Exhibit 10.12
EARN OUT STOCK ESCROW AGREEMENT
THIS EARN OUT STOCK ESCROW AGREEMENT (this "Agreement") is made on
November 6, 1996, among ZMAX CORPORATION, a Nevada corporation ("ZMAX"); Xxxxxxx
X. Xxxxxxx and Xxxxxxx X. Xxxxxx (collectively, the "Stockholders" and
individually, a "Stockholder"); and Powell, Goldstein, Xxxxxx & Xxxxxx ("Escrow
Agent").
BACKGROUND:
ZMAX and the Stockholders have agreed that ZMAX is acquiring all
outstanding capital stock, par value $1.00 (the "CSI Stock") of Century
Services, Inc., a Maryland corporation ("CSI") by the Corporation, pursuant to
the terms and conditions of the Stock Purchase Agreement dated the same date as
this Agreement, among ZMAX and the Stockholders (the "Acquisition Agreement").
The transactions contemplated by the Acquisition Agreement are referred to as
the "Transaction."
In accordance with the Acquisition Agreement, ZMAX will issue
3,200,000 shares of ZMAX common stock, par value $0.001 (the "ZMAX Stock") to
the Stockholders in exchange for their shares of CSI Stock.
2,800,000 of the 3,200,000 shares of ZMAX Stock (the "Earn Out Stock")
are subject to earn out on the terms and conditions set forth in the Acquisition
Agreement.
The parties have agreed to place the Earn Out Stock into escrow to be
released on the terms and conditions set forth in the Acquisition Agreement and
below.
In consideration of the mutual representations, warranties, covenants
and agreements contained in this Agreement, the parties agree as follows:
STATEMENT OF TERMS:
1. Definitions. All capitalized terms used in this Agreement and not
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otherwise defined herein shall have the meanings assigned to such terms in the
Acquisition Agreement.
2. Appointment of Escrow Agent. ZMAX and the Stockholders appoint
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Powell, Goldstein, Xxxxxx & Xxxxxx as Escrow Agent, and Escrow Agent agrees to
such appointment, all pursuant to the terms of this Agreement.
3. Delivery of Stock Certificates to Escrow Agent. ZMAX will deliver
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to Escrow Agent two stock certificates evidencing the issuance of 1,400,000
share of ZMAX Stock to each Stockholder. Escrow Agent will hold such stock
certificates in its vault and will release them only pursuant to the terms and
conditions of this Agreement.
4. Procedures for Release of Stock.
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4.1 Receipt of Cash Flow Statement; Notice to Transfer Agent. During
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the term of this Agreement, upon receipt by Escrow Agent of either (i) a Cash
Flow Statement (as defined in the Acquisition Agreement) signed as approved by
ZMAX and each Stockholder pursuant to Section 1.5 or 1.6 of the Acquisition
Agreement or (ii) instructions jointly signed by ZMAX and the Stockholders or a
court or arbitration order as to the Cash Flow of CSI for a particular period,
Escrow Agent will deliver the ZMAX stock certificates held by it to ZMAX's
transfer agent ("Transfer Agent") and instruct Transfer Agent to replace each
stock certificate with (i) one new stock certificate evidencing the number of
shares of ZMAX Stock to be released to the Stockholder as described in the Cash
Flow Statement or other instructions and (ii) a second new stock certificate
evidencing the number of shares remaining, if any, after deducting the shares
being released as described in the Cash Flow Statement or other instructions,
which remaining shares will continue to be designated as Earn Out Stock and
remain subject to this Agreement. Escrow Agent will further instruct the
Transfer Agent to deliver the first new certificate to the Stockholder and the
second new certificate to Escrow Agent and to legend all stock certificates in
accordance with the Stockholders Agreement between ZMAX and the Stockholders;
provided, however, that until August 6, 1997, the first new certificate will be
delivered to ZMAX in accordance with the Stock Pledge and Security Agreement
between each Stockholder and ZMAX dated as of the date of this Agreement.
4.2 Notice of Termination of Earn Out. Upon receipt by Escrow Agent
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of a certificate from an executive officer of ZMAX or CSI certifying that a
Stockholder has been terminated by CSI for cause (as defined in the
Stockholder's employment agreement with CSI) or has violated his non-
competition, non-solicitation or proprietary information restrictions contained
in his employment agreement with CSI, Escrow Agent will promptly fax a copy of
the officer's certificate to the affected Stockholder. Unless, within 10
business days of Escrow Agent's sending such fax, Escrow Agent receives notice
from the Stockholder that he disputes the termination or breach of his
employment agreement, Escrow Agent will deliver to ZMAX the stock certificate of
the Stockholder held by Escrow Agent. If Escrow Agent receives a dispute notice
from the Stockholder, Escrow Agent will continue holding the stock certificate
of the Stockholder until it receives joint instructions from ZMAX and the
Stockholder or court or arbitration order.
4.3 Delivery Method. All documents and stock certificates delivered
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under this Agreement will be delivered to the proper parties by Federal Express
or other recognized overnight courier service that provides receipt of delivery.
5. Notice of Accounting Firm. ZMAX will promptly notify Escrow Agent
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if the independent accounting firm serving CSI is changed.
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6. Rights and Duties of Escrow Agent.
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6.1 Escrow Agent will not be liable for any actions taken or omitted
upon the advice of counsel or upon a reasonable interpretation of any
instructions or documents provided to it by ZMAX or the Stockholders that it
reasonably believes to be genuine or duly authorized. Escrow Agent may decline
to act if it is in doubt as to its duties under this Agreement and shall not be
liable for such failure to act. Notwithstanding references herein to the
Acquisition Agreement, Escrow Agent will not be charged with, nor be deemed to
have knowledge of, any terms or conditions thereof, and Escrow Agent will not be
under any duty to make any investigation of facts reported to it thereunder.
6.2 If Escrow Agent shall incur any liability, damage or expense
arising out of or resulting from any claim that Escrow Agent has improperly
distributed any of the Closing Documents under this Agreement, other than as a
result of Escrow Agent's gross negligence or willful misconduct, ZMAX and the
Stockholders (collectively, the "Indemnitor") shall indemnify and hold Escrow
Agent harmless therefrom. Escrow Agent is not responsible for the genuineness
of any signature and may rely conclusively upon, and shall be protected in
acting upon, any list, advice, judicial order or decree, certificate, notice,
request, consent, statement, instruction or other instrument believed by it in
good faith to be genuine or to be signed or presented by the proper party, or
duly authorized or properly made.
6.3 Escrow Agent is not responsible for any of the agreements
described herein except for the performance of its duties as expressly set forth
herein. Escrow Agent's duties and obligations hereunder will be governed solely
by the provisions of this Agreement, and Escrow Agent shall not have any duties
other than the duties expressly imposed herein and shall not be required to take
any action other than in accordance with the terms of this Agreement.
6.4 Escrow Agent will not be bound by any notice of, or demand with
respect to, any waiver, modification, amendment, termination, cancellation,
rescission or other action under or with respect to this Agreement, unless duly
executed by ZMAX and the Stockholders and, if Escrow Agent's rights or duties
are affected thereby, unless Escrow Agent has given its prior written consent
thereto.
6.5 In the event of any controversy or dispute hereunder, or with
respect to any question as to the construction of this Agreement, or any action
to be taken by Escrow Agent hereunder, Escrow Agent will incur no liability for
any action taken or omitted in good faith in accordance with the advice and the
opinion of its counsel or its own reasonable judgment. In the event of any
controversy or dispute hereunder, or with respect to any question as to the
construction of this Agreement, or any action to be taken by Escrow Agent
hereunder, Escrow Agent may request joint written instructions signed by ZMAX
and both Stockholders and/or may seek advice of counsel or commence an
interpleader action or seek any other appropriate relief from a court of
competent jurisdiction. ZMAX and the Stockholders each consent to jurisdiction
and venue in such court. If Escrow Agent deems it necessary to seek
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advise of counsel under this Section 6.5, ZMAX and the Stockholders will
reimburse Escrow Agent for the actual and reasonable costs of such counsel.
6.6 Escrow Agent's liability under this Agreement will be limited
solely to gross negligence or willful misconduct on its part.
6.7 The parties acknowledge that Escrow Agent is a law firm
currently representing ZMAX in the Transaction. ZMAX and the Stockholders agree
that this Agreement and the performance of the terms thereof by Escrow Agent
will not act in any manner to disqualify the law firm of Powell, Goldstein,
Xxxxxx & Xxxxxx from continuing its representation of ZMAX in the Transaction or
the contemplated engagement of Powell, Goldstein, Xxxxxx & Xxxxxx by CSI after
the Transaction is completed. ZMAX and the Stockholders, each having advice of
separate counsel, hereby waive conflict, if any, created by Escrow Agent
simultaneously serving as escrow agent under this Agreement any in such
representation of ZMAX and/or CSI. The parties further acknowledge that Escrow
Agent is entitled to reimbursement of its costs and expenses and the standard
hourly fees of attorneys in its firm that assist in performing the duties of
Escrow Agent under this Agreement, which amounts will be billed by Escrow Agent
to ZMAX.
7. Termination. This Agreement shall terminate upon the date on
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which all Earn Out Shares have been delivered to the Stockholders.
8. Governing Law. This Agreement shall be governed by and construed
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in accordance with the laws of the District of Columbia.
9. Assignment. This Agreement shall be binding upon and inure to the
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benefit of the parties hereto and their respective heirs, legal representatives,
successors and assigns.
10. No Third Party Beneficiaries. None of the provisions of this
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Agreement is or shall be construed as for the benefit of or enforceable by any
person not a party to this Agreement.
11. Notice. Any notice required to be given hereunder shall be in
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writing and either hand delivered or sent by Federal Express or other recognized
overnight courier service that provides receipt of delivery, simultaneously to
all parties at the addresses set forth below. Each party shall have the right
to change its address for the receipt of notices, upon the giving of proper
notice to all other parties hereto.
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If to ZMAX: ZMAX Corporation
Powell, Goldstein, Xxxxxx & Xxxxxx
0000 Xxxxxxxxxxxx Xxxxxx, X.X.
Xxxxx Xxxxx
Xxxxxxxxxx, X.X. 00000
Attention: Xxxxxxx X. Xxxxxx, Esq.
Phone: (000) 000-0000
Fax: (000) 000-0000
If to the Stockholders: Xxxxxxx X. Xxxxxxx
00000 Xxxxxx Xxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Phone: (000) 000-0000
And/Or (as applicable): Xxxxxxx X. Xxxxxx
00000 Xxxxxxxxx Xxxxxxx
Xxxxxxxx, Xxxxxxxx 00000
Phone: (000) 000-0000
with a copy to: Xxxxxxx X. Xxxxx, III, Esq.
Law Offices of Rowan and Xxxxx
00 Xxxx Xxxx
Xxxxxxxxx, Xxxxxxxx 00000
Phone: (000) 000-0000
Fax: (000) 000-0000
If to Escrow Agent: Powell, Goldstein, Xxxxxx & Xxxxxx
0000 Xxxxxxxxxxxx Xxxxxx, X.X.
Xxxxx Xxxxx
Xxxxxxxxxx, X.X. 00000
Attention: Xxxxxxx X. Xxxxxx, Esq.
Phone: (000) 000-0000
Fax: (000) 000-0000
12. Entire Agreement. This Agreement constitutes the entire agreement
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among the parties hereto relating to the escrow arrangements for the Earn Out
Stock.
13. Counterparts. This Agreement may be executed in one or more
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counterparts, each of which shall be deemed to be an original. In order for
this Agreement to be effective, it shall not be necessary for all counterparts
to be signed by each party hereto, provided that at least one counterpart of
this Agreement is signed by each of the parties hereto.
[SIGNATURES ON FOLLOWING PAGE]
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EXECUTED on 11/6, 1996.
ZMAX CORPORATION
By: /s/ Xxxx Xxxxxxx
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Name: Xxxx Xxxxxxx
Title: Vice President
/s/ Xxxxxxx X. Xxxxxx
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Xxxxxxx X. Xxxxxx
/s/ Xxxxxxx X. Xxxxxxx
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Xxxxxxx X. Xxxxxxx
POWELL, GOLDSTEIN, XXXXXX & XXXXXX
By: /s/ Xxxxxxx X. Xxxxxx
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Name: Xxxxxxx X. Xxxxxx
Partner
