parkway, Suite J, Roswell, Georgia 30076.
This Amendment amends the Schedule 13D filed October 15, 1999, by
Beverly Nerenberg, A. Lowell Nerenberg, William M. Rychel, and Thomas A. Gust.
The purpose of this Amendment is to include additional members of the voting
group and to reflect the recent transactions by the members of the voting
group.
ITEM 2. IDENTIFY AND BACKGROUND
This Amendment is filed by (i) Beverly Nerenberg, who is employed by
BL Associates, an internet-based business selling consumer products over the
internet, located at 17513 Sir Galahad Way, Ashton, MD 20861; (ii) A. Lowell
Nerenberg, who is also employed by BL Associates, located at 17513 Sir Galahad
Way, Ashton, MD 20861; (iii) William M. Rychel, who is the Interim Chief
Executive Officer of Tekgraf, Inc., his office being located at 980 Corporate
Woods Parkway, Vernon Hills, IL 60061; (iv) Thomas A. Gust, who is employed by
GB marketing, an independent manufacturers representative specializing in
computer products, located at 200 North Fairway Drive, Suite 202, Vernon Hills,
IL 60061; (v) Rosa Sabato, who resides at 43 Balmiere Parkway, Cranford, NJ
07016; (vi) Martyn L. Cooper, who is Chief Operations Officer of the Issuer,
his office being located at 7621 Portwest, Suite 100, Houston TX 77024; and
(vii) J. Thomas Woolsey, who is Chief Information Officer of the Issuer, his
office being located at 645 Hembree Parkway, Suite J, Roswell, GA 30076
(collectively, the "Shareholders").
During the last five years, to the best of their knowledge, none of
the Shareholders have been (i) convicted in a criminal proceeding (excluding
traffic violations or similar misdemeanors) or (ii) a party to a civil
proceeding or a judicial or administrative body of competent jurisdiction and
as a result of such proceeding was or is subject to a judgment, decree, or
final order enjoining future violations of, or prohibiting activities subject
to, federal or state securities laws or finding any violation of such laws. All
reporting persons are citizens of the U.S.A.
ITEM 3. SOURCE AND AMOUNT OF FUNDS AND OTHER CONSIDERATION
As noted in Item 4 below, the Shareholders have filed this Amendment
because (i) each of the Shareholders other than Mr. Cooper and Mr. Woolsey have
agreed to vote their shares of Class A Stock and Class B Common Stock, par
value $.001 ("Class B Stock") in favor of the reclassification of the Class B
Stock into Class A Stock on a one-to-one basis and related amendments to the
articles of incorporation (the "Reclassification"), and (ii) each of Mr. Cooper
and Mr. Woolsey have agreed with Rychel to vote his shares in favor of every
matter recommended by the Issuer's Board of Directors (which would include the
Reclassification since approved by such Board). Because of these voting
agreements, under Rule 13d-5(b)(1) each Shareholder may be therefore deemed to
have acquired the beneficial ownership of all the equity securities
beneficially owned by each other Shareholder, including each other's Class A
Stock. Because this deemed acquisition is the only acquisition reported on this
Amendment by all of the Shareholders except Mr. Rychel, no information is
provided for the other Shareholders as to the source and amount of funds and
other consideration.
9
<PAGE> 10
On December 3, 1999, Mr. Rychel purchased a total of 685,816 shares of
Class B Stock and 121,167 shares of Class A Stock, and agreed to purchase an
additional 161,333 shares of Class B Stock from certain persons. More
specifically, Mr. Rychel purchased: 189,045 shares of Class B Stock and 41,955
shares of Class A Stock from Martyn L. Cooper; 356,888 shares of Class B Stock
and 75,445 shares of Class A Stock from J. Thomas Woolsey; 36,750 shares of
Class B Stock from A. Lowell Nerenberg; 90,383 shares of Class B Stock and
3,767 shares of Class A Stock from Beverly Nerenberg; and 12,750 shares of
Class B Stock from Rosa Sabato. The purchase price was $2.10 per share. In
addition, Mr. Rychel agreed to purchase 55,600 shares of Class B Stock from Mr.
Cooper and 105,733 shares of Class B Stock from Mr. Woolsey for $2.75 per
share. Mr. Rychel paid Messrs. Cooper and Woolsey $.50 per share as a down
payment. Those shares are currently held in an escrow established in connection
with a previous reorganization of the Issuer, and these purchases can be
completed only as to shares released from escrow by December 1, 2000. To the
extent the purchases are not completed, Mr. Rychel will forfeit the down
payment but will have no further obligations to Messrs. Cooper and Woolsey as
to these shares.
Mr. Rychel currently owns or has the power to vote 279,366 shares of
Class A Stock (8.7% of outstanding) and 1,606,633 shares of Class B Stock
(51.4% of outstanding).
The Issuer loaned Mr. Rychel a total of $1,775,000 to purchase the
shares of Class A Stock and Class B Stock. The loan is for a term of one year,
with interest payable annually at a rate that is .25% above the rate paid from
time to time by Tekgraf under its current bank loan agreement, and with all
principal and interest due at maturity. The loan is prepayable at any time
without penalty, and Mr. Rychel has stated his intent to attempt to sell blocks
of his shares on a private basis in an effort to repay the loan.
As collateral for payment of the loan, Mr. Rychel pledged the
121,167 shares of Class A Stock and 685,816 shares of Class B Stock which he
purchased with the proceeds of the loan, and 99,875 shares of previously owned
Class A Stock, and 182,692 shares of previously owned Class B Stock. The stock
pledge will terminate when $887,500 of the principal of the loan and all
accrued interest has been repaid, or the trading price of the Issuer's Class A
Stock has been above $2.50 for ten consecutive trading days, whichever comes
first. Mr. Rychel also collaterally assigned to the Issuer his rights under his
agreements with Messrs. Cooper, Woolsey and Nerenberg, and Mrs. Nerenberg and
Mrs. Sabato.
Mr. Rychel agreed that if the trading price of the Class A Stock
equals or exceeds $3.00 per share, the Issuer can purchase any of the recently
purchased Class A and Class B Stock from him at discounts to the then-current
market price ranging from 10-15% depending on the market price, with a
corresponding reduction of the loan balance. In connection with the loan, Mr.
Rychel agreed to purchase a $2,000,000 term life insurance policy on his life,
with the Issuer as beneficiary, and agreed to keep the policy in effect until
the loan is paid in full. The Issuer agreed to indemnify Mr. Rychel against any
actions brought against him personally by any of the Issuer's shareholders as a
result of the loan or his use of the loan to purchase shares as described
above.
The Issuer borrowed the money lent to Mr. Rychel under its existing
bank facility. In doing so, the Issuer incurred a service charge of
approximately $10,000 imposed by the bank in order to
10
<PAGE> 11
obtain a waiver from the usual lending conditions prohibiting loans by the
Issuer to its officers or directors.
ITEM 4. PURPOSE OF TRANSACTION
The only reason the Shareholders filed the Schedule 13D and this
Amendment is that they have agreed to act together for the purpose of acquiring
additional Class A Stock, as follows. Each Shareholder owns Class A Stock
and/or Class B Stock of the Issuer. Holders of the Class B Stock have five
votes per share as compared to one vote per share for the holders of Class A
Stock. Otherwise, the Class B Stock is identical to the Class A Stock, and the
Class B Stock is convertible into Class A Stock on a one-to-one basis.
Management of the Issuer has recommended to the shareholders of the
Issuer for their approval the reclassification of the Class B Stock into Class
A Stock and related amendments to the articles of incorporation. The purpose of
the purchases by Mr. Rychel, described in Item 3 above, was to allow Mr. Rychel
to accumulate enough Class B Stock votes to ensure approval of the
Reclassification. Mr. Rychel currently owns or has the power to vote 279,366
shares of Class A Stock (8.7% of outstanding) and 1,606,633 shares of Class B
Stock (51.4% of outstanding). Each Shareholder other than Mr. Cooper and Mr.
Woolsey have agreed to vote his or her Class A Stock and Class B Stock in favor
of the Reclassification if presented at a shareholders' meeting. Messrs. Cooper
and Woolsey have agreed to vote their shares in favor of every matter
recommended by the Issuer's Board of Directors (which would include the
Reclassification since approved by such Board). Under Rule 13d-5(b)(1), two or
more persons are deemed to have acquired the beneficial ownership of all the
equity securities beneficially owned by each person as of the date of an
agreement to act together for the purpose of acquiring, holding, voting, or
disposing of equity securities of an issuer. Thus, each of the Shareholders is
deemed to have acquired the beneficial ownership of each other's Class A Stock.
Each of the Shareholders intends to hold all of his or her shares of Class A
Stock for investment purposes.
ITEM 5. INTEREST IN THE SECURITIES OF THE ISSUER
(a) As noted in Item 4 above, the only reason the Shareholders have
filed the Schedule 13D and this Amendment is because of their various
agreements to vote their shares as described therein, and under Rule
13d-5(b)(1) each Shareholder may be therefore deemed to have acquired the
beneficial ownership of all the equity securities beneficially owned by each
other Shareholder. Thus, the aggregate number of shares of Class A Stock
beneficially owned by the each member of the group is 1,958,341 approximately
40.7% of the Class A Stock.
(b) While the Shareholders are deemed to have beneficial ownership of
each other's shares of Class A Stock under Rule 13d-5(b)(1), each reporting
person individually beneficially owns the following amounts of shares.
(1) Beverly Nerenberg and A. Lowell Nerenberg have shared
voting and disposition power with respect to 36,216
shares of Class A Stock and 53,333 shares of Class B
Stock. The Nerenbergs share the voting power of these
shares of Class A Stock and Class B Stock with Mr. Rychel
pursuant to the agreement described in Item 5(c). The
Nerenbergs also have 36,216 shares of Class A Stock
pursuant
11
<PAGE> 12
to an escrow agreement whereby a shareholder
representative has the sole power to direct the voting of
such shares. Thus, the Nerenbergs have beneficial
ownership of 125,765 shares of Class A Stock (includes
the right to conversion of 53,333 shares of Class B
Stock), or approximately 3.9% of the outstanding shares
of Class A Stock.
(2) William M. Rychel has sole voting and disposition power
with respect to 221,042 shares of Class A Stock and
970,758 shares of Class B Stock. Mr. Rychel also has
18,108 shares of Class A Stock pursuant to an escrow
agreement whereby a shareholder representative has the
sole power to direct the voting of such shares. Thus, Mr.
Rychel beneficially owns 1,209,908 shares of Class A
Stock (includes the right to conversion of 970,758 shares
of Class B Stock), or approximately 29.0% of the
outstanding shares of Class A Stock. Mr. Rychel currently
owns or has the power to vote 279,366 shares of Class A
Stock (8.7% of outstanding) and 1,606,633 shares of Class
B Stock (51.4% of outstanding) pursuant to the agreements
described in Item 5(c).
(3) Thomas A. Gust has shared voting and sole disposition
power with respect to 22,108 shares of Class A Stock and
376,625 shares of Class B Stock. Mr. Gust shares the
voting power of his shares of Class A Stock and Class B
Stock with Mr. Rychel pursuant to the agreement described
in Item 5(c). Mr. Gust also has 18,108 shares of Class A
Stock pursuant to an escrow agreement whereby a
shareholder representative has the sole power to direct
the voting of such shares. Thus, Mr. Gust beneficially
owns 416,841 shares of Class A Stock (includes the right
to conversion of 376,625 shares of Class B Stock), or
approximately 11.6% of the outstanding shares of Class A
Stock.
(4) Rosa Sabato has shared voting and sole disposition power
with respect to 4,250 shares of Class B Stock. Thus, Ms.
Sabato beneficially owns 4,250 shares of Class A Stock
(includes the right to conversion of 4,250 shares of
Class B Stock), or approximately 0.1% of the outstanding
shares of Class A Stock. Ms. Sabato shares the voting
power of her shares of Class B Stock with Mr. Rychel
pursuant to the agreement described in Item 5(c).
(5) Martyn L. Cooper has shared voting and disposition power
with respect to 69,500 shares of Class B Stock (includes
55,600 shares currently held in escrow which Mr. Rychel
has the right to purchase pursuant to the agreement
described in Item 5(c)). Thus, Mr. Cooper beneficially
owns 69,500 shares of Class A Stock (includes the right
to conversion of 69,500 shares of Class B Stock), or
approximately 2.1% of the outstanding shares of Class A
Stock. Mr. Cooper shares the voting power of 69,500
shares of his Class B Stock with Mr. Rychel pursuant to
the agreement described in Item 5(c).
(6) J. Thomas Woolsey has shared voting and disposition power
with respect to 132,167 shares of Class B Stock (includes
105,733 shares currently held in escrow which Mr. Rychel
has the right to purchase pursuant to the agreement
described in Item 5(c)). Thus, Mr. Woolsey beneficially
owns 132,167 shares of
12
<PAGE> 13
Class A Stock (includes the right to conversion of
132,167 shares of Class B Stock), or approximately 4.0%
of the outstanding shares of Class A Stock. Mr. Woolsey
shares the voting power of 132,167 shares of his Class B
Stock with Mr. Rychel pursuant to the agreement described
in Item 5(c).
Under Rule 13d-4 of the Securities Exchange Act of 1934, each of the
Shareholders expressly declares that the filing of the Schedule 13D and this
Amendment shall not be construed as an admission that each of the Shareholders,
for the purposes of section 13(d) or 13(g) of the Act, are beneficial owners of
each other's Class A Stock, except that Mr. and Mrs. Nerenberg state that they
share beneficial ownership of the Class A Stock and Class B Stock held by each
other.
(c) As described in more detail in Item 3 above, on December 3, 1999,
Mr. Rychel purchased a total of 685,816 shares of Class B Stock and 121,167
shares of Class A Stock, and agreed to purchase an additional 161,333 shares of
Class B Stock from certain persons. All of such transactions were effected
between holders of Class B Stock and by means of private agreements.
In connection with those purchases, the Nerenbergs, Mr. Gust, and Mrs.
Sabato each executed voting agreements and appointed Mr. Rychel his or her
proxy with respect to the other shares of Tekgraf not being sold to Mr. Rychel,
thereby allowing Mr. Rychel to vote those shares of Class A Stock and Class B
Stock in favor of the Reclassification if presented at a shareholders' meeting.
Messrs. Cooper and Woolsey each executed a voting agreement which appointed Mr.
Rychel his proxy with respect to the other shares of Tekgraf not being sold to
Mr. Rychel, thereby allowing Mr. Rychel to vote all of Messrs. Cooper and
Woolsey's shares of Class B Stock in favor of every matter recommended by the
Issuer's board of directors, including any amendment to the Issuer's articles
of incorporation.
The list below sets forth the transactions by Mr. and Mrs. Nerenberg
in the past 60 days. Upon the sale of Class B Stock, the shares are
automatically converted to Class A Stock. All of such sales were effected by
the Nerenbergs on NASDAQ.
1. 11/9/99 - 2500 shares at 1 1/8
2. 11/15/99 - 2000 shares at 1 1/8
3. 11/16/99 - 6000 shares at 1 1/8
(d) Not applicable.
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE ISSUER.
As noted in Item 3 and Item 5(c) above, Mr. Rychel has acquired the
right to vote certain shares of Class A Stock and Class B Stock. In the event
of default under the Loan Agreement, Stock Pledge Agreement, or the Promissory
Note, attached on Exhibits 8-10, the Issuer shall be entitled (i) to transfer
all or any part of the pledged shares into the Issuer's name or the name of its
nominee or nominees; (ii) to vote all or any part of the pledged shares
(whether or not transferred into the name of the Issuer) and give all consents,
waivers and ratifications in respect of the pledged shares; and
13
<PAGE> 14
(iii) to cause the purchases of the Delayed Shares under the voting agreements
with Messrs. Cooper and Woolsey to be completed by Mr. Rychel.
A. Lowell Nerenberg, William M. Rychel, and Thomas A. Gust have an
aggregate of 72,432 shares of Class A Stock (the "Escrow Shares") that are
being held in escrow pursuant to, and that will be released in accordance with,
the terms of: (i) an Escrow Agreement by and among the Issuer, Tekgraf Sub III,
Inc. ("Sub"), New England Computer Graphics, Inc. ("NECG"), David Boston, A.
Lowell Nerenberg, William Rychel, Thomas Gust, Scott Barker, Robert Shumaker
and Thomas Mills (the "Company Shareholders"), David Boston (the "Shareholder
Representative") and First Union National Bank (the "Escrow Agreement"); and
(ii) a Pledge, Security and Escrow Agreement by and among the Issuer, Sub,
NECG, the Company Shareholders, David Boston (the "Indemnification
Representative") and First Union National Bank (the "Pledge Agreement,"
together with the Escrow Agreement, the "Escrow Agreements"). According to the
Escrow Agreement, the Shareholder Representative has the authority to direct
the voting of the Escrow Shares. The Escrow Shares may not be transferred or
assigned unless by operation of law.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
<TABLE>
<S> <C>
Exhibit 1. Copies of written agreement relating to the
filing of joint acquisition statement as required by
Rule 13d-1(k).
Exhibit 2. Copy of the Agreement between Beverly Nerenberg and
William M. Rychel, dated as of December 1, 1999.
Exhibit 3. Copy of the Agreement between A. Lowell Nerenberg and
William M. Rychel, dated as of December 1, 1999.
Exhibit 4. Copy of the Agreement between Rosa Sabato and
William M. Rychel, dated as of December 1,1999.
Exhibit 5. Copy of the Agreement between Martyn L. Cooper and
William M. Rychel, dated as of December 1, 1999.
Exhibit 6. Copy of the Agreement between J. Thomas Woolsey and
William M. Rychel, dated as of December 1, 1999.
Exhibit 7. Copy of the Shareholder Voting Agreement between
Thomas A. Gust and William M. Rychel, dated as of
November 1, 1999.
Exhibit 8. Copy of the Loan Agreement by and between William
M. Rychel and Tekgraf, Inc., dated as of December 1,
1999.
Exhibit 9. Copy of the Promissory Note between William M.
Rychel and Tekgraf, Inc., dated December 1, 1999.
Exhibit 10. Copy of the Stock Pledge Agreement by and
between William M. Rychel
</TABLE>
14
<PAGE> 15
<TABLE>
<S> <C>
and Tekgraf, Inc., dated as of December 1, 1999.
Exhibit 11. Copy of the Collateral Assignment by and between
William M. Rychel and Tekgraf, Inc., dated as of
December 1, 1999.
Exhibit 12. Copy of the Escrow Agreement by and among the
Issuer, Tekgraf Sub III, Inc., New England Computer
Graphics, Inc., David Boston, A. Lowell Nerenberg,
William Rychel, Thomas Gust, Scott Barker, Robert
Shumaker and Thomas Mills, David Boston (the
"Shareholder Representative") and First Union
National Bank.
Exhibit 13. Copy of the Pledge, Security and Escrow Agreement by
and among the Issuer, Tekgraf Sub III, Inc., New
England Computer Graphics, Inc., David Boston, A.
Lowell Nerenberg, William Rychel, Thomas Gust, Scott
Barker, Robert Shumaker and Thomas Mills, David
Boston, David Boston (the "Indemnification
Representative") and First Union National Bank.
</TABLE>
This Amendment may be executed in any number of counterparts all of
which taken together shall constitute one and the same instrument.
[SIGNATURES ON FOLLOWING PAGE]
15
<PAGE> 16
SIGNATURES
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this Amendment is true, complete and
correct.
BEVERLY NERENBERG:
Dated: January 5, 2000 /S/ Beverly Nerenberg
------------------------------------
A. LOWELL NERENBERG:
Dated: January 5, 2000 /S/ A. Lowell Nerenberg
------------------------------------
WILLIAM M. RYCHEL:
Dated: January 13, 2000 /S/ William M. Rychel
------------------------------------
THOMAS A. GUST:
Dated: January 10, 2000 /S/ Thomas A. Gust
------------------------------------
[SIGNATURES CONTINUED ON FOLLOWING PAGE]
16
<PAGE> 17
[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
ROSA SABATO:
Dated: January 5, 2000 /S/ Rosa Sabato
------------------------------------
MARTYN L. COOPER:
Dated: January 6, 2000 /S/ Martyn L. Cooper
------------------------------------
J. THOMAS WOOLSEY
Dated: January 7, 2000 /S/ J. Thomas Woolsey
------------------------------------
17
<PAGE> 1
EXHIBIT 1
JOINT FILING AGREEMENT
In accordance with Rule 13d-1(k) under the Securities Exchange Act of
1934, as amended, the undersigned hereby agree to the joint filing on behalf of
each of them of an Amendment on Schedule 13D (including additional amendments
thereto) with respect to the Class A Common Stock, par value $.001 per share,
of Common Stock of Tekgraf, Inc. and that this Agreement be included as an
Exhibit to such joint filing. This Agreement may be executed in any number of
counterparts all of which taken together shall constitute one and the same
instrument.
IN WITNESS WHEREOF, the undersigned hereby execute this Agreement as
of the 5th day of January 2000.
BEVERLY NERENBERG:
/S/ Beverly Nerenberg
------------------------------------
A. LOWELL NERENBERG:
/S/ A. Lowell Nerenberg
------------------------------------
WILLIAM M. RYCHEL:
/S/ William M. Rychel
------------------------------------
THOMAS A. GUST:
/S/ Thomas A. Gust
------------------------------------
[SIGNATURES CONTINUED ON FOLLOWING PAGE]
18
<PAGE> 2
[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
ROSA SABATO
/S/ Rosa Sabato
------------------------------------
MARTYN L. COOPER
/S/ Martyn L. Cooper
------------------------------------
J. THOMAS WOOLSEY
/S/ J. Thomas Woolsey
------------------------------------
19
<PAGE> 1
EXHIBIT 2
AGREEMENT
This ("Agreement") is made and entered into as of December 1, 1999, by
and between WILLIAM M. RYCHEL ("Rychel") and BEVERLY NERENBERG ("Nerenberg").
WHEREAS, Nerenberg has, on the date hereof, sold to Rychel the number
of shares of the Class B Common Stock, $.001 par value ("Class B Stock") of
Tekgraf, Inc. (the "Corporation") set forth on Exhibit A hereto (the
"Transferred Shares");
Whereas, Nerenberg is also the owner of the number of shares of Class
B Stock set forth on Exhibit B hereto (the "Retained Shares") which will be
retained by Nerenberg after the date hereof;
Whereas, management of the Corporation (including Rychel) has
proposed that all outstanding Class B Stock be reclassified into the Class A
Common Stock, $.001 par value ("Class A Stock") of the Corporation on a
one-to-one basis, which reclassification would be submitted to the shareholders
of the Corporation for their approval (the "Reclassification"). If so
submitted, the Reclassification must be approved by the affirmative vote of a
majority of the votes entitled to be cast by holders of Class A Stock and by
holders of Class B Stock, voting as separate voting groups, as well as the
affirmative vote of a majority of the votes entitled to be cast by holders of
Class A Stock and Class B Stock voting together as a voting group;
Whereas, Nerenberg acknowledges that Rychel purchased the Transferred
Shares to facilitate the Reclassification and that certain benefits would
accrue to Nerenberg as regards the Retained Shares were the Reclassification to
occur, and desires to enter into the voting agreements with Rychel set forth
herein and to grant Rychel the irrevocable proxy contemplated hereby;
THEREFORE, in consideration of the benefits accruing to each of the
parties hereto as a result of this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties agree as follows.
1. Agreement To Vote Shares.
1.1. Agreement to Vote Shares.
(a) At every meeting of the shareholders of the Corporation at
which the Reclassification is submitted for approval, and at
every adjournment thereof, and on every action or approval
by written consent of the shareholders of Corporation with
respect to the Reclassification, Nerenberg shall cause
Nerenberg's Retained Shares to be voted, or such action to
be taken or approval given, in favor of the
Reclassification.
(b) Nerenberg understands that the Reclassification may be
effected by an amendment to the Corporation's Articles of
Incorporation, or by other corporate actions submitted to
the shareholders for approval, and Nerenberg acknowledges
that Nerenberg will cause the Retained Shares to be voted in
accordance with the preceding subsection (a) in any way
recommended by Rychel as necessary or appropriate to effect
the Reclassification.
20
<PAGE> 2
(c) Nerenberg also agrees to vote the Retained Shares against,
and refrain from taking any other action with respect to, any proposal to any
of the shareholders of the Corporation which if approved could prevent or delay
the implementation of the Recapitalization.
1.2. Additional Securities. Nerenberg agrees that any securities that
Nerenberg purchases or receives, or with respect to which Nerenberg otherwise
acquires ownership (beneficial or otherwise) after the execution of this
Agreement by reason of or on account of their ownership of the Retained Shares,
including any securities of a corporation that survives a merger with the
Corporation or to which substantially all of the Corporation's assets are
transferred, shall be subject to the terms and conditions of this Agreement to
the same extent as if they constituted Retained Shares.
2. Irrevocable Proxy. Concurrently with the execution of this Agreement,
Nerenberg agrees to deliver to Rychel a proxy, substantially in the form
attached hereto as Exhibit C (the "Proxy"), appointing Rychel as an
attorney-in-fact and proxy of Nerenberg with respect to the Retained Shares,
which Proxy shall be irrevocable to the fullest extent permitted by law. If the
Proxy becomes ineffective for any reason, Nerenberg shall immediately execute a
substitute proxy that is effective, and during any period that the Proxy is not
in effect, Nerenberg agrees to attend all meetings of shareholders, and to vote
Nerenberg's Retained Shares and take all other actions as provided in Section 1
hereof. A copy of the executed Proxy shall be submitted to the Corporation.
3. Agreement to Vote Shares and Proxy Termination. The obligations of Nerenberg
under Section 1 hereof and the Proxy shall terminate and shall have no further
force or effect as of the earlier to occur of (i) an agreement of the parties
that the same shall terminate, or (ii) December 1, 2000.
4. Representations And Warranties Of Nerenberg. Nerenberg represents and
warrants that Nerenberg (i) was the owner (beneficial or otherwise) of the
Transferred Shares prior to the purchase of the Transferred Shares by Rychel,
and that the Transferred Shares were transferred to Rychel free and clear of
any liens, encumbrances or security interests of any kind; (ii) is the owner
(beneficial or otherwise) of the Retained Shares, which as of the date hereof
are free and clear of any liens, encumbrances or security interests of any
kind; (iii) does not own (beneficially or otherwise) any shares of capital
stock of the Corporation other than the Retained Shares; and (iv) has absolute
and unrestricted power, capacity and authority to make, enter into and perform
the obligations imposed pursuant to the terms of this Agreement.
5. Representations And Warranties Of Rychel. Rychel represents and warrants
that Rychel (i) purchased the Transferred Shares for his own account for
investment purposes only and not with a view to the distribution thereof within
the meaning of the Securities Act of 1933, as amended; and (ii) has absolute
and unrestricted power, capacity and authority to make, enter into and perform
the obligations imposed pursuant to the terms of this Agreement.
6. Additional Documents. Nerenberg hereby covenants and agrees to execute and
deliver any additional documents necessary to carry out the intent of this
Agreement.
7. Miscellaneous.
21
<PAGE> 3
7.1. Severability. If any term, provision, covenant or restriction of
this Agreement or the Proxy is held by a Court of competent jurisdiction to be
invalid, void or unenforceable, then the remainder of the terms, provisions,
covenants and restrictions of this Agreement and/or the Proxy, as the case may
be, shall remain in full force and effect and shall in no way be affected,
impaired or invalidated.
7.2. Binding Effect and Assignment. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns, but, except as
otherwise specifically provided herein, neither this Agreement nor any of the
rights, interests or obligations of the parties hereto may be assigned by any
party without the prior written consent of the other parties. Nerenberg further
agrees not to transfer any Retained Shares now owned or hereafter acquired by
Nerenberg unless the transferee thereof agrees in writing to be bound by the
terms of this Agreement. Except as otherwise specifically provided herein, any
attempted assignment of Retained Shares by Nerenberg without such an agreement
by the intended transferee shall be null and void. Nerenberg acknowledges that
Rychel has assigned to the Corporation for collateral purposes his rights under
this Agreement and the Proxy.
7.3. Merger or Sale of Assets. Upon the merger of the Corporation or
the transfer of substantially all of the assets of the Corporation (the
surviving entity of such a merger or the transferee of such assets, as
applicable, being hereinafter referred to as the "Surviving Entity"), this
Agreement shall continue in full force and effect with respect to the Surviving
Entity and all securities of the Surviving Entity acquired by Nerenberg. If
requested by Rychel, Nerenberg will execute a new shareholder voting agreement
and irrevocable proxy with respect to the securities of the Surviving Entity,
although the execution of such an agreement or proxy shall not be required for
this Agreement and the Proxy to continue in full force and effect.
7.4. Legend. Upon execution of this Agreement, Nerenberg shall submit
Nerenberg's certificates representing the Retained Shares to the Corporation so
that the Corporation may add the following legend:
THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO THE
TERMS OF, AND RESTRICTIONS ON TRANSFER IMPOSED BY,
AN AGREEMENT DATED AS OF NOVEMBER 30,1999 AND AN
IRREVOCABLE PROXY, CONTAINING AN IRREVOCABLE
APPOINTMENT OF A PROXY, OF EVEN DATE THEREWITH,
COPIES OF BOTH OF WHICH ARE ON FILE AT THE
CORPORATION.
Each of the parties hereto hereby authorizes the Corporation to take such steps
as may be necessary to insure that such legend is added to such certificates,
including but not limited to issuing instructions to that effect to the
transfer agent for the Retained Shares.
7.5. Amendments and Modification. This Agreement may not be amended
or supplemented except in writing by the parties hereto.
7.6. Specific Performance, Injunctive Relief. The parties hereto
acknowledge that Rychel will be irreparably harmed and that there will be no
adequate remedy at law for a violation of any of the covenants or agreements of
Nerenberg set forth herein. Therefore, it is agreed that, in addition
22
<PAGE> 4
to any other remedies that may be available to Rychel upon any such violation,
Rychel shall have the right to enforce such covenants and agreements by
specific performance, injunctive relief or by any other means available at law
or in equity.
7.7. Notices. All notices or other communications hereunder shall be
in writing and shall be deemed to have been validly served, given or delivered
(i) five (5) days after deposit in the United States mail, prepaid, by
certified mail, with return receipt requested; (ii) when delivered personally;
(iii) one (1) day after delivery to a nationally recognized overnight courier;
or (iv) when transmitted by fax with telephone confirmation of receipt if a
copy is concurrently transmitted by U.S. mail or overnight courier as stated
above; in all cases, if applicable, with delivery prepaid and addressed to the
party to be notified to the address set forth beneath each party's signature
below, or to such other address and fax number of which a party has given
notice to the other party as provided in this Section 9.7.
7.8. Governing Law.
(a) This agreement shall be governed by and construed in
accordance with the laws of the United States of America and the State of
Georgia.
(b) The parties intend for this Agreement to constitute a voting
agreement under Section 14-2-731 of the Georgia Business Corporation Code.
(c) The parties irrevocably consent to the exclusive
jurisdiction and venue of the courts of any county in the State of Georgia and
the United States District Court for the Northern District of Georgia, in any
judicial proceeding brought to enforce this Agreement. The parties agree that
any forum other than the State of Georgia is an inconvenient forum and that a
lawsuit (or non-compulsory counterclaim) brought by one party against another
party, in a court of any jurisdiction other than the State of Georgia should be
forthwith dismissed or transferred to a court located in the State of Georgia.
7.9. Entire Agreement. This Agreement contains the entire
understanding of the parties with respect to the voting of the securities
referred to herein, and supersedes all prior negotiations and understandings
between the parties with respect to the voting of the securities referred to
herein.
7.10. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same agreement.
7.11. Effect of Headings. The section headings herein are for
convenience only and shall not affect the construction or interpretation of
this Agreement.
SIGNATURES
The parties have executed and delivered this Agreement on the date stated on
the first page.
/s/ Beverly Nerenberg
-----------------------------------------------
BEVERLY NERENBERG
23
<PAGE> 5
17513 Sir Galahad Way
Ashton, MD 20861
/s/ William M. Rychel
-----------------------------------------------
WILLIAM M. RYCHEL
980 Corporate Woods Parkway
Vernon Hills, IL 60061
ACKNOWLEDGED as of the date hereof and AGREED that Tekgraf, Inc. hereby
releases, acquits and forever discharges Beverly Nerenberg and her successors,
assigns, agents, and attorneys from any and all claims, of any kind or nature
whatsoever, known or unknown, foreseen or unforeseen, matured or unmatured,
developed or undeveloped, discoverable or undiscoverable, which exist as of or
after the date hereof, based on or arising from the transactions contemplated
hereby (including the Reclassification):
TEKGRAF, INC.
By: /s/ Jeff Camp
--------------------
Its: CFO
--------------------
24
<PAGE> 6
EXHIBIT A
TRANSFERRED SHARES
<TABLE>
<CAPTION>
Number of Shares Certificate No.
---------------- ---------------
<S> <C> <C>
Class A Stock 3,767
Class B Stock 90,383
</TABLE>
25
<PAGE> 7
EXHIBIT B
RETAINED SHARES
<TABLE>
<CAPTION>
Certificate No. Number of Shares
--------------- ----------------
<S> <C> <C>
Class A Stock N/A
Class B Stock 41,083
</TABLE>
26
<PAGE> 8
EXHIBIT C
IRREVOCABLE PROXY
The undersigned, being a shareholder of Tekgraf, Inc., a Georgia
corporation (the "Corporation"), hereby irrevocably appoints William M. Rychel
as her attorney-in-fact and proxy, with full power of substitution and
resubstitution, to the full extent of the undersigned's rights with respect to
the shares of capital stock of the Corporation owned (beneficially or
otherwise) by the undersigned, which shares are listed beside the undersigned's
signatures below, and any other securities of the Corporation that the
undersigned currently or hereafter own or control that are then entitled to
vote, including shares or securities of another corporation issued to the
undersigned in connection with a merger of the Corporation or the transfer of
substantially all of the Corporation's assets (all of such shares and other
securities being referred to as the "Retained Shares"), to vote the Retained
Shares for the purposes stated in Section 2 of the Agreement dated as of the
date hereof between the undersigned and William M. Rychel (the "Voting
Agreement"). Upon the execution hereof, all prior proxies given by the
undersigned with respect to the Retained Shares, and any of them, are hereby
revoked. The undersigned hereby agrees that the undersigned will not give any
subsequent proxies with respect to the Retained Shares without the express
prior written consent of William M. Rychel.
This proxy is granted pursuant to the Voting Agreement and is granted
in consideration of the benefits accruing to the undersigned from the Voting
Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged. This proxy is coupled with an
interest and is irrevocable. The attorney-in-fact and proxy named above will be
empowered to exercise all voting and other rights (including, without
limitation, the power to execute and deliver written consents with respect to
the Retained Shares) at every annual, special or adjourned meeting of the
shareholders of Corporation, and in every written consent in lieu of such a
meeting, or otherwise, for the purposes stated in Section 2 of the Voting
Agreement. This proxy shall terminate and shall have not further force or
effect as of the earlier to occur of (i) an agreement of all the undersigned
that the proxy shall terminate, or (ii) December 1, 2000.
Any obligation of the undersigned hereunder shall be binding upon the
successors, representatives and assigns of the undersigned.
Dated as of: December 1, 1999
Number of Shares Owned (beneficially or /s/
Otherwise): ------------------------------
BEVERLY NERENBERG
17513 Sir Galahad Way
Class A Common: N/A Ashton, MD 20861
Class B Common: 41,083
ACKNOWLEDGED: /s/
------------------------------
WILLIAM M. RYCHEL
980 Corporate Woods Parkway
Vernon Hills, IL 60061
27
<PAGE> 1
EXHIBIT 3
AGREEMENT
This ("Agreement") is made and entered into as of December 1, 1999, by
and between WILLIAM M. RYCHEL ("Rychel") and A. LOWELL NERENBERG ("Nerenberg").
WHEREAS, Nerenberg has, on the date hereof, sold to Rychel the number
of shares of the Class B Common Stock, $.001 par value ("Class B Stock") of
Tekgraf, Inc. (the "Corporation") set forth on Exhibit A hereto (the
"Transferred Shares");
Whereas, Nerenberg is also the owner of the number of shares of Class
B Stock and of the number of shares of Class A Common Stock, $.001 par value
("Class A Stock") of the Corporation set forth on Exhibit B hereto (the
"Retained Shares") which will be retained by Nerenberg after the date hereof;
Whereas, management of the Corporation (including Rychel) has proposed
that all outstanding Class B Stock be reclassified into Class A Stock on a
one-to-one basis, which reclassification would be submitted to the shareholders
of the Corporation for their approval (the "Reclassification"). If so
submitted, the Reclassification must be approved by the affirmative vote of a
majority of the votes entitled to be cast by holders of Class A Stock and by
holders of Class B Stock, voting as separate voting groups, as well as the
affirmative vote of a majority of the votes entitled to be cast by holders of
Class A Stock and Class B Stock voting together as a voting group;
Whereas, Nerenberg acknowledges that Rychel purchased the Transferred
Shares to facilitate the Reclassification and that certain benefits would
accrue to Nerenberg as regards the Retained Shares were the Reclassification to
occur, and desires to enter into the voting agreements with Rychel set forth
herein and to grant Rychel the irrevocable proxy contemplated hereby;
THEREFORE, in consideration of the benefits accruing to each of the
parties hereto as a result of this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties agree as follows.
1. Agreement to Vote Shares.
1.1. Agreement To Vote Shares.
(a) At every meeting of the shareholders of the Corporation at
which the Reclassification is submitted for approval, and at
every adjournment thereof, and on every action or approval
by written consent of the shareholders of Corporation with
respect to the Reclassification, Nerenberg shall cause
Nerenberg's Retained Shares to be voted, or such action to
be taken or approval given, in favor of the
Reclassification.
(b) Nerenberg understands that the Reclassification may be
effected by an amendment to the Corporation's Articles of
Incorporation, or by other corporate actions submitted to
the shareholders for approval, and Nerenberg acknowledges
that Nerenberg will cause the Retained
28
<PAGE> 2
Shares to be voted in accordance with the preceding subsection
(a) in any way recommended by Rychel as necessary or
appropriate to effect the Reclassification.
(c) Nerenberg also agrees to vote the Retained Shares against, and
refrain from taking any other action with respect to, any
proposal to any of the shareholders of the Corporation which
if approved could prevent or delay the implementation of the
Recapitalization.
1.2. Additional Securities. Nerenberg agrees that any securities
that Nerenberg purchases or receives, or with respect to which
Nerenberg otherwise acquires ownership (beneficial or otherwise)
after the execution of this Agreement by reason of or on account
of their ownership of the Retained Shares, including any
securities of a corporation that survives a merger with the
Corporation or to which substantially all of the Corporation's
assets are transferred, shall be subject to the terms and
conditions of this Agreement to the same extent as if they
constituted Retained Shares.
2. Irrevocable Proxy. Concurrently with the execution of this Agreement,
Nerenberg agrees to deliver to Rychel a proxy, substantially in the form
attached hereto as Exhibit C (the "Proxy"), appointing Rychel as an
attorney-in-fact and proxy of Nerenberg with respect to the Retained Shares,
which Proxy shall be irrevocable to the fullest extent permitted by law. If
the Proxy becomes ineffective for any reason, Nerenberg shall immediately
execute a substitute proxy that is effective, and during any period that the
Proxy is not in effect, Nerenberg agrees to attend all meetings of
shareholders, and to vote Nerenberg's Retained Shares and take all other
actions as provided in Section 1 hereof. A copy of the executed Proxy shall
be submitted to the Corporation.
3. Agreement to Vote Shares and Proxy Termination. The obligations of Nerenberg
under Section 1 hereof and the Proxy shall terminate and shall have no
further force or effect as of the earlier to occur of (i) an agreement of
the parties that the same shall terminate, or (ii) December 1, 2000.
4. Representations And Warranties Of Nerenberg. Nerenberg represents and
warrants that Nerenberg (i) was the owner (beneficial or otherwise) of the
Transferred Shares prior to the purchase of the Transferred Shares by
Rychel, and that the Transferred Shares were transferred to Rychel free and
clear of any liens, encumbrances or security interests of any kind; (ii) is
the owner (beneficial or otherwise) of the Retained Shares, which as of the
date hereof are free and clear of any liens, encumbrances or security
interests of any kind; (iii) does not own (beneficially or otherwise) any
shares of capital stock of the Corporation other than the Retained Shares;
and (iv) has absolute and unrestricted power, capacity and authority to
make, enter into and perform the obligations imposed pursuant to the terms
of this Agreement.
5. Representations And Warranties Of Rychel. Rychel represents and warrants
that Rychel (i) purchased the Transferred Shares for his own account for
investment purposes only and not with a view to the distribution thereof
within the meaning of the Securities Act of 1933, as amended; and (ii) has
absolute and unrestricted power, capacity and authority to make, enter into
and perform the obligations imposed pursuant to the terms of this Agreement.
6. Additional Documents. Nerenberg hereby covenants and agrees to execute and
deliver any additional documents necessary to carry out the intent of this
Agreement.
29
<PAGE> 3
7. Miscellaneous.
7.1. Severability. If any term, provision, covenant or restriction
of this Agreement or the Proxy is held by a Court of competent
jurisdiction to be invalid, void or unenforceable, then the
remainder of the terms, provisions, covenants and restrictions of
this Agreement and/or the Proxy, as the case may be, shall remain
in full force and effect and shall in no way be affected, impaired
or invalidated.
7.2. Binding Effect and Assignment. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and
permitted assigns, but, except as otherwise specifically provided
herein, neither this Agreement nor any of the rights, interests or
obligations of the parties hereto may be assigned by any party
without the prior written consent of the other parties. Nerenberg
further agrees not to transfer any Retained Shares now owned or
hereafter acquired by Nerenberg unless the transferee thereof
agrees in writing to be bound by the terms of this Agreement.
Except as otherwise specifically provided herein, any attempted
assignment of Retained Shares by Nerenberg without such an
agreement by the intended transferee shall be null and void.
Nerenberg acknowledges that Rychel has assigned to the Corporation
for collateral purposes his rights under this Agreement and the
Proxy.
7.3. Merger or Sale of Assets. Upon the merger of the Corporation or
the transfer of substantially all of the assets of the Corporation
(the surviving entity of such a merger or the transferee of such
assets, as applicable, being hereinafter referred to as the
"Surviving Entity"), this Agreement shall continue in full force
and effect with respect to the Surviving Entity and all securities
of the Surviving Entity acquired by Nerenberg. If requested by
Rychel, Nerenberg will execute a new shareholder voting agreement
and irrevocable proxy with respect to the securities of the
Surviving Entity, although the execution of such an agreement or
proxy shall not be required for this Agreement and the Proxy to
continue in full force and effect.
7.4. Legend. Upon execution of this Agreement, Nerenberg shall
submit Nerenberg's certificates representing the Retained Shares
to the Corporation so that the Corporation may add the following
legend:
THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO THE TERMS
OF, AND RESTRICTIONS ON TRANSFER IMPOSED BY, AN AGREEMENT
DATED AS OF NOVEMBER 30,1999 AND AN IRREVOCABLE PROXY,
CONTAINING AN IRREVOCABLE APPOINTMENT OF A PROXY, OF EVEN
DATE THEREWITH, COPIES OF BOTH OF WHICH ARE ON FILE AT THE
CORPORATION.
Each of the parties hereto hereby authorizes the Corporation to
take such steps as may be necessary to insure that such legend is
added to such certificates, including but not limited to issuing
instructions to that effect to the transfer agent for the Retained
Shares.
7.5. Amendments and Modification. This Agreement may not be amended
or supplemented except in writing by the parties hereto.
30
<PAGE> 4
7.6. Specific Performance, Injunctive Relief. The parties hereto
acknowledge that Rychel will be irreparably harmed and that there
will be no adequate remedy at law for a violation of any of the
covenants or agreements of Nerenberg set forth herein. Therefore,
it is agreed that, in addition to any other remedies that may be
available to Rychel upon any such violation, Rychel shall have the
right to enforce such covenants and agreements by specific
performance, injunctive relief or by any other means available at
law or in equity.
7.7. Notices. All notices or other communications hereunder shall be in
writing and shall be deemed to have been validly served, given or
delivered (i) five (5) days after deposit in the United States
mail, prepaid, by certified mail, with return receipt requested;
(ii) when delivered personally; (iii) one (1) day after delivery to
a nationally recognized overnight courier; or (iv) when transmitted
by fax with telephone confirmation of receipt if a copy is
concurrently transmitted by U.S. mail or overnight courier as
stated above; in all cases, if applicable, with delivery prepaid
and addressed to the party to be notified to the address set forth
beneath each party's signature below, or to such other address and
fax number of which a party has given notice to the other party as
provided in this Section 9.7.
7.8. Governing Law.
(a) This agreement shall be governed by and construed in
accordance with the laws of the United States of America and
the State of Georgia.
(b) The parties intend for this Agreement to constitute a voting
agreement under Section 14-2-731 of the Georgia Business
Corporation Code.
(c) The parties irrevocably consent to the exclusive jurisdiction
and venue of the courts of any county in the State of Georgia
and the United States District Court for the Northern District
of Georgia, in any judicial proceeding brought to enforce this
Agreement. The parties agree that any forum other than the
State of Georgia is an inconvenient forum and that a lawsuit
(or non-compulsory counterclaim) brought by one party against
another party, in a court of any jurisdiction other than the
State of Georgia should be forthwith dismissed or transferred
to a court located in the State of Georgia.
7.9. Entire Agreement. This Agreement contains the entire understanding
of the parties with respect to the voting of the securities
referred to herein, and supersedes all prior negotiations and
understandings between the parties with respect to the voting of
the securities referred to herein.
7.10. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be an original, but all of which
together shall constitute one and the same agreement.
7.11. Effect of Headings. The section headings herein are for convenience
only and shall not affect the construction or interpretation of
this Agreement.
SIGNATURES
31
<PAGE> 5
The parties have executed and delivered this Agreement on the date stated on
the first page.
/s/ A. Lowell Nerenberg
---------------------------------
A. LOWELL NERENBERG
17513 Sir Galahad Way
Ashton, MD 20861
/s/ William M. Rychel
---------------------------------
WILLIAM M. RYCHEL
980 Corporate Woods Parkway
Vernon Hills, IL 60061
ACKNOWLEDGED as of the date hereof and AGREED that Tekgraf, Inc. hereby
releases, acquits and forever discharges A. Lowell Nerenberg and his
successors, assigns, agents, and attorneys from any and all claims, of any kind
or nature whatsoever, known or unknown, foreseen or unforeseen, matured or
unmatured, developed or undeveloped, discoverable or undiscoverable, which
exist as of or after the date hereof, based on or arising from the transactions
contemplated hereby (including the Reclassification):
TEKGRAF, INC.
By: /s/ Jeff Camp
-----------------------
Its: CFO
-----------------------
32
<PAGE> 6
EXHIBIT A
TRANSFERRED SHARES
<TABLE>
<CAPTION>
Number of Shares Certificate No.
---------------- ---------------
<S> <C> <C>
Class A Stock N/A
Class B Stock 36,750
</TABLE>
33
<PAGE> 7
EXHIBIT B
RETAINED SHARES
<TABLE>
<CAPTION>
Number of Shares Certificate No.
---------------- ---------------
<S> <C> <C>
Class A Stock 72,432(1)
Class B Stock 12,250
</TABLE>
- -------------
(1) Of these shares, 36,216 are subject to that certain Escrow Agreement by and
among Tekgraf, Inc., Tekgraf Sub III, Inc., New England Computer Graphics,
Inc., A. Lowell Nerenberg, William Rychel, Thomas Gust, David Boston, Scott
Barker, Robert Shumaker, Thomas Mills, and First Union National Bank, dated as
of May 8, 1998.
34
<PAGE> 8
EXHIBIT C
IRREVOCABLE PROXY
The undersigned, being a shareholder of Tekgraf, Inc., a Georgia
corporation (the "Corporation"), hereby irrevocably appoints William M. Rychel
as his attorney-in-fact and proxy, with full power of substitution and
resubstitution, to the full extent of the undersigned's rights with respect to
the shares of capital stock of the Corporation owned (beneficially or
otherwise) by the undersigned, which shares are listed beside the undersigned's
signatures below, and any other securities of the Corporation that the
undersigned currently or hereafter own or control that are then entitled to
vote, including shares or securities of another corporation issued to the
undersigned in connection with a merger of the Corporation or the transfer of
substantially all of the Corporation's assets (all of such shares and other
securities being referred to as the "Retained Shares"), to vote the Retained
Shares for the purposes stated in Section 2 of the Agreement dated as of the
date hereof between the undersigned and William M. Rychel (the "Voting
Agreement"). Upon the execution hereof, all prior proxies given by the
undersigned with respect to the Retained Shares, and any of them, are hereby
revoked. The undersigned hereby agrees that the undersigned will not give any
subsequent proxies with respect to the Retained Shares without the express
prior written consent of William M. Rychel.
This proxy is granted pursuant to the Voting Agreement and is granted
in consideration of the benefits accruing to the undersigned from the Voting
Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged. This proxy is coupled with an
interest and is irrevocable. The attorney-in-fact and proxy named above will be
empowered to exercise all voting and other rights (including, without
limitation, the power to execute and deliver written consents with respect to
the Retained Shares) at every annual, special or adjourned meeting of the
shareholders of Corporation, and in every written consent in lieu of such a
meeting, or otherwise, for the purposes stated in Section 2 of the Voting
Agreement. This proxy shall terminate and shall have not further force or
effect as of the earlier to occur of (i) an agreement of all the undersigned
that the proxy shall terminate, or (ii) December 1, 2000.
Any obligation of the undersigned hereunder shall be binding upon the
successors, representatives and assigns of the undersigned.
Dated as of: December 1, 1999
Number of Shares Owned (beneficially or /s/
Otherwise): -----------------------------
A. LOWELL NERENBERG
17513 Sir Galahad Way
Class A Common: 72,432 Ashton, MD 20861
Class B Common: 12,250
ACKNOWLEDGED: /s/
- ------------ -----------------------------
WILLIAM M. RYCHEL
980 Corporate Woods Parkway
Vernon Hills, IL 60061
35
<PAGE> 1
EXHIBIT 4
AGREEMENT
This ("Agreement") is made and entered into as of December 1, 1999, by
and between WILLIAM M. RYCHEL ("Rychel") and ROSA SABATO ("Sabato").
WHEREAS, Sabato has, on the date hereof, sold to Rychel the number of
shares of the Class B Common Stock, $.001 par value ("Class B Stock") of
Tekgraf, Inc. (the "Corporation") set forth on Exhibit A hereto (the
"Transferred Shares");
Whereas, Sabato is also the owner of the number of shares of Class B
Stock set forth on Exhibit B hereto (the "Retained Shares") which will be
retained by Sabato after the date hereof;
Whereas, management of the Corporation (including Rychel) has proposed
that all outstanding Class B Stock be reclassified into the Class A Common
Stock, $.001 par value ("Class A Stock") of the Corporation on a one-to-one
basis, which reclassification would be submitted to the shareholders of the
Corporation for their approval (the "Reclassification"). If so submitted, the
Reclassification must be approved by the affirmative vote of a majority of the
votes entitled to be cast by holders of Class A Stock and by holders of Class B
Stock, voting as separate voting groups, as well as the affirmative vote of a
majority of the votes entitled to be cast by holders of Class A Stock and Class
B Stock voting together as a voting group;
Whereas, Sabato acknowledges that Rychel purchased the Transferred
Shares to facilitate the Reclassification and that certain benefits would
accrue to Sabato as regards the Retained Shares were the Reclassification to
occur, and desires to enter into the voting agreements with Rychel set forth
herein and to grant Rychel the irrevocable proxy contemplated hereby;
THEREFORE, in consideration of the benefits accruing to each of the
parties hereto as a result of this Agreement, and for other good and
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties agree as follows.
1. Agreement to Vote Shares
1.1. Agreement To Vote Shares.
(a) At every meeting of the shareholders of the Corporation at which
the Reclassification is submitted for approval, and at every
adjournment thereof, and on every action or approval by written
consent of the shareholder s of Corporation with respect to the
Reclassification, Sabato shall cause Sabato's Retained Shares to be
voted, or such action to be taken or approval given, in favor of
the Reclassification.
(b) Sabato understands that the Reclassification may be effected by an
amendment to the Corporation's Articles of Incorporation, or by
other corporate actions submitted to the shareholders for approval,
and Sabato acknowledges that Sabato will cause the Retained Shares
to be voted in accordance with the preceding subsection (a) in any
way recommended by Rychel as necessary or appropriate to effect the
Reclassification.
36
<PAGE> 2
(c) Sabato also agrees to vote the Retained Shares against, and
refrain from taking any other action with respect to, any proposal to any of
the shareholders of the Corporation which if approved could prevent or delay
the implementation of the Recapitalization.
1.2. Additional Securities. Sabato agrees that any securities that
Sabato purchases or receives, or with respect to which Sabato otherwise
acquires ownership (beneficial or otherwise) after the execution of this
Agreement by reason of or on account of their ownership of the Retained Shares,
including any securities of a corporation that survives a merger with the
Corporation or to which substantially all of the Corporation's assets are
transferred, shall be subject to the terms and conditions of this Agreement to
the same extent as if they constituted Retained Shares.
2. Irrevocable Proxy. Concurrently with the execution of this Agreement, Sabato
agrees to deliver to Rychel a proxy, substantially in the form attached hereto
as Exhibit C (the "Proxy"), appointing Rychel as an attorney-in-fact and proxy
of Sabato with respect to the Retained Shares, which Proxy shall be irrevocable
to the fullest extent permitted by law. If the Proxy becomes ineffective for
any reason, Sabato shall immediately execute a substitute proxy that is
effective, and during any period that the Proxy is not in effect, Sabato agrees
to attend all meetings of shareholders, and to vote Sabato's Retained Shares
and take all other actions as provided in Section 1 hereof. A copy of the
executed Proxy shall be submitted to the Corporation.
3. Agreement to Vote Shares and Proxy Termination. The obligations of Sabato
under Section 1 hereof and the Proxy shall terminate and shall have no further
force or effect as of the earlier to occur of (i) an agreement of the parties
that the same shall terminate, or (ii) December 1, 2000.
4. Representations And Warranties Of Sabato. Sabato represents and warrants
that Sabato (i) was the owner (beneficial or otherwise) of the Transferred
Shares prior to the purchase of the Transferred Shares by Rychel, and that the
Transferred Shares were transferred to Rychel free and clear of any liens,
encumbrances or security interests of any kind; (ii) is the owner (beneficial
or otherwise) of the Retained Shares, which as of the date hereof are free and
clear of any liens, encumbrances or security interests of any kind; (iii) does
not own (beneficially or otherwise) any shares of capital stock of the
Corporation other than the Retained Shares; and (iv) has absolute and
unrestricted power, capacity and authority to make, enter into and perform the
obligations imposed pursuant to the terms of this Agreement.
5. Representations And Warranties Of Rychel. Rychel represents and warrants
that Rychel (i) purchased the Transferred Shares for his own account for
investment purposes only and not with a view to the distribution thereof within
the meaning of the Securities Act of 1933, as amended; and (ii) has absolute
and unrestricted power, capacity and authority to make, enter into and perform
the obligations imposed pursuant to the terms of this Agreement.
6. Additional Documents. Sabato hereby covenants and agrees to execute and
deliver any additional documents necessary to carry out the intent of this
Agreement.
7. Miscellaneous.
7.1. Severability. If any term, provision, covenant or restriction of
this Agreement or the Proxy is held by a court of competent jurisdiction to be
invalid, void or unenforceable, then the remainder of the terms, provisions,
covenants and restrictions of this Agreement and/or the Proxy,
37
<PAGE> 3
as the case may be, shall remain in full force and effect and shall in no way
be affected, impaired or invalidated.
7.2. Binding Effect and Assignment. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns, but, except as
otherwise specifically provided herein, neither this Agreement nor any of the
rights, interests or obligations of the parties hereto may be assigned by any
party without the prior written consent of the other parties. Sabato further
agrees not to transfer any Retained Shares now owned or hereafter acquired by
Sabato unless the transferee thereof agrees in writing to be bound by the terms
of this Agreement. Except as otherwise specifically provided herein, any
attempted assignment of Retained Shares by Sabato without such an agreement by
the intended transferee shall be null and void. Sabato acknowledges that Rychel
has assigned to the Corporation for collateral purposes his rights under this
Agreement and the Proxy.
7.3. Merger or Sale of Assets. Upon the merger of the Corporation or
the transfer of substantially all of the assets of the Corporation (the
surviving entity of such a merger or the transferee of such assets, as
applicable, being hereinafter referred to as the "Surviving Entity"), this
Agreement shall continue in full force and effect with respect to the Surviving
Entity and all securities of the Surviving Entity acquired by Sabato. If
requested by Rychel, Sabato will execute a new shareholder voting agreement and
irrevocable proxy with respect to the securities of the Surviving Entity,
although the execution of such an agreement or proxy shall not be required for
this Agreement and the Proxy to continue in full force and effect.
7.4. Legend. Upon execution of this Agreement, Sabato shall submit
Sabato's certificates representing the Retained Shares to the Corporation so
that the Corporation may add the following legend:
THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO
THE TERMS OF, AND RESTRICTIONS ON TRANSFER IMPOSED BY,
AN AGREEMENT DATED AS OF NOVEMBER 30, 1999 AND AN
IRREVOCABLE PROXY, CONTAINING AN IRREVOCABLE APPOINTMENT
OF A PROXY, OF EVEN DATE THEREWITH, COPIES OF BOTH OF
WHICH ARE ON FILE AT THE CORPORATION.
Each of the parties hereto hereby authorizes the Corporation to take such steps
as may be necessary to insure that such legend is added to such certificates,
including but not limited to issuing instructions to that effect to the
transfer agent for the Retained Shares.
7.5. Amendments and Modification. This Agreement may not be amended or
supplemented except in writing by the parties hereto.
7.6. Specific Performance; Injunctive Relief. The parties hereto
acknowledge that Rychel will be irreparably harmed and that there will be no
adequate remedy at law for a violation of any of the covenants or agreements of
Sabato set forth herein. Therefore, it is agreed that, in addition to any other
remedies that may be available to Rychel upon any such violation, Rychel shall
have the right to enforce such covenants and agreements by specific
performance, injunctive relief or by any other means available at law or in
equity.
38
<PAGE> 4
7.7. Notices. All notices or other communications hereunder shall be
in writing and shall be deemed to have been validly served, given or delivered
(i) five (5) days after deposit in the United States mail, prepaid, by
certified mail, with return receipt requested; (ii) when delivered personally;
(iii) one (1) day after delivery to a nationally recognized overnight courier;
or (iv) when transmitted by fax with telephone confirmation of receipt if a
copy is concurrently transmitted by U.S. mail or overnight courier as stated
above; in all cases, if applicable, with delivery prepaid and addressed to the
party to be notified to the address set forth beneath each party's signature
below, or to such other address and fax number of which a party has given
notice to the other party as provided in this Section 9.7.
7.8. Governing Law.
(a) This agreement shall be governed by and construed in
accordance with the laws of the United States of America and the State of
Georgia.
(b) The parties intend for this Agreement to constitute a voting
agreement under Section 14-2-731 of the Georgia Business Corporation Code.
(c) The parties irrevocably consent to the exclusive jurisdiction
and venue of the courts of any county in the State of Georgia and the United
States District Court for the Northern District of Georgia, in any judicial
proceeding brought to enforce this Agreement. The parties agree that any forum
other than the State of Georgia is an inconvenient forum and that a lawsuit (or
non-compulsory counterclaim) brought by one party against another party, in a
court of any jurisdiction other than the State of Georgia should be forthwith
dismissed or transferred to a court located in the State of Georgia.
7.9. Entire Agreement. This Agreement contains the entire
understanding of the parties with respect to the voting of the securities
referred to herein, and supersedes all prior negotiations and understandings
between the parties with respect to the voting of the securities referred to
herein.
7.10. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same agreement.
7.11. Effect of Headings. The section headings herein are for
convenience only and shall not affect the construction or interpretation of
this Agreement.
SIGNATURES
The parties have executed and delivered this Agreement on the date stated on
the first page.
/s/ Rosa Sabato
-----------------------------------
Rosa Sabato
43 Balmiere Parkway
Cranford, New Jersey 07016
/s/ William M. Rychel
-----------------------------------
39
<PAGE> 5
William M. Rychel
980 Corporate Woods Parkway
Vernon Hills, IL 60061
ACKNOWLEDGED as of the date hereof and AGREED that Tekgraf, Inc. hereby
releases, acquits and forever discharges Rosa Sabato and her successors,
assigns, agents, and attorneys from any and all claims, of any kind or nature
whatsoever, known or unknown, foreseen or unforeseen, matured or unmatured,
developed or undeveloped, discoverable or undiscoverable, which exist as of or
after the date hereof, based on or arising from the transactions contemplated
hereby (including the Reclassification):
TEKGRAF, INC.
By: /s/ Jeff Camp
--------------------------
Its: CFO
--------------------------
40
<PAGE> 6
EXHIBIT A
TRANSFERRED SHARES
<TABLE>
<CAPTION>
Certificate No. Number of Shares
--------------- ----------------
<S> <C> <C>
Class A Stock N/A
Class B Stock 12,750
</TABLE>
41
<PAGE> 7
EXHIBIT B
RETAINED SHARES
<TABLE>
<CAPTION>
Certificate No. Number of Shares
--------------- ----------------
<S> <C> <C>
Class A Stock N/A
Class B Stock 4,250
</TABLE>
42
<PAGE> 8
EXHIBIT C
IRREVOCABLE PROXY
The undersigned, being a shareholder of Tekgraf, Inc., a Georgia
corporation (the "Corporation"), hereby irrevocably appoints William M. Rychel
as her attorney-in-fact and proxy, with full power of substitution and
resubstitution, to the full extent of the undersigned's rights with respect to
the shares of capital stock of the Corporation owned (beneficially or
otherwise) by the undersigned, which shares are listed beside the undersigned's
signatures below, and any other securities of the Corporation that the
undersigned currently or hereafter own or control that are then entitled to
vote, including shares or securities of another corporation issued to the
undersigned in connection with a merger of the Corporation or the transfer of
substantially all of the Corporation's assets (all of such shares and other
securities being referred to as the "Retained Shares"), to vote the Retained
Shares for the purposes stated in Section 2 of the Agreement dated as of the
date hereof between the undersigned and William M. Rychel (the "Voting
Agreement"). Upon the execution hereof, all prior proxies given by the
undersigned with respect to the Retained Shares, and any of them, are hereby
revoked. The undersigned hereby agrees that the undersigned will not give any
subsequent proxies with respect to the Retained Shares without the express
prior written consent of William M. Rychel.
This proxy is granted pursuant to the Voting Agreement and is granted
in consideration of the benefits accruing to the undersigned from the Voting
Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged. This proxy is coupled with an
interest and is irrevocable. The attorney-in-fact and proxy named above will be
empowered to exercise all voting and other rights (including, without
limitation, the power to execute and deliver written consents with respect to
the Retained Shares) at every annual, special or adjourned meeting of the
shareholders of Corporation, and in every written consent in lieu of such a
meeting, or otherwise, for the purposes stated in Section 2 of the Voting
Agreement. This proxy shall terminate and shall have not further force or
effect as of the earlier to occur of (i) an agreement of all the undersigned
that the proxy shall terminate, or (ii) December 1, 2000.
Any obligation of the undersigned hereunder shall be binding upon the
successors, representatives and assigns of the undersigned.
Dated as of: December 1, 1999
Number of Shares Owned (beneficially or /s/
------------------------------
Otherwise): ROSA SABATO
43 BALMIERE PARKWAY
Class A Common: N/A CRANFORD, NEW JERSEY 07016
Class B Common: 4,250
ACKNOWLEDGED: /s/
- ------------ ------------------------------
WILLIAM M. RYCHEL
980 Corporate Woods Parkway
Vernon Hills, IL 60061
43
<PAGE> 1
EXHIBIT 5
AGREEMENT
This ("Agreement") is made and entered into as of December 1, 1999, by
and between WILLIAM M. RYCHEL ("Rychel") and MARTYN L. COOPER ("Cooper").
WHEREAS, Cooper has, on the date hereof, sold to Rychel the number of
shares of the Class A Common Stock, $.001 par value ("Class A Stock") of
Tekgraf, Inc. (the "Corporation") and of the Class B Common Stock, $.001 par
value ("Class B Stock") of the Corporation set forth on Exhibit A hereto (the
"Transferred Shares"), at a per share selling price of $2.10;
Whereas, Cooper is also the owner of the number of shares of Class A
Stock and Class B Stock set forth on Exhibit B hereto (the "Delayed Shares");
Whereas, Cooper would have transferred the Delayed Shares to Rychel on
the date hereof however the Delayed Shares are subject to certain escrow
arrangements under a Pledge, Security and Escrow Agreement dated June 2, 1997
(the "Escrow"), between Cooper and the Corporation;
Whereas, Cooper desires that Rychel purchase beneficial ownership of
the Delayed Shares upon the terms and conditions set forth herein with actual
transfer of the certificates therefor to occur upon such Delayed Shares being
released from the Escrow pursuant to the terms thereof;
Whereas, Cooper is also the owner of the number of shares of Class A
Stock and Class B Stock set forth on Exhibit C hereto (such shares, together
with the Delayed Shares, are herein called the "Retained Shares") which will be
retained by Cooper after the date hereof,
Whereas, Cooper acknowledges that it is a condition precedent to
Rychel's purchase of the Transferred Shares was Cooper's entering into the
voting agreements with Rychel set forth herein and to granting Rychel the
irrevocable proxy contemplated hereby;
THEREFORE, in consideration of the benefits accruing to each of the
parties hereto as a result of this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties agree as follows.
1. Delayed Purchase.
1.1 Purchase of Delayed Shares. Rychel hereby agrees to purchase and Cooper
agrees to sell the Delayed Shares at a price of $2.75 per share (such
amount to be appropriately adjusted in the event of any future stock
split, stock combination, stock dividend, or similar event) for a total
purchase price of $152,900 (the "Delayed Purchase"). It is understood
that the purchase price will be appropriately adjusted in the event
that less than all of the Delayed Shares are released from the Escrow.
As a down payment, Rychel has, on the date hereof, paid to Cooper $.50
per Delayed Share, for a total nonrefundable installment payment of $
27,800 (which is to be credited against the purchase price).
44
<PAGE> 2
1.2 Completion of Purchase. At any time within 60 days of written
notification from Cooper or the Corporation that the Delayed Shares have been
released from the Escrow, Rychel shall give Cooper written notice of the date
(the "Closing") for the completion of the purchase of the Delayed Shares, which
date must be reasonably satisfactory to Cooper.
1.3 Payment and Delivery of Certificate(s). In connection with the
Closing, (a) Rychel will pay the aggregate purchase price for the Delayed
Shares to Cooper by delivery of a certified or bank cashier's check payable to
the order of Cooper (less the $.50/share down payment), and (b) Cooper will
deliver to Rychel, free and clear of any encumbrance whatsoever, a certificate
or certificates representing the Delayed Shares as well as a properly executed
blank stock power therefor.
1.4 Failure to Close. Should the Delayed Shares not be released from
Escrow by December 1, 2000, or should they be released from Escrow prior to
such date but Rychel fails to timely deliver the notice to complete the
purchase of the Delayed Shares as set forth in Section 1.2 above, then the
purchase of the Delayed Shares shall be cancelled and of no further force or
effect, Cooper shall retain the Delayed Shares and the $.50/share down payment,
and Rychel will have no liability or obligation to Cooper relative to the
Delayed Shares or for his (Rychel's) election to not cause the completion of
the transfer of the Delayed Shares.
2. Agreement to Vote Shares.
2.1 Agreement To Vote Shares.
(a) At every meeting of the shareholders of the Corporation
and at every adjournment thereof, and on every action or approval by written
consent of the shareholders of Corporation, Cooper shall cause Cooper's
Retained Shares to be voted, or such action to be taken or approval given, in
favor of every matter recommended by the Corporation's Board of Directors
(including any amendment to the Corporation's Articles of Incorporation).
(b) Cooper also agrees to vote the Retained Shares against,
and refrain from taking any other action with respect to, any proposal to any
of the shareholders of the Corporation which if approved could prevent or delay
the implementation of any recommendation of the Corporation's Board of
Directors.
2.2 Additional Securities. Cooper agrees that any securities that
Cooper purchases or receives, or with respect to which Cooper otherwise
acquires ownership (beneficial or otherwise) after the execution of this
Agreement by reason of or on account of their ownership of the Retained Shares,
including any securities of a corporation that survives a merger with the
Corporation or to which substantially all of the Corporation's assets are
transferred, shall be subject to the terms and conditions of this Agreement to
the same extent as if they constituted Retained Shares.
3. Irrevocable Proxy. Concurrently with the execution of this Agreement, Cooper
agrees to deliver to Rychel a proxy, substantially in the form attached hereto
as Exhibit D (the "Proxy"), appointing Rychel as an attorney-in-fact and proxy
of Cooper with respect to the Retained Shares, which Proxy shall be irrevocable
to the fullest extent permitted by law. If the Proxy becomes ineffective for
any reason, Cooper shall immediately execute a substitute proxy that is
effective, and during any period that the Proxy is not in effect, Cooper agrees
to attend all meetings of shareholders, and to vote
45
<PAGE> 3
Cooper's Retained Shares and take all other actions as provided in Section 2
hereof. A copy of the executed Proxy shall be submitted to the Corporation.
4. Agreement to Vote Shares and Proxy Termination. The obligations of
Cooper under Section 2 hereof and the Proxy shall terminate and shall have no
further force or effect as of the earlier to occur of (i) an agreement of the
parties that the same shall terminate, or (ii) December 1, 2000.
5. Representations and Warranties of Cooper. Cooper represents and
warrants (which representations and warranties survive closing) that Cooper (i)
was the owner (beneficial or otherwise) of the Transferred Shares prior to the
purchase of the Transferred Shares by Rychel, and that the Transferred Shares
were transferred to Rychel, and, the Delayed Shares if transferred to Rychel,
will be transferred free and clear of any liens, encumbrances or security
interests of any kind; (ii) is the owner (beneficial or otherwise) of the
Delayed Shares and the Retained Shares, which as of the date hereof are free
and clear of any liens, encumbrances or security interests of any kind (other
than the Escrow); (iii) does not own (beneficially or otherwise) any shares of
capital stock of the Corporation other than the Retained Shares; and (iv) has
absolute and unrestricted power, capacity and authority to make enter into and
perform the obligations imposed pursuant to the terms of this Agreement.
6. Representations and Warranties of Rychel. Rychel represents and warrants
(which representations and warranties survive closing) that Rychel (i)
purchased the Transferred Shares for his own account for investment purposes
only and not with a view to the distribution thereof within the meaning of the
Securities Act of 1933, as amended; (ii) has absolute and unrestricted power,
capacity and authority to make, enter into and perform the obligations imposed
pursuant to the terms of this Agreement.
7. Releases By Cooper and Rychel. Other than the representations set forth
in Section 6, Cooper hereby releases, acquits and forever discharges Rychel and
the Corporation, and each of the Corporation's parents, subsidiaries,
affiliates, successors, assigns, shareholders, directors, officers, employees,
agents, representatives and attorneys from any and all claims, of any kind or
nature whatsoever, known or unknown, foreseen or unforeseen, matured or
unmatured, developed or undeveloped, discoverable or undiscoverable, which
exist as of or after the date hereof (other than a failure of Rychel to pay for
the Delayed Shares), based on or arising from the Transferred Shares, the
Delayed Purchase, the Delayed Shares, the Retained Shares, the voting
agreements set forth herein, the Proxy or Cooper's ownership of any of the
Corporation's securities; provided, however, notwithstanding the foregoing,
Cooper is not releasing any person or party as to (i) any right of
indemnification for claims made by third parties that Cooper may have under
Georgia law, the Corporation's Articles of Incorporation or Bylaws, or pursuant
to that certain Indemnification Agreement dated July 19, 1999 between the
Corporation and Cooper, to the extent resulting from Cooper's current or former
capacities as an employee, officer, director, agent or fiduciary of the
Corporation or its predecessor corporations, or (ii) any claims against the
Corporation that exist as of the date hereof, but are unknown to Cooper, or
that arise after the date hereof, based on a transaction where shares of any
class of the Corporation then held by Cooper are treated differently by the
Corporation in such transaction than shares of that same class then held by all
other shareholders of the Corporation. Other than the representations set forth
in Section 5, Rychel hereby releases, acquits and forever discharges Cooper and
Cooper's successors, assigns, agents, and attorneys from any and all claims, of
any kind or nature whatsoever, known or unknown, foreseen or unforeseen,
matured or unmatured, developed or undeveloped, discoverable or undiscoverable,
which exist as of or after the
46
<PAGE> 4
date hereof (other than a failure by Cooper to deliver the Delayed Shares as
required hereunder), based on or arising from the Transferred Shares, the
Delayed Purchase, the Delayed Shares, the Retained Shares, the voting
agreements set forth herein or the Proxy.
8. Additional Documents. Cooper hereby covenants and agrees to execute
and deliver any additional documents necessary to carry out the intent of this
Agreement.
9. Miscellaneous.
9.1 Severability. If any term, provision, covenant or restriction of
this Agreement or the Proxy is held by a court of competent jurisdiction to be
invalid, void or unenforceable, then the remainder of the terms, provisions,
covenants and restrictions of this Agreement and/or the Proxy, as the case may
be, shall remain in full force and effect and shall in no way be affected,
impaired or invalidated.
9.2 Binding Effect and Assignment. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns, but neither this
Agreement nor any of the rights, interests or obligations of Cooper may be
assigned by Cooper without the prior written consent of Rychel (it being
understood that Rychel may in his discretion assign any and all of his rights,
interests and/or obligations under this Agreement). Cooper further agrees not
to transfer any Retained Shares now owned or hereafter acquired by Cooper
unless the transferee thereof agrees in writing to be bound by the terms of
this Agreement. Except as otherwise specifically provided herein, any attempted
assignment of Retained Shares by Cooper without such an agreement by the
intended transferee shall be null and void.
9.3 Merger or Sale of Assets. Upon the merger of the Corporation or
the transfer of substantially all of the assets of the Corporation (the
surviving entity of such a merger or the transferee of such assets, as
applicable, being hereinafter referred to as the "Surviving Entity"), this
Agreement shall continue in full force and effect with respect to the Surviving
Entity and all securities of the Surviving Entity acquired by Cooper. If
requested by Rychel, Cooper will execute a new shareholder voting agreement and
irrevocable proxy with respect to the securities of the Surviving Entity (as
prepared by Rychel on substantially the same terms and for the same purposes as
this Agreement), although the execution of such an agreement or proxy shall not
be required for this Agreement and the Proxy to continue in full force and
effect.
9.4 Legend. Upon execution of this Agreement, Cooper shall submit
Cooper's certificates representing the Retained Shares to the Corporation so
that the Corporation may add the following legend:
THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO THE
TERMS OF, AND RESTRICTIONS ON TRANSFER IMPOSED BY, AN
AGREEMENT DATED AS OF NOVEMBER 30, 1999 AND AN IRREVOCABLE
PROXY, CONTAINING AN IRREVOCABLE APPOINTMENT OF A PROXY,
OF EVEN DATE THEREWITH, COPIES OF BOTH OF WHICH ARE ON
FILE AT THE CORPORATION.
47
<PAGE> 5
Each of the parties hereto hereby authorizes the Corporation to take such steps
as may be necessary to insure that such legend is added to such certificates,
including but not limited to issuing instructions to that effect to the
transfer agent for the Retained Shares.
9.5 Amendments and Modification. This Agreement may not be amended
or supplemented except in writing by the parties hereto.
9.6 Specific Performance; Injunctive Relief. The parties hereto
acknowledge that Rychel will be irreparably harmed and that there will be no
adequate remedy at law for a violation of any of the covenants or agreements of
Cooper set forth herein. Therefore, it is agreed that, in addition to any other
remedies that may be available to Rychel upon any such violation, Rychel shall
have the right to enforce such covenants and agreements by specific
performance, injunctive relief or by any other means available at law or in
equity.
9.7 Notices. All notices or other communications hereunder shall be
in writing and shall be deemed to have been validly served, given or delivered
(i) five (5) days after deposit in the United States mail, prepaid, by
certified mail, with return receipt requested; (ii) when delivered personally;
(iii) one (1) day after delivery to a nationally-recognized overnight courier;
or (iv) when transmitted by fax with telephone confirmation of receipt if a
copy is concurrently transmitted by U.S. mail or overnight courier as stated
above; in all cases, if applicable, with delivery prepaid and addressed to the
party to be notified to the address set forth beneath each party's signature
below, or to such other address and fax number of which a party has given
notice to the other party as provided in this Section 9.7.
9.8 Governing Law.
(a) This agreement shall be governed by and construed in
accordance with the laws of the United States of America and the State of
Georgia.
(b) The parties intend for this Agreement to constitute a
voting agreement under Section 14-2-731 of the Georgia Business Corporation
Code.
(c) The parties irrevocably consent to the exclusive
jurisdiction and venue of the courts of any county in the State of Georgia and
the United States District Court for the Northern District of Georgia, in any
judicial proceeding brought to enforce this Agreement. The parties agree that
any forum other than the State of Georgia is an inconvenient forum and that a
lawsuit (or noncompulsory counterclaim) brought by one party against another
party, in a court of any jurisdiction other than the State of Georgia should be
forthwith dismissed or transferred to a court located in the State of Georgia.
9.9 Entire Agreement. This Agreement contains the entire
understanding of the parties with respect to the voting of the securities
referred to herein, and supersedes all prior negotiations and understandings
between the parties with respect to the voting of the securities referred to
herein.
9.10 Counterparts. This Agreement may be executed in several
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same agreement.
48
<PAGE> 6
9.11 Effect of Headings. The section headings herein are for
convenience only and shall not affect the construction or interpretation of
this Agreement.
SIGNATURES
The parties have executed and delivered this Agreement on the date stated on
the first page.
/s/ Martyn L. Cooper
--------------------------------------
MARTYN L. COOPER
622 Haskell Avenue
Houston, TX 77077
/s/ William M. Rychel
--------------------------------------
WILLIAM M. RYCHEL
980 Corporate Woods Parkway
Vernon Hills, IL 60061
49
<PAGE> 7
EXHIBIT A
TRANSFERRED SHARES
<TABLE>
<CAPTION>
Certificate No. Number of Shares
--------------- ----------------
<S> <C> <C>
Class A Stock 41,955
Class B Stock 189,045
</TABLE>
50
<PAGE> 8
EXHIBIT B
DELAYED SHARES
<TABLE>
<CAPTION>
Certificate No. Number of Shares
-------------- ----------------
<S> <C> <C>
Class A Stock NONE
Class B Stock 55,600
</TABLE>
51
<PAGE> 9
EXHIBIT C
RETAINED SHARES*
<TABLE>
<CAPTION>
Certificate No. Number of Shares
-------------- ----------------
<S> <C> <C>
Class A Stock NONE
Class B Stock 69,500
</TABLE>
* Includes Delayed Shares
52
<PAGE> 10
EXHIBIT D
IRREVOCABLE PROXY
The undersigned, being a shareholder of Tekgraf, Inc., a Georgia
corporation (the "Corporation"), hereby irrevocably appoints William M. Rychel
as his attorney-in-fact and proxy, with full power of substitution and
resubstitution, to the full extent of the undersigned's rights with respect to
the shares of capital stock of the Corporation owned (beneficially or
otherwise) by the undersigned, which shares are listed beside the undersigned's
signatures below, and any other securities of the Corporation that the
undersigned currently or hereafter own or control that are then entitled to
vote, including shares or securities of another corporation issued to the
undersigned in connection with a merger of the Corporation or the transfer of
substantially all of the Corporation's assets (all of such shares and other
securities being referred to as the "Retained Shares"), to vote the Retained
Shares for the purposes stated in Section 2 of the Agreement dated as of the
date hereof between the undersigned and William M. Rychel (the "Voting
Agreement"). Upon the execution hereof, all prior proxies given by the
undersigned with respect to the Retained Shares, and any of them, are hereby
revoked. The undersigned hereby agrees that the undersigned will not give any
subsequent proxies with respect to the Retained Shares without the express
prior written consent of William M. Rychel.
This proxy is granted pursuant to the Voting Agreement and is granted
in consideration of the benefits accruing to the undersigned from the Voting
Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged. This proxy is coupled with an
interest and is irrevocable. The attorney-in-fact and proxy named above will be
empowered to exercise all voting and other rights (including, without
limitation, the power to execute and deliver written consents with respect to
the Retained Shares) at every annual, special or adjourned meeting of the
shareholders of Corporation, and in every written consent in lieu of such a
meeting, or otherwise, for the purposes stated in Section 2 of the Voting
Agreement. This proxy shall terminate and shall have not further force or
effect as of the earlier to occur of (i) an agreement of all the undersigned
that the proxy shall terminate, or (ii) December 1, 2000.
Any obligation of the undersigned hereunder shall be binding upon the
successors, representatives and assigns of the undersigned.
Dated as of: December 1, 1999
Number of Shares Owned (beneficially or /s/
otherwise): ---------------------------------
MARTYN L. COOPER
6227 Haskell Avenue
Class A Common: N/A Houston, TX 77077
Class B Common: 69,500
53
<PAGE> 11
ACKNOWLEDGED: /s/
---------------------------------
WILLIAM M. RYCHEL
980 Corporate Woods Parkway
Vernon Hills, IL 60061
54
<PAGE> 12
IRREVOCABLE PROXY
The undersigned, being a shareholder of Tekgraf, Inc., a Georgia
corporation (the "Corporation"), hereby irrevocably appoints William M. Rychel
as his attorney-in-fact and proxy, with full power of substitution and
resubstitution, to the full extent of the undersigned's rights with respect to
the shares of capital stock of the Corporation owned (beneficially or
otherwise) by the undersigned, which shares are listed beside the undersigned's
signatures below, and any other securities of the Corporation that the
undersigned currently or hereafter own or control that are then entitled to
vote, including shares or securities of another corporation issued to the
undersigned in connection with a merger of the Corporation or the transfer of
substantially all of the Corporation's assets (all of such shares and other
securities being referred to as the "Retained Shares"), to vote the Retained
Shares for the purposes stated in Section 2 of the Agreement dated as of the
date hereof between the undersigned and William M. Rychel (the "Voting
Agreement"). Upon the execution hereof, all prior proxies given by the
undersigned with respect to the Retained Shares, and any of them, are hereby
revoked. The undersigned hereby agrees that the undersigned will not give any
subsequent proxies with respect to the Retained Shares without the express
prior written consent of William M. Rychel.
This proxy is granted pursuant to the Voting Agreement and is granted
in consideration of the benefits accruing to the undersigned from the Voting
Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged. This proxy is coupled with an
interest and is irrevocable. The attorney-in-fact and proxy named above will be
empowered to exercise all voting and other rights (including, without
limitation, the power to execute and deliver written consents with respect to
the Retained Shares) at every annual, special or adjourned meeting of the
shareholders of Corporation, and in every written consent in lieu of such a
meeting, or otherwise, for the purposes stated in Section 2 of the Voting
Agreement. This proxy shall terminate and shall have not further force or
effect as of the earlier to occur of (i) an agreement of all the undersigned
that the proxy shall terminate, or (ii) December 1, 2000.
Any obligation of the undersigned hereunder shall be binding upon the
successors, representatives and assigns of the undersigned.
Dated as of: December 1, 1999
Number of Shares Owned (beneficially or /s/ Martyn L. Cooper
otherwise): --------------------------
MARTYN L. COOPER
6227 Haskell Avenue
Class A Common: N/A Houston, TX 77077
Class B Common: 69,500
ACKNOWLEDGED: /s/ William M. Rychel
- ------------ ---------------------------
WILLIAM M. RYCHEL
980 Corporate Woods Parkway
Vernon Hills, IL 60061
55
<PAGE> 1
EXHIBIT 6
AGREEMENT
This ("Agreement") is made and entered into as of December 1, 1999, by
and between WILLIAM M. RYCHEL ("Rychel") and J. THOMAS WOOLSEY ("Woolsey").
WHEREAS, Woolsey has, on the date hereof, sold to Rychel the number of
shares of the Class A Common Stock, $.001 par value ("Class A Stock")
of Tekgraf, Inc. (the "Corporation") and of the Class B Common Stock,
$.001 par value ("Class B Stock") of the Corporation set forth on
Exhibit A hereto (the "Transferred Shares") at a per share selling
price of $2.10;
WHEREAS, Woolsey is also the owner of the number of shares of Class A
Stock and Class B Stock set forth on Exhibit B hereto (the "Delayed Shares");
WHEREAS, Woolsey would have transferred the Delayed Shares to Rychel
on the date hereof however the Delayed Shares are subject to certain escrow
arrangements under a Pledge, Security and Escrow Agreement dated June 2, 1997
(the "Escrow"), between Woolsey and the Corporation;
WHEREAS, Woolsey desires that Rychel purchase beneficial ownership of
the Delayed Shares upon the terms and conditions set forth herein with actual
transfer of the certificates therefor to occur upon such Delayed Shares being
released from the Escrow pursuant to the terms thereof;
WHEREAS, Woolsey is also the owner of the number of shares of Class A
Stock and Class B Stock set forth on Exhibit C hereto (such shares, together
with the Delayed Shares, are herein called the "Retained Shares") which will be
retained by Woolsey after the date hereof;
WHEREAS, Woolsey acknowledges that it is a condition precedent to
Rychel's purchase of the Transferred Shares was Woolsey's entering into the
voting agreements with Rychel set forth herein and to granting Rychel the
irrevocable proxy contemplated hereby;
THEREFORE, in consideration of the benefits accruing to each of the
parties hereto as a result of this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties agree as follows.
1. Delayed Purchase.
1.1 Purchase of Delayed Shares. Rychel hereby agrees to purchase and
Woolsey agrees to sell the Delayed Shares at a price of $2.75 per share
(such amount to be appropriately adjusted in the event of any future
stock split, stock combination, stock dividend, or similar event) for a
total purchase price of $290,765.75 (the "Delayed Purchase"). It is
understood that the purchase price will be appropriately adjusted in
the event that less than all of the Delayed Shares are released from
the Escrow. As a down payment, Rychel has, on the date hereof, paid to
Woolsey $.50 per Delayed Share, for a total nonrefundable installment
payment of $52,866.50 (which is to be credited against the purchase
price).
56
<PAGE> 2
1.2 Completion of Purchase. At any time within 30 days of written
notification from Woolsey or the Corporation that the Delayed Shares have been
released from the Escrow. Rychel shall give Woolsey written notice of the date
(the "Closing") for the completion of the purchase of the Delayed Shares, which
date must be reasonably satisfactory to Woolsey.
1.3 Payment and Delivery of Certificate(s). In connection with the
Closing, (a) Rychel will pay the aggregate purchase price for the Delayed
Shares to Woolsey by delivery of a certified or bank cashier's check payable to
the order of Woolsey (less the $.50/share down payment), and (b) Woolsey will
deliver to Rychel, free and clear of any encumbrance whatsoever, a certificate
or certificates representing the Delayed Shares as well as a properly executed
blank stock power therefor.
1.4 Failure to Close. Should the Delayed Shares not be released from
Escrow by December 1, 2000, or should they be released from Escrow prior to
such date but Rychel fails to timely deliver the notice to complete the
purchase of the Delayed Shares as set forth in Section 1.2 above, then the
purchase of the Delayed Shares shall be cancelled and of no further force or
effect, Woolsey shall retain the Delayed Shares and the $.50/share down
payment, and Rychel will have no liability or obligation to Cooper relative to
the Delayed Shares or for his (Rychel's) election to not cause the completion
of the transfer of the Delayed Shares.
2. Agreement to Vote Shares.
2.1 Agreement To Vote Shares.
(a) At every meeting of the shareholders of the Corporation and
at every adjournment thereof, and on every action or approval by written
consent of the shareholders of Corporation, Woolsey shall cause Woolsey's
Retained Shares to be voted, or such action to be taken or approval given, in
favor of every matter recommended by the Corporation's Board of Directors
(including any amendment to the Corporation's Articles of Incorporation).
(b) Woolsey also agrees to vote the Retained Shares against,
and refrain from taking any other action with respect to, any proposal to any
of the shareholders of the Corporation which if approved could prevent or delay
the implementation of any recommendation of the Corporation's Board of
Directors.
2.2 Additional Securities. Woolsey agrees that any securities that
Woolsey purchases or receives, or with respect to which Woolsey otherwise
acquires ownership (beneficial or otherwise) after the execution of this
Agreement by reason of or on account of their ownership of the Retained Shares,
including any securities of a corporation that survives a merger with the
Corporation or to which substantially all of the Corporation's assets are
transferred, shall be subject to the terms and conditions of this Agreement to
the same extent as if they constituted Retained Shares.
3. Irrevocable Proxy. Concurrently with the execution of this Agreement,
Woolsey agrees to deliver to Rychel a proxy, substantially in the form attached
hereto as Exhibit D (the "Proxy"), appointing Rychel as an attorney-in-fact and
proxy of Woolsey with respect to the Retained Shares, which Proxy shall be
irrevocable to the fullest extent permitted by law. If the Proxy becomes
ineffective for any reason, Woolsey shall immediately execute a substitute
proxy that is effective, and during any period that the Proxy is not in effect,
Woolsey agrees to attend all meetings of
57
<PAGE> 3
shareholders, and to vote Woolsey's Retained Shares and take all other actions
as provided in Section 2 hereof. A copy of the executed Proxy shall be
submitted to the Corporation.
4. Agreement to Vote Shares and Proxy Termination. The obligations of Woolsey
under Section 2 hereof and the Proxy shall terminate and shall have no further
force or effect as of the earlier to occur of (i) an agreement of the parties
that the same shall terminate, or (ii) December 1, 2000.
5. Representations And Warranties Of Woolsey. Woolsey represents and warrants
(which representations and warranties survive closing) that Woolsey (i) was the
owner (beneficial or otherwise) of the Transferred Shares prior to the purchase
of the Transferred Shares by Rychel, and that the Transferred Shares were
transferred to Rychel, and, the Delayed Shares if transferred to Rychel, will
be transferred free and clear of any liens, encumbrances or security interests
of any kind; (ii) is the owner (beneficial or otherwise) of the Delayed Shares
and the Retained Shares, which as of the date hereof are free and clear of any
liens, encumbrances or security interests of any kind (other than the Escrow);
(iii) does not own (beneficially or otherwise) any shares of capital stock of
the Corporation other than the Retained Shares; and (iv) has absolute and
unrestricted power, capacity and authority to make, enter into and perform the
obligations imposed pursuant to the terms of this Agreement.
6. Representations And Warranties Of Rychel. Rychel represents and warrants
(which representations and warranties survive closing) that Rychel (i)
purchased the Transferred Shares for his own account for investment purposes
only and not with a view to the distribution thereof within the meaning of the
Securities Act of 1933, as amended; and (ii) has absolute and unrestricted
power, capacity and authority to make, enter into and perform the obligations
imposed pursuant to the terms of this Agreement.
7. Releases By Woolsey and Rychel. Other than the representations set forth in
Section 6, Woolsey hereby releases, acquits and forever discharges Rychel and
the Corporation, and each of the Corporation's parents, subsidiaries,
affiliates, successors, assigns, shareholders, directors, officers, employees,
agents, representatives and attorneys from any and all claims, of any kind or
nature whatsoever, known or unknown, foreseen or unforeseen, matured or
unmatured, developed or undeveloped, discoverable or undiscoverable, which exist
as of or after the date hereof (other than a failure of Rychel to pay for the
Delayed Shares), based on or arising from the Transferred Shares, the Delayed
Purchase, the Delayed Shares, the Retained Shares, the voting agreements set
forth herein, the Proxy or Woolsey's ownership of any of the Corporation's
securities; provided, however, notwithstanding the foregoing Woolsey, is not
releasing any person or party as to (i) any right of indemnification for claims
made by third parties that Woolsey may have under Georgia law, the Corporation's
Articles of Incorporation or Bylaws, or pursuant to that certain Indemnification
Agreement dated July 19, 1999 between the Corporation and Woolsey, to the extent
resulting from Woolsey's current or former capacities as an employee, officer,
director, agent or fiduciary of the Corporation or its predecessor corporations,
or (ii) any claims against the Corporation that exist as of the date hereof, but
are unknown to Woolsey, or that arise after the date hereof, based on a
transaction where shares of any class of the Corporation then held by Woolsey
are treated differently by the Corporation in such transaction than shares of
that same class then held by all other shareholders of the Corporation. Other
than the representations set forth in Section 5, Rychel hereby releases, acquits
and forever discharges Woolsey and Woolsey's successors, assigns, agents, and
attorneys from any and all claims, of any kind or nature whatsoever, known or
unknown, foreseen
58
<PAGE> 4
or unforeseen, matured or unmatured, developed or undeveloped, discoverable or
undiscoverable, which exist as of or after the date hereof (other than a
failure by Woolsey to deliver the Delayed Shares as required hereunder), based
on or arising from the Transferred Shares, the Delayed Purchase, the Delayed
Shares, the Retained Shares, the voting agreements set forth herein or the
Proxy.
8. Additional Documents. Woolsey hereby covenants and agrees to execute
and deliver any additional documents necessary to carry out the intent of this
Agreement.
9. Miscellaneous.
9.1 Severability. If any term, provision, covenant or restriction of
this Agreement or the Proxy is held by a court of competent jurisdiction to be
invalid, void or unenforceable, then the remainder of the terms, provisions,
covenants and restrictions of this Agreement and/or the Proxy, as the case may
be, shall remain in full force and effect and shall in no way be affected,
impaired or invalidated.
9.2 Binding Effect and Assignment. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns, but neither this
Agreement nor any of the rights, interests or obligations of Woolsey may be
assigned by Woolsey without the prior written consent of Rychel (it being
understood that Rychel may in his discretion assign any or all of his rights,
interests and/or obligations under this Agreement). Woolsey further agrees not
to transfer any Retained Shares now owned or hereafter acquired by Woolsey
unless the transferee thereof agrees in writing to be bound by the terms of
this Agreement. Except as otherwise specifically provided herein, any attempted
assignment of Retained Shares by Woolsey without such an agreement by the
intended transferee shall be null and void.
9.3 Merger or Sale of Assets. Upon the merger of the Corporation or
the transfer of substantially all of the assets of the Corporation (the
surviving entity of such a merger or the transferee of such assets, as
applicable, being hereinafter referred to as the "Surviving Entity"), this
Agreement shall continue in full force and effect with respect to the Surviving
Entity and all securities of the Surviving Entity acquired by Woolsey. If
requested by Rychel, Woolsey will execute a new shareholder voting agreement
and irrevocable proxy with respect to the securities of the Surviving Entity
(as prepared by Rychel on substantially the same terms and for the same
purposes as this Agreement), although the execution of such an agreement or
proxy shall not be required for this Agreement and the Proxy to continue in
full force and effect.
9.4 Legend. Upon execution of this Agreement, Woolsey shall submit
Woolsey's certificates representing the Retained Shares to the Corporation so
that the Corporation may add the following legend:
THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO THE TERMS
OF, AND RESTRICTIONS ON TRANSFER IMPOSED BY, AN AGREEMENT
DATED AS OF NOVEMBER 30, 1999 AND AN IRREVOCABLE PROXY,
CONTAINING AN IRREVOCABLE APPOINTMENT OF A PROXY, OF EVEN
59
<PAGE> 5
DATE THEREWITH, COPIES OF BOTH OF WHICH ARE ON FILE AT THE
CORPORATION.
Each of the parties hereto hereby authorizes the Corporation to take such steps
as may be necessary to insure that such legend is added to such certificates,
including but not limited to issuing instructions to that effect to the
transfer agent for the Retained Shares.
9.5 Amendments and Modification. This Agreement may not be amended or
supplemented except in writing by the parties hereto.
9.6 Specific Performance; Injunctive Relief. The parties hereto
acknowledge that Rychel will be irreparably harmed and that there will be no
adequate remedy at law for a violation of any of the covenants or agreements of
Woolsey set forth herein. Therefore, it is agreed that, in addition to any
other remedies that may be available to Rychel upon any such violation, Rychel
shall have the right to enforce such covenants and agreements by specific
performance, injunctive relief or by any other means available at law or in
equity.
9.7 Notices. All notices or other communications hereunder shall be in
writing and shall be deemed to have been validly served, given or delivered (i)
five (5) days after deposit in the United States mail, prepaid, by certified
mail, with return receipt requested; (ii) when delivered personally; (iii) one
(1) day after delivery to a nationally-recognized overnight courier; or (iv)
when transmitted by fax with telephone confirmation of receipt if a copy is
concurrently transmitted by U.S. mail or overnight courier as stated above; in
all cases, if applicable, with delivery prepaid and addressed to the party to
be notified to the address set forth beneath each party's signature below, or
to such other address and fax number of which a party has given notice to the
other party as provided in this Section 9.7.
9.8 Governing Law.
(a) This agreement shall be governed by and construed in accordance
with the laws of the United States of America and the State of
Georgia.
(b) The parties intend for this Agreement to constitute a voting
agreement under Section 14-2-731 of the Georgia Business
Corporation Code.
(c) The parties irrevocably consent to the exclusive jurisdiction
and venue of the courts of any county in the State of Georgia
and the United States District Court for the Northern District
of Georgia, in any judicial proceeding brought to enforce this
Agreement. The parties agree that any forum other than the
State of Georgia is an inconvenient forum and that a lawsuit
(or non-compulsory counterclaim) brought by one party against
another party, in a court of any jurisdiction other than the
State of Georgia should be forthwith dismissed or transferred
to a court located in the State of Georgia.
9.9 Entire Agreement. This Agreement contains the entire understanding
of the parties with respect to the voting of the securities referred to herein,
and supersedes all prior negotiations and understandings between the parties
with respect to the voting of the securities referred to herein.
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<PAGE> 6
9.10 Counterparts. This Agreement may be executed in several
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same agreement.
9.11 Effect of Headings. The section headings herein are for
convenience only and shall not affect the construction or interpretation of
this Agreement.
SIGNATURES
The parties have executed and delivered this Agreement on the date stated on
the first page.
/s/ J. Thomas Woolsey
------------------------
J. THOMAS WOOLSEY
215 Birchmead Drive
Roswell, Georgia 30075
/s/ William M. Rychel
--------------------------
WILLIAM M. RYCHEL
980 Corporate Woods Parkway
Vernon Hills, IL 60061
61
<PAGE> 7
EXHIBIT A
TRANSFERRED SHARES
<TABLE>
<CAPTION>
Certificate No. Number of Shares
<S> <C> <C>
Class A Stock 75,445
Class B Stock 356,888
</TABLE>
62
<PAGE> 8
EXHIBIT B
DELAYED SHARES
<TABLE>
<CAPTION>
Certificate No. Number of Shares
<S> <C> <C>
Class A Stock None
Class B Stock 105,733
</TABLE>
EXHIBIT C
RETAINED SHARES*
<TABLE>
<CAPTION>
Certificate No. Number of Shares
<S> <C> <C>
Class A Stock NONE
Class B Stock 132,167
</TABLE>
*/1 Includes Delayed Shares
EXHIBIT D
IRREVOCABLE PROXY
The undersigned, being a shareholder of Tekgraf, Inc., a Georgia corporation
(the "Corporation"), hereby irrevocably appoints William M. Rychel as his
attorney-in-fact and proxy, with full power of substitution and resubstitution,
to the full extent of the undersigned's rights with respect to the shares of
capital stock of the Corporation owned (beneficially or otherwise) by the
undersigned, which shares are listed beside the undersigned's signatures below,
and any other securities of the Corporation that the undersigned currently or
hereafter own or control that are then entitled to vote, including shares or
securities of another corporation issued to the undersigned in connection with
a merger of the Corporation or the transfer of substantially all of the
Corporation's assets (all of such shares and other securities being referred to
as the "Retained Shares"), to vote the Retained Shares for the purposes stated
in Section 2 of the Agreement dated as of the date hereof between the
undersigned and William M. Rychel (the "Voting Agreement"). Upon the execution
hereof, all prior proxies given by the undersigned with respect to the Retained
Shares, and any of them, are hereby revoked. The undersigned hereby agrees that
the undersigned will not give any subsequent proxies with respect to the
Retained Shares without the express prior written consent of William M. Rychel.
This proxy is granted pursuant to the Voting Agreement and is granted in
consideration of the benefits accruing to the undersigned from the Voting
Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged. This proxy is coupled
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<PAGE> 9
with an interest and is irrevocable. The attorney-in-fact and proxy named above
will be empowered to exercise all voting and other rights (including, without
limitation, the power to execute and deliver written consents with respect to
the Retained Shares) at every annual, special or adjourned meeting of the
shareholders of Corporation, and in every written consent in lieu of such a
meeting, or otherwise, for the purposes stated in Section 2 of the Voting
Agreement. This proxy shall terminate and shall have not further force or
effect as of the earlier to occur of (i) an agreement of all the undersigned
that the proxy shall terminate, or (ii) December 1, 2000.
Any obligation of the undersigned hereunder shall be binding upon the
successors, representatives and assigns of the undersigned.
Dated as of: December 1, 1999
/s/
Number of Shares Owned (beneficially or ---------------------------
otherwise): J. THOMAS WOOLSEY
215 Birchmead Drive
Roswell, Georgia 30075
Class A Common: N/A
Class B Common: 132,167
/s/
ACKNOWLEDGED: ---------------------------
WILLIAM M. RYCHEL
980 Corporate Woods Parkway
Vernon Hills, IL 60061
64
<PAGE> 10
IRREVOCABLE PROXY
The undersigned, being a shareholder of Tekgraf, Inc., a Georgia
corporation (the "Corporation") hereby irrevocably appoints William M. Rychel
as his attorney-in-fact and proxy, with full power of substitution and
resubstitution, to the full extent of the undersigned's rights with respect to
the shares of capital stock of the Corporation owned (beneficially or
otherwise) by the undersigned, which shares are listed beside the undersigned's
signatures below, and any other securities of the Corporation that the
undersigned currently or hereafter own or control that are then entitled to
vote, including shares or securities of another corporation issued to the
undersigned in connection with a merger of the Corporation or the transfer of
substantially all of the Corporation's assets (all of such shares and other
securities being referred to as the "Retained Shares"), to vote the Retained
Shares for the purposes stated in Section 2 of the Agreement dated as of the
date hereof between the undersigned and William M. Rychel (the "Voting
Agreement"). Upon the execution hereof, all prior proxies given by the
undersigned with respect to the Retained Shares, and any of them, are hereby
revoked. The undersigned hereby agrees that the undersigned will not give any
subsequent proxies with respect to the Retained Shares without the express
prior written consent of William M. Rychel.
This proxy is granted pursuant to the Voting Agreement and is granted
in consideration of the benefits accruing to the undersigned from the Voting
Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged. This proxy is coupled with an
interest and is irrevocable. The attorney-in-fact and proxy named above will be
empowered to exercise all voting and other rights (including, without
limitation, the power to execute and deliver written consents with respect to
the Retained Shares) at every annual, special or adjourned meeting of the
shareholders of Corporation, and in every written consent in lieu of such a
meeting, or otherwise, for the purposes stated in Section 2 of the Voting
Agreement. This proxy shall terminate and shall have not further force or
effect as of the earlier to occur of (i) an agreement of all the undersigned
that the proxy shall terminate, or (ii) December 1, 2000.
Any obligation of the undersigned hereunder shall be binding upon the
successors, representatives and assigns of the undersigned.
/s/ J. THOMAS WOOLSEY
Number of Shares Owned (beneficially or ------------------------------
Otherwise): J. THOMAS WOOLSEY
215 Birchmead Drive
Roswell, Georgia 30075
Class A Common: N/A
Class B Common: 132,167
/s/ WILLIAM M. RYCHEL
ACKNOWLEDGED: ------------------------------
WILLIAM M. RYCHEL
980 Corporate Woods Parkway
Vernon Hills, IL 60061
65
<PAGE> 1
EXHIBIT 7
SHAREHOLDER VOTING AGREEMENT
This Shareholder Voting Agreement ("Agreement") is made and entered
into as of November 1, 1999, by and between THOMAS A. GUST and WILLIAM M.
RYCHEL (each a "Shareholder," and collectively the "Shareholders"), each of
whom is shareholder of Tekgraf, Inc., a Georgia corporation (the
"Corporation").
Each Shareholder is the record holder and beneficial owner (as defined in
Rule 13d-3 under the Securities Exchange Act of 1934) of the number of shares of
the Class A Common Stock, $.001 par value (the "Class A Stock") of the
Corporation and the Class B Common Stock, $.001 par value of the Corporation
(the "Class B Stock") indicated beside each Shareholder's name on the signature
page (such shares of Class A Stock and Class B Stock being hereinafter referred
to as the "Shares"). Management of the Corporation has proposed that all
outstanding Class B Stock be reclassified into Class A Stock on a one-to-one
basis, which reclassification would be submitted to the shareholders of the
Corporation for their approval (the "Reclassification"). If so submitted, the
Reclassification must be approved by the affirmative vote of a majority of the
votes entitled to be cast by holders of Class A Stock and by holders of Class B
Stock, voting as separate voting groups, as well as the affirmative vote of a
majority of the votes entitled to be cast by holders of Class A Stock and Class
B Stock voting together as a voting group. The Shareholders acknowledge that
certain benefits would accrue to them and to the other shareholders of the
Corporation were the Reclassification to occur, and each Shareholder desires
that the other Shareholder enter into this Agreement to insure that as many of
the Shares as possible are voted in favor of the Reclassification if it is
presented to the shareholders for approval.
THEREFORE, in consideration of the benefits accruing to each
Shareholder as a result of this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties agree as follows.
1. Agreement to Vote Shares.
1.1 Agreement To Vote Shares.
(a) At every meeting of the shareholders of the Corporation at
which the Reclassification is submitted for approval, and at
every adjournment thereof, and on every action or approval by
written consent of the shareholders of Corporation with respect
to the Reclassification, each Shareholder shall cause such
Shareholder's Shares to be voted, or such action to be taken or
approval given, in favor of the Reclassification.
(b) Each Shareholder understands that the Reclassification may be
effected by an amendment to the Corporation's Articles of
Incorporation, or by other corporate actions submitted to the
shareholders for approval, and each Shareholder acknowledges
that he will cause his Shares to be voted in accordance with
the preceding subsection (a) in any way recommended by the
Corporation's Board of Directors as necessary or appropriate to
effect the Reclassification.
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<PAGE> 2
(c) Each Shareholder also agrees to vote the Shares against, and
refrain from taking any other action with respect to, any
proposal to any of the shareholders of the Corporation which if
approved could prevent or delay the implementation of the
Recapitalization.
1.2 Additional Securities. For purposes of this Agreement, the term
"Shares" shall be deemed to include any other securities of the
Corporation that the Shareholder currently or hereafter owns or
controls that are then entitled to vote, including, but not limited
to, common stock and preferred stock. The Shareholders agree that
any securities that they purchase or receive, or with respect to
which they otherwise acquire beneficial ownership after the
execution of this Agreement by reason of or on account of their
ownership of the Shares, including any securities of a corporation
that survives a merger with the Corporation or to which
substantially all of the Corporation's assets are transferred,
shall be subject to the terms and conditions of this Agreement to
the same extent as if they constituted Shares.
2. Irrevocable Proxy. Concurrently with the execution of this Agreement,
each Shareholder agrees to deliver to the other a proxy, substantially
in the form attached hereto as Exhibit A (the "Proxy"), appointing the
other as an attorney-in-fact and proxy of the Shareholder with respect
to the Shares, which Proxy shall be irrevocable to the fullest extent
permitted by law. If the Proxy becomes ineffective for any reason, the
Shareholders shall immediately execute a substitute proxy that is
effective, and during any period that the Proxy is not in effect, the
Shareholders agree to attend all meetings of shareholders, and to vote
their Shares and take all other actions as provided in Section 1 hereof.
A copy of each executed Proxy shall be submitted to the Corporation.
3. Representations And Warranties Of The Shareholder. Each Shareholder
represents and warrants that such Shareholder (i) is the beneficial
owner of the Shares, which as of the date hereof are free and clear of
any liens, encumbrances or security interests of any kind; (ii) does not
beneficially own any shares of capital stock of the Corporation other
than the Shares; and (iii) has absolute and unrestricted power, capacity
and authority to make, enter into and perform the obligations imposed
pursuant to the terms of this Agreement.
4. Additional Documents. Each Shareholder hereby covenants and agrees to
execute and deliver any additional documents necessary to carry out the
intent of this Agreement.
5. Termination. This Agreement shall terminate and shall have no further
force or effect as of the earlier to occur of (i) an agreement of the
parties that the Agreement shall terminate, or (ii) the fifth
anniversary of the date of this Agreement.
6. Miscellaneous.
6.1 Severability. If any term, provision, covenant or restriction of
this Agreement or the Proxy is held by a court of competent
jurisdiction to be invalid, void or unenforceable, then the
remainder of the terms, provisions, covenants and restrictions of
this Agreement and/or the Proxy, as the case may be, shall remain
in full force and effect and shall in no way be affected, impaired
or invalidated.
6.2 Binding Effect and Assignment. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and permitted
assigns, but, except as otherwise specifically provided herein,
neither this Agreement nor any of the
67
<PAGE> 3
rights, interests or obligations of the parties hereto may be
assigned by any party without the prior written consent of the
other parties. Each Shareholder further agrees not to transfer any
Class B Stock now owned or hereafter acquired by such Shareholder
unless the transferee thereof agrees in writing to be bound by the
terms of this Agreement. Except as otherwise specifically provided
herein, any attempted assignment of Class B Stock by a Shareholder
without such an agreement by the intended transferee shall be null
and void.
6.3 Merger or Sale of Assets. Upon the merger of the Corporation or
the transfer of substantially all of the assets of the Corporation
(the surviving entity of such a merger or the transferee of such
assets, as applicable, being hereinafter referred to as the
"Surviving Entity"), this Agreement shall continue in full force
and effect with respect to the Surviving Entity and all securities
of the Surviving Entity acquired by the Shareholders. If requested
by a Shareholder, the other Shareholder will execute a new
shareholder voting agreement and irrevocable proxy with respect to
the securities of the Surviving Entity, although the execution of
such an agreement or proxy shall not be required for this Agreement
and the Proxy to continue in full force and effect.
6.4 Legend. Upon execution of this Agreement, the Shareholders
shall submit their certificates representing the shares of Class B
Stock to the Corporation so that the Corporation may add the
following legend:
THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO THE TERMS OF, AND
RESTRICTIONS ON TRANSFER IMPOSED BY, A SHAREHOLDER VOTING AGREEMENT
DATED AS OF NOVEMBER 1, 1999 AND AN IRREVOCABLE PROXY, CONTAINING
AN IRREVOCABLE APPOINTMENT OF A PROXY, OF EVEN DATE THEREWITH,
COPIES OF BOTH OF WHICH ARE ON FILE AT THE CORPORATION.
Each Shareholder hereby authorizes the Corporation to take such
steps as may be necessary to insure that such legend is added to
such certificates, including but not limited to issuing
instructions to that effect to the transfer agent for the Shares.
6.5 Amendments and Modification. This Agreement may not be amended
or supplemented except in writing by the parties hereto.
6.6 Specific Performance; Injunctive Relief. The parties hereto
acknowledge that each Shareholder will be irreparably harmed and
that there will be no adequate remedy at law for a violation of any
of the covenants or agreements of a Shareholder set forth herein.
Therefore, it is agreed that, in addition to any other remedies
that may be available to a Shareholder upon any such violation,
each Shareholder shall have the right to enforce such covenants and
agreements by specific performance, injunctive relief or by any
other means available at law or in equity.
6.7 Notices. All notices or other communications hereunder shall be
in writing and shall be deemed to have been validly served, given
or delivered (i) five (5) days after deposit in the United States
mail, prepaid, by certified mail, with return receipt requested;
(ii) when delivered personally; (iii) one (1) day after delivery to
a nationally-recognized overnight courier; or (iv) when transmitted
by fax with telephone confirmation of receipt if a copy is
concurrently transmitted by U.S. mail or overnight courier as
stated above; in all cases, if applicable, with delivery prepaid
and addressed to the party to be notified to the address set forth
beneath each Shareholder's signature below, or to such other
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<PAGE> 4
address and fax number of which a party has given notice to the
other party as provided in this Section 6.7.
6.8 Governing Law.
(a) This agreement shall be governed by and construed in accordance
with the laws of the United States of America and the State of
Georgia.
(b) The parties intend for this Agreement to constitute a voting
agreement under Section 14-2-731 of the Georgia Business
Corporation Code.
(c) The Corporation and the Shareholders irrevocably consent to the
exclusive jurisdiction and venue of the courts of any county in
the State of Georgia and the United States District Court for
the Northern District of Georgia, in any judicial proceeding
brought to enforce this Agreement. The parties agree that any
forum other than the State of Georgia is an inconvenient forum
and that a lawsuit (or non-compulsory counterclaim) brought by
one party against another party, in a court of any jurisdiction
other than the State of Georgia should be forthwith dismissed
or transferred to a court located in the State of Georgia.
6.9 Entire Agreement. This Agreement contains the entire
understanding of the parties with respect to the voting of the
securities referred to herein, and supersedes all prior
negotiations and understandings between the parties with respect to
the voting of the securities referred to herein.
6.10 Counterparts. This Agreement may be executed in several
counterparts, each of which shall be an original, but all of which
together shall constitute one and the same agreement.
6.11 Effect of Headings. The section headings herein are for
convenience only and shall not affect the construction or
interpretation of this Agreement.
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<PAGE> 5
SIGNATURES
The parties have executed and delivered this Agreement on the date stated on
the first page.
Number of Shares Beneficially Owned: /s/ Thomas A. Gust
-----------------------------
Thomas A. Gust
Class A Common: 40,216 200 North Fairway Drive
Class B Common: 376,625 Suite 202
Vernon Hills, IL 60061
Number of Shares Beneficially Owned: /s/ William M. Rychel
-----------------------------
William M. Rychel
Class A Common: 117,893 980 Corporate Woods Parkway
Class B Common: 284,942 Vernon Hills, IL 60061
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<PAGE> 6
CUSIP No. 879102101
EXHIBIT A
IRREVOCABLE PROXY
The undersigned, each being a shareholder of Tekgraf, Inc., a Georgia
corporation (the "Corporation"), hereby irrevocably appoints the other
undersigned shareholder as his attorney-in-fact and proxy, with full power of
substitution and resubstitution, to the full extent of each of the
undersigned's rights with respect to the shares of capital stock of the
Corporation beneficially owned by the undersigned, which shares are listed
beside each of the undersigned's signatures below, and any other securities of
the Corporation that the undersigned currently or hereafter own or control that
are then entitled to vote, including shares or securities of another
corporation issued to the undersigned in connection with a merger of the
Corporation or the transfer of substantially all of the Corporation's assets
(all of such shares and other securities being referred to as the "Shares"), to
vote the Shares for the purposes stated in Section 1.1 of the Shareholder
Voting Agreement dated as of the date hereof between the undersigned
shareholders (the "Voting Agreement"). Upon the execution hereof, all prior
proxies given by the undersigned with respect to the Shares, and any of them,
are hereby revoked. The undersigned Shareholder hereby agrees that he will not
give any subsequent proxies with respect to the Shares without the express
prior written consent of the other undersigned Shareholder.
This proxy is granted pursuant to the Voting Agreement and is granted in
consideration of the benefits accruing to the undersigned from the Voting
Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged. This proxy is coupled with an
interest and is irrevocable. The attorney-in-fact and proxy named above will be
empowered to exercise all voting and other rights (including, without
limitation, the power to execute and deliver written consents with respect to
the Shares) at every annual, special or adjourned meeting of the shareholders
of Corporation, and in every written consent in lieu of such a meeting, or
otherwise, for the purposes stated in Section 1.1 of the Voting Agreement. This
proxy shall terminate and shall have not further force or effect as of the
earlier to occur of (i) an agreement of all the undersigned that the proxy
shall terminate, or (ii) the fifth anniversary of the date hereof.
Any obligation of the undersigned hereunder shall be binding upon the
successors, representatives and assigns of the undersigned.
Dated: November 1, 1999
71
<PAGE> 7
CUSIP No. 879102101
Number of Shares Beneficially Owned: /s/
-----------------------------
Class A Common: 40,216 Thomas A. Gust
Class B Common: 376,625 200 North Fairway Drive
Suite 202
Vernon Hills, IL 60061
Number of Shares Beneficially Owned: /s/
-----------------------------
Class A Common: 117,893 William M. Rychel
Class B Common: 284,942 980 Corporate Woods Parkway
Vernon Hills, IL 60061
72
<PAGE> 1
EXHIBIT 8
LOAN AGREEMENT
This Loan Agreement is made and entered into as of December 1, 1999, by
and between WILLIAM M. RYCHEL ("Rychel") and TEKGRAF, INC., a Georgia
corporation ("Tekgraf").
Rychel wishes to borrow $1,775,000 from Tekgraf to enable Rychel to
purchase shares of Tekgraf's Class A Common Stock, $.001 par value (the "Class A
Stock") and Class B Common Stock, $.001 par value (the "Class B Stock") from
other Tekgraf shareholders. Management of Tekgraf has proposed that all
outstanding Class B Stock be reclassified into Class A Stock on a one-to-one
basis (the "Reclassification"), and Rychel and Tekgraf acknowledge that certain
benefits would accrue to Tekgraf and its shareholders were the Reclassification
to occur. The purchases by Rychel would be made in connection with the
Reclassification, to insure that as much of the Class A Stock and Class B Stock
as possible is voted in favor of the Reclassification if it is presented to the
shareholders for approval. Therefore, Tekgraf is agreeable to making the loan to
Rychel.
Therefore, in consideration of the premises and mutual covenants and
agreements contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows.
1. The Loan. Tekgraf hereby agrees to loan to Rychel, and Rychel hereby
agrees to, and hereby does, borrow from Tekgraf, in reliance on and
subject to the terms and conditions contained herein, the amount of
$1,775,000 (the "Loan"). The Loan is evidenced by a promissory note in
the form attached hereto as Exhibit A and by this reference
incorporated herein and made a part hereof (the "Note").
2. Interest Rate. The outstanding principal balance of the Loan shall bear
interest at the rate per annum that is one fourth of a percentage point
(.25%) above the rate paid by Tekgraf from time to time under its Loan
and Security Agreement dated as of July 2, 1998, between Tekgraf and
[name of bank deleted]. The Tekgraf rate currently is the monthly LIBOR
Index Rate plus 2.5%.
3. Payment. The principal of and all interest accrued on the Loan shall be
due and payable on the first anniversary of this Agreement, or on the
next business day if the first anniversary falls on a weekend or
holiday on which national banks are closed.
4. Prepayment. Rychel may prepay the Loan, in whole or in part, at any
time without penalty. Prepayments shall be applied consistent with the
terms of the Note.
5. Security. As security for the payment of the Loan, Rychel has entered
into (a) a Stock Pledge Agreement dated the date hereof (the "Stock
Pledge Agreement") pursuant to which he has pledged to Tekgraf 221,042
shares of Class A Stock and 970,758 shares of Class B Stock, and
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<PAGE> 2
(b) a Collateral Assignment dated the date hereof pursuant to which he
has collaterally assigned to Tekgraf his rights under certain
agreements to purchase additional shares of Class B Stock.
6. Covenants.
(a) At every meeting of the Tekgraf shareholders at which the
Reclassification is submitted for approval, and at every
adjournment thereof, and on every action or approval by written
consent of the Tekgraf shareholders with respect to the
Reclassification, Rychel shall cause all of his shares of Class A
Stock and Class B (collectively, the "Rychel Shares") to be voted,
or such action to be taken or approval given, in favor of the
Reclassification. Rychel understands that the Reclassification may
be effected by an amendment to Tekgraf's Articles of Incorporation,
or by other corporate actions submitted to the shareholders for
approval, and Rychel acknowledges that he will vote all the Rychel
Shares in accordance with the preceding sentence in any way
recommended by Tekgraf's Board of Directors as necessary or
appropriate to effect the Reclassification. Rychel also agrees to
vote all the Rychel Shares against, and refrain from taking any
other action with respect to, any proposal to any of the Tekgraf
shareholders which if approved could prevent or delay the
implementation of the Recapitalization. For purposes of this
Agreement, the term "Rychel Shares" shall be deemed to include any
other Tekgraf securities that Rychel currently or hereafter owns or
controls that are then entitled to vote, including, but not limited
to, common stock and preferred stock as to which Rychel exercises
voting control at the time of the meeting or other action or
approval.
(b) Rychel shall use the proceeds of the Loan to purchase an aggregate
of 117,400 shares of Class A Stock and 689,583 shares of Class B
Stock (collectively, the "Purchased Shares") from the following
Tekgraf shareholders in the following amounts, and to make a down
payment for a delayed purchase of an additional 161,333 shares of
Class B Stock (the "Delayed Shares") from the following Tekgraf
shareholders in the following amounts:
<TABLE>
<CAPTION>
Number of Purchased Shares
Class A Stock Class B Stock
<S> <C> <C>
Martyn L. Cooper 41,955 189,045
J. Thomas Woolsey 75,445 356,888
A. Lowell Nerenberg 36,750
Beverly Nerenberg 3,767 90,383
Rosa Sabato 12,750
</TABLE>
<TABLE>
<CAPTION>
Number of Delayed Shares
<S> <C>
Martyn L. Cooper 55,600
J. Thomas Woolsey 105,733
</TABLE>
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<PAGE> 3
(c) Rychel shall use his reasonable efforts to sell as many of the
Purchased Shares as may be necessary to prepay the Loan as soon as
practicable; provided, however, Rychel shall not be required to
sell any of the Purchased Shares at a price below $2.65 per share
(such amount to be appropriately adjusted in the event of any
future stock split, stock combination, stock dividend, or similar
event). In connection with such sales, Rychel shall consult with
Tekgraf's Board of Directors with the goal that such sales be
conducted in private transactions if possible, so as not to disrupt
the public trading markets for Tekgraf's stock.
(d) Rychel hereby grants Tekgraf the option to purchase any or all of
the Purchased Shares from him at a price per share equal to the
following percentage of the average trading price of the Class A
Stock measured over the 20 consecutive trading days on which the
Class A Stock traded, with the last such trading day being not
later than the last business day before the date of exercise of
this option:
<TABLE>
<CAPTION>
If at the time of attempted exercise the average Then the applicable
trading price is: percentage will be:
<S> <C>
More than $3.00 and less than or equal to $4.50 90%
More than $4.50 and less than or equal to $6.00 88.5%
More than $6.00 85%
</TABLE>
Provided, however, (i) this option shall not be exercisable unless
the trading price is at least $3 per share at the time of attempted
exercise; (ii) this option shall terminate as soon as all of the
principal and interest under the Loan has been paid; and (iii) the
above trading price numbers shall be appropriately adjusted in the
event of any future stock split, stock combination, stock dividend,
or similar event. For purpose of this subsection, the trading price
shall be the last sale price if the Class A Stock is traded on the
Nasdaq National Market, and the average of the last bid and asked
prices if the Class A Stock is traded on another market. To
exercise this option, Tekgraf shall deliver to Rychel a written
notice of exercise stating the number of shares to be purchased,
and the proposed closing date, which shall be between 10-15
business days after exercise. On the closing date Rychel shall
deliver such executed documents as may be necessary to transfer the
shares to be purchased by Tekgraf, and Tekgraf shall pay the
purchase price to Rychel, first by treating the payment as a
prepayment under the Note, to the extent of the outstanding
principal and interest, with the balance if any payable in
immediately available funds.
(e) For as long as any principal or interest under the Loan remains
outstanding and unpaid, Rychel will maintain a life insurance
policy on his life in the amount of $2 million, with Tekgraf as the
beneficiary.
(f) Tekgraf shall indemnify and hold harmless Rychel and his heirs,
executors, administrators and assigns (collectively, the
"Indemnified Persons") from and against any claim, lawsuit or
proceeding by a third party against an Indemnified Person by reason
of Tekgraf having made
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<PAGE> 4
the Loan to Rychel, Rychel having accepted the Loan, and Rychel having
purchased any of the Purchased Shares; provided, however, Tekgraf shall
have no responsibility to indemnify any of the Indemnified Persons
against claims, lawsuits or proceedings based on intentional misconduct
or any violation of applicable securities laws by Rychel.
7. Default. The occurrence of any one or more of the following shall
constitute a default under this Agreement:
(a) Rychel fails to pay within fifteen (15) days after the date when
due any amount payable under the Note; or
(b) Rychel is in material breach of this Agreement or the Stock Pledge
Agreement, and such breach is not cured within 30 days after
receiving notice thereof from Tekgraf.
Upon the occurrence of any one or more of the foregoing events of
default, the entire unpaid principal balance of the Loan shall be
immediately due and payable, without presentment, protest, or
further demand or notice of any kind, all of which are hereby
expressly waived. In addition, Tekgraf shall have all the rights
accruing to it under the Stock Pledge Agreement. All rights and
remedies of Tekgraf hereunder are cumulative and may be exercised
successively or concurrently with other rights Tekgraf may have at
law or in equity.
8. Miscellaneous.
(a) Entire Agreement. This Agreement and the instruments, agreements,
and other documents contemplated hereby supersede all prior
discussions, understandings, and agreements between and among the
parties with respect to the matters contained herein, and this
Agreement and the instruments, agreements, and other documents
contemplated hereby contain the sole and entire agreement between
the parties hereto with respect to the matters contemplated herein.
(b) Amendments. This Agreement may not be amended or supplemented
except in writing by the parties hereto.
(c) Counterparts. This Agreement may be executed in several
counterparts, each of which shall be an original, but all of which
together shall constitute one and the same agreement.
(d) Effect of Headings. The section headings herein are for convenience
only and shall not affect the construction or interpretation of
this Agreement.
(e) Binding Effect. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective
principals, heirs, legal representatives, assigns and successors.
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<PAGE> 5
(f) Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the United States of America and the
State of Georgia. Tekgraf and Rychel irrevocably consent to the
exclusive jurisdiction and venue of the courts of any county in the
State of Georgia and the United States District Court for the
Northern District of Georgia, in any judicial proceeding brought to
enforce this Agreement. The parties agree that any forum other than
the State of Georgia is an inconvenient forum and that a lawsuit
(or non-compulsory counterclaim) brought by one party against
another party in a court of any jurisdiction other than the State
of Georgia should be forthwith dismissed or transferred to a court
located in the State of Georgia.
(g) Notices. All notices or other communications hereunder shall be in
writing and shall be deemed to have been validly served, given or
delivered (i) five (5) days after deposit in the United
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<PAGE> 6
States mail, prepaid, by certified mail, with return receipt
requested; (ii) when delivered personally; (iii) one (1) day after
delivery to a nationally-recognized overnight courier; or (iv) when
transmitted by fax with telephone confirmation of receipt if a copy
is concurrently transmitted by U.S. mail or overnight courier as
stated above; in all cases, if applicable, with delivery prepaid
and addressed to the party to be notified to the address set forth
beneath such party's signature below, or to such other address and
fax number of which a party has given notice to the other party as
provided in this subsection.
(h) Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such a manner as to be effective and valid
under applicable law, but if any provision of this Agreement shall
be deemed prohibited or invalid under such applicable law, such
provision shall be ineffective to the extent of such prohibition or
invalidity, but such prohibition or invalidity shall not invalidate
the remainder of such provision or the other provisions of this
Agreement.
The parties hereto have executed this Loan Agreement as of the day and
year first written above.
TEKGRAF, INC.
/s/ William M. Rychel By: /s/ W. Jeffrey Camp
- ------------------------- --------------------------------
William M. Rychel 645 Hembree Parkway, Suite J
980 Corporate Woods Parkway Roswell, GA 30076
Vernon Hills, IL 60061 Fax: (770) 442-6072
Fax: (954) 697-4329
78
<PAGE> 1
EXHIBIT 9
PROMISSORY NOTE
December 1, 1999 $1,775,000
FOR VALUE RECEIVED, the undersigned (hereinafter referred to as
"Maker") promises to pay to the order of TEKGRAF, INC. (hereinafter referred to
as "Payee") at Payee's address at 645 Hembree Parkway, Suite J, Roswell, Georgia
30076 or at such other place as the holder hereof may designate, the principal
sum of One-Million-Seven-Hundred-Seventy-Five-Thousand Dollars ($1,775,000) (the
"Loan"), together with interest on so much of the principal balance of the Loan
as may be outstanding and unpaid from time to time, calculated on the basis of a
365 day year and actual days elapsed, at the rate per annum that is one fourth
of a percentage point (.25%) above the rate paid by Tekgraf from time to time
under its Loan and Security Agreement dated as of July 2, 1998, between Tekgraf
and [name of bank deleted] (the "Interest Rate"). The Tekgraf rate is currently
the monthly LIBOR Index Rate plus 2.5%.
This Note has been given in connection with the Loan Agreement dated
the date hereof between Maker and Payee (the "Loan Agreement"), and is entitled
to all the benefits of the Loan Agreement.
The principal of and accrued interest on the Loan shall be repayable in
a lump sum on the first anniversary of this Note, or on the next business day if
the first anniversary falls on a weekend or holiday on which national banks are
closed. Any overdue payment of principal or interest on this Note shall bear
interest at the Interest Rate plus 5 percentage points, until paid, but only to
the extent that payment of such interest on overdue principal or interest is
enforceable under applicable law.
Maker may prepay this Note in whole or in part at any time without
penalty or premium. Each such prepayment shall be applied first to unpaid
interest accrued through the date of such prepayment, and then to outstanding
principal.
If Maker fails to pay within fifteen (15) days after the due date any
amount payable under this Note, or if Maker is otherwise in default under the
Loan Agreement, then this Note shall be in default and Payee, at its option,
without demand or further notice of any kind, may declare this Note immediately
due and payable, whereupon all outstanding principal and accrued interest shall
become immediately due and payable.
In case this Note is collected by or through an attorney-at-law in the
event of a default hereunder, all costs of collection, including reasonable
attorney's fees, shall be paid by Maker.
Time is of the essence.
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<PAGE> 2
This Note shall be governed by and construed in accordance with the
laws of the United States of America and the State of Georgia. Maker irrevocably
consents to the exclusive jurisdiction and venue of the courts of any county in
the State of Georgia and the United States District Court for the Northern
District of Georgia, in any judicial proceeding brought to enforce this Note.
Maker agrees that any forum other than the State of Georgia is an inconvenient
forum and that a lawsuit (or non-compulsory counterclaim) brought against Maker
in a court of any jurisdiction other than the State of Georgia should be
forthwith dismissed or transferred to a court located in the State of Georgia.
Words importing the singular number hereunder shall include the plural
number and vice versa, and any pronoun used herein shall be deemed to cover all
genders. Payee shall not be deemed to waive any of its rights unless such waiver
be in writing and signed by Payee. The word "Payee" as used herein shall include
transferees, successors, and assigns of Payee, and all rights of Payee hereunder
shall inure to the benefit of its transferees, successors ,and assigns. All
obligations of Maker shall bind his heirs, legal representatives and assigns.
SIGNED, SEALED, AND DELIVERED by the undersigned as of the date first
written above.
[EXHIBIT A - DO NOT SIGN] (SEAL)
William M. Rychel
980 Corporate Woods Parkway
Vernon Hills, IL 60061
80
<PAGE> 1
EXHIBIT 10
STOCK PLEDGE AGREEMENT
THIS STOCK PLEDGE AGREEMENT is made and entered into as of December 1,
1999, by and between WILLIAM M. RYCHEL ("Rychel") and TEKGRAF, INC. ("Tekgraf").
Rychel has borrowed $1,775,000 (the "Loan") from Tekgraf to enable
Rychel to purchase shares of Tekgraf's Class A Common Stock, $.001 par value
(the "Class A Stock") and Class B Common Stock, $.001 par value (the "Class B
Stock") from other Tekgraf shareholders, such shares having been identified as
the "Purchased Shares" on Exhibit A hereto. The Loan has been made under the
terms of a Loan Agreement of even date herewith between Rychel and Tekgraf (the
"Loan Agreement"), and Rychel has delivered a Promissory Note of even date
herewith to Tekgraf in the principal amount of the Loan (together with all
extensions, renewals, amendments and modifications thereof, the "Note"). To
secure the payment of all Obligations (as hereinafter defined), Rychel has
agreed to pledge to Tekgraf, and to grant Tekgraf a security interest in,
certain shares of the Class A Stock and Class B Stock, and to grant Tekgraf a
security interest in Rychel's rights to purchase additional shares of Class B
Stock from certain of Tekgraf's shareholders.
Therefore, in consideration of the premises and the agreements and
covenants contained herein, the parties hereto agree as follows.
1. Security Interest.
(a) As security for payment of all liabilities and obligations of
Rychel to Tekgraf of every kind and description, whether now
existing or hereafter arising, fixed or contingent, due or to
become due, under the Loan Agreement or the Note (the
"Obligations"), Rychel hereby pledges, and grants a continuing
security interest in and security title to, the shares of Class A
Stock and Class B Stock identified as the "Pledged Shares" on
Exhibit A hereto. Such shares, together with all dividends,
income, cash, options, warrants, rights, instruments and other
property, interests or proceeds from time to time in effect,
received, receivable or otherwise distributed in respect of, or in
exchange, replacement, renewal or substitution for, any or all of
such shares, are referred to herein as the "Pledged Shares".
(b) Concurrently herewith, and except as noted in subsection 1(c)
below, Rychel has delivered to Tekgraf a certificate or
certificates representing the Pledged Shares and stock powers in
the form attached hereto as Exhibit B endorsed in blank.
Beneficial ownership of the Pledged Shares, including, without
limitation, all voting, consensual and dividend rights, shall
remain in Rychel until the occurrence of a Default under Section 6
hereof. At Tekgraf's option, the certificates representing the
Pledged Shares shall bear the following legend: "THESE SHARES ARE
SUBJECT TO A STOCK PLEDGE AGREEMENT DATED DECEMBER 1, 1999."
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<PAGE> 2
(c) The shares of Class B Stock identified as the "Delayed Shares" on
Exhibit A hereto have been previously pledged under Pledge,
Security and Escrow Agreements dated June 2, 1997 between Tekgraf
and the holders of those shares. Rychel has the right to acquire
the Delayed Shares if they are released from escrow (the "Purchase
Rights"). It is Rychel's intention hereunder to grant a security
interest to Tekgraf in all of his right, title and interest in all
Delayed Shares he acquires under the Purchase Rights. As to all
Delayed Shares so acquired, the certificates therefor shall be
delivered to Tekgraf, together with properly executed stock
transfer powers, to be held as Pledged Shares under the terms of
this Agreement as if they had been delivered to Tekgraf under
subsection 1(b) above.
2. Warranty. Rychel hereby represents and warrants to Tekgraf that Rychel
owns the Pledged Shares free and clear of all liens, claims and
encumbrances, except for the security interest created hereby and
except as noted in subsection 1(c) above.
3. Covenants. Rychel shall not transfer, assign or otherwise dispose of
its beneficial interest in any of the Pledged Shares without the prior
written consent of Tekgraf, except as provided in Section 4 below, and
shall not transfer or assign any of his Purchase Rights. For so long as
Rychel shall have the right to vote the Pledged Shares, Rychel
covenants and agrees that it will not, without the prior written
consent of Tekgraf, vote or take any consensual action with respect to
the Pledged Shares which would constitute a default under this
Agreement.
4. Permitted Sale of Pledged Shares. Upon at least five (5) days advance
written request of Rychel, Tekgraf agrees to permit the Pledged Shares
(or a portion thereof) to be sold provided that:
(a) no Pledged Shares may be sold for less than $2.50 per Pledged
Share without the prior consent of Tekgraf (such amount to be
appropriately adjusted in the event of any future stock split,
stock combination, stock dividend, or similar event);
(b) the proceeds of such sale shall be tendered directly and
immediately to Tekgraf, and such proceeds shall be applied to
outstanding interest and principal under the Note; and
(c) Rychel shall execute and deliver, or cause to be executed and
delivered, any and all documents and agreements required by
Tekgraf in connection with such sale, including the agreement of
the selling agent, if any, to deliver all proceeds from the
sale(s) permitted hereunder directly and immediately to Tekgraf.
Notwithstanding any language herein to the contrary, Rychel shall
remain liable to Tekgraf for any and all amounts owed under the Note should the
proceeds delivered to Tekgraf from the sale of the Pledged Shares be
insufficient to pay the Note in full; and nothing herein is intended to release
Rychel from the requirements of federal and state securities laws applicable to
such sales.
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<PAGE> 3
5. Tekgraf's Duty of Care. Tekgraf shall have no duty with respect to any
of the Pledged Shares other than the duty to use reasonable care in the
safe custody of the Pledged Shares in its possession. Without limiting
the generality of the foregoing, Tekgraf shall be under no obligation
to take any steps necessary to preserve the value of any of the Pledged
Shares or to preserve rights in the Pledged Shares against any other
parties, but may do so at its option; and all expenses incurred in
connection therewith shall be for the sole account of Rychel and shall
be included in the Obligations secured hereby.
6. Default. Upon the occurrence of a default under the Loan Agreement or
the Note, or if Rychel shall fail to perform or observe any provision
of this Agreement or any other document or instrument which evidences
or secures any of the Obligations (any of such occurrences being
hereinafter referred to as a "Default"), Tekgraf shall be entitled (but
not obligated) to exercise the following rights, which Rychel hereby
agrees are commercially reasonable:
(a) to receive all amounts payable in respect of the Pledged Shares
otherwise payable to Rychel, and to exercise all of the rights,
powers and remedies of Rychel with respect to such payments;
(b) to transfer all or any part of the Pledged Shares into Tekgraf's
name or the name of its nominee or nominees;
(c) to vote all or any part of the Pledged Shares (whether or not
transferred into the name of Tekgraf) and give all consents,
waivers and ratifications in respect of the Pledged Shares and
otherwise act with respect thereto as though it were the outright
owner thereof;
(d) at any time or from time to time to sell, assign and deliver, or
grant options to purchase, all or any part of the Pledged Shares
in one or more blocks, or any interest therein, at any public or
private sale at any exchange or elsewhere, without demand of
performance, advertisement or notice of intention to sell or of
the time or place of sale or adjournment thereof (all of which are
hereby expressly and irrevocably waived by Rychel to the fullest
extent permitted by law), for cash, on credit or for other
property, for immediate or future delivery without any assumption
of credit risk, and for such price or prices and on such terms as
Tekgraf in its sole discretion may determine; Rychel agrees that
to the extent that notice of sale shall be required by law that at
least five (5) business days' notice to Rychel of the time and
place of any public sale or the time after which any private sale
is to be made shall constitute reasonable notification; Tekgraf
shall not be obligated to make any sale of the Pledged Shares
regardless of notice of sale having been given; Tekgraf may
adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and any such
sale may, without further notice, be made at the time and place to
which it was so adjourned; Rychel hereby waives and releases to
the fullest extent permitted by law any right or equity of
redemption with respect to the Pledged Shares, whether before or
after sale hereunder, and all rights, if any, of marshaling the
Pledged Shares; at any such sale, unless prohibited by applicable
law, Tekgraf may bid for and purchase all or any part of the
Pledged Shares so sold free from any
83
<PAGE> 4
such right or equity of redemption; and Tekgraf shall not be liable
for failure to collect or realize upon any or all of the Pledged
Shares or for any delay in so doing nor shall any of them be under
any obligation to take any action whatsoever with regard thereto;
(e) Accelerate and call due the unpaid balances of any or all of the
Obligations;
(f) Foreclose or enforce all or any security interests, mortgage
interests, liens, assignments, or pledges created by this
Agreement, the Loan Agreement, the Note, or any other document,
instrument or agreement which evidences or secures any Obligations
(collectively, the "Obligation Agreements");
(g) file suit against Rychel on any Obligation Agreement;
(h) seek specific performance or injunctive relief to enforce
performance of the undertakings, duties, and agreements provided in
any Obligation Agreement whether or not a remedy at law exists or
is adequate; and
(i) generally, to take all such other action as Tekgraf in his sole
discretion may determine as incidental or conducive to any of the
matters or powers mentioned in the foregoing provisions of this
Section and which Tekgraf may or can do lawfully and to use the
name of Rychel for the purposes aforesaid and in any proceedings
arising therefrom.
7. Application of Proceeds. The proceeds of the public or private sale or
other disposition under Section 6 above shall be applied first to the
costs incurred in connection with the sale, including, without
limitation, attorneys' fees actually incurred, then to any unpaid
interest which may have accrued on any Obligations secured hereby, and
then to any unpaid principal on any Obligations secured hereby; and any
remaining proceeds shall be paid over to Rychel or others as provided
by law.
8. Additional Rights of Tekgraf. In addition to its rights and privileges
under this Agreement, Tekgraf shall have all the rights, powers and
privileges of a secured party under the Georgia Uniform Commercial Code
and other applicable law. The rights and remedies provided in the
Obligation Agreements or otherwise under applicable law shall be
cumulative, and the exercise of any particular right or remedy shall
not preclude the exercise of any other rights or remedies in addition
to, or as an alternative of, such right or remedy.
9. Return of Pledged Shares to Rychel.
(a) The Pledged Shares identified as the "Current Rychel Shares" on
Exhibit A hereto shall be released from the terms of this
Agreement, and the certificates representing these Pledged Shares
shall be returned to Rychel if either (i) $887,500 of the principal
amount of the Loan
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<PAGE> 5
(50%), together with all interest accrued thereon, has been repaid,
or (ii) the average market price of a share of Class A Stock (last
sale price or average of last bid and asked, as the case may be)
has been not less than $2.50 for ten consecutive trading days
during the 30 days ending immediately before the date requested by
Rychel for the release of these Pledged Shares (such target price
to be appropriately adjusted in the event of any future stock
split, stock combination, stock dividend, or similar event).
(b) Upon payment in full of all principal and interest on the Note and
all other sums due in respect of all other Obligations, this
Agreement shall terminate and Tekgraf shall return to Rychel all of
the Pledged Shares then held by Tekgraf under the terms of this
Agreement.
10. Tekgraf Appointed Attorney-In-Fact. Rychel hereby constitutes and
appoints Tekgraf, with full power of substitution, Rychel's
attorney-in-fact and grants Tekgraf an IRREVOCABLE PROXY for the
purpose of carrying out the provisions of this Agreement and taking any
action and executing any instrument which Tekgraf may deem necessary or
advisable to accomplish the purposes hereof, including but not limited
to voting the Pledged Shares in any manner Tekgraf deems advisable,
which appointment is coupled with an interest and is irrevocable.
11. Indemnification. Rychel agrees to indemnify and save Tekgraf harmless
from and against any liability or damage which Tekgraf may incur, in
good faith and without negligence, in the exercise or performance of
any of Tekgraf's powers and duties specifically set forth herein.
12. Waivers. RYCHEL HEREBY WAIVES: NOTICE OF ACCEPTANCE OF THIS AGREEMENT,
PRESENTMENT AND DEMAND FOR PAYMENT OF ANY OF THE OBLIGATIONS; PROTEST
AND NOTICE OF DISHONOR OR DEFAULT WITH RESPECT TO ANY OF THE
OBLIGATIONS; AND ALL OTHER NOTICES TO WHICH RYCHEL MIGHT OTHERWISE BE
ENTITLED EXCEPT AS HEREIN OTHERWISE EXPRESSLY PROVIDED.
13. Miscellaneous.
(a) Entire Agreement. This Agreement and the instruments, agreements,
and other documents contemplated hereby supersede all prior
discussions, understandings, and agreements between and among the
parties with respect to the matters contained herein, and this
Agreement and the instruments, agreements, and other documents
contemplated hereby contain the sole and entire agreement between
the parties hereto with respect to the matters contemplated herein.
(b) Amendments. This Agreement may not be amended or supplemented
except in writing by the parties hereto.
(c) Counterparts. This Agreement may be executed in several
counterparts, each of which shall be an original, but all of which
together shall constitute one and the same agreement.
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<PAGE> 6
(d) Effect of Headings. The section headings herein are for convenience
only and shall not affect the construction or interpretation of this
Agreement.
(e) Binding Effect. This Agreement shall be binding upon and shall inure
to the benefit of the parties hereto and their respective principals,
heirs, legal representatives, assigns and successors.
(f) Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the United States of America and the State
of Georgia. Tekgraf and Rychel irrevocably consent to the exclusive
jurisdiction and venue of the courts of any county in the State of
Georgia and the United States District Court for the Northern District
of Georgia, in any judicial proceeding brought to enforce this
Agreement. The parties agree that any forum other than the State of
Georgia is an inconvenient forum and that a lawsuit (or non-compulsory
counterclaim) brought by one party against another party in a court of
any jurisdiction other than the State of Georgia should be forthwith
dismissed or transferred to a court located in the State of Georgia.
(g) Notices. All notices or other communications hereunder shall be in
writing and shall be deemed to have been validly served, given or
delivered (i) five (5) days after deposit in the United States mail,
prepaid, by certified mail, with return receipt requested; (ii) when
delivered personally; (iii) one (1) day after delivery to a
nationally-recognized overnight courier; or (iv) when transmitted by
fax with telephone confirmation of receipt if a copy is concurrently
transmitted by U.S. mail or overnight courier as stated above; in all
cases, if applicable, with delivery prepaid and addressed to the party
to be notified to the address set forth beneath such party's signature
below, or to such other address and fax number of which a party has
given notice to the other party as provided in this subsection.
(h) Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such a manner as to be effective and valid
under applicable law, but if any provision of this Agreement shall be
deemed prohibited or invalid under such applicable law, such provision
shall be ineffective to the extent of such prohibition or invalidity,
but such prohibition or invalidity shall not invalidate the remainder
of such provision or the other provisions of this Agreement.
The parties hereto have executed the Agreement as of the day and year
first written above.
TEKGRAF, INC.
/s/ William M. Rychel By: /s/ W. Jeffrey Camp
- ----------------------------- -----------------------------------
William M. Rychel 645 Hembree Parkway, Suite J
980 Corporate Woods Parkway Roswell, GA 30076
Vernon Hills, IL 60061 Fax: (770) 442-6072
Fax: (954) 697-4329
86
<PAGE> 7
EXHIBIT A
PURCHASED SHARES
<TABLE>
<CAPTION>
Certificate Shares of Shares of
Seller Number Class A Stock Class B Stock
<S> <C> <C> <C>
Martyn L. Cooper T0095 31,955
------ 10,000
TB0035 152,900
TB0098 23,645
TB0101 12,500
J. Thomas Woolsey T0094 60,445
------ 15,000
TB0032 105,733
TB0102 251,155
A. Lowell Nerenberg TB0047 26,950
TB0048 9,800
Beverly Nerenberg TB0051 90,383
------- 3,767
Rosa Sabato TB0055 9,350
TB0056 3,400
</TABLE>
CURRENT RYCHEL SHARES
<TABLE>
<CAPTION>
Certificate Number Shares of Class A Stock Shares of Class B Stock
<S> <C> <C>
T0093 81,767
T0051 18,108
TB0040 81,800
TB0094 100,892
[Shares in Escrow] 102,250
</TABLE>
87
<PAGE> 8
The Purchased Shares and the Current Rychel Shares together constitute the
"Pledged Shares."
DELAYED SHARES
<TABLE>
<CAPTION>
Certificate Shares of
Number Class B Stock
<S> <C> <C>
Martyn L. Cooper 55,600
------------
J. Thomas Woolsey 105,733
------------
</TABLE>
88
<PAGE> 9
EXHIBIT B
IRREVOCABLE STOCK POWER AND ASSIGNMENT
FOR VALUE RECEIVED, the undersigned does hereby bargain, sell, assign
and transfer unto TEKGRAF, INC. ("Tekgraf") the shares of the Class A Common
Stock, $.001 par value and the shares of the Class B Common Stock, $.001 par
value standing in his name on the books of Tekgraf and represented by the
following Certificates representing the following number of shares, and does
hereby irrevocably constitute and appoint Tekgraf and its successors and assigns
as his true and lawful attorney, for him and in his name and stead, to transfer
said shares on the books of Tekgraf with full power of substitution in the
premises. This power of attorney is coupled with an interest and shall be
irrevocable.
<TABLE>
<CAPTION>
Number of Shares of Number of Shares of
Certificate Number Class A Common Stock Class B Common Stock
<S> <C> <C>
</TABLE>
Date: [EXHIBIT B - DO NOT SIGN]
------------------------
William M. Rychel
89
<PAGE> 1
EXHIBIT 11
COLLATERAL ASSIGNMENT
This Collateral Assignment (this "Assignment") is made as of December
1, 1999, in favor of Tekgraf, Inc., a Georgia corporation ("Tekgraf") by WILLIAM
M. RYCHEL ("Rychel").
Rychel has borrowed $1,775,000 (the "Loan") from Tekgraf to enable
Rychel to purchase shares of Tekgraf's Class A Common Stock, $.001 par value
(the "Class A Stock") and Class B Common Stock, $.001 par value (the "Class B
Stock") from other Tekgraf shareholders. The Loan has been made under the terms
of a Loan Agreement of even date herewith between Rychel and Tekgraf (the "Loan
Agreement"), and Rychel has delivered a Promissory Note of even date herewith to
Tekgraf in the principal amount of the Loan (together with all extensions,
renewals, amendments and modifications thereof, the "Note"). In connection with
such purchases, Rychel has entered into voting agreements with the sellers of
the Class A Stock and Class B Stock (referred to herein as the "Voting
Agreements" and being identified on Exhibit A hereto), and the sellers have
appointed Rychel as their proxy with respect to certain Class A Stock and Class
B Stock (such appointments being referred to herein as the "Proxies"). Some of
the Voting Agreements contain rights for Rychel to acquire Class B Stock from
the Tekgraf shareholder (all of such rights being hereinafter referred to as the
"Purchase Rights" and the related voting agreements being identified on Exhibit
A hereto). To secure the payment of all Obligations (as hereinafter defined),
Rychel has agreed to grant Tekgraf a security interest in the Voting Agreements
and the Proxies. In addition, Rychel has agreed to pledge to Tekgraf certain
shares of the Class A Stock and Class B Stock under the terms of a Stock Pledge
Agreement of even date herewith (the "Pledge Agreement").
1. Transfer and Assignment. As security for payment of all liabilities and
obligations of Rychel to Tekgraf of every kind and description, whether
now existing or hereafter arising, fixed or contingent, due or to
become due, under the Loan Agreement or the Note (the "Obligations"),
Rychel hereby grants to Tekgraf a security interest in all of Rychel's
right, title, and interest in and to, and Rychel hereby collaterally
assigns to Tekgraf, the Voting Agreements, including the Purchase
Rights contained therein, and the Proxies.
2. Warranties of Rychel. Rychel hereby warrants to Tekgraf that: Rychel
has full power and authority to execute and deliver this Assignment;
Rychel has not assigned to any person or entity any of his rights under
the Voting Agreements or the Proxies; the Voting Agreements and Proxies
have not been modified, amended or revoked; Rychel is not prohibited
under any agreement with any other person or entity, or under any
judgment or decree, from the execution, delivery and performance of
this Assignment; and no action has been brought or, to
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Rychel's knowledge, threatened which might prohibit or interfere with
the execution, delivery and performance of this Assignment.
3. Rights Prior to Default. Prior to the occurrence of a Default under
the Loan Agreement, Rychel may exercise all rights under the Voting
Agreements and the Proxies, and Tekgraf may not exercise any rights
thereunder.
4. Rights After Default. From and after the occurrence of a Default
under the Loan Agreement, while such Default continues and subject to
any applicable cure period, Tekgraf shall have the right to cause the
purchases of the shares under the Purchase Rights to be completed, with
the Class B Stock acquired thereby to be subject to the terms of the
Pledge Agreement, and to exercise any other rights accruing to Rychel
under the Voting Agreements and the Proxies. If Tekgraf exercises such
rights, all amounts spent by Tekgraf in connection with such exercise
shall be added to and become part of the Obligations for purposes
hereof and of the Pledge Agreement. Rychel hereby constitutes and
appoints Tekgraf, with full power of substitution, Rychel's
attorney-in-fact for the purpose of carrying out the provisions of this
Assignment and taking any action and executing any instrument which
Tekgraf may deem necessary or advisable to accomplish the purposes
hereof, which appointment is coupled with an interest and is
irrevocable.
5. Further Assurances. Rychel agrees to execute and deliver such other
documentation and such further assurances as Tekgraf shall from time to
time reasonably require in order to preserve and maintain the security
provided hereby, including but not limited to UCC financing statements.
6. Termination. Upon payment in full of all principal and interest on
the Note and all other sums due in respect of all other Obligations,
this Assignment shall terminate.
7. Miscellaneous.
(a) Amendments. This Assignment may not be amended or supplemented
except in writing by Tekgraf and Rychel.
(b) Effect of Headings. The section headings herein are for convenience
only and shall not affect the construction or interpretation of
this Assignment.
(c) Binding Effect. This Assignment shall be binding upon and shall
inure to the benefit of the parties hereto and their respective
principals, heirs, legal representatives, assigns and successors.
(d) Governing Law. This Assignment shall be governed by and construed
in accordance with the laws of the United States of America and the
State of Georgia. Tekgraf and Rychel irrevocably consent to the
exclusive jurisdiction and venue of the courts of any county in the
State of
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Georgia and the United States District Court for the Northern
District of Georgia, in any judicial proceeding brought to
enforce this Assignment. The parties agree that any forum other
than the State of Georgia is an inconvenient forum and that a
lawsuit (or non-compulsory counterclaim) brought by one party
against another party in a court of any jurisdiction other than
the State of Georgia should be forthwith dismissed or
transferred to a court located in the State of Georgia.
(e) Notices. All notices or other communications hereunder shall be
in writing and shall be deemed to have been validly served,
given or delivered (i) five (5) days after deposit in the
United States mail, prepaid, by certified mail, with return
receipt requested; (ii) when delivered personally; (iii) one
(1) day after delivery to a nationally-recognized overnight
courier; or (iv) when transmitted by fax with telephone
confirmation of receipt if a copy is concurrently transmitted
by U.S. mail or overnight courier as stated above; in all
cases, if applicable, with delivery prepaid and addressed to
the party to be notified to the address set forth beneath such
party's signature below, or to such other address and fax
number of which a party has given notice to the other party as
provided in this subsection.
(f) Severability. Whenever possible, each provision of this
Assignment shall be interpreted in such a manner as to be
effective and valid under applicable law, but if any provision
of this Assignment shall be deemed prohibited or invalid under
such applicable law, such provision shall be ineffective to the
extent of such prohibition or invalidity, but such prohibition
or invalidity shall not invalidate the remainder of such
provision or the other provisions of this Assignment.
The undersigned have executed and delivered this Assignment as of the
date first written above.
TEKGRAF, INC.
/s/ William M. Rychel By: /s/ W. Jeffrey Camp
- --------------------- -------------------------
William M. Rychel 645 Hembree Parkway, Suite J
980 Corporate Woods Parkway Roswell, GA 30076
Vernon Hills, IL 60061 Fax: (770) 442-6072
Fax: (954) 697-4329
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EXHIBIT A
VOTING AGREEMENTS
Agreement dated December 1, 1999 between A. Lowell Nerenberg and William M.
Rychel (see attached copy)
Agreement dated December 1, 1999 between Beverly Nerenberg and William M. Rychel
(see attached copy)
Agreement dated December 1, 1999 between Rosa Sabato and William M. Rychel (see
attached copy)
Agreement dated December 1, 1999 between Martyn L. Cooper and William M. Rychel
(see attached copy)*
Agreement dated December 1, 1999 between J. Thomas Woolsey and William M. Rychel
(see attached copy)*
*These Voting Agreements also contain Purchase Rights.
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EXHIBIT 12
ESCROW AGREEMENT
This Escrow Agreement (this "Agreement") is entered into as of May 8,
1998, by and among TEKGRAF, INC., a Georgia corporation (the "Purchaser"),
TEKGRAF SUB III, INC. ("Acquisition Sub"), NEW ENGLAND COMPUTER GRAPHICS, INC.,
a Massachusetts corporation (the "Company"), A. Lowell Nerenberg, William
Rychel, Thomas Gust, David Boston, Scott Barker, Robert Shumaker, and Thomas
Mills (collectively, the "Company Shareholders"), David Boston (the
"Shareholder Representative") and First Union National Bank, a national banking
association (the "Escrow Agent").
WHEREAS, the Purchaser and the Company have entered into an Agreement
and Plan of Merger, dated March 25, 1998, by and among the Company, the Company
Shareholders, Acquisition Sub and the Purchaser, as amended by that certain
First Amendment to Agreement and Plan of Merger, dated as of March 30, 1998
(the "Merger Agreement").
WHEREAS, the Merger Agreement provides that escrow accounts will be
established to secure the Company Shareholders' guaranty with respect to the
Warranted Pre-Tax Profit and the Warranted Tangible Net Asset Value of the
Company (each as defined in the Merger Agreement) on the terms and conditions
set forth herein.
WHEREAS, the parties hereto desire to establish the terms and
conditions pursuant to which such escrow accounts will be established and
maintained.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Defined Terms. Capitalized terms used in this Agreement and not otherwise
defined shall have the meanings given them in the Merger Agreement.
2. Consent of Company Shareholders. By virtue of the Company Shareholders'
approval of the Merger Agreement, the Company Shareholders who may
indirectly or directly receive cash and shares of Purchaser Common Stock
pursuant to the Merger Agreement have, without any further act of any
Company Shareholder, consented to: (a) the establishment of this escrow to
secure the Company Shareholders' guaranty with respect to the Warranted
Pre-Tax Profit and the Warranted Tangible Net Asset Value of the Company in
the manner set forth herein and in the Merger Agreement, (b) the appointment
of the Shareholder Representative as their representatives for purposes of
this Agreement and as attorneys-in-fact and agents for and on behalf of each
Company Shareholder, and the taking by the Shareholder Representative of any
and all actions and the making of any decisions required or permitted to be
taken or made by
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him under this Agreement, and (c) all of the other terms, conditions and
limitations in this Agreement and the Merger Agreement.
3. Escrow and Warranty.
(a) Escrow of Cash. On the Closing Date, the Purchaser shall deposit with
the Escrow Agent $75,000 of the Cash Consideration. The Escrowed Cash
shall be held as a trust fund and shall not be subject to any lien,
attachment, trustee process or any other judicial process of any
creditor of any party hereto. The Escrow Agent agrees to accept
delivery of the Escrowed Cash and to hold the Escrowed Cash in an
interest-bearing escrow account (the "Cash Escrow Account"), subject
to the terms and conditions of this Agreement.
(b) Escrow of Shares. On the Closing Date, the Purchaser shall deposit
with the Escrow Agent a certificate for the number of Escrowed Shares
specified in Section 1.3(e) of the Merger Agreement, issued in the
name of the Escrow Agent or its nominee. The Escrowed Shares shall be
held as a trust fund and shall not be subject to any lien,
attachment, trustee process or any other judicial process of any
creditor of any party hereto. The Escrow Agent agrees to accept
delivery of the Escrowed Shares and to hold the Escrowed Shares in an
escrow account (the "Share Escrow Account"), subject to the terms and
conditions of this Agreement.
(c) Warranty. The Company Shareholders have agreed in Article I of the
Merger Agreement that the Warranted Pre-Tax Profit and the Warranted
Tangible Net Asset Value of the Company shall not be less than the
amounts set forth in Section 1.3(a) of the Merger Agreement. The
Escrowed Shares shall be security for such warranty obligation of the
Company Shareholders, subject to the limitations, and in the manner
provided, in this Agreement.
(d) Dividends, Etc. Any securities distributable to the Company
Shareholders in respect of or in exchange for any of the Escrowed
Shares, whether by way of stock dividends, stock splits or otherwise,
shall be delivered to the Escrow Agent, who shall hold such
securities in the Share Escrow Account. Such securities shall be
issued in the name of the Escrow Agent or its nominee and shall be
considered Escrowed Shares for purposes hereof. Any cash dividends
distributable to the Company Shareholders in respect of the Escrowed
Shares shall be distributed to the Company Shareholders.
(e) Voting of Shares. The Shareholder Representative shall have the
right, in his sole discretion, on behalf of the Company Shareholders,
to direct the Escrow Agent in writing as to the exercise of any
voting rights pertaining to the Escrowed Shares, and the Escrow Agent
shall comply with any such written instructions. In the absence of
such instructions, the Escrow Agent shall not vote any of the
Escrowed Shares.
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(f) Transferability. The respective interests of the Company Shareholders
in the Escrowed Shares shall not be assignable or transferable, other
than by operation of law. Notice of any such assignment or transfer by
operation of law shall be given to the Escrow Agent and the Purchaser,
and no such assignment or transfer shall be valid until such notice is
given.
(g) Transfer of Shares Upon Waiver of Warranty. In the event the Purchaser
elects, pursuant to the provisions of Section 1.3(h) of the Merger
Agreement, to waive the Profit Shortfall Adjustment and the Profit
Surplus Adjustment, the Escrowed Shares shall be transferred, upon
receipt of notice by Escrow Agent from Purchaser of such waiver, into
the escrow account created pursuant to that certain Pledge, Security
and Escrow Agreement dated as of even date herewith, to be treated in
all respects as escrow shares thereunder and the Escrowed Shares in
such case shall be distributed to the Company Shareholders pursuant to
the terms thereof.
4. Administration of Cash Escrow Account. The Escrow Agent shall
administer the Cash Escrow Account as follows:
(a) In the event that there is a Net Asset Value Shortfall (including any
Collection Shortfall or Inventory Shortfall that remains unpaid ten
(10) days after demand for payment thereof by Purchaser or Acquisition
Sub to the Company Shareholders), the Purchase Price shall be reduced
by the amount of such Net Asset Value Shortfall. Purchaser or
Acquisition Sub shall provide to the Escrow Agent and the Shareholder
Representative written notice of the amount of such Net Asset Value
Shortfall, and such amount, including any interest accrued thereon (or
such lesser amount as is then held in the Cash Escrow Account), shall
be paid to Purchaser by Escrow Agent within three (3) business days
after receipt of such notice.
(b) Any cash remaining in the Cash Escrow Account after payment of the Net
Asset Value Shortfall amount as set forth in subsection (a) above,
shall be distributed to the Company Shareholders pursuant to Section
6(a) hereof.
(c) In the event that the Net Asset Value Shortfall exceeds the amount of
Escrowed Cash available, Purchaser's recovery of cash pursuant to
Section 1.3 of the Merger Agreement shall not be limited to the amount
of Escrowed Cash available.
5. Administration of Share Escrow Account. The Escrow Agent shall
administer the Share Escrow Account as follows:
(a) In the event that the Warranted Pre-Tax Profit exceeds the Actual
Pre-Tax Profit for the Year (or the Alternative Year, if applicable),
the Purchase Price shall be reduced by the number of Purchaser Shares
equal to the Profit Shortfall Adjustment, subject to the Adjustment
Floor. In such event, Purchaser or Acquisition Sub and the Shareholder
Representative shall provide written notice to the Escrow Agent of the
amount of the Profit Shortfall Adjustment,
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and the Escrow Agent shall transfer, deliver and assign to
Purchaser such number of Escrowed Shares held in the Share Escrow
Account which have a Fair Market Value equal to the Profit
Shortfall Adjustment (or such lesser number of Purchaser Shares as
is then held in the Share Escrow Account). The Fair Market Value of
the Escrowed Shares to be distributed shall be determined in
accordance with Section 7 hereof.
(b) On the first anniversary of the Closing Date (or if the Alternative
Year is elected, at the end of the Alternative Year), the Escrow
Agent shall distribute to the Company Shareholders, in accordance
with Sections 6(a) and (b) below, one half of the Escrowed Shares
remaining in the Share Escrow Account not required for
redistribution pursuant to Section 5(a) hereof. Any Escrowed Shares
remaining in the Share Escrow Account after payment of the Profit
Shortfall Adjustment amount as set forth in subsection (a) above,
shall be distributed to the Company Shareholders pursuant to
Sections 6(a) and (b) hereof.
(c) In the event that the Profit Shortfall Adjustment exceeds the
number of Escrowed Shares available, Purchaser's recovery of
Purchaser Shares pursuant to Section 1.3 of the Merger Agreement
shall not be limited to the amount of Escrowed Shares available.
6. Release of Escrowed Cash and Escrowed Shares.
(a) Any distribution of all or a portion of the Escrowed Cash or the
Escrowed Shares to the Company Shareholders shall be made in
accordance with the percentages set forth opposite such holders'
respective names on Exhibit B attached hereto; provided, however,
that the Escrow Agent shall withhold the distribution of the
portion of the Escrowed Cash or the Escrowed Shares otherwise
distributable to Company Shareholders who have not, according to
written notice provided by the Purchaser to the Escrow Agent, prior
to such distribution, surrendered their respective Certificates
pursuant to the terms and conditions of the Merger Agreement. Any
such withheld cash or shares shall be delivered to the Purchaser
instead of to the Company Shareholders, and shall be delivered by
the Purchaser to the Company Shareholders upon surrender of their
Certificates. Distributions of Escrowed Shares to the Company
Shareholders shall be made by mailing stock certificates to such
holders at their respective addresses shown on Exhibit B (or such
other address as may be provided in writing to the Escrow Agent by
any such holder).
(b) No fractional Escrowed Shares shall be distributed to Purchaser or
Company Shareholders pursuant to this Agreement. Instead, the
number of shares that Purchaser or each Company Shareholder shall
receive shall be rounded down to the nearest whole number; and the
Escrow Agent shall sell such number of Escrowed Shares as is equal
to the aggregate of the fractional shares that would otherwise be
distributed to the Purchaser or the Company Shareholders, as the
case may be, and shall distribute the proceeds of such sale to the
Purchaser or the Company Shareholders otherwise entitled to a
fractional Escrowed Share based upon the fraction of an Escrowed
Share to which Purchaser or each such Company Shareholder is
otherwise entitled, as the case may be.
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7. Valuation of Escrowed Shares. For purposes of this Agreement, the Fair
Market Value of the Escrowed Shares to be released from the Share
Escrow Account after a final determination of the Profit Shortfall
Adjustment shall be determined based upon the average closing prices of
the Purchaser's Common Stock on the Nasdaq National Market System for
the twenty trading days immediately preceding the date of such final
determination.
8. Fees and Expenses of Escrow Agent. The Purchaser and the Company
Shareholders shall compensate Escrow Agent for its services hereunder
in accordance with Schedule A attached hereto and, in addition, shall
reimburse Escrow Agent for all of its reasonable out-of-pocket
expenses, including attorneys' fees, travel expenses, telephone and
facsimile transmission costs, postage (including express mail and
overnight delivery charges), copying charges and the like. All of the
compensation and reimbursement obligations set forth in this Section 8
shall be payable one-half each by Purchaser and the Company
Shareholders, jointly and severally, upon demand by Escrow Agent. The
obligations of Purchaser and the Company Shareholders under this
Section 8 shall survive any termination of this Escrow Agreement and
the resignation or removal of Escrow Agent.
9. Investment of Funds. Escrow Agent shall invest and reinvest the funds
held in the Cash Escrow Account as the Shareholder Representative and
the Purchaser jointly shall direct (subject to applicable minimum
investment requirements) by the furnishing of a joint written
direction; provided, however, that no investment or reinvestment may be
made except in the following:
a. direct obligations of the United States of America or obligations
the principal of and the interest on which are unconditionally
guaranteed by the United States of America;
b. certificates of deposit issued by any bank, bank and trust company,
or national banking association (including Escrow Agent and its
affiliates), which certificates of deposit are insured by the
Federal Deposit Insurance Corporation or a similar governmental
agency;
c. repurchase agreements with any bank, trust company, or national
banking association (including Escrow Agent and its affiliates); or
d. any money market fund substantially all of which is invested in the
foregoing investment categories, including any money market fund
managed by Escrow Agent and any of its affiliates.
If Escrow Agent has not received a joint written direction at any
time that an investment decision must be made, Escrow Agent shall
invest the Cash Escrow Account, or such portion thereof as to which
no joint written direction has been received, in investments
described in clause (d) above. Each of the foregoing investments
shall be made in the name of Escrow
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Agent. No investment shall be made in any instrument or security
that has a maturity of greater than six (6) months. Notwithstanding
anything to the contrary contained herein, Escrow Agent may,
without notice to the Purchaser or the Shareholder Representative,
sell or liquidate any of the foregoing investments at any time if
the proceeds thereof are required for any release of funds
permitted or required hereunder, and Escrow Agent shall not be
liable or responsible for any loss, cost or penalty resulting from
any such sale or liquidation. With respect to any funds received by
Escrow Agent for deposit into the Cash Escrow Account or any joint
written direction received by Escrow Agent with respect to
investment of any funds in the Cash Escrow Account after ten
o'clock, a.m., Atlanta, Georgia, time, Escrow Agent shall not be
required to invest such funds or to effect such investment
instruction until the next day upon which banks in Atlanta, Georgia
are open for business.
10. Liability and Authority of Shareholder Representative; Successors and
Assignees.
(a) The Shareholder Representative shall incur no liability to the
Company Shareholders with respect to any action taken or suffered
by him in reliance upon any note, direction, instruction, consent,
statement or other documents believed by him to be genuinely and
duly authorized, nor for other action or inaction except his own
willful misconduct or gross negligence. The Shareholder
Representative may, in all questions arising under the Escrow
Agreement, rely on the advice of counsel and for anything done,
omitted or suffered in good faith by the Shareholder Representative
based on such advice, the Shareholder Representatives shall not be
liable to the Company Shareholders.
(b) In the event of the death or permanent disability of Shareholder
Representative, or his resignation as a Shareholder Representative,
a successor Shareholder Representative shall be elected by a
majority vote of the Company Shareholders, with each such Company
Shareholder (or his or her successors or assigns) to be given a
vote equal to the number of votes represented by the Escrowed
Shares held by such Company Shareholder immediately prior to the
Effective Time. Each successor Shareholder Representative shall
have all of the power, authority, rights and privileges conferred
by this Agreement upon the original Shareholder Representative, and
the term "Shareholder Representative" as used herein shall be
deemed to include successor Shareholder Representatives.
(c) The Shareholder Representatives shall have full power and authority
to represent the Company Shareholders, and their successors, with
respect to all matters arising under this Agreement and all actions
taken by any Shareholder Representative hereunder shall be binding
upon the Company Shareholder, and their successors, as if expressly
confirmed and ratified in writing by each of them. Without limiting
the generality of the foregoing, the Shareholder Representatives,
acting jointly but not singly, shall have full power and authority
to interpret all of the terms and provisions of this Agreement, to
compromise any claims asserted hereunder and to authorize payments
to be made with respect thereto, on behalf of the Company
Shareholders and their successors. All actions to be taken by the
Shareholder
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Representative hereunder shall be evidenced by, and taken upon, the
written direction of a majority thereof.
11. Amounts Payable by Company Shareholders. The amounts payable by the
Company Shareholders under this Agreement (i.e., the fees and expenses
of arbitrators payable pursuant to Section 18, the fees of the Escrow
Agent payable pursuant to Section 8 and the indemnification obligations
pursuant to Sections 16) shall be payable solely as follows. The
Purchaser or the Shareholder Representative shall notify the Escrow
Agent of any such amount payable by the Company Shareholders as soon as
they become aware that any such amount is payable, with a copy of such
notice to the Purchaser. On the sixth business day after the delivery
of such notice, the Escrow Agent shall sell such number of Escrowed
Shares (up to the number of Escrowed Shares then available in the
Escrow Account), subject to compliance with all applicable securities
laws, as is necessary to raise such amount, and shall disburse such
proceeds to the party to whom such amount is owed in accordance with
the instructions of the Shareholder Representative; provided that if
the Purchaser delivers to the Escrow Agent (with a copy to the
Shareholder Representative), within five business days after delivery
of such notice by the Shareholder Representative, a written notice
contesting the legitimacy or reasonableness of such amount, then the
Escrow Agent shall not sell Escrowed Shares to raise the disputed
portion of such claimed amount, and such dispute shall be resolved by
the Purchaser and the Shareholder Representative in accordance with the
procedures set forth in Section 19.
12. Termination. This Agreement shall terminate upon the distribution by
the Escrow Agent of all of the Escrowed Cash and all of the Escrowed
Shares in accordance with this Agreement; provided that the provisions
of Sections 10, 15, 16 and 17 shall survive such termination.
13. Notices. All notices, instructions and other communications given
hereunder or in connection herewith shall be in writing. Any such
notice, instruction or communication shall be sent either (i) by
registered or certified mail, return receipt requested, postage
prepaid, or (ii) via a reputable nationwide overnight courier service,
in each case to the address set forth below. Any such notice,
instruction or communication shall be deemed to have been delivered two
business days after it is sent by registered or certified mail, return
receipt requested, postage prepaid, or one business day after it is
sent via a reputable nationwide overnight courier service.
If to the Purchaser and/or the Acquisition Sub:
Tekgraf, Inc.
6000 Lake Forrest Drive
Suite 110
Atlanta, GA 30328
Attn: Mr. Phillip Aginsky
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If to the Company:
New England Computer Graphics, Inc.
2 Park Drive #6
Westford, Massachusetts 01886
If to the Shareholder Representative:
-----------------------
2 Park Drive #6
Westford, Massachusetts 01886
If to the Escrow Agent:
First Union National Bank
Attn: Corporate Trust - GA9094
999 Peachtree Street, NE, Suite 1100
Atlanta, Georgia 30309-9094
Attn: Ms. Teresa L. Davis
Any party may give any notice, instruction or communication in
connection with this Agreement using any other means (including
personal delivery, telecopy or ordinary mail), but no such notice,
instruction or communication shall be deemed to have been delivered
unless and until it is actually received by the party to whom it was
sent. Any party may change the address to which notices, instructions
or communications are to be delivered by giving the other parties to
this Agreement notice thereof in the manner set forth in this Section
13.
14. Resignation and Removal of Escrow Agent. Escrow Agent may resign from
the performance of its duties hereunder at any time by giving ten (10)
days' prior written notice to the Purchaser and the Shareholder
Representative or may be removed, with or without cause, by the
Purchaser and the Shareholder Representative, acting jointly by
furnishing a joint written direction to Escrow Agent, at any time by
the giving of ten (10) days' prior written notice to Escrow Agent. Such
resignation or removal shall take effect upon the appointment of a
successor Escrow Agent as provided hereinbelow. Upon any such notice of
resignation or removal, the Purchaser and the Shareholder
Representative jointly shall appoint a successor Escrow Agent
hereunder, which shall be a commercial bank, trust company or other
financial institution with a combined capital and surplus in excess of
$5,000,000. Upon the acceptance in writing of any appointment as Escrow
Agent hereunder by a successor Escrow Agent, such successor Escrow
Agent shall thereupon succeed to and become vested with all the rights,
powers, privileges and duties of the retiring Escrow Agent, and the
retiring Escrow Agent shall be discharged from its duties and
obligations under this Escrow Agreement, but shall not be discharged
from any liability for actions taken as Escrow Agent hereunder prior to
such succession. After any retiring Escrow Agent's resignation or
removal, the provisions of this
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Escrow Agreement shall inure to its benefit as to any actions taken or
omitted to be taken by it while it was Escrow Agent under this Escrow
Agreement. The retiring Escrow Agent shall transmit all records
pertaining to the Escrowed Cash and the Escrowed Shares and shall pay
all funds and deliver all shares held by it in the Cash Escrow Account
and the Share Escrow Account to the successor Escrow Agent, after
making copies of such records as the retiring Escrow Agent deems
advisable and after deduction and payment to the retiring Escrow Agent
of all fees and expenses (including court costs and attorneys' fees)
payable to, incurred by, or expected to be incurred by the retiring
Escrow Agent in connection with the performance of its duties and the
exercise of its rights hereunder.
15. Liability of Escrow Agent.
(a) Escrow Agent shall have no liability or obligation with respect to
the Escrowed Cash or the Escrowed Shares except for Escrow Agent's
willful misconduct or gross negligence. Escrow Agent's sole
responsibility shall be for the safekeeping, investment, and
disbursement of the Escrowed Cash or the Escrowed Shares in
accordance with the terms of this Escrow Agreement. Escrow Agent
shall have no implied duties or obligations and shall not be
charged with knowledge or notice of any fact or circumstance not
specifically set forth herein. Escrow Agent may rely upon any
instrument, not only as to its due execution, validity and
effectiveness, but also as to the truth and accuracy of any
information contained therein, which Escrow Agent shall in good
faith believe to be genuine, to have been signed or presented by
the person or parties purporting to sign the same and to conform
to the provisions of this Escrow Agreement. In no event shall
Escrow Agent be liable for incidental, indirect, special,
consequential or punitive damages. Escrow Agent shall not be
obligated to take any legal action or commence any proceeding in
connection with the Escrowed Cash or the Escrowed Shares, any
account in which Escrowed Cash or the Escrowed Shares are
deposited, this Escrow Agreement or the Merger Agreement, or to
appear in, prosecute or defend any such legal action or
proceeding. Escrow Agent may consult legal counsel selected by it
in the event of any dispute or question as to the construction of
any of the provisions hereof or of any other agreement or of its
duties hereunder, or relating to any dispute involving any party
hereto, and shall incur no liability and shall be fully
indemnified from any liability whatsoever in acting in accordance
with the opinion or instruction of such counsel. Purchaser and the
Company Shareholders, jointly and severally, shall each promptly
pay, upon demand, one-half of the reasonable fees and expenses of
any such counsel.
The Escrow Agent is authorized, in its sole discretion, to
comply with orders issued or process entered by any court with
respect to the Escrowed Cash or the Escrowed Shares, without
determination by the Escrow Agent of such court's jurisdiction in
the matter. If any portion of the Escrowed Cash or the Escrowed
Shares is at any time attached, garnished or levied upon under any
court order, or in case the payment, assignment, transfer,
conveyance or delivery of any such property shall be stayed or
enjoined by any court order, or in case any order, judgment or
decree shall be made or entered by any court affecting such
property or any part thereof, then and in any such event, the
Escrow Agent is authorized, in its sole discretion,
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to rely upon and comply with any such order, writ, judgment or decree which it
is advised by legal counsel selected by it is binding upon it without the need
for appeal or other action; and if the Escrow Agent complies with any such
order, writ, judgment or decree, it shall not be liable to any of the parties
hereto or to any other person or entity by reason of such compliance even
though such order, writ, judgment or decree may be subsequently reversed,
modified, annulled, set aside or vacated.
16. Indemnification of Escrow Agent. From and at all times after
the date of this Escrow Agreement, Purchaser and the Company Shareholders,
jointly and severally, shall, to the fullest extent permitted by law and to the
extent provided herein, indemnify and hold harmless Escrow Agent and each
director, officer, employee, attorney, agent and affiliate of Escrow Agent
(collectively, the "Indemnified Parties") against any and all actions, claims
(whether or not valid), losses, damages, liabilities, costs and expenses of any
kind or nature whatsoever (including without limitation reasonable attorneys'
fees, costs and expenses) incurred by or asserted against any of the
Indemnified Parties from and after the date hereof, whether direct, indirect or
consequential, as a result of or arising from or in any way relating to any
claim, demand, suit, action or proceeding (including any inquiry or
investigation) by any person, including without limitation Purchaser and the
Company Shareholders, whether threatened or initiated, asserting a claim for
any legal or equitable remedy against any person under any statute or
regulation, including, but not limited to, any federal or state securities
laws, or under any common law or equitable cause or otherwise, arising from or
in connection with the negotiation, preparation, execution, performance or
failure of performance of this Escrow Agreement or any transactions
contemplated herein, whether or not any such Indemnified Party is a party to
any such action, proceeding, suit or the target of any such inquiry or
investigation; provided, however, that no Indemnified Party shall have the
right to be indemnified hereunder for any liability finally determined by a
court of competent jurisdiction, subject to no further appeal, to have resulted
solely from the gross negligence or willful misconduct of such Indemnified
Party. If any such action or claim shall be brought or asserted against any
Indemnified Party, such Indemnified Party shall promptly notify Purchaser and
the Company Shareholders in writing, and Purchaser and the Company Shareholders
shall assume the defense thereof, including the employment of counsel and the
payment of all expenses. Such Indemnified Party shall, in its sole discretion,
have the right to employ separate counsel (who may be selected by such
Indemnified Party in its sole discretion) in any such action and to participate
in the defense thereof, and the fees and expenses of such counsel shall be paid
by such Indemnified Party, except that Purchaser and/or the Company
Shareholders shall be required to pay such fees and expenses if (a) Purchaser
and/or the Company Shareholders agree to pay such fees and expenses, or (b)
Purchaser and/or the Company Shareholders shall fail to assume the defense of
such action or proceeding or shall fail, in the sole discretion of such
Indemnified Party, to employ counsel satisfactory to the Indemnified Party in
any such action or proceeding, (c) Purchaser or the Company Shareholders is the
plaintiff in any such action or proceeding or (d) the named or potential
parties to any such action or proceeding (including any potentially impleaded
parties) include both Indemnified Party and the Company Shareholders and/or
Purchaser, and Indemnified Party shall have been
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advised by counsel that there may be one or more legal defenses available to it
which are different from or additional to those available to the Company
Shareholders or Purchaser. Purchaser and the Company Shareholders shall be
jointly and severally liable to pay fees and expenses of counsel pursuant to
the preceding sentence, except that any obligation to pay under clause (a)
shall apply only to the party so agreeing. All such fees and expenses payable
by the Company Shareholders and/or Purchaser pursuant to the foregoing sentence
shall be paid from time to time as incurred, both in advance of and after the
final disposition of such action or claim. All of the foregoing losses,
damages, costs and expenses of the Indemnified Parties shall be payable by
Purchaser and the Company Shareholders, jointly and severally, upon demand by
such Indemnified Party. The obligations of Purchaser and the Company
Shareholders under this Section 16 shall survive any termination of this Escrow
Agreement, and the resignation or removal of Escrow Agent shall be independent
of any obligation of the Escrow Agent.
The parties agree that neither the payment by Purchaser or the Company
Shareholders of any claim by Escrow Agent for indemnification hereunder nor the
disbursement of any amounts to Escrow Agent from the Cash Escrow Account or the
Share Escrow Account in respect of a claim by Escrow Agent for indemnification
shall impair, limit, modify, or affect, as between Purchaser and the Company
Shareholders, the respective rights and obligations of Purchaser, on the one
hand, and the Company Shareholders, on the other hand, under the Underlying
Agreement.
17. General.
(a) Governing Law, Assigns. This Agreement shall be governed by
and construed in accordance with the internal laws of the State of Georgia
without regard to conflict-of-law principles and shall be binding upon, and
inure to the benefit of, the parties hereto and their respective successors and
assigns.
(b) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(c) Entire Agreement. Except for those provisions of the Merger
Agreement referenced herein, this Agreement constitutes the entire
understanding and agreement of the parties with respect to the subject matter
of this Agreement and supersedes all prior agreements or understandings,
written or oral, between the parties with respect to the subject matter hereof.
(d) Waivers. No waiver by any party hereto of any condition or of
any breach of any provision of this Escrow Agreement shall be effective unless
in writing. No waiver by any party of any such condition or breach, in any one
instance, shall be deemed to be a further or
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continuing waiver of any such condition or breach or a waiver
of any other condition or breach of any other provision
contained herein.
(e) Amendment. This Agreement may be amended only with the written
consent of the Purchaser, the Escrow Agent and the Shareholder
Representative.
18. Arbitration; Attorneys' Fees.
(a) The parties agree to use reasonable efforts to resolve any
dispute arising out of this Agreement, but should a dispute
remain unresolved ten (10) days following notice of the dispute
to the other party (but in no event prior to said ten (10)
days, except as specifically provided otherwise herein), such
dispute shall be finally settled by binding arbitration in
Atlanta, Georgia in accordance with the then current Commercial
Arbitration Rules of the American Arbitration Association (the
"AAA") or such other mediation or arbitration service as shall
be mutually agreeable to the parties, and judgment upon the
award rendered by the arbitrator shall be final and binding on
the parties and may be entered in any court having jurisdiction
thereof; provided, however, that any party shall be entitled to
appeal a question of law or determination of law to a court of
competent jurisdiction; and provided, further, however, that
the parties may first seek appropriate injunctive relief prior
to, and/or in addition to pursuing negotiation or arbitration.
Such arbitration shall be conducted by an arbitrator chosen by
mutual agreement of the parties, or failing such agreement, an
arbitrator appointed by the AAA. There shall be limited
discovery prior to the arbitration hearing as follows: (a)
exchange of witness lists and copies of documentary evidence
and documents related to or arising out of the issues to be
arbitrated, (b) depositions of all party witnesses, and (c)
such other depositions as may be allowed by the arbitrator upon
a showing of good cause. Depositions shall be conducted in
accordance with the Georgia Code of Civil Procedure and
questions of evidence in all hearings shall be resolved in
accordance with the Federal Rules of Evidence. The arbitrator
shall be required to provide in writing to the parties the
basis for the award or order of such arbitrator, and a court
reporter shall record all hearings (unless otherwise agreed to
by the parties), with such record constituting the official
transcript of such proceedings.
(b) In the event of arbitration or litigation filed or instituted
between the parties with respect to this Agreement, the
prevailing party will be entitled to receive from the other
party all costs, damages and expenses, including reasonable
attorney's fees, incurred by the prevailing party in
connection with that action or proceeding whether or not the
controversy is reduced to judgment or award. The prevailing
party will be that party who may be fairly said by the
arbitrator(s) or the court to have prevailed on the major
disputed issues.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as
of the day and year first above written.
PURCHASER:
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<PAGE> 13
TEKGRAF, INC.
By:
-------------------------------------
Dan I. Bailey, President
ACQUISITION SUB:
TEKGRAF SUB III, INC.
By:
-------------------------------------
Phillip Aginsky, Chairman
ESCROW AGENT:
FIRST UNION NATIONAL BANK
By:
-------------------------------------
Name: Teresa L. Davis
Title: Vice President
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<PAGE> 14
SHAREHOLDER REPRESENTATIVE:
------------------------------- (SEAL)
Name:
--------------------------
COMPANY:
NEW ENGLAND COMPUTER GRAPHICS, INC.
By:
--------------------------
David Boston, President
COMPANY SHAREHOLDERS:
------------------------------- (SEAL)
A. Lowell Nerenberg
------------------------------- (SEAL)
William Rychel
------------------------------- (SEAL)
Thomas Gust
------------------------------- (SEAL)
Scott Barker
------------------------------- (SEAL)
Robert Shumaker
------------------------------- (SEAL)
Thomas Mills
------------------------------- (SEAL)
David Boston
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<PAGE> 15
EXHIBIT B
<TABLE>
<CAPTION>
Company Shareholder NECG Shares Percentage
<S> <C> <C>
A. Lowell Nerenberg 5000 27.33%
C/o Tekgraf, Inc.
620 East Diamond Avenue
Gaithersburg, MD 20877
William Rychel 2500 13.66%
C/o Tekgraf, Inc.
980 Corporate Woods Parkway
Vernon Hills, IL 60061
Thomas Gust 2500 13.66%
C/o Tekgraf, Inc.
980 Corporate Woods Parkway
Vernon Hills, IL 60061
David Boston 3293 18.00%
C/o New England Computer Graphics, Inc.
2 Park Drive #6
Westford, MA 01886
Scott Barker 4000 21.87%
1110 West Butler Road
Greenville, SC 29607
Bob Shumaker 500 2.73%
1011 Plantation Drive
Simpsonville, SC 29681
Tom Mills 500 2.73%
110 Clubhouse Court
Taylors, SC 29687
</TABLE>
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<PAGE> 1
EXHIBIT 13
PLEDGE, SECURITY AND ESCROW AGREEMENT
This Pledge, Security and Escrow Agreement (this "Agreement") is
entered into as of May 8, 1998, by and among TEKGRAF, INC., a Delaware
corporation (the "Purchaser"), TEKGRAF SUB III, INC. ("Acquisition Sub"), NEW
ENGLAND COMPUTER GRAPHICS, INC., a Massachusetts corporation (the "Company"),
A. Lowell Nerenberg, William Rychel, Scott Barker, Robert Shumaker, Thomas
Mills, Thomas Gust, and David Boston (the "Company Shareholders"), and David
Boston (the "Indemnification Representative") and First Union National Bank, a
national banking association (the "Escrow Agent").
WHEREAS, the Purchaser and the Company have entered into an Agreement
and Plan of Merger, dated March 25, 1998, by and among the Company, the Company
Shareholders, Acquisition Sub and the Purchaser, as amended by that certain
First Amendment to Agreement to Agreement and Plan of Merger, dated as of March
30, 1998 (the "Merger Agreement").
WHEREAS, the Merger Agreement provides that an escrow account will be
established to secure the Company's and the Company Shareholders'
indemnification obligations to the Indemnified Parties under the Merger
Agreement on the terms and conditions set forth herein.
WHEREAS, the parties hereto desire to establish the terms and
conditions pursuant to which such escrow account will be established and
maintained.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Defined Terms. Capitalized terms used in this Agreement and not
otherwise defined shall have the meanings given them in the Merger
Agreement.
2. Consent of Company Shareholders. By virtue of the Company Shareholders'
approval of the Merger Agreement, the Company Shareholders who may
indirectly or directly receive shares of Purchaser Common Stock
pursuant to the Merger Agreement (the "Indemnifying Shareholders")
have, without any further act of any Company Stockholder, consented to:
(a) the establishment of this escrow to secure the Company
Shareholders' indemnification obligations under Article V of the Merger
Agreement in the manner set forth herein and therein, (b) the
appointment of the Indemnification Representative as their
representatives for purposes of this Agreement and as attorneys-in-fact
and agents for and on behalf of each Indemnifying Shareholder, and the
taking by the Indemnification Representative of any and all actions and
the making of any decisions required or permitted to be taken or
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<PAGE> 2
made by him under this Agreement, and (c) all of the other terms, conditions
and limitations in this Agreement and the Merger Agreement.
3. Escrow and Indemnification.
(a) Escrow of Shares. On the Closing Date, the Purchaser shall
deposit with the Escrow Agent a certificate for the number of Purchaser Shares
specified in Section 5.6 of the Merger Agreement (the "Escrow Shares"), issued
in the name of the Escrow Agent or its nominee. In addition, in the event the
Purchaser elects, pursuant to the provisions of Section 1.3(h) of the Merger
Agreement, to waive the Profit Shortfall Adjustment and the Profit Surplus
Adjustment, the shares of Purchaser common stock held in the escrow account
established by Section 1.3(e) of the Merger Agreement shall be transferred into
the escrow account created pursuant to this Escrow Agreement (the "Transferred
Shares"), to be treated in all respects as Escrow Shares hereunder and the
Transferred Shares shall be distributed to the Company Shareholders pursuant to
Section 5(a) hereof. The Escrow Shares shall be held as a trust fund and shall
not be subject to any lien, attachment, trustee process or any other judicial
process of any creditor of any party hereto. The Escrow Agent agrees to accept
delivery of the Escrow Shares and to hold the Escrow Shares in an escrow
account (the "Escrow Account"), subject to the terms and conditions of this
Agreement.
(b) Indemnification. The Indemnifying Shareholders have agreed in
Article V of the Merger Agreement to indemnify and hold harmless the
Indemnified Parties from and against specified Damages. The Escrow Shares shall
be security for such indemnity obligation of the Indemnifying Shareholders,
subject to the limitations, and in the manner provided, in this Agreement.
(c) Dividends, Etc. Any securities distributable to the
Indemnifying Shareholders in respect of or in exchange for any of the Escrow
Shares, whether by way of stock dividends, stock splits or otherwise, shall be
delivered to the Escrow Agent, who shall hold such securities in the Escrow
Account. Such securities shall be issued in the name of the Escrow Agent or its
nominee and shall be considered Escrow Shares for purposes hereof. Any cash
dividends distributable to the Indemnifying Shareholders in respect of the
Escrow Shares shall be distributed to the Indemnifying Shareholders.
(d) Voting of Shares. The Indemnification Representative shall
have the right, in his sole discretion, on behalf of the Indemnifying
Shareholders, to direct the Escrow Agent in writing as to the exercise of any
voting rights pertaining to the Escrow Shares, and the Escrow Agent shall
comply with any such written instructions. In the absence of such instructions,
the Escrow Agent shall not vote any of the Escrow Shares.
(e) Transferability. The respective interests of the Indemnifying
Shareholders in the Escrow Shares shall not be assignable or transferable,
other than by operation of law. Notice of any such assignment or transfer by
operation of law shall be given to the Escrow
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<PAGE> 3
Agent and the Purchaser, and no such assignment or transfer shall be valid
until such notice is given.
4. Administration of Escrow Account. The Escrow Agent shall
administer the Escrow Account as follows:
(a) If an Indemnified Party has incurred or suffered Damages for
which it is entitled to indemnification under Article V of the Merger
Agreement, the Indemnified Party shall, on or before the date of the expiration
of the representation, warranty, covenant or agreement to which such claim
relates, give written notice of such claim (a "Claim Notice") to the
Indemnification Representative and the Escrow Agent. Each Claim Notice shall
state the amount of claimed Damages (the "Claimed Amount") and the basis for
such claim.
(b) Within 20 days after delivery of a Claim Notice, the
Indemnification Representative shall provide to the Indemnified Party, with a
copy to the Escrow Agent, a written response (the "Response Notice") in which
the Indemnification Representative shall: (i) agree that Escrow Shares having a
Fair Market Value (as computed pursuant to Section 6) equal to the full Claimed
Amount may be released from the Escrow Account to the Indemnified Party, (ii)
agree that Escrow Shares having a Fair Market Value equal to part, but not all,
of the Claimed Amount (the "Agreed Amount") may be released from the Escrow
Account to the Indemnified Party or (iii) contest that any of the Escrow Shares
may be released from the Escrow Account to the Indemnified Party. The
Indemnification Representative may contest the release of Escrow Shares having
a Fair Market Value equal to all or a portion of the Claimed Amount only based
upon a good faith belief that all or such portion of the Claimed Amount does
not constitute Damages for which the Indemnified Party is entitled to
indemnification under Article V of the Merger Agreement. If no Response Notice
is delivered by the Indemnification Representative within such 20-day period,
the Indemnification Representative shall be deemed to have agreed that Escrow
Shares having a Fair Market Value equal to all of the Claimed Amount may be
released to the Indemnified Party from the Escrow Account.
(c) If the Indemnification Representative in the Response Notice
agrees (or is deemed to have agreed) that Escrow Shares having a Fair Market
Value equal to all of the Claimed Amount may be released from the Escrow
Account to the Indemnified Party, the Escrow Agent shall, promptly following
the earlier of the required delivery date for the Response Notice or the
delivery of the Response Notice, transfer, deliver and assign to the
Indemnified Party such number of Escrow Shares held in the Escrow Account which
have a Fair Market Value equal to the Claimed Amount (or such lesser number of
Escrow Shares as is then held in the Escrow Account).
(d) If the Indemnification Representative in the Response Notice
agrees that Escrow Shares having a Fair Market Value equal to part, but not
all, of the Claimed Amount may be released from the Escrow Account to the
Indemnified Party, the Escrow Agent shall promptly
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<PAGE> 4
following the delivery of the Response Notice transfer, deliver and assign to
the Indemnified Party such number of Escrow Shares held in the Escrow Account
which have a Fair Market Value equal to the Agreed Amount (or such lesser
number of Escrow Shares as is then held in the Escrow Account). A determination
with respect to the remainder of the Claimed Amount shall be made in accordance
with subsection 4(e) below.
(e) If the Indemnification Representative in the Response Notice
contests the release of Escrow Shares having a Fair Market Value equal to all
or part of the Claimed Amount (the "Contested Amount"), the matter shall be
settled by binding arbitration in Atlanta, Georgia. All claims shall be settled
by three arbitrators in accordance with the Commercial Arbitration Rules then
in effect of the American Arbitration Association (the "AAA Rules"). The
Indemnification Representative and the Indemnified Party shall each designate
one arbitrator within 15 days of the delivery of the Indemnification
Representative's Response Notice contesting the Claimed Amount. The
Indemnification Representative and the Indemnified Party shall cause such
designated arbitrators mutually to agree upon and designate a third arbitrator;
provided, however, that (i) failing such agreement within 45 days of delivery
of the Indemnification Representative's Response Notice, the third arbitrator
shall be appointed in accordance with the AAA Rules and (ii) if either the
Indemnification Representatives or the Indemnified Party fail to timely
designate an arbitrator, the dispute shall be resolved by the one arbitrator
timely designated. The Indemnifying Shareholders and the Indemnified Party
shall pay the fees and expenses of their respectively designated arbitrators
and shall bear equally the fees and expenses of the third arbitrator. The
Indemnification Representative and the Indemnified Party shall cause the
arbitrators to decide the matter to be arbitrated pursuant hereto within 60
days after the appointment of the last arbitrator. The arbitrators' decision
shall relate solely to whether the Indemnified Party is entitled to receive the
Contested Amount (or a portion thereof) pursuant to the applicable terms of the
Merger Agreement and this Agreement. The final decision of the majority of the
arbitrators shall be furnished to the Indemnification Representative, the
Indemnified Party and the Escrow Agent in writing and shall constitute a
conclusive determination of the issue in question, binding upon the
Indemnification Representative, the Indemnifying Shareholders, the Indemnified
Party and the Escrow Agent, and shall not be contested by any of them. Such
decision may be used in a court of law only for the purpose of seeking
enforcement of the arbitrators' award. After delivery of a Response Notice that
the Claimed Amount is contested by the Indemnification Representative, the
Escrow Agent shall continue to hold in the Escrow Account a number of Escrow
Shares having a Fair Market Value sufficient to cover the Contested Amount (up
to the number of Escrow Shares then available in the Escrow Account),
notwithstanding the occurrence of the Termination Date (as hereinafter
defined), until (i) delivery of a copy of a settlement agreement executed by
the Indemnified Party and the Indemnification Representative setting forth
instructions to the Escrow Agent as to the release of Escrow Shares, if any,
that shall be made with respect to the Contested Amount or (ii) delivery of a
copy of the final award of the majority of the arbitrators setting forth
instructions to the Escrow Agent as to the release of Escrow Shares, if any,
that shall be made with respect to the Contested Amount. The Escrow Agent shall
thereupon release Escrow Shares from the Escrow Account (to the
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<PAGE> 5
extent Escrow Shares are then held in the Escrow Account) in accordance with
such agreement or instructions; provided, however, if the claim related to a
third party claim the amount of which is contested and the subject of
litigation, the Escrow Agent shall not release the Escrow Shares being held in
connection with the Contested Amount of such third party claim until a final
order or other final resolution or settlement has been entered or reached in
the underlying litigation determining the amount of such claim, whereupon the
Escrow Agent shall release Escrow Shares from the Escrow Account (to the extent
Escrow Shares are then held in the Escrow Account) in accordance with such
final order or final resolution or settlement.
5. Release of Escrow Shares.
(a) In the event that Purchaser elects, pursuant to the provisions
of Section 1.3(h) of the Merger Agreement, to waive the Profit Shortfall
Adjustment and the Profit Surplus Adjustment, one half of the Transferred
Shares shall be distributed to the Indemnifying Shareholders on the first
anniversary of the Closing Date. Promptly after the Termination Date, the
Escrow Agent shall distribute to the Indemnifying Shareholders all of the
Escrow Shares (including any remaining Transferred Shares) then held in escrow.
Notwithstanding the foregoing, if an Indemnified Party has previously given a
Claim Notice which has not then been resolved in accordance with Section 4, the
Escrow Agent shall retain in the Escrow Account after the Termination Date a
number of Escrow Shares (including Transferred Shares if necessary) having a
Fair Market Value equal to the Claimed Amount covered by any Claim Notice which
has not then been resolved. Any funds so retained in escrow shall be disbursed
in accordance with the terms of the resolution of such claims.
(b) Any distribution of all or a portion of the Escrow Shares to
the Indemnifying Shareholders shall be made in accordance with the percentages
set forth opposite such holders' respective names on Exhibit B attached hereto;
provided, however, that the Escrow Agent shall withhold the distribution of the
portion of the Escrow Shares otherwise distributable to Indemnifying
Shareholders who have not, according to written notice provided by the
Purchaser to the Escrow Agent, prior to such distribution, surrendered their
respective Certificates pursuant to the terms and conditions of the Merger
Agreement. Any such withheld shares shall be delivered to the Purchaser
promptly after the Termination Date, and shall be delivered by the Purchaser to
the Indemnifying Shareholders to whom such shares would have otherwise been
distributed upon surrender of their respective Certificates. Distributions to
the Indemnifying Shareholders shall be made by mailing stock certificates to
such holders at their respective addresses shown on Exhibit B (or such other
address as may be provided in writing to the Escrow Agent by any such holder).
No fractional Escrow Shares shall be distributed to Indemnifying Shareholders
pursuant to this Agreement. Instead, the number of shares that each
Indemnifying Shareholder shall receive shall be rounded down to the nearest
whole number; and the Escrow Agent shall sell such number of Escrow Shares as
is equal to the aggregate of the fractional shares that would otherwise be
distributed to the Indemnifying Shareholders and shall distribute the proceeds
of such sale to the Indemnifying Shareholders
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<PAGE> 6
other-wise entitled to a fractional Escrow Share pro rata based upon
the fraction of an Escrow Shares to which each such Indemnifying
Shareholder is otherwise entitled.
6. Valuation of Escrow Shares. For purposes of this Agreement, the Fair
Market Value of the Escrow Shares to be retained in the Escrow Account
pending a final resolution of a claim shall be determined based upon
the average of the closing prices of the Purchaser Common Stock on the
Nasdaq National Market System for the twenty trading days immediately
preceding the date on which the claim is made. The Fair Market Value of
the Escrow Shares to be released from the Escrow Account after a final
determination/resolution of a claim shall be determined based upon the
average closing prices of the Purchaser's Common Stock on the Nasdaq
National Market System for the twenty trading days immediately
preceding the date of such final determination/resolution.
7. Fees and Expenses of Escrow Agent. The Purchaser and the Company
Shareholders as a group shall each pay one-half of the amounts required
to compensate Escrow Agent for its services hereunder and, in addition,
shall each pay one-half of the amounts required to reimburse Escrow
Agent for all of its reasonable out-of-pocket expenses, including
attorneys' fees, travel expenses, telephone and facsimile transmission
costs, postage (including express mail and overnight delivery charges),
copying charges and the like. All of the compensation and reimbursement
obligations set forth in this Section 7 shall be payable one-half each
by Purchaser and the Company Shareholders, jointly and severally, upon
demand by Escrow Agent. The obligations of Purchaser and the Company
Shareholders under this Section 7 shall survive any termination of this
Escrow Agreement and the resignation or removal of Escrow Agent.
8. Liability and Authority of Indemnification Representative; Successors
and Assignees.
(a) The Indemnification Representative shall incur no liability to the
Indemnifying Shareholders with respect to any action taken or
suffered by them in reliance upon any note, direction, instruction,
consent, statement or other documents believed by them to be
genuinely and duly authorized, nor for other action or inaction
except their own willful misconduct or gross negligence. The
Indemnification Representative may, in all questions arising under
the Escrow Agreement, rely on the advice of counsel and for
anything done, omitted or suffered in good faith by the
Indemnification Representative based on such advice, the
Indemnification Representative shall not be liable to the
Indemnifying Shareholders.
(b) In the event of the death or permanent disability of the
Indemnification Representative, or his resignation as an
Indemnification Representative, a successor Indemnification
Representative shall be elected by a majority vote of the
Indemnifying Shareholders, with each such Indemnifying Shareholder
(or his or her successors or assigns) to be given a vote equal to
the number of votes represented by the Escrowed Shares held by such
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<PAGE> 7
Indemnifying Shareholder immediately prior to the Effective Time. Each
successor Indemnification Representative shall have all of the power,
authority, rights and privileges conferred by this Agreement upon the original
Indemnification Representative, and the term "Indemnification Representative"
as used herein shall be deemed to include successor Indemnification
Representatives.
(c) The Indemnification Representative shall have full power and
authority to represent the Indemnifying Shareholders, and their successors,
with respect to all matters arising under this Agreement and all actions taken
by any Indemnification Representative hereunder shall be binding upon the
Indemnifying Shareholders, and their successors, as if expressly confirmed and
ratified in writing by each of them. Without limiting the generality of the
foregoing, the Indemnification Representative shall have full power and
authority to interpret all of the terms and provisions of this Agreement, to
compromise any claims asserted hereunder and to authorize payments to be made
with respect thereto, on behalf of the Indemnifying Shareholders and their
successors. All actions to be taken by the Indemnification Representative
hereunder shall be evidenced by, and taken upon, the written direction of a
majority thereof.
9. Amounts Payable by Indemnifying Shareholders. The amounts
payable by the Indemnifying Shareholders under this Agreement (i.e., the fees
and expenses of arbitrators payable pursuant to Section 4(e), the fees of the
Escrow Agent payable pursuant to Section 7 and the indemnification obligations
pursuant to Section 13) shall be payable solely as follows. The Purchaser or
the Indemnification Representative shall notify the Escrow Agent of any such
amount payable by the Indemnifying Shareholders as soon as they become aware
that any such amount is payable, with a copy of such notice to the Purchaser.
On the sixth business day after the delivery of such notice, the Escrow Agent
shall sell such number of Escrow Shares (up to the number of Escrow Shares then
available in the Escrow Account), subject to compliance with all applicable
securities laws, as is necessary to raise such amount, and shall disburse such
proceeds to the party to whom such amount is owed in accordance with the
instructions of the Indemnification Representative; provided that if the
Purchaser delivers to the Escrow Agent (with a copy to the Indemnification
Representative), within five business days after delivery of such notice by the
Indemnification Representative, a written notice contesting the legitimacy or
reasonableness of such amount, then the Escrow Agent shall not sell Escrow
Shares to raise the disputed portion of such claimed amount, and such dispute
shall be resolved by the Purchaser and the Indemnification Representative in
accordance with the procedures set forth in Section 4(e).
10. Termination. This Agreement shall terminate upon the later
of the date which is eighteen (18) months after the Date of Closing (the
"Termination Date") or the distribution by the Escrow Agent of all of the
Escrow Shares in accordance with this Agreement; provided that the provisions
of Sections 4, 5, 7, 8, 9, 12 and 13 shall survive such termination.
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11. Notices. All notices, instructions and other communications
given hereunder or in connection herewith shall be in writing. Any such notice,
instruction or communication shall be sent either (i) by registered or
certified mail, return receipt requested, postage prepaid, or (ii) via a
reputable nationwide overnight courier service, in each case to the address set
forth below. Any such notice, instruction or communication shall be deemed to
have been delivered two business days after it is sent by registered or
certified mail, return receipt requested, postage prepaid, or one business day
after it is sent via a reputable nationwide overnight courier service.
If to the Purchaser and/or the Acquisition Sub:
Tekgraf, Inc.
6000 Lake Forrest Drive
Suite 110
Atlanta, Georgia 30328
Attn: Mr. Phillip Aginsky
If to the Company:
New England Computer Graphics, Inc.
2 Park Drive #6
Westford, Massachusetts 01886
Attn: Mr. David Boston
If to the Indemnification Representatives:
--------------------------
2 Park Drive #6
Westford, Massachusetts 01886
If to the Escrow Agent:
First Union National Bank
Attn: Corporate Trust - GA9094
999 Peachtree Street, NE, Suite 1100
Atlanta, Georgia 30309-9094
Attn: Ms. Teresa L. Davis
Any party may give any notice, instruction or communication in
connection with this Agreement using any other means (including personal
delivery, telecopy or ordinary mail), but no such notice, instruction or
communication shall be deemed to have been delivered unless and until it is
actually received by the party to whom it was sent. Any party may change the
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<PAGE> 9
address to which notices, instructions or communications are to be
delivered by giving the other parties to this Agreement notice
thereof in the manner set forth in this Section 12.
12. Liability of Escrow Agent.
(a) Escrow Agent shall have no liability or obligation with respect to
the Escrowed Cash or the Escrowed Shares except for Escrow Agent's
willful misconduct or gross negligence. Escrow Agent's sole
responsibility shall be for the safekeeping, investment, and
disbursement of the Escrowed Cash or the Escrowed Shares in
accordance with the terms of this Escrow Agreement. Escrow Agent
shall have no implied duties or obligations and shall not be
charged with knowledge or notice of any fact or circumstance not
specifically set forth herein. Escrow Agent may rely upon any
instrument, not only as to its due execution, validity and
effectiveness, but also as to the truth and accuracy of any
information contained therein, which Escrow Agent shall in good
faith believe to be genuine, to have been signed or presented by
the person or parties purporting to sign the same and to conform to
the provisions of this Escrow Agreement. In no event shall Escrow
Agent be liable for incidental, indirect, special, consequential or
punitive damages. Escrow Agent shall not be obligated to take any
legal action or commence any proceeding in connection with the
Escrowed Cash or the Escrowed Shares, any account in which Escrowed
Cash or the Escrowed Shares are deposited, this Escrow Agreement or
the Merger Agreement, or to appear in, prosecute or defend any such
legal action or proceeding. Escrow Agent may consult legal counsel
selected by it in the event of any dispute or question as to the
construction of any of the provisions hereof or of any other
agreement or of its duties hereunder, or relating to any dispute
involving any party hereto, and shall incur no liability and shall
be fully indemnified from any liability whatsoever in acting in
accordance with the opinion or instruction of such counsel.
Purchaser and the Company Shareholders, jointly and severally,
shall each promptly pay, upon demand, one-half of the reasonable
fees and expenses of any such counsel.
(b) The Escrow Agent is authorized, in its sole discretion, to comply
with orders issued or process entered by any court with respect to
the Escrowed Cash or the Escrowed Shares, without determination by
the Escrow Agent of such court's jurisdiction in the matter. If any
portion of the Escrowed Cash or the Escrowed Shares is at any time
attached, garnished or levied upon under any court order, or in
case the payment, assignment, transfer, conveyance or delivery of
any such property shall be stayed or enjoined by any court order,
or in case any order, judgment or decree shall be made or entered
by any court affecting such property or any part thereof, then and
in any such event, the Escrow Agent is authorized, in its sole
discretion, to rely upon and comply with any such order, writ,
judgment or decree which it is advised by legal counsel selected by
it is binding upon it without the need for appeal or other action;
and if the Escrow Agent complies with any such order, writ,
judgment or decree, it shall not be liable to any of the parties
hereto or to any other person or entity by reason of such
compliance even though such order, writ, judgment or decree may be
subsequently reversed, modified, annulled, set aside or vacated.
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<PAGE> 10
13. Indemnification of Escrow Agent. From and at all times after
the date of this Escrow Agreement, Purchaser and the Company Shareholders,
jointly and severally, shall, to the fullest extent permitted by law and to the
extent provided herein, indemnify and hold harmless Escrow Agent and each
director, officer, employee, attorney, agent and affiliate of Escrow Agent
(collectively, the "Indemnified Parties") against any and all actions, claims
(whether or not valid), losses, damages, liabilities, costs and expenses of any
kind or nature whatsoever (including without limitation reasonable attorneys'
fees, costs and expenses) incurred by or asserted against any of the
Indemnified Parties from and after the date hereof, whether direct, indirect or
consequential, as a result of or arising from or in any way relating to any
claim, demand, suit, action or proceeding (including any inquiry or
investigation) by any person, including without limitation Purchaser and the
Company Shareholders, whether threatened or initiated, asserting a claim for
any legal or equitable remedy against any person under any statute or
regulation, including, but not limited to, any federal or state securities
laws, or under any common law or equitable cause or otherwise, arising from or
in connection with the negotiation, preparation, execution, performance or
failure of performance of this Escrow Agreement or any transactions
contemplated herein, whether or not any such Indemnified Party is a party to
any such action, proceeding, suit or the target of any such inquiry or
investigation; provided, however, that no Indemnified Party shall have the
right to be indemnified hereunder for any liability finally determined by a
court of competent jurisdiction, subject to no further appeal, to have resulted
solely from the gross negligence or willful misconduct of such Indemnified
Party. If any such action or claim shall be brought or asserted against any
Indemnified Party, such Indemnified Party shall promptly notify Purchaser and
the Company Shareholders in writing, and Purchaser and the Company Shareholders
shall assume the defense thereof, including the employment of counsel and the
payment of all expenses. Such Indemnified Party shall, in its sole discretion,
have the right to employ separate counsel (who may be selected by such
Indemnified Party in its sole discretion) in any such action and to participate
in the defense thereof, and the fees and expenses of such counsel shall be paid
by such Indemnified Party, except that Purchaser and/or the Company
Shareholders shall be required to pay such fees and expenses if (a) Purchaser
and/or the Company Shareholders agree to pay such fees and expenses, or (b)
Purchaser and/or the Company Shareholders shall fail to assume the defense of
such action or proceeding or shall fail, in the sole discretion of such
Indemnified Party, to employ counsel satisfactory to the Indemnified Party in
any such action or proceeding, (c) Purchaser or the Company Shareholders is the
plaintiff in any such action or proceeding or (d) the named or potential
parties to any such action or proceeding (including any potentially impleaded
parties) include both Indemnified Party and the Company Shareholders and/or
Purchaser, and Indemnified Party shall have been advised by counsel that there
may be one or more legal defenses available to it which are different from or
additional to those available to the Company Shareholders or Purchaser.
Purchaser and the Company Shareholders shall be jointly and severally liable to
pay fees and expenses of counsel pursuant to the preceding sentence, except
that any obligation to pay under clause (a) shall apply only to the party so
agreeing. All such fees and expenses payable by the Company Shareholders and/or
Purchaser pursuant to the foregoing sentence shall be paid from time to time as
incurred, both in advance of and after the
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<PAGE> 11
final disposition of such action or claim. All of the foregoing losses,
damages, costs and expenses of the Indemnified Parties shall be payable by
Purchaser and the Company Shareholders, jointly and severally, upon demand by
such Indemnified Party. The obligations of Purchaser and the Company
Shareholders under this Section 13 shall survive any termination of this Escrow
Agreement, and the resignation or removal of Escrow Agent shall be independent
of any obligation of the Escrow Agent.
The parties agree that neither the payment by Purchaser or
the Company Shareholders of any claim by Escrow Agent for indemnification
hereunder nor the disbursement of any amounts to Escrow Agent from the Cash
Escrow Account or the Share Escrow Account in respect of a claim by Escrow
Agent for indemnification shall impair, limit, modify, or affect, as between
Purchaser and the Company Shareholders, the respective rights and obligations
of Purchaser, on the one hand, and the Company Shareholders, on the other hand,
under the Underlying Agreement.
14. Resignation and Removal of Escrow Agent. Escrow Agent may
resign from the performance of its duties hereunder at any time by giving ten
(10) days' prior written notice to the Purchaser and the Indemnification
Representative or may be removed, with or without cause, by the Purchaser and
the Indemnification Representative, acting jointly by furnishing a joint
written direction to Escrow Agent, at any time by the giving of ten (10) days'
prior written notice to Escrow Agent. Such resignation or removal shall take
effect upon the appointment of a successor Escrow Agent as provided
hereinbelow. Upon any such notice of resignation or removal, the Purchaser and
the Indemnification Representative jointly shall appoint a successor Escrow
Agent hereunder, which shall be a commercial bank, trust company or other
financial institution with a combined capital and surplus in excess of
$5,000,000. Upon the acceptance in writing of any appointment as Escrow Agent
hereunder by a successor Escrow Agent, such successor Escrow Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring Escrow Agent, and the retiring Escrow Agent shall be
discharged from its duties and obligations under this Escrow Agreement, but
shall not be discharged from any liability for actions taken as Escrow Agent
hereunder prior to such succession. After any retiring Escrow Agent's
resignation or removal, the provisions of this Escrow Agreement shall inure to
its benefit as to any actions taken or omitted to be taken by it while it was
Escrow Agent under this Escrow Agreement. The retiring Escrow Agent shall
transmit all records pertaining to the Escrowed Shares and shall deliver all
shares held by it in the Share Escrow Account to the successor Escrow Agent,
after making copies of such records as the retiring Escrow Agent deems
advisable and after deduction and payment to the retiring Escrow Agent of all
fees and expenses (including court costs and attorneys' fees) payable to,
incurred by, or expected to be incurred by the retiring Escrow Agent in
connection with the performance of its duties and the exercise of its rights
hereunder.
15. General.
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(a) Governing Law, Assigns. This Agreement shall be governed by
and construed in accordance with the internal laws of the State of Georgia
without regard to conflict-of-law principles and shall be binding upon, and
inure to the benefit of, the parties hereto and their respective successors and
assigns.
(b) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(c) Entire Agreement. Except for those provisions of the Merger
Agreement referenced herein, this Agreement constitutes the entire
understanding and agreement of the parties with respect to the subject matter
of this Agreement and supersedes all prior agreements or understandings,
written or oral, between the parties with respect to the subject matter hereof.
(d) Waivers. No waiver by any party hereto of any condition or of
any breach of any provision of this Escrow Agreement shall be effective unless
in writing. No waiver by any party of any such condition or breach, in any one
instance, shall be deemed to be a further or continuing waiver of any such
condition or breach or a waiver of any other condition or breach of any other
provision contained herein.
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<PAGE> 13
(e) Amendment. This Agreement may be amended only with the written
consent of the Purchaser, the Escrow Agent and the Indemnification
Representative.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as
of the day and year first above written.
PURCHASER
TEKGRAF, INC.
By:
-------------------------------------
Dan I. Bailey, President
ACQUISITION SUB:
TEKGRAF SUB I, INC.
By:
-------------------------------------
Phillip Aginsky, Chairman
ESCROW AGENT
FIRST UNION NATIONAL BANK
By:
-------------------------------------
Name: Teresa L. Davis
Title: Vice President
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<PAGE> 14
INDEMNIFICATION REPRESENTATIVE
------------------------------- (SEAL)
Name:
--------------------------
COMPANY:
NEW ENGLAND COMPUTER GRAPHICS, INC.
By:
---------------------------
David Boston, President
COMPANY SHAREHOLDERS:
------------------------------- (SEAL)
A. Lowell Nerenberg
------------------------------- (SEAL)
William Rychel
------------------------------- (SEAL)
Thomas Gust
------------------------------- (SEAL)
Scott Barker
------------------------------- (SEAL)
Robert Shumaker
------------------------------- (SEAL)
Thomas Mills
------------------------------- (SEAL)
David Boston
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<PAGE> 15
EXHIBIT B
<TABLE>
<CAPTION>
Company Shareholder NECG Shares Percentage
<S> <C> <C>
Lowell Nerenberg 5000 27.33%
C/o Tekgraf, Inc.
620 East Diamond Avenue
Gaithersburg, MD 20877
William Rychel 2500 13.66%
C/o Tekgraf, Inc.
980 Corporate Woods Parkway
Vernon Hills, IL 60061
Thomas Gust 2500 13.66%
C/o Tekgraf, Inc.
980 Corporate Woods Parkway
Vernon Hills, IL 60061
David Boston 3293 18.00%
C/o New England Computer Graphics, Inc.
2 Park Drive #6
Westford, MA 01886
Scott Barker 4000 21.87%
1110 West Butler Road
Greenville, SC 29607
Bob Shumaker 500 2.73%
1011 Plantation Drive
Simpsonville, SC 29681
Tom Mills 500 2.73%
110 Clubhouse Court
Taylors, SC 29687
</TABLE>
123
