EXHIBIT 10.1
STOCK EXCHANGE AGREEMENT
BY AND AMONG
SILICON MOUNTAIN MEMORY, INCORPORATED ("SMM"),
THE PRINCIPAL STOCKHOLDERS OF SMM,
Z-AXIS CORPORATION
AND
THE PRINCIPAL STOCKHOLDERS OF Z-AXIS CORPORATION
MAY 7, 2006
STOCK EXCHANGE AGREEMENT
TABLE OF CONTENTS
1. DEFINITIONS............................................................ 1
2. THE EXCHANGE; ADDITIONAL AGREEMENTS.................................... 7
2.1 Exchange....................................................... 7
2.2 Transfer of Z-Axis Business.................................... 8
2.3 Z-Axis LLC Purchase............................................ 8
2.4 The Closing.................................................... 8
2.5 Fractional Shares.............................................. 8
2.6 SMM Purchase Rights............................................ 8
2.7 Adjustments.................................................... 9
2.8 No Further Ownership Rights in SMM Common Stock................ 9
3. DIRECTORS AND OFFICERS................................................. 9
4. EXCHANGE OF SHARES AND PURCHASE RIGHTS................................. 9
4.1 Exchange Of Shares............................................. 9
4.2 Exchange Of Purchase Rights.................................... 9
4.3 Mechanics Of Exchange.......................................... 10
4.4 Exemption from Registration.................................... 10
5. REPRESENTATIONS AND WARRANTIES OF Z-AXIS............................... 10
5.1 Organization and Qualification................................. 11
5.2 Authority; Enforceability...................................... 11
5.3 No Conflicts................................................... 11
5.4 No Defaults.................................................... 11
5.5 Consents and Approvals......................................... 12
5.6 Capitalization; Subsidiaries................................... 12
5.7 Litigation..................................................... 12
5.8 Intellectual Property.......................................... 13
5.9 Financial Statements........................................... 13
5.10 Books and Records.............................................. 14
5.11 Absence of Changes............................................. 14
5.12 No Undisclosed Liabilities..................................... 15
5.13 Filings with the SEC........................................... 15
5.14 Taxes.......................................................... 16
5.15 Benefit Plans.................................................. 17
5.16 Property, Assets............................................... 17
5.17 Contracts...................................................... 18
5.18 Personnel...................................................... 19
5.19 Compliance with Laws; Permits.................................. 19
5.20 Brokers or Finders............................................. 19
5.21 Insurance...................................................... 19
5.22 Environmental Compliance....................................... 20
5.23 Representations Complete....................................... 20
5.24 Independent Accountants........................................ 20
5.25 Sarbanes Oxley Compliance...................................... 21
5.26 FCPA Compliance................................................ 21
5.27 Financial Recordkeeping and Reporting Compliance............... 21
5.28 OFAC Compliance................................................ 21
5.29 Non-Compete and Non-Solicitation Agreements.................... 21
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5.30 Internal Controls.............................................. 22
6. REPRESENTATIONS AND WARRANTIES OF SMM.................................. 22
6.1 Organization and Qualification................................. 22
6.2 Authority; Enforceability...................................... 23
6.3 No Conflicts................................................... 23
6.4 No Defaults.................................................... 23
6.5 Consents and Approvals......................................... 23
6.6 Capitalization; Subsidiaries................................... 23
6.7 Litigation..................................................... 24
6.8 Compliance with Laws; Permits.................................. 24
6.9 Benefit Plans.................................................. 24
6.10 Property, Assets............................................... 25
6.11 Contracts...................................................... 26
6.12 Personnel...................................................... 26
6.13 Brokers or Finders............................................. 26
6.14 Environmental Compliance....................................... 26
6.15 Financial Statements........................................... 27
6.16 Absence of Changes............................................. 27
6.17 No Undisclosed Liabilities..................................... 28
6.18 Purchase Entirely for Own Account.............................. 28
6.19 Intellectual Property.......................................... 29
6.20 Taxes.......................................................... 30
6.21 Insurance...................................................... 31
6.22 Books and Records.............................................. 32
6.23 Representations Complete....................................... 32
6.24 Independent Accountants........................................ 32
6.25 Sarbanes Oxley Compliance...................................... 32
6.26 FCPA Compliance................................................ 33
6.27 Financial Recordkeeping and Reporting Compliance............... 33
6.28 OFAC Compliance................................................ 33
6.29 Non-Compete and Non-Solicitation Agreements.................... 33
6.30 Internal Controls.............................................. 33
7. CERTAIN AGREEMENTS..................................................... 33
7.1 Access And Information......................................... 33
7.2 Stockholders Authorization..................................... 34
7.3 Operation Of Business.......................................... 34
7.4 Preservation Of Business....................................... 34
7.5 Tax Cooperation................................................ 35
7.6 Interim Operations............................................. 36
7.7 Accuracy Of Representations.................................... 38
7.8 Consents, Waivers And Approvals................................ 38
7.9 Notice Of Breach Of Warranty................................... 38
7.10 Additional Documents; Further Assurances....................... 38
7.11 Notice Of Inaccurate Information............................... 38
7.12 Publicity...................................................... 38
7.13 Stand Still.................................................... 39
7.14 Reverse Split.................................................. 39
7.15 Assumption of SMM Equity Incentive Plan........................ 39
7.16 Preparation of Proxy Statement................................. 39
7.17 Release from Z-Axis Lease Liabilities.......................... 39
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8. CONDITIONS TO PERFORMANCE BY ALL PARTIES............................... 40
8.1 SMM Approval................................................... 40
8.2 Z-Axis Approval................................................ 40
8.3 Proceedings.................................................... 40
8.4 Due Diligence.................................................. 40
9. CONDITIONS PRECEDENT TO PERFORMANCE BY SMM............................. 40
10. CONDITIONS PRECEDENT TO PERFORMANCE BY Z-AXIS.......................... 42
11. SECURITIES FILINGS..................................................... 44
12. INDEMNIFICATION........................................................ 44
12.1 Survival of Representations, Warranties, Covenants
and Agreements................................................. 44
12.2 Indemnification By Z-Axis LLC and the Z-Axis Principal
Stockholders................................................... 44
12.3 Indemnification by SMM......................................... 46
12.4 Limitations on Indemnification................................. 46
12.5 Indemnification and Insurance.................................. 47
12.6 Remedies....................................................... 47
13. NOTICE OF CLAIM........................................................ 47
14. CLOSING................................................................ 48
15. TERMINATION AND ABANDONMENT OF THE EXCHANGE............................ 49
15.1 Termination.................................................... 49
15.2 Effect Of Termination.......................................... 50
16. AMENDMENT OR WAIVER.................................................... 50
17. ENTIRE AGREEMENT....................................................... 50
18. NOTICE................................................................. 50
19. SEVERABILITY........................................................... 52
20. HEADINGS............................................................... 52
21. COUNTERPARTS........................................................... 52
22. EXPENSES............................................................... 52
23. BENEFITS AND ASSIGNMENT................................................ 52
24. SPECIFIC PERFORMANCE................................................... 52
25. COSTS.................................................................. 52
26. TERMINATION ON DEFAULT................................................. 53
27. CHOICE OF LAW.......................................................... 53
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STOCK EXCHANGE AGREEMENT
THIS STOCK EXCHANGE AGREEMENT (the "AGREEMENT") is made and entered into as
of May 7, 2006 (the "EXECUTION DATE"), by and among Silicon Mountain Memory,
Incorporated, a Colorado corporation ("SMM"), Z-Axis Corporation, a Colorado
corporation ("Z-Axis"), Xxxxxxx (Tre) Xxxxx and Xxxxx Xxxxxx (collectively, the
"SMM PRINCIPAL STOCKHOLDERS"), and Xxxx Xxxxxxxx and Xxxxxxxxx Xxxxx
(collectively, the "Z-AXIS PRINCIPAL STOCKHOLDERS"). SMM, Z-Axis, SMM Principal
Stockholders, and the Z-Axis Principal Stockholders may be referred to
individually as a "PARTY", and collectively as the "PARTIES".
RECITALS
A. The Parties believe it is in the best interests of SMM and Z-Axis and
their respective stockholders that Z-Axis acquire the issued and outstanding
securities of SMM through an exchange (the "EXCHANGE").
B. Pursuant to the Exchange, and subject to the terms and conditions of
this Agreement, following the Reverse Split, Z-Axis will (i) deliver to the SMM
Stockholders shares of restricted common stock of Z-Axis (the "EXCHANGE SHARES")
in exchange for shares of common stock of SMM (the "ACQUIRED SHARES") and (ii)
assume outstanding SMM Purchase Rights and exchange the same for Z-Axis Purchase
Rights exercisable for shares of Z-Axis Common Stock (the "Z-AXIS CONVERSION
PURCHASE RIGHTS"). As a result of the Exchange, SMM will become a Subsidiary of
Z-Axis.
C. It is also the intention of the Parties that Z-Axis shall prior to the
Closing assign all of the assets and liabilities associated with the Z-Axis
Business to Z-Axis LLC, the wholly owned Subsidiary of Z-Axis ("Z-AXIS LLC"),
and that simultaneously with the Closing, the Z-Axis Principal Stockholders will
purchase all of the issued and outstanding limited liability company interests
of Z-Axis LLC ("Z-AXIS LLC PURCHASE").
D. New SMM also intends to consummate a financing involving the private
placement of its common stock with certain investors within fifteen business
days of the Closing (the "PRIVATE PLACEMENT").
E. The Parties desire to effect the Exchange as a "reorganization" under
the Internal Revenue Code of 1986, as amended (the "CODE") so that the Exchange
will not be taxable to SMM, the SMM Stockholders, Z-Axis or the Z-Axis
Stockholders. This Agreement constitutes a "plan of reorganization" within the
meaning of Treasury Regulations Section 1.368-1(c).
AGREEMENT
In consideration of the premises and the mutual representations,
warranties, covenants and agreements herein contained, the Parties agree as
follows:
1. Definitions. As used in this Agreement the following terms have the
meanings indicated:
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"1933 Act" shall mean the Securities Act of 1933, as amended.
"1934 Act" shall mean the Securities Exchange Act of 1934, as amended.
"Acquired Shares" shall have the meaning set forth in the Recitals.
"Applicable Liability" shall have the meaning set forth in Section
7.5.
"Assumed Purchase Right" shall have the meaning set forth in Section
2.6.
"Claiming Party" shall have the meaning set forth in Section 7.5.
"Claims" or a "Claim" shall mean all demands, claims, actions or
causes of action, assessments, complaints, directives, citations, information
requests issued by any Governmental Authority, legal proceedings, orders,
notices of potential responsibility, losses, all damages of whatever nature
(including, without limitation, diminution in value and lost profits),
Liabilities, sanctions, costs and expenses, including, without limitation,
interest, penalties and attorneys' and experts' fees and disbursements.
"Closing Date" shall have the meaning set forth in Section 2.4.
"Closing" shall have the meaning set forth in Section 2.4.
"Code" shall have the meaning set forth in the Recitals.
"Colorado Law" shall mean the Colorado Business Corporation Act.
"Defending Party" shall have the meaning set forth in Section 7.5.
"EKSH" shall have the meaning set forth in Section 5.24.
"Encumbrances" or an "Encumbrance" shall mean any covenants,
conditions, Liens, encumbrances, equities, security interests, restrictions,
Claims, charges, and other Claims or rights of third parties of whatever kind
and nature.
"Environmental Claims" shall mean all Claims pursuant to Environmental
Laws, including but not limited to, those based on, arising out of or otherwise
relating to: (i) the Remediation, presence or Release of, or exposure to,
Hazardous Materials or other environmental conditions initiated, existing or
occurring prior to the Closing Date at, on, under, above, from, or about any
real property or any real properties currently or formerly owned, leased or
operated by Z-Axis or SMM (as applicable) or any of Z-Axis' or SMM's, as the
case may be, predecessors or affiliates; (ii) the off-site Release, treatment,
transportation, storage or disposal prior to the Closing Date of Hazardous
Materials originating from Z-Axis' or SMM's, as the case may be, assets or
business; or (iii) any violations of Environmental Laws by Z-Axis or SMM, as the
case may be, prior to the Closing Date, including reasonable expenditures
necessary to cause Z-Axis or SMM (as applicable) to be in compliance with or
resolve violations of Environmental Laws.
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"Environmental Laws" shall mean any Laws (including, without
limitation, the Comprehensive Environmental Response, Compensation, and
Liability Act, the Resource Conservation and Recovery Act, the Clean Air Act,
the Federal Water Pollution Control Act, the Solid Waste Disposal Act, the Toxic
Substances Control Act, the Occupational Safety and Health Act, the Mine Safety
and Health Act, counterpart Laws adopted by any State or local Governmental
Authority, and any amendments thereto), including any regulations, plans, other
criteria, or guidelines promulgated pursuant to such Laws, or administrative or
judicial orders issued pursuant to such Laws, now or hereafter in effect
relating to the Remediation, generation, production, installation, use, storage,
management, treatment, transportation, Release, threatened Release, or disposal
of Hazardous Materials, or noise control, or the protection of human health,
safety, natural resources, animal health or welfare, or the environment.
"ERISA" shall have the meaning set forth in Section 5.15.
"Exchange Shares" shall have the meaning set forth in the Recitals.
"Exchange" shall have the meaning set forth in the Recitals.
"Execution Date" shall have the meaning set forth in the Preamble.
"Expense Reimbursements" shall have the meaning set forth in Section
22.
"FCPA" shall mean the Foreign Corrupt Practices Act of 1977, as
amended, and the rules and regulations thereunder.
"GAAP" shall mean United States generally accepted accounting
principles, consistently applied.
"Governmental Authority" shall mean any agency, public or regulatory
authority, instrumentality, department, commission, court, ministry, tribunal or
board of any government, whether foreign or domestic and whether national,
federal, provincial, canton, state, regional, local or municipal.
"Hazardous Materials" shall mean any wastes, substances, radiation, or
materials (whether solids, liquids or gases): (i) which are hazardous, toxic,
infectious, explosive, radioactive, carcinogenic, or mutagenic; (ii) which are
or become defined as "pollutants," "contaminants," "hazardous materials,"
"hazardous wastes," "hazardous substances," "toxic substances," "radioactive
materials," "solid wastes," or other similar designations in, or otherwise
subject to regulation under, any Environmental Laws; (iii) the presence of which
on real property cause or threaten to cause a nuisance pursuant to applicable
statutory or common law upon real property or to adjacent properties; (iv) which
contain without limitation polychlorinated biphenyls (PCBs), asbestos or
asbestos-containing materials, lead-based paints, urea-formaldehyde foam
insulation, or petroleum or petroleum products (including, without limitation,
crude oil or any component or derivation thereof); or (v) which pose a hazard to
human health, safety, natural resources, employees, or the environment.
"Xxxx" shall have the meaning set forth in Section 6.24.
"Indemnified Officers" shall have the meaning set forth in Section
12.5.
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"Indemnified Party" shall have the meaning set forth in Section 13.
"Indemnifying Party" shall have the meaning set forth in Section 13.
"Laws" shall mean statutes, common laws, rules, ordinances,
regulations, codes, licensing requirements, orders, judgments, injunctions,
decrees, licenses, permits and bylaws of a Governmental Authority.
"Liability" and "Liabilities" shall mean debts, liabilities,
commitments, obligations, duties and responsibilities of any kind and
description, whether absolute or contingent, monetary or non-monetary, direct or
indirect, known or unknown or matured or unmatured, or of any other nature.
"Liens" or a "Lien" shall mean any security interest, lien, mortgage,
charge, pledge, equitable interest or Encumbrance of any nature and, in the case
of securities, any put, call or similar right of a third party with respect to
such securities.
"Litigation" shall mean any litigation, legal action, arbitration,
proceeding, demand, Claim or investigation against, affecting or brought by or
against an entity or any present or former employees of such entity relating to
the business, operations, assets or Liabilities of such entity.
"Material Adverse Change" or "Material Adverse Effect" means, when
used with respect to Z-Axis or SMM, as the case may be, any change or effect
that is, or so far as can reasonably be determined, is likely to be, materially
adverse to the assets, properties, condition (financial or otherwise), business
or results of operations of Z-Axis or SMM, as the case may be.
"Money Laundering Laws" shall have the meaning set forth in Section
5.27.
"New SMM" shall mean the entity following the Closing that was
formerly Z-Axis Corporation prior to the Closing.
"Notices" shall have the meaning set forth in Section 18.
"OFAC" shall have the meaning set forth in Section 5.28.
"PCAOB" shall have the meaning set forth in Section 5.24.
"Principal Stockholders" shall mean collectively the Z-Axis Principal
Stockholders and the SMM Principal Stockholders.
"Private Placement" shall have the meaning set forth in the Recitals.
"Release" means any emission, spill, seepage, leak, escape, leaching,
discharge, injection, pumping, pouring, emptying, dumping, disposal, migration,
abandonment or release of Hazardous Materials from any source over, into, under
or upon the environment, including the air, soil, improvements, surface water,
groundwater, the sewer, septic system, storm drain, publicly owned treatment
works, or waste treatment, storage, or disposal systems.
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"Remediation" means any investigation, clean-up, removal action,
remedial action, restoration, repair, response action, corrective action,
monitoring, sampling and analysis, risk assessment, installation, reclamation,
closure, or post-closure in connection with the suspected, threatened or actual
presence or Release of Hazardous Materials.
"Returned Payments" shall have the meaning set forth in Section 12.5.
"Reverse Split" shall have the meaning set forth in Section 7.14.
"Xxxxxxxx-Xxxxx Act" shall have the meaning set forth in Section 5.13.
"SEC" refers to the United States Securities and Exchange Commission.
"SMM" shall have the meaning as set forth in the preamble.
"SMM Balance Sheet Date" shall have the meaning set forth in Section
6.16.
"SMM Business" refers to the businesses of providing computer memory
services and solutions and of manufacturing computer memory equipment, devices
and peripherals, carried on by SMM prior to the Closing and any other business
in which the New SMM is engaged or in which SMM plans to engage following the
Closing.
"SMM Common Stock" shall mean the $.001 par value common stock of SMM.
"SMM Contracts" shall have the meaning set forth in Section 6.11.
"SMM Equity Incentive Plan" shall mean the Silicon Mountain Memory
Incorporated 2003 Equity Incentive Plan as revised on October 15, 2003.
"SMM Financial Statements" shall have the meaning set forth in Section
6.15.
"SMM Holders" shall collectively mean the SMM Stockholders and the SMM
Purchase Rights Holders.
"SMM Intellectual Property" shall have the meaning set forth in
Section 6.19.
"SMM Leases" shall have the meaning set forth in Section 6.10.
"SMM License" shall have the meaning set forth in Section 6.19.
"SMM Purchase Rights Holders" shall mean the holders of SMM
outstanding options listed on EXHIBIT B attached hereto.
"SMM Purchase Rights" shall mean any option, warrant or other right to
acquire shares of SMM common stock.
"SMM Real Property" shall have the meaning set forth in Section 6.10.
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"SMM Stockholders" shall mean the holders of the SMM Common Stock
listed on Exhibit A attached hereto.
"SMM Subsidiary" shall mean SMPC, Inc.
"SMM Websites" shall have the meaning set forth in Section 6.19.
"Special Committee" shall have the meaning set forth in Section 10.10.
"Subsidiary" means any corporation, partnership, joint venture or
other legal entity of which Z-Axis or SMM, as the case may be (either alone or
through or together with any other Subsidiary), owns, directly or indirectly, 50
percent or more of the stock or other equity interests the holders of which are
generally entitled to vote for the election of the board of directors or other
governing body of such corporation or other legal entity.
"Tax Return" shall mean all returns, declarations, reports, forms,
estimates, information returns, statements or other documents (including any
schedule, attachment and related or supporting information) filed or required to
be filed with or supplied to any Governmental Authority in connection with any
Taxes, and including any amendments thereof.
"Taxes" or a "Tax" shall mean all federal, state, local, foreign and
other taxes, charges, fees, duties, levies, penalties or other assessments,
including, without limitation, income, gross receipts, excise, profits, value
added, real and personal property, sales, use, transfer, severance, stamp,
occupation, disability, license, payroll, withholding, social security,
franchise, gains, built in gains, unemployment insurance, workers' compensation,
employer health tax or other taxes, imposed by any Governmental Authority from
time to time and shall include any interest, penalties or additions to tax
attributable to any of the foregoing, whether disputed or not, including,
without limitation, any Liability for taxes as a transferee or successor, by
contract or otherwise.
"Transfer Agent" refers to Computershare Trust Company, located at 000
Xxxxxxx Xxxxxx, Xxxxx 000, Xxxxxx, Xxxxxxxx 00000.
The "VWAP" means the weighted average trading price for New SMM's
common stock on the over-the-counter bulletin board system for ten consecutive
trading days, with the first of such consecutive ten trading days to be five
trading days before the Closing Date. The VWAP is calculated by adding, for each
trade, the product obtained by multiplying the price of the trade by the number
of shares traded, and then dividing the sum of all such products by the
aggregate sum of the number of shares traded in those transactions.
"Z-Axis Assets and Liabilities" shall have the meaning set forth in
Section 2.2.
"Z-Axis Balance Sheet Date" shall have the meaning set forth in
Section 5.11.
"Z-Axis Business" refers to the business of providing video graphic
presentation and related services in the litigation services industry for
commercial and government customers carried on throughout the United States and
Europe by Z-Axis prior to the Closing.
"Z-Axis Common Stock" shall mean the $.001 par value common stock of
Z-Axis.
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"Z-Axis Contracts" shall have the meaning set forth in Section 5.17.
"Z-Axis Conversion Purchase Rights" shall have the meaning set forth
in the Recitals.
"Z-Axis Intellectual Property" shall have the meaning set forth in
Section 5.8.
"Z-Axis Landlord" shall have the meaning set forth in Section 7.17.
"Z-Axis Lease" shall have the meaning set forth in Section 5.16.
"Z-Axis License" shall have the meaning set forth in Section 5.8.
"Z-Axis LLC Purchase Agreement" shall have the meaning as set forth in
Section 2.3.
"Z-Axis LLC Purchase" shall have the meaning set forth in the
Recitals.
"Z-Axis LLC" shall have the meaning as set forth in the Recitals.
"Z-Axis Office" shall have the meaning set forth in Section 7.17.
"Z-Axis Office Lease Assignment" shall have the meaning set forth in
Section 7.17.
"Z-Axis Principal Stockholders" shall have the meaning set forth in
the preamble.
"Z-Axis Purchase Rights" shall mean any option, warrant or other right
to acquire shares of Z-Axis Common Stock except any right to acquire Z-Axis
Common Stock pursuant to the Exchange.
"Z-Axis Real Property" shall have the meaning set forth in Section
5.16.
"Z-Axis SEC Documents" shall have the meaning set forth in Section
5.13.
"Z-Axis Securities" shall have the meaning set forth in Section 6.18.
"Z-Axis Stockholders" shall mean the stockholders of Z-Axis.
"Z-Axis Transfer" shall have the meaning as set forth in Section 2.2.
"Z-Axis Websites" shall have the meaning set forth in Section 5.8.
"Z-Axis" shall have the meaning as set forth in the Preamble.
2. The Exchange; Additional Agreements.
2.1 Exchange. Subject to the terms and conditions hereof, at the
Closing, Z-Axis shall (i) deliver to the SMM Stockholders the Exchange Shares in
exchange for all the issued and outstanding shares of SMM Common Stock, and (ii)
deliver to the SMM Purchase Rights Holders the Z-Axis Conversion Purchase Rights
in exchange for the SMM Purchase Rights owned by the SMM Purchase Rights
Holders, with Z-Axis then being the sole stockholder of SMM.
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2.2 Transfer of Z-Axis Business. Prior to the Closing, pursuant to
such documentation that is reasonably acceptable to SMM, (i) Z-Axis shall
transfer (the "Z-AXIS TRANSFER"), assign, convey and deliver all of Z-Axis'
right, title and interest in and to all of Z-Axis' assets, real, personal or
mixed, tangible and intangible, of every kind and description wherever located
and all Liabilities of Z-Axis, including all Liabilities associated with the
Z-Axis Business and any other Liability of Z-Axis, including, without
limitation, Liability of Z-Axis for any Taxes attributable to the Z-Axis LLC
Purchase, (the "Z-AXIS ASSETS AND LIABILITIES") to Z-Axis LLC, its wholly owned
Subsidiary, and (ii) Z-Axis LLC shall assume all Liabilities associated with the
Z-Axis Business and shall assume any other Liability of Z-Axis, which has been
incurred prior to Closing. Following the Z-Axis Transfer and immediately prior
to the Closing, no assets or Liabilities of whatever kind or nature, including
those used in, associated with or related to the Z-Axis Business, shall remain
with Z-Axis but shall be in Z-Axis LLC.
2.3 Z-Axis LLC Purchase. Simultaneously with the Closing, the Z-Axis
Principal Stockholders shall purchase all of the outstanding limited liability
company interests of Z-Axis LLC pursuant to the Limited Liability Interest
Purchase Agreement substantially in the form and content as attached hereto as
EXHIBIT C (the "Z-AXIS LLC PURCHASE AGREEMENT") the final version of which shall
be subject to the reasonable approval of SMM as such agreement will not be
executed on or before the Execution Date. The execution of the Z-Axis LLC
Purchase Agreement by the Z-Axis Principal Stockholders shall be a condition to
Closing.
2.4 The Closing. Unless this Agreement is earlier terminated pursuant
to Section 15, the closing of the Exchange (the "Closing") will take place as
promptly as practicable, following satisfaction or waiver of the conditions set
forth in Sections 8, 9 and 10, at the offices of Xxxxxx Xxxxx LLP, 0000 Xxxxxxx
Xxxxxx, Xxxxx 0000, Xxxxxx, Xxxxxxxx, 00000. Unless another date or time is
agreed to by SMM and Z-Axis, the Closing shall occur at 1:00 p.m. on the first
business day after the effective date of approval of the Exchange by the Z-Axis
Stockholders. The date upon which the Closing actually occurs is herein referred
to as the "CLOSING Date." The Closing shall be deemed to be effective as of the
12:01 a.m. Mountain Time on the Closing Date.
2.5 Fractional Shares. No fractional shares of Z-Axis Common Stock
shall be issued pursuant to the Exchange, but in lieu thereof, if a fractional
share of Z-Axis Common Stock would otherwise be issued to any SMM Stockholder,
the number of shares of Z-Axis Common Stock to be received by such SMM
Stockholder who would otherwise be entitled to a fraction of a share of Z-Axis
Common Stock (after aggregating all fractional shares of Z-Axis Common Stock to
be received by such holder) shall be rounded up or down to the nearest whole
share.
2.6 SMM Purchase Rights. Prior to the Closing, the Z-Axis Stockholders
shall have approved and Z-Axis shall have assumed, effective as of the Closing,
the SMM Equity Incentive Plan. At the Closing, all SMM Purchase Rights then
outstanding as identified on EXHIBIT B attached hereto shall be assumed by
Z-Axis (each such an "ASSUMED PURCHASE RIGHT" and collectively the "ASSUMED
PURCHASE RIGHTS"). Each Assumed Purchase Right shall continue to have, and be
subject to, the same terms and conditions as in effect immediately prior to the
Closing, except that (i) each Assumed Purchase Right will be exercisable for the
shares of Z-Axis Common Stock that are identified in EXHIBIT B; and (ii) the per
share exercise price for the shares of Z-Axis Common Stock issuable upon
exercise of each Assumed Purchase Right will be equal to the exercise price per
share
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of Z-Axis Common Stock at which such Assumed Purchase Right was exercisable
immediately prior to the Closing as identified in EXHIBIT B. Notwithstanding the
foregoing, the Assumed Purchase Rights shall be adjusted to account for the
Reverse Split so that they will be exercisable for the same number of shares of
Z-Axis Common Stock at the same exercise price as if they had been exercised for
shares of SMM Common Stock prior to the Exchange and then those shares of SMM
Common Stock had been exchanged for shares of Z-Axis Common Stock pursuant to
the Exchange. To evidence the assumption of the Assumed Purchase Rights by
Z-Axis, Z-Axis will issue to each holder of an Assumed Purchase Right a
replacement option agreement and to the extent such holders of SMM Purchase
Rights have been provided an applicable replacement option agreement then,
contemporaneously, such SMM Purchase Rights shall be cancelled and thereafter be
of no further force or effect.
2.7 Adjustments. The Exchange Shares and the Z-Axis Conversion
Purchase Rights shall be equitably adjusted to reflect fully the effect of any
stock split, reverse split, stock combination, stock dividend (including any
dividend or distribution of securities convertible into Z-Axis Common Stock or
SMM Common Stock), reorganization, reclassification, recapitalization or other
like change with respect to Z-Axis Common Stock or SMM Common Stock occurring
after the date hereof and prior to Closing.
2.8 No Further Ownership Rights in SMM Common Stock. All shares of
Z-Axis Common Stock issued upon the surrender for exchange of the Acquired
Shares in accordance with the terms hereof shall be deemed to have been issued
in full satisfaction of all rights pertaining to such Acquired Shares, and there
shall be no further registration of transfers on the records of SMM of shares of
SMM Common Stock which were outstanding immediately prior to the Closing.
3. Directors and Officers. At the Closing, the members of the Board of
Directors of Z-Axis and of any Subsidiary of Z-Axis, and each person serving as
an officer of Z-Axis or of any Subsidiary of Z-Axis, shall resign his or her
respective positions by tendering written resignations, and the members of the
Board of Directors of SMM who are members prior to the Closing, consisting of
Xxxx Xxxxxxxx, Xxxxxxx (Tre) Xxxxx, Xxxxxx Xxxx, Xxxx Xxxxxx, Xxxx Xxxxxxxxxx,
Xxxxxx Xxxxx and Xxxxx Man Xxx (the "NEW BOARD") will be simultaneously
appointed to serve as members of the Board of Directors of New SMM and of all
Subsidiaries of New SMM excepting Z-Axis LLC, with such appointments to be
effective as of the Closing. The New Board shall elect the following to serve in
the offices indicated beginning as of the Closing Date: Xxxxxxx (Tre) Xxxxx,
Chief Executive Officer, and Xxxxx Xxxxxx, Chief Financial Officer.
4. Exchange of Shares and Purchase Rights.
4.1 Exchange Of Shares. At the Closing Z-Axis shall deliver to the SMM
Stockholders the number of Exchange Shares set forth opposite their respective
names in EXHIBIT A attached hereto in exchange for the Acquired Shares, and the
SMM Stockholders shall each deliver to Z-Axis a SMM stock certificate or
certificates (as the case may be) representing all the Acquired Shares owned by
each of the SMM Stockholders together with a duly executed stock power and
assignment transferring those shares to Z-Axis.
4.2 Exchange Of Purchase Rights. At the Closing Z-Axis shall deliver
to the SMM Purchase Rights Holders, the number of Z-Axis Conversion Purchase
Rights set forth opposite their
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respective names in EXHIBIT B in exchange for all the Assumed Purchase Rights in
accordance with the terms of Section 2.6 hereof.
4.3 Mechanics Of Exchange. At the Closing, SMM shall cause the SMM
Stockholders and the SMM Purchase Rights Holders to surrender any and all
certificates representing the Acquired Shares and the Assumed Purchase Rights,
as applicable, together with any other reasonably required documents, to Z-Axis,
and the SMM Stockholders and SMM Purchase Rights Holders shall be entitled, upon
surrender, to receive in exchange therefor certificates representing the
Exchange Shares and Z-Axis Conversion Purchase Rights, as applicable, in
accordance with the terms of this Agreement. Alternatively, if an SMM
Stockholder requests his or her Exchange Shares to be held by a brokerage firm
or other eligible nominee, Z-Axis will provide irrevocable instructions to its
Transfer Agent providing for book entry issuances of the applicable Exchange
Shares. If any certificate for Z-Axis Common Stock is to be issued in a name
other than that in which the certificate for shares of SMM Common Stock
surrendered in exchange therefor is registered, it shall be a condition of that
exchange that the person requesting the exchange shall pay any transfer or other
Taxes or fees required by reason of the issuance of certificates for Z-Axis
Common Stock in a name other than that of the registered holder of the SMM
certificate surrendered. If any SMM certificates representing shares of SMM
Common Stock shall have been lost or destroyed, the SMM Stockholders who are the
registered owners of those shares may obtain the certificate representing the
Z-Axis Common Stock to which the SMM Stockholders are entitled by reason of the
consummation of the Exchange, provided that the SMM Stockholders deliver to
Z-Axis and the Transfer Agent a statement certifying to the loss or destruction
and providing for indemnity or a bond satisfactory to Z-Axis and the Transfer
Agent indemnifying Z-Axis and the Transfer Agent against any loss or expense
either of them may incur if the lost or destroyed certificates are thereafter
presented to Z-Axis or the Transfer Agent for exchange.
4.4 Exemption from Registration. The shares of Z-Axis Common Stock to
be issued in connection with the Exchange will be issued in a transaction exempt
from registration under the 1933 Act and applicable state Blue Sky Laws pursuant
to Section 4(2) of the 1933 Act and analogous state exemptions under applicable
Blue Sky Laws, and such shares will constitute "restricted securities" within
the meaning of the 1933 Act.
5. Representations and Warranties of Z-Axis. Z-Axis hereby represents and
warrants, and concerning Section 5.6(a) only Z-Axis and each Z-Axis Principal
Stockholder hereby represent and warrant, jointly and severally, to SMM and each
SMM Holder as follows, which representations and warranties are true, correct
and complete as of the Execution Date and will be true, correct and complete as
of the Closing (as though made then and as though the Closing were substituted
for the date of this Agreement throughout this Section 5), except as set forth
in the Disclosure Schedule. Nothing in the Disclosure Schedule shall be deemed
adequate to disclose an exception to a representation or warranty made herein,
however, unless the Disclosure Schedule identifies the exception with
particularity and describes the relevant facts in detail. Without limiting the
generality of the foregoing, the mere listing (or inclusion of a copy) of a
document or other item shall not be deemed adequate to disclose an exception to
a representation or warranty made herein (unless the representation or warranty
has to do with the existence of the document or other item itself). The
Disclosure Schedule will be arranged in paragraphs corresponding to the lettered
and numbered paragraphs contained in this Section 5.
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5.1 Organization and Qualification.
(a) As of the Closing, Z-Axis is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Colorado and has all requisite power and authority to own, operate and
lease its properties and to carry on its business as now being conducted.
Z-Axis is qualified and licensed to do business and is in good standing as
a foreign corporation in each jurisdiction in which the ownership, use,
licensing or leasing of its assets and properties, or the conduct or nature
of its business, makes such qualification, licensing or admission
necessary, except for such failure to be so duly qualified, licensed and in
good standing that would not reasonably be expected to have a Material
Adverse Effect on Z-Axis. Z-Axis has the requisite corporate power to own,
lease and operate its properties and assets, and to carry on its business
as currently conducted and as proposed to be conducted. SCHEDULE 5.1 sets
forth each jurisdiction where Z-Axis is so qualified or licensed to do
business.
(b) Z-Axis has delivered to SMM complete and correct copies of
its (i) articles of incorporation and bylaws, which articles of
incorporation and bylaws are in full force and effect and have not been
amended, corrected, restated or superseded in any way, (ii) minutes of all
directors' and shareholders' meetings, as the same are now available to
Z-Axis in its records or those of its professionals, all of which are
complete and accurate as of the date hereof, (iii) stock certificate and
transfer sheets from the Transfer Agent for Z-Axis, which collectively
correctly set forth the record ownership of all outstanding shares of
capital stock, (iv) records of all rights to purchase capital stock of such
entity and (v) form of stock certificates, option plans and agreements and
rights to purchase shares of capital stock of such entity. Z-Axis is not in
violation, and has not taken any action in violation, of any provisions of
its articles of incorporation or bylaws.
5.2 Authority; Enforceability. Z-Axis has all requisite power and
authority to execute and deliver this Agreement, to perform each of its
obligations hereunder, and to consummate the transactions contemplated hereby.
All actions required on the part of Z-Axis for such execution, delivery, and
performance of this Agreement have been duly and validly taken. Assuming due
execution and delivery by each of the other parties hereto, this Agreement
constitutes the legal, valid, and binding obligation of Z-Axis enforceable
against Z-Axis in accordance with its respective terms, except as the
enforceability may be limited by bankruptcy, insolvency, moratorium, and other
similar Laws affecting creditors' rights generally and by general equitable
principles.
5.3 No Conflicts. The execution and delivery by Z-Axis of this
Agreement, and the performance and consummation by Z-Axis of the transactions
contemplated hereby will not (i) conflict with such entity's articles of
incorporation or bylaws; (ii) conflict with or result in a breach or violation
of, or default under, or give rise to any right of acceleration or termination
of, any of the terms, conditions or provisions of any note, lease, license,
agreement or other instrument or obligation to which such entity is a party or
by which such entity's assets or properties are bound; (iii) result in the
creation of any Encumbrance on any of the assets or properties of such entity;
or (iv) violate any law, rule, regulation or order applicable to such entity or
any of such entity's assets or properties.
5.4 No Defaults. Z-Axis is not (i) in violation of any provision of
its articles of incorporation or bylaws or (ii) in default or violation of any
term condition or provision of (A) any
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judicial or Governmental Authority decree or order applicable to Z-Axis or (B)
any agreement, note, material Contract, lease or instrument, permit or license
to which Z-Axis is a party.
5.5 Consents and Approvals. Except as set forth in SCHEDULE 5.5, no
approval, consent, waiver or authorization of, or registration, declaration or
filing with, exemption by, or any notice to, any Governmental Authority or other
third party is required to be made, obtained, or given by Z-Axis: (a) for or in
connection with the valid execution and delivery by Z-Axis of this Agreement or
the consummation by such party of the transactions contemplated hereby including
the Z-Axis Business Transfer; or (b) as a condition to the legality, validity or
enforceability as against Z-Axis of this Agreement.
5.6 Capitalization; Subsidiaries.
(a) The authorized capital stock of Z-Axis consists of (i)
10,000,000 shares of Z-Axis Common Stock, of which 3,825,000 shares of
common stock are issued and outstanding, and (ii) as of the Closing and
following the Reverse Split, 30,000,000 shares of Z-Axis Common Stock, of
which 425,000 shares are issued and outstanding. Immediately prior to the
Closing, Z-Axis owns all of the outstanding limited liability company
interests of Z-Axis LLC. As of the Closing, all of the issued and
outstanding shares of Z-Axis Common Stock have been duly authorized and
validly issued, are fully paid and non-assessable, are free of
Encumbrances, are not subject to preemptive rights or rights of first
refusal created by statute, the articles of incorporation of Z-Axis or any
agreement to which Z-Axis is a party or is bound, and have been offered,
issued and sold by Z-Axis in compliance with all applicable securities
Laws. Except as set forth in SCHEDULE 5.6(A), (i) no subscription, warrant,
option, convertible security or other right (contingent or otherwise) to
purchase or acquire from Z-Axis any shares of Z-Axis Common Stock is
authorized or outstanding, (ii) Z-Axis has no obligation (contingent or
otherwise) to issue any subscription, warrant, option, convertible security
or other such right or security or to issue or distribute to holders of any
shares of Z-Axis Common Stock any evidence of indebtedness or assets of
Z-Axis, (iii) Z-Axis has no obligation or right (contingent or otherwise)
to purchase, redeem, or otherwise acquire any shares of Z-Axis Common Stock
or any interest therein or to pay any dividend or any distribution in
respect thereof, and (iv) no person or holder of any security of Z-Axis has
or will have, and Z-Axis does not have and will not have, any obligation
concerning any right to the registration of any security or of any
transaction of Z-Axis. SCHEDULE 5.6(A) accurately reflects the outstanding
Z-Axis Purchase Rights, the price at which each is convertible into Z-Axis
Common Stock, the expiration date, and the names of the record and
beneficial owners. The Z-Axis Purchase Rights shall have the uniform
expiration date of May 1, 2011, subject to the Closing of the Exchange
under this Agreement.
(b) Except for Z-Axis LLC, which is a wholly owned Subsidiary of
Z-Axis, Z-Axis has no (and prior to the Closing will have no) other
Subsidiaries and does not (and prior to the Closing, will not) otherwise
hold any equity, membership, partnership, joint venture or other ownership
interest in any entity.
5.7 Litigation. There is no Litigation of any nature pending or
threatened against or involving Z-Axis or the transactions contemplated by this
Agreement or any transactions
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contemplated hereby, nor does Z-Axis have any reasonable basis to believe that
there is any basis for any such Litigation.
5.8 Intellectual Property. SCHEDULE 5.8 sets forth all of the names
under which Z-Axis does business and all intellectual property rights used in
the businesses of Z-Axis as currently conducted, including all patents and
patent applications, brand names, brand marks, fictitious names, trademarks,
trademark registrations and applications, service marks, service xxxx
registrations and applications, logos, designs, slogans and general intangibles
of like nature, together with all goodwill related to the foregoing; trade
names, copyrights, copyright registrations and applications; computer programs;
technology, trade secrets, know-how, confidential information, proprietary
processes and formulae (collectively, the "Z-AXIS INTELLECTUAL PROPERTY").
Z-Axis owns, or has a valid license to use, all Z-Axis Intellectual Property
free and clear of all Liens. Each item of Z-Axis Intellectual Property is valid
and subsisting, in full force and effect in all material respects, and has not
been canceled, expired or abandoned. SCHEDULE 5.8 sets forth a complete and
accurate list of all agreements pertaining to the use of or granting any right
to use or practice any rights under any Z-Axis Intellectual Property by or
Z-Axis (other than "shrink-wrap" license agreements relating to commercial
off-the-shelf software) and identifies whether Z-Axis is the licensee or
licensor thereunder (each a "Z-AXIS LICENSE" and, collectively, the "Z-AXIS
LICENSES"). The Z-Axis Licenses are valid and binding obligations of each party
thereto, enforceable against each such party in accordance with their terms, and
there are no breaches or defaults under any of the Z-Axis Licenses. Each Z-Axis
License will continue to be valid, binding and enforceable on identical terms
following the consummation of the transactions contemplated by this Agreement
including the transfer of the Z-Axis Business to Z-Axis LLC. Z-Axis' current or
past use of the Z-Axis Intellectual Property does not infringe and has not
infringed upon the rights owned or controlled by any third party and, to the
knowledge of Z-Axis or the Z-Axis Principal Stockholders, (i) no third party is
infringing upon any of the Z-Axis Intellectual Property, and (ii) Z-Axis has not
to date, infringed upon the intellectual property of any other person or entity.
SCHEDULE 5.8 sets forth an accurate and complete list of all Web sites, by URL
(the "Z-AXIS WEB SITES"), used by Z-Axis and a description of the lines of
business in and purposes for which each such Z-Axis Web Site is used.
5.9 Financial Statements. Z-Axis has delivered to SMM (i) its audited
financial statements (balance sheets, statements of income, statement of changes
in stockholders' equity and statements of cash flows) as at, and for the fiscal
years ended March 31, 2005 and March 31, 2004 and (ii) its unaudited condensed
financial statements (condensed balance sheets, statements of operations, and
statements of cash flows) as at, and for the nine-month period ended, December
31, 2005 (collectively, the "Z-AXIS FINANCIAL STATEMENTS"). The Z-Axis Financial
Statements complied as to form in all material respects with applicable
accounting requirements as of their respective dates, and were prepared in
accordance with GAAP on a consistent basis throughout the periods indicated and
with each other (except as may be indicated in the notes thereto or as permitted
by Regulation S-B, as applicable to filings under the 1933 Act and the 1934
Act). The Z-Axis Financial Statements fairly present in all material respects
the financial condition and operating results of Z-Axis as of the dates, and for
the periods, indicated therein, subject, in the case of unaudited financial
statements, to presentation in a condensed format and normal year-end audit
adjustments. Z-Axis maintains and will continue to maintain a standard system of
accounting established and administered in accordance with GAAP or, where
permitted, in accordance with Regulation S-B.
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5.10 Books and Records. The minute books and stock record books and
other similar records of Z-Axis have been provided or made available to SMM or
its counsel prior to the execution of this Agreement. Such minute books contain
an accurate record of all material actions taken at all meetings and by all
written consents in lieu of meetings of the directors, stockholders, and
committees of the board of directors of Z-Axis from inception through the date
hereof.
5.11 Absence of Changes. Since December 31, 2005 (the "Z-AXIS BALANCE
SHEET DATE") there has not been any occurrence or event which, individually or
in the aggregate, could be reasonably expected to have a Material Adverse Effect
on Z-Axis. Since the Z-Axis Balance Sheet Date, Z-Axis has operated its business
in the ordinary course of business consistent with past practice. In addition,
without limiting the generality of the foregoing, except as set forth on
SCHEDULE 5.11 or as contemplated by this Agreement, since the Z-Axis Balance
Sheet Date:
(a) Z-Axis has not entered into any contract in connection with
any transaction involving a proposal to acquire substantially all of the
assets or stock of Z-Axis;
(b) Z-Axis has not entered into any strategic alliance, joint
development, or joint marketing contract;
(c) There has not been any material amendment or other
modification (or agreement to do so), or violation of the terms of, any of
the contracts set forth or described in the SCHEDULE 5.17;
(d) Z-Axis has not entered into any transaction with any officer,
director, stockholder, affiliate, or associate of Z-Axis;
(e) No Litigation has been commenced or, to the knowledge of
Z-Axis, threatened by or against Z-Axis;
(f) Z-Axis has not declared or set aside or paid any dividends on
or made any other distributions (whether in cash, stock or property) in
respect of any Z-Axis Common Stock, or effected or approved any split,
combination or reclassification of any Z-Axis Common Stock except the
Reverse Split, or issued or authorized the issuance of any other securities
in respect of, in lieu of or in substitution for shares of Z-Axis Common
Stock;
(g) There has not been any amendment to Z-Axis' articles of
incorporation or bylaws;
(h) Z-Axis has not made, or agreed to make, payment, discharge,
or other satisfaction, in an amount in excess of $5,000, in any one case,
or $10,000 in the aggregate, of any Claim, Liability or obligation (whether
absolute, accrued, asserted or unasserted, contingent or otherwise), other
than (i) the payment, discharge or satisfaction of Liabilities in the
ordinary course of business consistent with past practices or (ii) the
payment of costs and expenses incurred by Z-Axis as part of fulfilling its
obligations concerning the transactions contemplated by this Agreement;
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(i) Z-Axis has not incurred any indebtedness or guaranteed any
indebtedness, issued or sold any debt securities of Z-Axis, or guaranteed
any debt securities of others;
(j) Z-Axis has not granted or agreed to grant any bonus,
severance or termination pay to any director, officer, employee or
consultant, except payments made pursuant to written Contracts outstanding
on the date hereof, which are set forth on SCHEDULE 5.17 and copies of
which have been delivered to SMM;
(k) Z-Axis has not paid or approved the payment of any
consideration to any current or former officer, director, stockholder,
employee, independent contractor or consultant of Z-Axis outside the
ordinary course of business;
(l) Z-Axis has not made or changed any material election in
respect of Taxes, adopted or changed any accounting method in respect of
Taxes, entered into any Tax allocation, sharing, indemnity or settlement
agreement or compromise of any Claim or assessment in respect of Taxes, or
consented to any extension or waiver of the limitation period applicable to
any Claim or assessment in respect of Taxes with any Governmental Authority
or otherwise; and
(m) Z-Axis has not entered into or approved any contract,
arrangement or understanding or acquiesced in respect of any arrangement or
understanding, to do, engage in, or cause or having the effect of any of
the foregoing.
5.12 No Undisclosed Liabilities. As of the date of execution of this
Agreement, except as reflected or reserved against in the Z-Axis Financial
Statements, there are no Liabilities (whether absolute, accrued or contingent,
fixed or otherwise) of, relating to or affecting Z-Axis or Z-Axis' assets, other
than Liabilities not exceeding $10,000 in the aggregate.
5.13 Filings with the SEC. Z-Axis has made available to SMM each
statement, report, registration statement (with the prospectus in the form filed
pursuant to Rule 424(b) of the 1933 Act), definitive proxy statement, and other
filings filed with the SEC by Z-Axis since inception and, prior to the Closing,
Z-Axis will have furnished or made available to SMM true and complete copies of
any additional documents filed with the SEC by Z-Axis after the date hereof and
prior to the Closing (collectively, the "Z-AXIS SEC DOCUMENTS"). As of their
respective filing dates, the Z-Axis SEC Documents complied in all material
respects with the requirements of the 1934 Act and the 1933 Act. Except as
describe in SCHEDULE 5.13, Z-Axis has timely filed with the SEC all filings
required by the 1934 Act and the 1933 Act and has provided all certifications of
its officers which are required by the Sarbanes Oxley Act of 2002 and the rules
and regulations promulgated in connection therewith (the "SARBANES OXLEY ACT"),
as such rules and regulations have been enacted by the SEC. All documents
required to be filed as exhibits to the Z-Axis SEC Documents have been so filed,
and all material contracts so filed as exhibits are in full force and effect,
except those which have expired in accordance with their terms, and Z-Axis is
not in material default thereof. None of the Z-Axis SEC Documents, as of their
respective dates, contained any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary in order to
make the statements made therein, in light of the circumstances under which they
were made, not misleading; provided, however, that Z-Axis makes no
representations or warranties as to the information contained in or
15
omitted from Z-Axis SEC Documents in reliance upon and in conformity with
information furnished to Z-Axis by or on behalf of counterparties to the
material contracts included in the Z-Axis SEC Documents.
5.14 Taxes.
(a) All Tax Returns required to have been filed by or with
respect to Z-Axis on or before the Closing Date have been duly and timely
filed (including any extensions). All such Tax Returns are true, complete
and accurate in all material respects. All Taxes that are due and payable
by Z-Axis for periods (or portions of periods) ending on or before the
Closing Date, including, but not limited to, any income Taxes attributable
to income earned during the portion of the period ending on or before the
Closing Date (determined using a closing of the books method), have been
paid or accrued on the balance sheets included in the Z-Axis Financial
Statements. Z-Axis has made available to SMM true and correct copies of the
Tax Returns filed by Z-Axis for each of the three most recent fiscal years
for which such returns have been filed.
(b) Z-Axis is not a party to any agreement extending the time
within which to file any Tax Return.
(c) Z-Axis has withheld and paid all Taxes required to have been
withheld and paid and has complied with all information reporting
requirements in connection with amounts paid or owing to any employee,
creditor or independent contractor.
(d) Z-Axis does not have knowledge of any actions by any
Governmental Authority in connection with assessing additional Taxes
against or in respect of it for any past period. There is no dispute or
Claim concerning any Tax Liability of Z-Axis either (i) pending, or to
Z-Axis' knowledge, threatened by any Governmental Authority or (ii) of
which Z-Axis is otherwise aware. There are no Liens for Taxes upon the
assets or properties of Z-Axis other than Liens for Taxes not yet due. No
audit or other proceedings by any Governmental Authority is pending or, to
Z-Axis' knowledge, threatened with respect to any Taxes due from or with
respect to Z-Axis. Z-Axis has delivered to SMM all federal, state, local
and foreign income Tax Returns filed by, and all Tax examination reports
and statements of deficiencies assessed against or agreed to by, Z-Axis
since Z-Axis' inception.
(e) There are no outstanding agreements or waivers extending the
statutory period of limitation applicable to any Tax Returns required to be
filed by, or that include or are treated as including, Z-Axis or with
respect to any Tax assessment or deficiency affecting Z-Axis.
(f) Z-Axis has no Liability for the Taxes of any person or entity
other than the Z-Axis (i) under Section 1.1502-6 of the Treasury
regulations (or any similar provision of state, local or foreign law), (ii)
as a transferee or successor, or (iii) by Contract or otherwise.
(g) Z-Axis has neither agreed to make nor is required to make any
adjustment under Section 481 of the Code.
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(h) Z-Axis is not a party to or bound by any obligations under
any Tax sharing, allocation, indemnity or similar agreement or arrangement.
(i) Z-Axis was not included and is not includable in the Tax
Return of any affiliated, consolidated, combined, unitary or similar group
of corporations.
(j) Z-Axis is not a party to any contract, agreement or
arrangement covering any current or former employee or consultant of Z-Axis
that under certain circumstances could require it to make or give rise to
any payments that are not deductible as a result of the provisions set
forth in Section 162(m) or Section 280G of the Code or the treasury
regulations thereunder.
(k) There is currently no limitation on the utilization of the
net operating losses, built-in losses, capital losses, Tax credits or other
similar items of Z-Axis under (i) Section 382 of the Code, (ii) Section 383
of the Code, (iii) Section 384 of the Code, and (iv) Section 1502 of the
Code and Treasury regulations promulgated thereunder.
(l) Z-Axis is not, and has not been, required to make any
disclosure to any Tax authority with respect to a "listed transaction"
pursuant to Section 1.6011-4(b)(2) of the Treasury Regulations.
(m) Z-Axis has no reason to believe that any conditions exist
that might prevent or impede the Exchange from qualifying as a
reorganization within the meaning of Section 368(a) of the Code.
5.15 Benefit Plans. Except as described in SCHEDULE 5.15, Z-Axis does
not maintain (i) any employee benefit plans (as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), (ii) and
is not required to contribute to a "welfare plan" (as defined in Section 3(1) of
ERISA) which provides retiree or other post-employment welfare benefits or
insurance coverage (other than "continuation coverage" (as defined in Section
602 of ERISA)); (iii) any stock option, stock purchase, phantom stock, stock
appreciation right, supplemental retirement, severance, medical, dental, vision
care, disability, employee relocation, cafeteria benefit, dependent care, life
insurance or accident insurance plans, programs or arrangements, (iv) bonus,
pension, profit sharing, savings, deferred compensation or incentive plans,
programs or arrangements, and (v) other fringe or employee benefit plans,
programs or arrangements. Z-Axis has not incurred or could reasonably be
expected to incur any withdrawal Liability under Section 4201 of ERISA, any
Liability under Section 4062, 4063, or 4064 of ERISA, or any other Liability
under Title IV of ERISA.
5.16 Property, Assets.
(a) As of the Execution Date, Z-Axis, and as of the Closing
(following the Z-Axis Transfer), Z-Axis LLC, owns, or otherwise has a valid
leasehold interest providing sufficient and legally enforceable rights to
use, all of the assets used in the Z-Axis Business. Such assets are
sufficient in nature, quality and quantity to conduct such business as it
is currently conducted. As of the Execution Date, Z-Axis, and as of the
Closing (following the Z-Axis Transfer), Z-Axis LLC have good and
marketable title to all the assets used in its
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respective business, or associated leaseholds therein, free and clear of
all Liens. Such assets are in good operating condition and repair (ordinary
wear and tear excepted), have been reasonably maintained consistent with
standards generally followed in the industry, are suitable for their
present uses and, in the case of owned structures, are structurally sound.
As of the Closing, no other company owns or retains control over any asset
used in the Z-Axis Business except in the case of leased assets.
(b) Neither Z-Axis nor Z-Axis LLC owns any real property.
SCHEDULE 5.16 contains a list of all real property (collectively, "Z-AXIS
REAL PROPERTY") leased or subleased by Z-Axis (a "Z-AXIS LEASE" and,
collectively, the "Z-AXIS LEASES"), identifying the lessor and lessee,
whether or not the lessor is an affiliate of Z-Axis, or an officer,
director, partner, member, manager or stockholder of Z-Axis or of any
affiliate of Z-Axis (or any immediate family member of any such person),
rental rate, lease term, expiration date, square footage and existence of
any renewal option. Except as set forth in Schedule 5.16, no lessor of any
office or facility occupied by Z-Axis is an affiliate of Z-Axis, or an
officer, director, partner, member or stockholder of Z-Axis or an affiliate
of Z-Axis (or an immediate family member of any such person). With respect
to each Z-Axis Lease, Z-Axis has a valid leasehold interest, free and clear
of all Liens except for defects in title or Liens which do not and will not
interfere with the use of such Z-Axis Real Property as presently used or
intended by Z-Axis to be used, or otherwise materially impair business
operations at such properties, or materially detract from the value of such
Z-Axis Real Property as presently used or intended by Z-Axis to be used.
Each Z-Axis Lease is legal, valid and binding on and enforceable against
Z-Axis and the other parties thereto and is in full force and effect. Upon
the consummation of the transactions contemplated herein, including the
Z-Axis Transfer, assuming the receipt of the consent of certain landlords
by Z-Axis in connection with the change of control contemplated by this
Agreement, each Lease shall remain in full force and effect with Z-Axis,
LLC as the sole lessee and obligor without any loss of benefits thereunder
and without the need to obtain any consent of any party thereto to the
transactions contemplated herein. Z-Axis has delivered to SMM true, correct
and complete copies of all Z-Axis Leases, as such leases have been amended
to date. Z-Axis is not in default, and will not be in default as a result
of the passage of time, with respect to any Z-Axis Lease.
(c) SCHEDULE 5.16 sets forth a complete and accurate list of all
furniture, equipment, automobiles and all other tangible personal property
(including its net book value) owned by, in the possession of, or used by,
Z-Axis which have a book value in excess of $500 per item. Except as set
forth in SCHEDULE 5.16, such personal property is not held under any lease,
security agreement, conditional sales contract, or other retention or
security arrangement or subject to any Liens, or is located other than in
the possession of Z-Axis.
5.17 Contracts.
(a) Except for the contracts described in SCHEDULE 5.17, Z-Axis
is not a party to or subject to any contract, arrangement, agreement,
license, lease, commitment, instrument of any nature, written or oral
(collectively, the "Z-AXIS CONTRACTS").
(b) Each Contract to which Z-Axis is a party or by which is bound
(i) is valid and binding on such entity and each other party thereto, (ii)
is in full force and effect
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unamended, (iii) has not been breached by such entity or any other party
thereto, (iv) contains no liquidated damages, penalty or similar provision,
and (v) will continue to be legal, valid, binding, enforceable and in full
force and effect on identical terms as of the Closing, with respect to
Z-Axis, LLC and not with respect to New SMM, immediately after giving
effect to the consummation of the transactions contemplated by this
Agreement including the Z-Axis Transfer. Z-Axis has not been notified that
any party to any such Z-Axis Contract intends to cancel, withdraw, modify
or amend such Z-Axis Contract. Z-Axis and, to the knowledge of Z-Axis, each
other party thereto, has performed all material obligations required to be
performed by it on or prior to the date hereof under each Z-Axis Contract,
and Z-Axis is not currently aware of any facts from which it could
reasonably conclude that it or any other party thereto will not be able to
perform all obligations required to be performed by it or such other party
subsequent to the date hereof under each such Z-Axis Contract.
5.18 Personnel. SCHEDULE 5.18 lists the names of all current
directors, officers, employees, independent contractors and consultants of
Z-Axis, setting forth the job title of, and salary (including bonuses and
commissions) payable to each such person. The employment of each of Z-Axis'
employees is "at will." Z-Axis has no obligation (i) to provide any particular
form or period of notice prior to termination, or (ii) to pay any of such
employees any severance benefits in connection with their termination of
employment or service. In addition, no severance pay will become due to any of
Z-Axis' employees under any agreement, plan or program as a result of the
transactions set forth in this Agreement, including termination of their
employment by Z-Axis and their contemporaneous employment by Z-Axis LLC.
5.19 Compliance with Laws; Permits.
(a) Z-Axis has complied with each Law, rule, regulation,
judgment, order and decree of any Governmental Authority to which Z-Axis,
or Z-Axis' business, operations, or assets is subject and is not currently
in violation of any of the foregoing.
(b) Z-Axis owns, holds, possesses or lawfully uses in the
operation of Z-Axis' business all permits which are in any manner necessary
for Z-Axis' conduct of its business as now or previously conducted. Z-Axis
is not in default, nor has Z-Axis received any notice of any Claim of
default, with respect to any such permits.
5.20 Brokers or Finders. Z-Axis has no commitment to, and is not aware
of any commitment to, any agent, broker, investment banker or other firm or
person for any broker's or finder's fee or any other commission or similar fee
in connection with any of the transactions contemplated by this Agreement.
5.21 Insurance. Z-Axis has in full force and effect as of the Closing
Date such insurance policies as are customary in its industry (including
policies providing property, casualty, employment practices, liability and
workers' compensation coverage and bond and surety arrangements) including
coverage, deductibles and ceilings that are reasonable and customary in the
industry. SCHEDULE 5.21 sets forth the following information with respect to
each insurance policy (including policies providing property, casualty, errors
and omissions, employment practices, liability and workers' compensation
coverage and bond and surety arrangements) to which Z-Axis is a party, a named
insured or otherwise the beneficiary of coverage:
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(a) the name of the insurer, the name of the policyholder and the
name of each covered insured;
(b) the policy number and the period of coverage;
(c) the scope (including an indication of whether the coverage
was on a claims made, occurrence or other basis) and amount (including a
description of how deductibles and ceilings are calculated and operate) of
coverage; and
(d) a description of any retroactive premium adjustments or other
loss-sharing arrangements.
With respect to each such insurance policy, (i) the policy is legal, valid,
binding, enforceable and in full force and effect and shall remain in effect
through Closing, and (ii) Z-Axis is not, and to Z-Axis' knowledge no other party
to the policy is, in breach or default (including with respect to the payment of
premiums or the giving of notices), and no event has occurred which, with notice
or the lapse of time or both, would constitute such a breach or default, or
permit termination, modification or acceleration, under the policy. Z-Axis shall
notify each insurer that as of the Closing, the beneficiary and obligor for
payment of all policy premiums under all such policies shall thereupon become
Z-Axis LLC.
5.22 Environmental Compliance.
(a) Z-Axis has complied and is in compliance with all
Environmental Laws.
(b) Z-Axis has no Liability, known or unknown, contingent or
absolute, under any Environmental Law, and Z-Axis is not responsible for
any such Liability of any other person under any Environmental Law, whether
by contract, by operation of law or otherwise. There are no pending or
threatened Environmental Claims as to Z-Axis, and neither Z-Axis nor any
officer, director or stockholder of Z-Axis has directly or indirectly
received any notice of any Environmental Claim from any Governmental
Authority or any other person or entity or knows or suspects any fact(s)
which might reasonably form the basis for any such Environmental Claim.
5.23 Representations Complete. None of the representations or
warranties made by Z-Axis herein or in any certificate or other instrument
furnished by Z-Axis pursuant to this Agreement, when all such documents are read
together in their entirety, contains or will contain as of the Closing any
untrue statement of a material fact, or omits or will omit as of the Closing to
state any material fact necessary in order to make the statements contained
herein or therein, in the light of the circumstances under which made, not
misleading.
5.24 Independent Accountants. Xxxxxxxx Xxxxx Xxxxxxx & Xxxxxxx PC
("EKSH") are independent public accountants with respect to Z-Axis within the
meaning of the 1933 Act and the applicable published rules and regulations
thereunder and the Public Company Accounting Oversight Board (including the
rules and regulations promulgated by such entity, the "PCAOB"). EKSH is duly
registered and in good standing with the PCAOB. EKSH has not, during the periods
covered by
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the Z-Axis Financial Statements, provided to Z-Axis any non-audit services, as
such term is used in Section 10A(g) of the 0000 Xxx.
5.25 Sarbanes Oxley Compliance. Z-Axis has, since being legally
required to do so, and its directors and officers, in their capacities as such
have, taken all actions necessary to comply with the provisions of the Sarbanes
Oxley Act, including Section 402 related to loans.
5.26 FCPA Compliance. Neither Z-Axis nor, to the knowledge of Z-Axis,
any Z-Axis Principal Stockholder, director, officer, agent, employee or
affiliate of Z-Axis is aware of or has taken any action, directly or indirectly,
that would result in a violation by such persons of the FCPA, including, without
limitation, making use of the mails or any means or instrumentality of
interstate commerce corruptly in furtherance of an offer, payment, promise to
pay or authorization of the payment of any money, or other property, gift,
promise to give, or authorization of the giving of anything of value to any
"foreign official" (as such term is defined in the FCPA) or any foreign
political party or official thereof or any candidate for foreign political
office, in contravention of the FCPA and Z-Axis and, to the knowledge of Z-Axis,
its affiliates have conducted their businesses in compliance with the FCPA and
have instituted and maintain policies and procedures designed to ensure, and
which are reasonably expected to continue to ensure, continued compliance
therewith.
5.27 Financial Recordkeeping and Reporting Compliance. The operations
of Z-Axis are and have been conducted at all times in compliance with applicable
financial recordkeeping and reporting requirements of the Currency and Foreign
Transactions Reporting Act of 1970, as amended, the money laundering statutes of
all jurisdictions, including the Money Laundering Control Act of 1986, as
amended, and any related or similar rules, regulations or guidelines, issued,
administered or enforced by any Governmental Authority (collectively, the "MONEY
LAUNDERING LAWS") and no action, suit or proceeding by or before any court or
Governmental Authority or any arbitrator involving Z-Axis with respect to the
Money Laundering Laws is pending or, to the best knowledge of Z-Axis,
threatened. Z-Axis has not violated (i) the Bank Secrecy Act, as amended, or
(ii) the Uniting and Strengthening of America by Providing Appropriate Tools
Required to Intercept and Obstruct Terrorism (USA PATRIOT ACT) Act of 2001,
and/or the rules and regulations promulgated under any such law, or any
successor law.
5.28 OFAC Compliance. Neither Z-Axis nor, to the knowledge of Z-Axis,
any Z-Axis Principal Stockholder, director, officer, agent, employee or
affiliate of Z-Axis is currently subject to any U.S. sanctions administered by
the Office of Foreign Assets Control of the U.S. Treasury Department ("OFAC"),
and Z-Axis has not knowingly directly or indirectly lent, contributed or
otherwise made available funds to any Subsidiary, joint venture partner or other
person or entity, for the purpose of financing the activities of any person
currently subject to any U.S. sanctions administered by OFAC.
5.29 Non-Compete and Non-Solicitation Agreements. No officer or
employee of Z-Axis, and none of the Z-Axis Principal Stockholders, is subject to
any non-competition agreement or non-solicitation agreement with any employer or
prior employer which could materially affect his or her ability to be and act in
the capacity of an officer, employee or Principal Stockholder of Z-Axis or, at
the time of Closing, Z-Axis LLC.
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5.30 Internal Controls. Z-Axis has a system of internal accounting
controls sufficient to provide reasonable assurance that (i) transactions are
executed in accordance with management's general or specific authorizations;
(ii) transactions are recorded as necessary to permit preparation of financial
statements in conformity with GAAP and to maintain asset accountability; (iii)
access to assets is permitted only in accordance with management's general or
specific authorization; and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
6. Representations and Warranties of SMM. SMM hereby represents and
warrants, and concerning Section 6.6(a) only SMM and each of the SMM Principal
Stockholders hereby represent and warrant, jointly and severally, to Z-Axis and
the Z-Axis Principal Stockholders as follows, which representations and
warranties are true, correct and complete as of the Execution Date and will be
true, correct and complete as of the Closing (as though made then and as though
the Closing were substituted for the date of this Agreement throughout this
Section 6), except as set forth in the Disclosure Schedule. Nothing in the
Disclosure Schedule shall be deemed adequate to disclose an exception to a
representation or warranty made herein, however, unless the Disclosure Schedule
identifies the exception with particularity and describes the relevant facts in
detail. Without limiting the generality of the foregoing, the mere listing (or
inclusion of a copy) of a document or other item shall not be deemed adequate to
disclose an exception to a representation or warranty made herein (unless the
representation or warranty has to do with the existence of the document or other
item itself). The Disclosure Schedule will be arranged in paragraphs
corresponding to the lettered and numbered paragraphs contained in this Section
6. References in this Section 6 to SMM will, in all instances, be read to
include SMM Subsidiary unless specifically provided to the contrary below or
unless the context otherwise requires.
6.1 Organization and Qualification.
(a) As of the Closing, SMM is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Colorado and has all requisite power and authority to own, operate and
lease its properties and to carry on its business as now being conducted.
SMM is qualified and licensed to do business and is in good standing as a
foreign corporation in each jurisdiction in which the ownership, use,
licensing or leasing of its assets and properties, or the conduct or nature
of its business, makes such qualification, licensing or admission
necessary, except for such failure to be so duly qualified, licensed and in
good standing that would not reasonably be expected to have a Material
Adverse Effect on SMM. SMM has the requisite corporate power to own, lease
and operate its properties and assets, and to carry on its business as
currently conducted and as proposed to be conducted. SCHEDULE 6.1 sets
forth each jurisdiction where SMM is so qualified or licensed to do
business.
(b) SMM has delivered to Z-Axis complete and correct copies of
its (i) articles of incorporation and bylaws, which articles of
incorporation and bylaws are in full force and effect and have not been
amended, corrected, restated or superseded in any way, (ii) minutes of all
directors' and shareholders' meetings, as the same are now available to SMM
in its records or those of its professionals, all of which are complete and
accurate as of the date hereof, (iii) stock certificate books and all other
records of SMM, which collectively
22
correctly set forth the record ownership of all outstanding shares of
capital stock and all rights to purchase capital stock of SMM and (iv) form
of stock certificates, option plans and agreements and rights to purchase
shares of capital stock of SMM. SMM is not in violation, and has not taken
any action in violation, of any provisions of its articles of incorporation
or bylaws.
6.2 Authority; Enforceability. SMM has all requisite power and
authority to execute and deliver this Agreement, to perform each of its
obligations hereunder, and to consummate the transactions contemplated hereby.
All actions required on the part of SMM for such execution, delivery, and
performance of this Agreement have been duly and validly taken. Assuming due
execution and delivery by each of the other parties hereto, this Agreement
constitutes the legal, valid, and binding obligation of SMM enforceable against
SMM in accordance with its terms, except as the enforceability thereof may be
limited by bankruptcy, insolvency, moratorium, and other similar Laws affecting
creditors' rights generally and by general equitable principles.
6.3 No Conflicts. Except as set forth in SCHEDULE 6.3, the execution
and delivery by SMM of this Agreement does not, and the performance and
consummation by SMM of the transactions contemplated hereby will not (i)
conflict with such entity's articles of incorporation or bylaws; (ii) conflict
with or result in a breach or violation of, or default under, or give rise to
any right of acceleration or termination of, any of the terms, conditions or
provisions of any note, lease, license, agreement or other instrument or
obligation to which SMM is a party or by which such entity's assets or
properties are bound; (iii) result in the creation of any Encumbrance on any of
the assets or properties of SMM; or (iv) violate any law, rule, regulation or
order applicable to SMM or any of SMM's assets or properties.
6.4 No Defaults. Except as set forth in SCHEDULE 6.4, SMM is not (i)
in violation of any provision of its articles of incorporation or bylaws or (ii)
in default or violation of any term condition or provision of (A) any judicial
or Governmental Authority decree or order applicable to SMM or (B) any
agreement, note, material Contract, lease or instrument, permit or license to
which SMM is a party.
6.5 Consents and Approvals. Except as set forth in SCHEDULE 6.5, no
approval, consent, waiver or authorization of, or registration, declaration or
filing with, exemption by, or any notice to, any Governmental Authority or other
third party is required to be made, obtained, or given by SMM: (a) for or in
connection with the valid execution and delivery by SMM of this Agreement or the
consummation by such party of the transactions contemplated hereby; or (b) as a
condition to the legality, validity or enforceability as against SMM of this
Agreement.
6.6 Capitalization; Subsidiaries.
(a) The authorized capital stock of SMM consists of as of the
Execution Date and the Closing, 50,000,000 shares of SMM Common Stock, of
which 4,475,775 shares of common stock are issued and outstanding. SMM owns
all of the issued and outstanding stock of SMM Subsidiary. As of the
Closing and except as described in SCHEDULE 6.6, all of the issued and
outstanding shares of SMM Capital Stock have been duly authorized and
validly issued, are fully paid and non-assessable, are free of
Encumbrances, are not subject to preemptive rights or rights of first
refusal (other than rights in favor of SMM) created by
23
statute, the articles of incorporation of SMM or any agreement to which SMM
is a party or is bound, and have been offered, issued and sold by SMM in
compliance with all applicable securities Laws. Except as set forth in
EXHIBIT B and Schedule 6.6, (i) no subscription, warrant, option,
convertible security or other right (contingent or otherwise) to purchase
or acquire from SMM any shares of SMM Common Stock is authorized or
outstanding, (ii) SMM has no obligation (contingent or otherwise) to issue
any subscription, warrant, option, convertible security or other such right
or security or to issue or distribute to holders of any shares of SMM
Common any evidence of indebtedness or assets of SMM, and (iii) SMM has no
obligation or right (contingent or otherwise) to purchase, redeem, or
otherwise acquire any shares of SMM Common Stock or any interest therein or
to pay any dividend or any distribution in respect thereof. EXHIBIT A sets
forth the name of each holder of SMM Common Stock, together with the total
number of shares of SMM Common Stock held by each such stockholder.
(b) Except for SMM Subsidiary, SMM has no (and prior to the
Closing will have no) Subsidiaries and does not (and prior to the Closing,
will not) otherwise hold any equity, membership, partnership, joint venture
or other ownership interest in any entity.
6.7 Litigation. There is no Litigation of any nature pending or
threatened against or involving SMM or the transactions contemplated by this
Agreement or any transactions contemplated hereby, nor does SMM have any
reasonable basis to believe that there is any basis for any such Litigation.
6.8 Compliance with Laws; Permits.
(a) Except as set forth in SCHEDULE 6.8, SMM has complied with
each law, rule, regulation, judgment, order and decree of any Governmental
Authority to which SMM, or SMM's business, operations, or assets is subject
and is not currently in violation of any of the foregoing.
(b) SMM owns, holds, possesses and lawfully uses in the operation
of its business all permits which are in any manner necessary for SMM's
conduct of its business as now or previously conducted. SMM is not in
default, nor has SMM received any notice of any Claim of default, with
respect to any such permits.
6.9 Benefit Plans. Except as set forth on SCHEDULE 6.9, SMM does not
maintain (i) any employee benefit plans (as defined in Section 3(3) of ERISA,
(ii) and is not required to contribute to a "welfare plan" (as defined in
Section 3(1) of ERISA) which provides retiree or other post-employment welfare
benefits or insurance coverage (other than "continuation coverage" (as defined
in Section 602 of ERISA)); (iii) any stock option, stock purchase, phantom
stock, stock appreciation right, supplemental retirement, severance, medical,
dental, vision care, disability, employee relocation, cafeteria benefit,
dependent care, life insurance or accident insurance plans, programs or
arrangements, (iv) bonus, pension, profit sharing, savings, deferred
compensation or incentive plans, programs or arrangements, or (v) other fringe
or employee benefit plans, programs or arrangements. SMM has not incurred or
could reasonably be expected to incur any withdrawal Liability under Section
4201 of ERISA, any Liability under Section 4062, 4063, or 4064 of ERISA, or any
other Liability under Title IV of ERISA.
24
6.10 Property, Assets.
(a) SMM owns, or otherwise has a valid leasehold interest
providing sufficient and legally enforceable rights to use, all of the
assets used in the SMM Business. Such assets are sufficient in nature,
quality and quantity to conduct such business as it is currently conducted.
Except as set forth on SCHEDULE 6.10, SMM has good and marketable title to
all the assets used in its respective business, or associated leaseholds
therein, free and clear of all Liens. Such assets are in good operating
condition and repair (ordinary wear and tear excepted), have been
reasonably maintained consistent with standards generally followed in the
industry, are suitable for their present uses and, in the case of owned
structures, are structurally sound. As of the Closing, no other company
owns or retains control over any asset used in the SMM Business except in
the case of leased assets.
(b) SMM owns no real property. SCHEDULE 6.10 contains a list of
all real property (collectively, "SMM REAL PROPERTY") leased or subleased
by SMM (a "SMM LEASE" and, collectively, the "SMM LEASES"), identifying the
lessor and lessee, whether or not the lessor is an affiliate of SMM, or an
officer, director, partner, member, manager or stockholder of SMM or of any
affiliate of SMM (or any immediate family member of any such person),
rental rate, lease term, expiration date, square footage and existence of
any renewal option. Except as set forth in SCHEDULE 6.10, no lessor of any
office or facility occupied by SMM is an affiliate of SMM, or an officer,
director, partner, member or stockholder of SMM or an affiliate of SMM (or
an immediate family member of any such person). With respect to each SMM
Lease, SMM, has a valid leasehold interest, free and clear of all Liens
except for defects in title or Liens which do not and will not interfere
with the use of such Real Property as presently used or intended by SMM to
be used, or otherwise materially impair business operations at such
properties, or materially detract from the value of such SMM Real Property
as presently used or intended by SMM to be used. Each SMM Lease is legal,
valid and binding on and enforceable against SMM and the other parties
thereto and is in full force and effect. Upon the consummation of the
transactions contemplated herein, assuming the receipt of the consent of
certain landlords by SMM in connection with the transactions contemplated
by this Agreement, each SMM Lease shall remain in full force and effect
without any loss of benefits thereunder and without the need to obtain any
consent of any party thereto to the transactions contemplated herein. SMM
has delivered to Z-Axis true, correct and complete copies of all SMM
Leases, as such leases have been amended to date. SMM is not in default,
and will not be in default as a result of the passage of time, with respect
to any SMM Lease.
SCHEDULE 6.10 sets forth a complete and accurate list of all
furniture, equipment, automobiles and all other tangible personal property
(including its net book value) owned by, in the possession of, or used by SMM,
which have a book value in excess of $500 per item. Except as set forth in
SCHEDULE 6.10, such personal property is not held under any lease, security
agreement, conditional sales contract, or other retention or security
arrangement or subject to any Liens, or is located other than in the possession
of SMM.
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6.11 Contracts.
(a) Except for the contracts described in SCHEDULE 6.11, SMM is
not a party to or subject to any contract, arrangement, agreement, license,
lease, commitment, instrument of any nature, written or oral (collectively,
the "SMM CONTRACTS") that provides for aggregate payments or other
commitments in excess of $25,000.
(b) Each Contract to which SMM is a party or by which is bound
(i) is valid and binding on such entity and each other party thereto, (ii)
is in full force and effect unamended, (iii) has not been breached by such
entity or any other party thereto, (iv) contains no liquidated damages,
penalty or similar provision, and (v) will continue to be legal, valid,
binding, enforceable and in full force and effect on identical terms as of
the Closing immediately after giving effect to the consummation of the
transactions contemplated by this Agreement. SMM has not been notified that
any party to any such SMM Contract intends to cancel, withdraw, modify or
amend such SMM Contract. SMM and, to the knowledge of SMM, each other party
thereto has performed all material obligations required to be performed by
it on or prior to the date hereof under each SMM Contract, and SMM is not
currently aware of any facts from which it could reasonably conclude that
it or any other party thereto will not be able to perform all obligations
required to be performed by it or such other party subsequent to the date
hereof under each such SMM Contract.
6.12 Personnel. SCHEDULE 6.12 lists the names of all current
directors, officers, employees, independent contractors and consultants of SMM,
setting forth the job title of, and salary (including bonuses and commissions)
payable to each such person. The employment of each of SMM's employees is "at
will." SMM has no obligation (i) to provide any particular form or period of
notice prior to termination, or (ii) to pay any of such employees any severance
benefits in connection with their termination of employment or service. In
addition, no severance pay will become due to any of SMM's employees under any
agreement, plan or program as a result of the transactions set forth in this
Agreement.
6.13 Brokers or Finders. Except as described in SCHEDULE 6.13, SMM has
no commitment to, and is not aware of any commitment to, any agent, broker,
investment banker or other firm or person for any broker's or finder's fee or
any other commission or similar fee in connection with any of the transactions
contemplated by this Agreement.
6.14 Environmental Compliance.
(a) SMM has complied and is in compliance with all Environmental
Laws.
(b) SMM has no Liability, known or unknown, contingent or
absolute, under any Environmental Law, and SMM is not responsible for any
such Liability of any other person under any Environmental Law, whether by
contract, by operation of law or otherwise. There are no pending or
threatened Environmental Claims as to SMM, and neither SMM nor any officer,
director or stockholder of SMM has directly or indirectly received any
notice of any Environmental Claim from any Governmental Authority or any
other person or entity or knows or suspects any fact(s) which might
reasonably form the basis for any such Environmental Claim.
26
6.15 Financial Statements. SMM has delivered to Z-Axis its audited
financial statements (balance sheets, statements of operations, statements of
changes in stockholders' equity and statements of cash flows) on a consolidated
basis as at, and for the fiscal years ended December 31, 2005 and December 31,
2004 (collectively, the "SMM FINANCIAL STATEMENTS"). The SMM Financial
Statements complied as to form in all material respects with applicable
accounting requirements as of their respective dates, and were prepared in
accordance with GAAP on a consistent basis throughout the periods indicated and
with each other (except as may be indicated in the notes thereto). The SMM
Financial Statements fairly present in all material respects the consolidated
financial condition and operating results of SMM as of the dates, and for the
periods, indicated therein, subject, in the case of unaudited financial
statements, to normal year-end audit adjustments. SMM maintains and will
continue to maintain a standard system of accounting established and
administered in accordance with GAAP.
6.16 Absence of Changes. Since December 31, 2005 (the "SMM BALANCE
SHEET DATE") there has not been any occurrence or event which, individually or
in the aggregate, could be reasonably expected to have a Material Adverse Effect
on SMM. Since the SMM Balance Sheet Date, SMM has operated its business in the
ordinary course of business consistent with past practice. In addition, without
limiting the generality of the foregoing, except as set forth on SCHEDULE 6.16,
since the SMM Balance Sheet Date:
(a) SMM has not entered into any contract in connection with any
transaction involving a proposal to acquire substantially all of the assets
or stock of SMM except this Agreement;
(b) SMM has not entered into any material strategic alliance,
joint development, or joint marketing contract;
(c) There has not been any material amendment or other
modification (or agreement to do so), or violation of the terms of, any of
the SMM Contracts set forth or described in the SCHEDULE 6.11;
(d) SMM has not entered into any transaction with any officer,
director, stockholder, affiliate, or associate of SMM;
(e) No Litigation has been commenced or, to the knowledge of SMM,
threatened by or against SMM;
(f) SMM has not declared or set aside or paid any dividends on or
made any other distributions (whether in cash, stock or property) in
respect of any SMM Common Stock, or effected or approved any split,
combination or reclassification of any SMM Common Stock or issued or
authorized the issuance of any other securities in respect of, in lieu of
or in substitution for shares of SMM Common Stock;
(g) There has not been any amendment to SMM's articles of
incorporation or bylaws;
27
(h) SMM has not made, or agreed to make, payment, discharge,
satisfaction, in an amount in excess of $25,000, in any one case, or
$50,000 in the aggregate, of any Claim, Liability or obligation (whether
absolute, accrued, asserted or unasserted, contingent or otherwise), other
than the payment discharge or satisfaction of Liabilities in the ordinary
course of business consistent with past practices;
(i) SMM has not incurred any indebtedness or guaranteed any
indebtedness, issued or sold any debt securities of SMM, or guaranteed any
debt securities of others;
(j) SMM has not granted, or agreed to grant, any bonus, severance
or termination pay to any director, officer, employee or consultant, except
payments made pursuant to written contracts outstanding on the date hereof,
which are set forth on SCHEDULE 6.11 and copies of which have been
delivered to Z-Axis;
(k) SMM has not paid or approved the payment of any consideration
to any current or former officer, director, stockholder, employee,
independent contractor or consultant of SMM outside the ordinary course of
business;
(l) SMM has not made or changed any material election in respect
of Taxes, adopted or changed any accounting method in respect of Taxes,
entered into any Tax allocation, sharing, indemnity or settlement agreement
or compromise of any Claim or assessment in respect of Taxes, or consented
to any extension or waiver of the limitation period applicable to any Claim
or assessment in respect of Taxes with any Governmental Authority or
otherwise; and
(m) SMM has not entered into or approved any contract,
arrangement or understanding or acquiesced in respect of any arrangement or
understanding, to do, engage in, or cause or having the effect of any of
the foregoing.
6.17 No Undisclosed Liabilities. As of the date of execution of this
Agreement, except as reflected or reserved against in the SMM Financial
Statements, there are no Liabilities (whether absolute, accrued or contingent,
fixed or otherwise) of, relating to or affecting SMM or SMM's assets, other than
Liabilities not exceeding $50,000 in the aggregate.
6.18 Purchase Entirely for Own Account. The Exchange Shares and Z-Axis
Conversion Purchase Rights (the "Z-AXIS SECURITIES") to be received by each SMM
Stockholder and SMM Purchase Rights Holder, as applicable, hereunder will be
acquired for such individual's own account, not as nominee or agent, and not
with a view to the resale or distribution of any part thereof in violation of
the 1933 Act, and such individual has no present intention of selling, granting
any participation in, or otherwise distributing the same in violation of the
1933 Act without prejudice, however, to such individual's right at all times to
sell or otherwise dispose of all or any part of such Z-Axis Securities in
compliance with applicable federal and state securities Laws. Nothing contained
herein shall be deemed a representation or warranty by such individual to hold
the Z-Axis Securities for any period of time; provided, however, that:
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(a) SMM shall take all appropriate action prior to Closing to
obtain from the persons representing 95% of the outstanding securities of
SMM prior to Closing a lock-up commitment which provides that such persons
will not offer, sell, contract to sell, pledge, or otherwise dispose of, or
enter into any transaction which is designed to, or might reasonably be
expected to, result in the disposition (whether by actual disposition or
effective economic disposition due to cash settlement or otherwise) by such
person, directly or indirectly, including the filing (or participation in
the filing) of a registration statement with the SEC in respect of, or
establish or increase a put equivalent position or liquidate or decrease a
call equivalent position within the meaning of Section 16 of the 1934 Act,
any Z-Axis Securities or shares of Common Stock of New SMM, warrants,
options or any other securities convertible into, or exercisable, or
exchangeable for, shares of New SMM Common Stock, or publicly announce an
intention to effect any such transaction, during the period commencing on
the date hereof and ending 365 days after the Closing Date;
(b) such individual is not a broker-dealer registered with the
SEC under the 1934 Act, or an entity engaged in a business that would
require it to be so registered;
(c) as of the Closing Date, no persons to which the Z-Axis
Securities will be issued have or will have rights to the registration of
such Z-Axis Securities, and no persons will have any rights to have their
SMM Common Stock registered for which the Z-Axis Securities are being
exchanged; and
(d) the certificates representing the Z-Axis Securities to be
delivered to the SMM Stockholders upon consummation of the Exchange shall
bear a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), AND ARE
'RESTRICTED SECURITIES' AS THAT TERM IS DEFINED IN RULE 144 UNDER THE
1933 ACT. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD OR
OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE 1933 ACT, OR PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE 1933 ACT, THE AVAILABILITY OF WHICH IS TO BE
ESTABLISHED TO THE SATISFACTION OF THE COMPANY THROUGH REASONABLE
MEANS AS DETERMINED BY THE COMPANY, INCLUDING AN OPINION OF SELLER'S
COUNSEL REASONABLY ACCEPTABLE TO THE COMPANY."
6.19 Intellectual Property. SCHEDULE 6.19 sets forth all of the names
under which SMM does business and all intellectual property rights used in the
businesses of SMM as currently conducted, including all patents and patent
applications, brand names, brand marks, fictitious names, trademarks, trademark
registrations and applications, service marks, service xxxx registrations and
applications, logos, designs, slogans and general intangibles of like nature,
together with all goodwill related to the foregoing; trade names, copyrights,
copyright registrations and applications; computer programs; technology, trade
secrets, know-how, confidential information, proprietary processes and
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formulae (collectively, the "SMM INTELLECTUAL PROPERTY"). SMM owns, or has a
valid license to use, all SMM Intellectual Property free and clear of all Liens.
Each item of SMM Intellectual Property is valid and subsisting, in full force
and effect in all material respects, and has not been canceled, expired or
abandoned. SCHEDULE 6.19 sets forth a complete and accurate list of all
agreements pertaining to the use of or granting any right to use or practice any
rights under any SMM Intellectual Property by or to SMM (other than
"shrink-wrap" license agreements relating to commercial off-the-shelf software)
and identifies whether SMM is the licensee or licensor thereunder (each a "SMM
LICENSE" and, collectively, the "SMM LICENSES"). The SMM Licenses are valid and
binding obligations of each party thereto, enforceable against each such party
in accordance with their terms, and there are no breaches or defaults under any
of the SMM Licenses. Each SMM License will continue to be valid, binding and
enforceable on identical terms following the consummation of the transactions
contemplated by this Agreement. SMM's current or past use of the SMM
Intellectual Property does not infringe and has not infringed upon the rights
owned or controlled by any third party and, to the knowledge of SMM or the SMM
Principal Stockholders, (i) no third party is infringing upon any of the SMM
Intellectual Property, and (ii) SMM has not to date infringed upon the
intellectual property of any other person or entity. SCHEDULE 6.19 sets forth an
accurate and complete list of all Web sites, by URL (the "SMM WEB SITES"), used
by SMM and a description of the lines of business in and purposes for which each
such SMM Web Site is used.
6.20 Taxes.
(a) All Tax Returns required to have been filed by or with
respect to SMM on or before the Closing Date have been duly and timely
filed (including any extensions). All such Tax Returns are true, complete
and accurate in all material respects. All Taxes that are due and payable
by SMM for periods (or portions of periods) ending on or before the Closing
Date have been paid or accrued on the balance sheets included in the SMM
Financial Statements. SMM has made available to Z-Axis true and correct
copies of the Tax Returns filed by SMM for each of the three most recent
fiscal years for which such returns have been filed.
(b) SMM is not a party to any agreement extending the time within
which to file any Tax Return.
(c) SMM has withheld and paid all Taxes required to have been
withheld and paid in connection with amounts paid or owing to any employee,
creditor or independent contractor.
(d) SMM does not have knowledge of any actions by any
Governmental Authority in connection with assessing additional Taxes
against or in respect of it for any past period. There is no dispute or
Claim concerning any Tax Liability of SMM either (i) pending, or to SMM's
knowledge, threatened by any Governmental Authority or (ii) of which SMM is
otherwise aware. There are no Liens for Taxes upon the assets or properties
of SMM other than Liens for Taxes not yet due. No audit or other
proceedings by any Governmental Authority is pending or, to SMM's
knowledge, threatened with respect to any Taxes due from or with respect to
SMM. SMM has delivered to Z-Axis all federal, state, local and foreign
income Tax Returns filed by, and all Tax examination reports and statements
of deficiencies assessed against or agreed to by, SMM since SMM's
inception.
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(e) There are no outstanding agreements or waivers extending the
statutory period of limitation applicable to any Tax Returns required to be
filed by, or that include or are treated as including, SMM or with respect
to any Tax assessment or deficiency affecting SMM.
(f) SMM has no Liability for the Taxes of any person or entity
other than the SMM (i) under Section 1.1502-6 of the Treasury regulations
(or any similar provision of state, local or foreign law), (ii) as a
transferee or successor, or (iii) by Contract or otherwise.
(g) SMM has neither agreed to make nor is required to make any
adjustment under Section 481 of the Code.
(h) SMM is not a party to or bound by any obligations under any
Tax sharing, allocation, indemnity or similar agreement or arrangement.
(i) SMM was not included and is not includable in the Tax Return
of any affiliated, consolidated, combined, unitary or similar group of
corporations.
(j) SMM is not a party to any contract, agreement or arrangement
covering any current or former employee or consultant of SMM that under
certain circumstances could require it to make or give rise to any payments
that are not deductible as a result of the provisions set forth in Section
162(m) or Section 280G of the Code or the treasury regulations thereunder.
(k) Except as disclosed in SCHEDULE 6.20, there is currently no
limitation on the utilization of the net operating losses, built-in losses,
capital losses, Tax credits or other similar items of SMM under (i) Section
382 of the Code, (ii) Section 383 of the Code, (iii) Section 384 of the
Code, and (iv) Section 1502 of the Code and Treasury regulations
promulgated thereunder.
(l) SMM is not, and has not been, required to make any disclosure
to any Tax authority with respect to a "listed transaction" pursuant to
Section 1.6011-4(b)(2) of the Treasury Regulations.
(m) SMM has no reason to believe that any conditions exist that
might prevent or impede the Exchange from qualifying as a reorganization
within the meaning of Section 368(a) of the Code.
6.21 Insurance. SMM has in full force and effect as of the Closing
Date such insurance policies as are customary in its industry (including
policies providing property, casualty, employment practices, liability and
workers' compensation coverage and bond and surety arrangements) including
coverage, deductibles and ceilings that are reasonable and customary in the
industry. SCHEDULE 6.21 sets forth the following information with respect to
each insurance policy (including policies providing property, casualty, errors
and omissions, employment practices, liability and workers' compensation
coverage and bond and surety arrangements) to which SMM is a party, a named
insured or otherwise the beneficiary of coverage:
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(a) the name of the insurer, the name of the policyholder and the
name of each covered insured;
(b) the policy number and the period of coverage;
(c) the scope (including an indication of whether the coverage
was on a claims made, occurrence or other basis) and amount (including a
description of how deductibles and ceilings are calculated and operate) of
coverage; and
(d) a description of any retroactive premium adjustments or other
loss-sharing arrangements.
(e) With respect to each such insurance policy, (i) the policy is
legal, valid, binding, enforceable and in full force and effect and shall
remain in effect through Closing, and (ii) SMM is not, and to SMM's
knowledge no other party to the policy is, in breach or default (including
with respect to the payment of premiums or the giving of notices), and no
event has occurred which, with notice or the lapse of time or both, would
constitute such a breach or default, or permit termination, modification or
acceleration, under the policy. SMM shall notify each insurer that as of
the Closing, New SMM shall be named as an additional beneficiary under all
such policies.
6.22 Books and Records. The minute books and stock record books and
other similar records of SMM have been provided or made available to Z-Axis or
its counsel prior to the execution of this Agreement. Such minute books contain
an accurate record of all material actions taken at all meetings and by all
written consents in lieu of meetings of the directors, stockholders, and
committees of the board of directors of SMM from inception through the date
hereof.
6.23 Representations Complete. None of the representations or
warranties made by SMM herein or in any certificate or other instrument
furnished by SMM pursuant to this Agreement, when all such documents are read
together in their entirety, contains or will contain as of the Closing any
untrue statement of a material fact, or omits or will omit as of the Closing to
state any material fact necessary in order to make the statements contained
herein or therein, in the light of the circumstances under which made, not
misleading.
6.24 Independent Accountants. Xxxx & Associates LLP ("XXXX") are
independent public accountants with respect to SMM within the meaning of the
1933 Act and the applicable published rules and regulations thereunder and the
rules and regulations promulgated by the PCAOB. Xxxx is duly registered and in
good standing with the PCAOB. Xxxx has not, during the periods covered by the
SMM Financial Statements, provided to SMM any non-audit services, as such term
is used in Section 10A(g) of the 0000 Xxx.
6.25 Sarbanes Oxley Compliance. As soon as it is legally required to
do so, New SMM and its directors and officers, in their capacities as such,
intend to take all actions necessary to comply with any provision of the
Sarbanes Oxley Act and the rules and regulations promulgated in connection
therewith, including Section 402 related to loans and Sections 302 and 906
related to certifications.
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6.26 FCPA Compliance. Neither SMM nor, to the knowledge of SMM, any
SMM Principal Stockholder, director, officer, agent, employee or affiliate of
SMM is aware of or has taken any action, directly or indirectly, that would
result in a violation by such persons of the FCPA, including, without
limitation, making use of the mails or any means or instrumentality of
interstate commerce corruptly in furtherance of an offer, payment, promise to
pay or authorization of the payment of any money, or other property, gift,
promise to give, or authorization of the giving of anything of value to any
"foreign official" (as such term is defined in the FCPA) or any foreign
political party or official thereof or any candidate for foreign political
office, in contravention of the FCPA and SMM and, to the knowledge of SMM, its
affiliates have conducted their businesses in compliance with the FCPA and have
instituted and maintain policies and procedures designed to ensure, and which
are reasonably expected to continue to ensure, continued compliance therewith.
6.27 Financial Recordkeeping and Reporting Compliance. The operations
of SMM are and have been conducted at all times in compliance with applicable
financial recordkeeping and reporting requirements of the Money Laundering Laws,
and no action, suit or proceeding by or before any court or Governmental
Authority or any arbitrator involving SMM with respect to the Money Laundering
Laws is pending or, to the best knowledge of SMM, threatened. SMM has not
violated (i) the Bank Secrecy Act, as amended, or (ii) the Uniting and
Strengthening of America by Providing Appropriate Tools Required to Intercept
and Obstruct Terrorism (USA PATRIOT ACT) Act of 2001, and/or the rules and
regulations promulgated under any such law, or any successor law.
6.28 OFAC Compliance. Neither SMM nor, to the knowledge of SMM, any
SMM Principal Stockholder, director, officer, agent, employee or affiliate of
SMM is currently subject to any U.S. sanctions administered by OFAC, and SMM has
not knowingly directly or indirectly lent, contributed or otherwise made
available funds to any Subsidiary, joint venture partner or other person or
entity, for the purpose of financing the activities of any person currently
subject to any U.S. sanctions administered by OFAC.
6.29 Non-Compete and Non-Solicitation Agreements. No officer or
employee of SMM, and none of the SMM Principal Stockholders, is subject to any
non-competition agreement or non-solicitation agreement with any employer or
prior employer which could materially affect his or her ability to be and act in
the capacity of an officer, employee or Principal Stockholder of SMM or, at the
time of Closing, New SMM.
6.30 Internal Controls. SMM has a system of internal accounting
controls sufficient to provide reasonable assurance that (i) transactions are
executed in accordance with management's general or specific authorizations;
(ii) transactions are recorded as necessary to permit preparation of financial
statements in conformity with GAAP and to maintain asset accountability; (iii)
access to assets is permitted only in accordance with management's general or
specific authorization; and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
7. Certain Agreements.
7.1 Access And Information. Z-Axis shall give to SMM and its
representatives, and SMM shall give to Z-Axis and its representatives, during
normal business hours from the Execution Date until the Closing, full access to
all properties, books, contracts and records (including
33
Tax returns and insurance policies) of or relating to SMM or Z-Axis,
respectively, with all information reasonably requested by the other Party.
Except as agreed to by SMM and Z-Axis, all information obtained hereunder which
is not otherwise public shall be held confidential and, in the event of
termination of this Agreement, all documents (including copies thereof) obtained
hereunder containing such information shall be destroyed or returned to the
Party from which they were obtained. Nothing in this Agreement shall diminish or
modify the obligations of the Parties under the confidentiality agreement
previously executed by the Parties.
7.2 Stockholders Authorization. SMM shall provide Z-Axis with evidence
of the approval of this Agreement and the transactions contemplated by this
Agreement that require approval by the SMM Stockholders and/or the SMM Purchase
Rights Holders in accordance with all applicable Laws and the governing
documents of SMM. Z-Axis shall provide SMM with evidence of the approval by the
Z-Axis Stockholders of this Agreement, the Reverse Split, and the other
transactions contemplated by this Agreement that require approval of the Z-Axis
Stockholders in accordance with all applicable Laws and the governing documents
of Z-Axis. Each of the SMM Principal Stockholders and the Z-Axis Principal
Stockholders agrees that he or she will vote as a stockholder of SMM or Z-Axis,
as the case may be, in his or her individual capacity, in favor of the Exchange
and the transactions contemplated by this Agreement and that their respective
obligations to act in the best interests of SMM and Z-Axis, respectively, in
their capacities as directors (as the case may be) and in accordance with their
fiduciary duties shall not in any way be affected by the foregoing.
7.3 Operation Of Business. Each of SMM and Z-Axis agrees with the
other that from the Execution Date to the Closing, except as otherwise consented
to or approved by the other in writing, each will operate its business as
presently operated in the ordinary course, and, consistent with those
operations, each of SMM and Z-Axis will substantially comply with all applicable
legal and contractual obligations, except where noncompliance will not cause a
Material Adverse Effect on their respective operations, and will use its best
efforts consistent with past practices to preserve the goodwill of its
suppliers, customers and others with whom it has business relationships; and
neither SMM nor Z-Axis, without the written consent of the other Party, (a)
shall institute nor use any methods of purchase, sale, lease, management,
accounting or operation that are inconsistent with practices normally followed
or that vary substantially from those methods used by that Party as of the date
of this Agreement, (b) will take any action (or omit to take any action) within
their control (as opposed to actions taken or omitted by third parties as to
which that Party does not exercise control), which action or omission would
cause any representation to be untrue at any time prior to the Execution Date as
if that representation or warranty were made at and as of the Execution Date, or
make any change in any method of reporting income or expenses for federal income
Tax purposes unless otherwise required by applicable Law.
7.4 Preservation Of Business. Unless it has the written consent of the
other Party to this Agreement, SMM and Z-Axis will each use its best efforts to
preserve its business organization intact and to preserve its present
relationships with suppliers, customers and others having business relationships
with it.
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7.5 Tax Cooperation.
(a) Following the Closing, New SMM, SMM, Z-Axis LLC, and Z-Axis
Principal Stockholders agree to cooperate, and cause their respective
directors, managers, employees, officers and representatives to cooperate,
with each other and with each other's respective agents, including
accounting firms and legal counsel, in connection with any proposed
adjustment to Taxes relating to Z-Axis, New SMM, Z-Axis LLC, or New SMM's,
Z-Axis', or Z-Axis LLC's activities, if such proposed adjustment if made
would give rise to any obligation of the other Party (or any of its
affiliates) (x) to pay such Tax (other than an obligation fully assumed by
the Party receiving notice) or (y) to indemnify or reimburse the payor for
such Tax, including without limitation any Taxes attributable to the Z-Axis
LLC Purchase, (collectively "Applicable Liability"). The Parties shall
cooperate with each other and shallmake available to the other all
information, records, and documents in their possession relating to the
Applicable Liability. The Parties shall make available to each other, as
reasonably requested and available, access to the personnel responsible for
preparing, maintaining and interpreting information, records and documents
in connection with Taxes as well as any related Litigation. Any information
provided or obtained pursuant to this Section 7.5(a) shall be kept
confidential, except as may be otherwise necessary in connection with the
filing of returns or reports, refund Claims, audits, Tax Claims and any
related Litigation.
(b) New SMM and Z-Axis LLC shall provide written notice to the
other on or before 15 days after learning of any pending or threatened Tax
audit, assessment or proceeding related to New SMM or Z-Axis LLC for whole
or partial periods for which a Claim for payment or reimbursement may be
made by any of New SMM, the SMM Holders, the Principal Stockholders or
Z-Axis LLC against any Party. The notice required by the previous sentence
shall contain factual information (to the extent known) describing the
asserted Liability for Taxes in reasonable detail and shall include copies
of any notice or other document received from any Tax Governmental
Authority in respect of any such matters. If a Party (the "CLAIMING PARTY")
has knowledge of an asserted Liability for Taxes with respect to a matter
for which that Claiming Party may make a Claim against the other Party (the
"DEFENDING PARTY") and the Claiming Party fails to give the Defending Party
prompt notice of that asserted Liability for Taxes as required by this
Section 7.5(b), and (i) if the Defending Party is not on notice or should
not have been on notice for the asserted Liability for Taxes and is
precluded by the failure to receive prompt notice from contesting the
asserted Liability for Taxes in both the administrative and judicial
forums, then the Defending Party shall have no responsibility for any Taxes
or penalties arising out of that asserted Liability for Taxes, and (ii) if
the Defending Party is not so precluded from contesting, but such failure
to receive prompt notice results in a detriment to the Defending Party,
then any amount that the Defending Party is otherwise required to pay to
the Claiming Party pursuant to this Agreement shall be reduced by the
amount of such detriment, provided that the Claiming Party shall
nevertheless be entitled to full payment as provided pursuant to this
Agreement to the extent, and only to the extent, that the Claiming Party
can establish that the Defending Party was not prejudiced by such failure.
35
(c) In the event of an audit or dispute with a Governmental
Authority over Taxes for which a Party is primarily liable pursuant to this
Agreement, that Party will be entitled to control the proceedings related
to those Taxes (including action taken to pay, compromise, or settle those
Taxes), provided that New SMM, SMM, Z-Axis LLC, the Z-Axis Principal
Stockholders and the SMM Holders shall jointly control, in good faith with
each other, any proceeding related to a Tax period that begins before and
ends after the Execution Date and which New SMM, SMM, Z-Axis LLC and/or the
SMM Holders have Liability for pursuant to this Agreement, provided
further, however, that New SMM will in any event be entitled to solely
control any proceeding that relates to or impacts a consolidated, combined
or unitary Tax Return filed in any jurisdiction by SMM and New SMM.
Reasonable out-of-pocket expenses with respect to such contest shall be
borne by the Parties in proportion to their responsibility for those Taxes.
The Party that is not entitled to control any such proceedings shall be
afforded a reasonable opportunity to participate in such proceedings at its
own expense.
(d) Z-Axis LLC, New SMM, and SMM shall have possession of their
own and their Subsidiaries', as applicable, Tax records after the Closing.
Z-Axis LLC and New SMM shall make available to each other for inspection
and copying during normal business hours, in connection with the
preparation of Tax returns, audits and any Litigation, all Tax records in
their possession relating to Z-Axis LLC and New SMM or their respective
activities for a period prior to the Execution Date, Tax periods for which
Z-Axis LCC, SMM and New SMM may share Tax Liabilities, and Tax records that
are relevant to periods following the Closing. Z-Axis LLC and New SMM shall
preserve and keep all such Tax records in their possession until the
expiration of any applicable statutes of limitation or extensions thereof
and as otherwise required by law, but in any event for a period not less
than seven years after the Tax closing date. Notwithstanding the foregoing,
any of the Parties may dispose of those records provided 90 days advance
written notice of the intent to dispose is given to other Party. Such
notice shall be delivered in accordance with the provisions of Section 18
of this Agreement and shall include a list of the records to be disposed of
which shall describe in reasonable detail each file, book or other record
accumulation to be disposed. The notified Party shall have the opportunity,
at its cost and expense, to copy or remove, within that 90-day period, all
or any part of those Tax records. For purposes of this Section 7.5(d) Tax
records include, without limitation, journal vouchers, cash vouchers,
general ledgers, material contracts, and other related records.
7.6 Interim Operations. From the Execution Date to the Closing,
neither SMM nor Z-Axis will, without the prior written approval of the other:
(a) amend or otherwise change its Articles of Incorporation; (b) issue or sell
or authorize for issuance or sale additional shares of any class of capital
stock, or subscriptions, options (including employee stock options), warrants,
rights or convertible securities or other agreements obligating either of them
to issue shares of its capital stock; (c) declare, set aside, make or pay any
dividend or other distribution with respect to its capital stock; (d) redeem,
purchase or otherwise acquire, directly or indirectly, any of its capital stock;
(e) issue any instrument that permits participation in the revenues or profits
of either SMM or Z-Axis; (f) incur any indebtedness except for accounts payable
in the ordinary course of its business; (g) permit the sale or Encumbrance of
any of the assets of SMM; (h) enter into any employment or severance agreements
or
36
similar agreements with any person; or (i) agree to, make, engage in or allow to
occur or continue any of the following:
(a) Any material transaction;
(b) Concerning Z-Axis, any capital expenditure except a capital
expenditure for cash up to US$25,000;
(c) Concerning SMM, any capital expenditure in excess of
US$75,000;
(d) Any changes in its condition (financial or otherwise),
Liabilities, assets, or business that, when considered individually or in
the aggregate, have a Material Adverse Effect;
(e) The destruction of, damage to, or loss of any asset
(regardless of whether covered by insurance) as a direct or indirect result
of the action or inaction of either SMM or Z-Axis, that, when considered
individually or in the aggregate, has a Material Adverse Effect upon the
condition (financial or otherwise) or business of the applicable Party;
(f) Any labor troubles or other events or conditions of any
character that, when considered individually or in the aggregate, have a
Material Adverse Effect upon the condition (financial or otherwise) or
business of either SMM or Z-Axis;
(g) Any change in accounting methods or practices (including,
without limitation, any change in depreciation or amortization policies or
rates);
(h) Any increase in the salary or other compensation payable or
to become payable to any of its officers or directors, or the declaration,
payment, or commitment or obligation of any kind for the payment of a bonus
or other additional salary or compensation to any such person;
(i) The material amendment or termination of any material
Contract, agreement, or license to which it is a Party;
(j) Any loan to any person or entity, or the guaranteeing of any
loan;
(k) Any mortgage, pledge or other Encumbrance of any asset of
either SMM or Z-Axis by the respective Party or as a direct or indirect
result of the action or inaction of either Party; or
(l) The waiver or release of any right or Claim of either Party
by the respective Party.
Notwithstanding the foregoing, or any other provision of this Agreement,
(i) any transaction or other matter, such as the Reverse Split, the Z-Axis
Transfer and the assumption of the SMM Equity Incentive Plan by Z-Axis, that is
agreed to in this Agreement shall be considered to have the written approval of
both SMM and Z-Axis; and (ii) written approval also is deemed to have been
granted hereunder to SMM for (x) capital-raising transactions with third parties
that are not affiliated with or
37
related to SMM or any of the SMM Holders, on arms-length terms that the Board of
Directors of SMM deems to be in the best interests of SMM and (y) the entry by
SMM into a definitive agreement to acquire all or substantially all of the
assets or the outstanding equity of a potential acquisition target or targets
identified by SMM that are not affiliated with or related to SMM or any of the
SMM Holders, on arms-length terms that the Board of Directors of SMM deems to be
in the best interests of SMM.
7.7 Accuracy Of Representations. Each Party will take all reasonable
action necessary to render accurate, as of the Closing, its representations and
warranties contained in this Agreement, and it will refrain from taking any
action or omitting to take any action that would render any such representation
or warranty inaccurate as of that time. Each Party will use its commercial best
efforts to perform or cause to be satisfied each covenant or condition to be
performed or satisfied by it pursuant to the terms of this Agreement.
7.8 Consents, Waivers And Approvals. Each of SMM and Z-Axis hereby
undertakes to use its commercial best efforts to obtain in writing, as soon as
practicable after the Execution Date, all such consents, waivers, approvals and
authorizations required prior to the consummation of the Exchange.
7.9 Notice Of Breach Of Warranty. SMM will immediately give notice to
Z-Axis of the occurrence of any event or the failure of any event to occur that
has resulted in a breach of SMM's representations or warranties or a failure by
SMM to comply with any covenant, condition or agreement contained in this
Agreement. Z-Axis will immediately give notice to SMM of the occurrence of any
event or the failure of any event to occur that has resulted in a breach of
Z-Axis' representations or warranties or a failure by Z-Axis to comply with any
covenant, condition or agreement contained in this Agreement.
7.10 Additional Documents; Further Assurances. In addition to the
schedules and other items specifically required to be furnished hereunder, SMM
and Z-Axis hereby agree that each will promptly furnish to the other such
further schedules, certificates and other instruments and take such other action
as may reasonably be requested in order to effectuate the purposes of this
Agreement.
7.11 Notice Of Inaccurate Information. SMM and Z-Axis each will notify
the other in writing as soon as possible of any events or occurrences that have
happened or that may happen and that have caused or that may cause any of the
information contained in this Agreement or in the Schedules to this Agreement to
become materially inaccurate or materially incomplete.
7.12 Publicity. All pre-Closing notices to third parties and all other
publicity concerning the transactions contemplated by this Agreement shall be
made subject to the mutual agreement of both SMM and Z-Axis. Any press releases
made following the Closing by any Party hereto concerning the transactions
contemplated by this Agreement shall be approved by the New SMM. Notwithstanding
anything to the contrary in this Section, any Party to this Agreement shall be
permitted unilaterally to make such notices and to engage in such publicity as
it reasonably deems necessary to comply with applicable Laws and regulations,
including its reporting obligations, if any, under the 1934 Act. The Parties
agree that a press release shall be made at the time of the execution
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of this Agreement and a Form 8-K will be filed with the SEC within four business
days of the Execution Date.
7.13 Stand Still. Pursuant to the letter of intent dated Xxxxx 00,
0000, xxxx of Z-Axis, SMM, their officers, directors, or representatives, nor
the Principal Stockholders, may discuss or negotiate with any other corporation,
firm or person, or entertain or consider any inquiries or proposals relating to
the possible disposition of their shares of capital stock of their companies, or
their assets, and each of them will cause their respective companies to conduct
business only in the ordinary course. Notwithstanding the foregoing, each party
shall be free to engage in activities mentioned in the preceding sentence which
are designed to further the Exchange. The standstill described above shall be in
effect commencing on March 21, 2006 and shall remain in effect for a period of
60 days hereafter, and shall be automatically extended by one additional day for
each day that either party fails to provide, within ten days after written
request therefore, due diligence information which has been requested by the
other party.
7.14 Reverse Split. Z-Axis agrees to implement a one for nine
(1-for-9) reverse stock split (the "REVERSE SPLIT") following the Execution Date
and prior to the Closing.
7.15 Assumption of SMM Equity Incentive Plan. Z-Axis agrees to assume
and have the Z-Axis Stockholders approve, effective as of the Closing, the SMM
Equity Incentive Plan, as amended as applicable.
7.16 Preparation of Proxy Statement. Immediately following the
Execution Date, Z-Axis and SMM shall promptly prepare and file with the SEC the
preliminary proxy statement. Each of the Parties will cooperate and use its
commercially reasonable best efforts to address any SEC comments on the
preliminary proxy statement such that a definitive proxy statement relating to
the Exchange and the other matters addressed in the preliminary proxy statement
can be promptly filed with the SEC. Z-Axis shall also take any action (other
than qualifying to do business in any jurisdiction in which it is now not so
qualified) required to be taken under any applicable state securities laws in
connection with the issuance of the Z-Axis Securities in the Exchange. SMM shall
furnish all information concerning SMM and the holders of its securities as may
be reasonably requested in connection with any such action. Each of Z-Axis and
SMM agrees that the information supplied or to be supplied by it for inclusion
in the proxy statement will not, at the time it is filed in preliminary form
with the SEC and at the time it is filed in definitive form with the SEC,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading, in light of the circumstances in which they were made.
7.17 Release from Z-Axis Lease Liabilities. Prior to the Z-Axis
Transfer, Z-Axis LLC shall obtain an assignment to, and assumption by, Z-Axis
LLC of the lease (the "Z-AXIS OFFICE LEASE ASSIGNMENT") concerning Z-Axis'
current office location located at 0000 XXX Xxxxxxx, Xxxxx 000, Xxxxxxxxx
Xxxxxxx, Xxxxxxxx 00000 (the "Z-AXIS OFFICE") and any other real property
currently leased by Z-Axis as the case may be. The Z-Axis Office Lease
Assignment shall be executed by Z-Axis, Z-Axis LLC and the landlord of the
Z-Axis Office (the "Z-AXIS LANDLORD"). Further, Z-Axis LLC shall obtain any
consent or assignment required including that of the Z-Axis Landlord in the
event the Z-Axis LLC Purchase triggers an anti-change-of-control or
anti-assignment provision of any current Z-Axis Lease.
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8. Conditions To Performance By All Parties. The obligations of all Parties
to effect the Exchange shall be subject to the fulfillment at or prior to the
Execution Date of the following conditions:
8.1 SMM Approval. The Exchange and this Agreement shall have been
approved by the Board of Directors of SMM and the SMM Stockholders in accordance
with Colorado Law.
8.2 Z-Axis Approval. The Exchange, this Agreement, the Reverse Split,
the Z-Axis Transfer, Z-Axis LLC Purchase and any other transaction contemplated
by this Agreement shall have been approved by the Board of Directors of Z-Axis
and Z-Axis Stockholders in accordance with Colorado Law.
8.3 Proceedings. At the Execution Date, there shall not be in effect
any court order restraining or prohibiting consummation of the Exchange or any
transaction contemplated by this Agreement, or any pending proceeding brought
by, or before, any Governmental Authority, court or body with a view to seeking,
or in which it is sought, to restrain or prohibit consummation of the Exchange
or in which it is sought to obtain divestiture of a material amount of assets of
either SMM, and its Subsidiaries taken as a whole, or Z-Axis.
8.4 Due Diligence. Z-Axis, SMM, and the Principal Stockholders, acting
through their own management personnel, counsel, accountants or other
representatives, as designated by them, shall have completed due diligence
concerning the other Party and each Party shall be satisfied in their sole
discretion with the results of such due diligence prior to executing the
Agreement or within a period of 15 days thereafter. At the end of such 15 day
period, if neither Party notifies the other of its failure to be satisfied with
the results of such examination and investigation, this condition to Closing
shall by its terms be deemed satisfied or waived without further action by the
Parties.
9. Conditions Precedent to Performance by SMM. The obligations of SMM to
effect the Exchange shall be subject to the fulfillment at or prior to the
Closing of the following conditions (unless any or all of them is waived by
SMM):
9.1 The representations and warranties of Z-Axis shall be true and
correct on the date hereof and on and as of the Closing Date, as though made on
and as of the Closing Date (except for representations and warranties made as of
a specified date, which need to be true and correct only as of the specified
date).
9.2 Z-Axis shall have performed and complied with each agreement,
covenant and obligation required by it pursuant to this Agreement to be so
performed or complied with by Z-Axis at or before the Closing.
9.3 Z-Axis shall have delivered to SMM a certificate, dated the
Closing Date and executed by Z-Axis' Chief Executive Officer, certifying as to
the fulfillment of the conditions specified in Sections 9.1 and 9.2.
9.4 The Secretary of Z-Axis shall have delivered to SMM at the Closing
a certificate stating that all board of directors and stockholder approvals
necessary to consummate the transactions contemplated by this Agreement have
been obtained and attaching thereto: (i) a copy of
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the articles of incorporation and bylaws (as amended through the Closing),
certified by such Secretary as the true and correct copies thereof as of the
Closing; and (ii) a copy of the resolutions of the board of directors and
stockholders of such entity, evidencing the approval of this Agreement and the
transactions contemplated hereby.
9.5 Any and all consents or waivers required from third parties
relating to performance by Z-Axis of its obligations hereunder shall have been
obtained.
9.6 No Claim, action, suit, investigation or proceeding shall be
pending or threatened before any court or Governmental Authority which presents
a substantial risk of the restraint or prohibition of the transactions
contemplated by this Agreement.
9.7 All authorizations, permits, consents, orders or approvals of, or
declarations or filings with, or expiration of waiting periods imposed by, any
Governmental Authority necessary for the consummation of the transactions
contemplated by this Agreement shall have been filed, occurred or been obtained.
9.8 The Z-Axis Landlord shall have executed an assignment and
assumption obtained by Z-Axis pursuant to Section 7.17 and Z-Axis shall have
delivered the same to SMM.
9.9 The Z-Axis Transfer shall have occurred.
9.10 The Z-Axis Principal Stockholders shall have delivered prior to
the Closing an executed Z-Axis LLC Purchase Agreement, which shall contemplate
that the Z-Axis Purchase shall occur simultaneous with the Closing.
9.11 Z-Axis shall use its best efforts to have delivered to SMM prior
to Closing documentation acceptable to SMM that all the Z-Axis Stockholders who
beneficially own more than three percent (3%) of the outstanding stock of Z-Axis
immediately prior to the Closing will agree not to sell or otherwise transfer
any such shares until the first anniversary of the Closing.
9.12 SMM shall have received an opinion of counsel from Xxxxxx X.
Xxxxxx, P.C., legal counsel to Z-Axis, dated the Execution Date, substantially
to the effect that:
(a) The incorporation, existence, good standing and
capitalization of Z-Axis are as stated in this Agreement and, assuming the
tender of the SMM Common Stock by the holders thereof, the shares of Z-Axis
Common Stock to be issued to and received by the SMM Stockholders pursuant
to this Agreement will be duly and validly authorized and issued, fully
paid and non-assessable.
(b) Z-Axis has full corporate power and authority to execute,
deliver and perform this Agreement, and this Agreement has been duly
authorized, executed and delivered by Z-Axis, and (assuming the due and
valid authorization, execution and delivery by SMM) constitutes the legal,
valid and binding agreement of Z-Axis.
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(c) To the knowledge of such counsel, there are no actions, suits
or proceedings, pending or threatened against Z-Axis by any Governmental
Authority which seek to restrain, prohibit or invalidate the transactions
contemplated by this Agreement.
(d) The execution and performance by Z-Axis of this Agreement
will not violate the Articles of Incorporation, as amended, or Bylaws of
Z-Axis.
(e) To the knowledge of such counsel, no consent, approval,
authorization or order of any court or Governmental Authority which has not
been obtained is required on behalf of Z-Axis for consummation of the
transactions contemplated by this Agreement.
In rendering its opinion, counsel may rely as to factual matters on certificates
of public officials and officers or employees of Z-Axis, provided that copies of
such opinions and certificates shall be delivered with such opinion, and
provided further that in the case of any such reliance, counsel shall state that
it believes that it is justified in relying on such opinions and certificates
for such matters.
9.13 As contemplated by Section 3 of this Agreement, the members of
Z-Axis', and any Subsidiary of Z-Axis', current Boards of Directors and each
person serving as an officer of Z-Axis, or of any Subsidiary of Z-Axis, shall
resign his or her respective positions by tendering written resignations and the
New Board will have been appointed to serve as members of the Board of Directors
of New SMM and of all Subsidiaries of New SMM, excepting Z-Axis LLC, with such
appointments to be effective as of the Closing.
9.14 Dissenters' rights of appraisal shall not have been exercised
with respect to more than four percent of the outstanding shares of either SMM
or Z-Axis.
9.15 The Reverse Split shall have occurred.
9.16 The assumption of the SMM Equity Incentive Plan as contemplated
by Section 7.15 shall have occurred.
10. Conditions Precedent To Performance By Z-Axis. The obligations of
Z-Axis to effect the Exchange shall be subject to the fulfillment at or prior to
the Closing of the following conditions (unless any or all of them is waived by
Z-Axis):
10.1 The representations and warranties of SMM contained in this
Agreement shall be true and correct on the date hereof and on and as of the
Closing Date, as though made on and as of the Closing Date (except for
representations and warranties made as of a specified date, which need to be
true and correct only as of the specified date).
10.2 SMM shall have performed and complied in all material respects
with each agreement, covenant and obligation required by this Agreement to be so
performed or complied with by SMM at or before the Closing.
10.3 Any and all consents or waivers required from third parties
relating to the performance by SMM of its obligations hereunder shall have been
obtained.
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10.4 No Claim, action, suit, investigation or proceeding shall be
pending or threatened before any court or Governmental Authority which presents
a substantial risk of the restraint or prohibition of the transactions
contemplated by this Agreement.
10.5 All authorizations, permits, consents, orders or approvals of, or
declarations or filings with, or expiration of waiting periods imposed by, any
Governmental Authority necessary for the consummation of the transactions
contemplated by this Agreement shall have been filed, occurred or been obtained.
10.6 SMM shall have delivered to Z-Axis a certificate, dated the
Closing Date and executed by SMM's Chief Executive Officer, certifying as to the
fulfillment or the conditions specified in Sections 10.1 and 10.2.
10.7 The Secretary of SMM shall have delivered to Z-Axis at the
Closing a certificate stating that all board of director and stockholder
approvals necessary to consummate the transactions contemplated by this
Agreement have been obtained and attaching thereto: (i) a copy of the articles
of incorporation and bylaws (as amended through the Closing), certified by such
Secretary as the true and correct copies thereof as of the Closing; and (ii) a
copy of the resolutions of the board of directors and stockholders of such
entity, evidencing the approval of this Agreement and the transactions
contemplated hereby.
10.8 SMM shall deliver to Z-Axis financial statements, prepared in
accordance with GAAP and applicable regulations of the SEC, required to be filed
as an exhibit to the Form 8-K described in Section 11 hereto.
10.9 SMM shall have obtained at the Closing a lock-up commitment from
the persons representing 95% of the outstanding securities of SMM prior to
Closing.
10.10 The Special Committee of the Board of Directors of Z-Axis (the
"SPECIAL COMMITTEE") shall have received a fairness opinion pertaining to the
transactions described in this Agreement and such fairness opinion shall be
reasonably acceptable to the Special Committee.
10.11 Z-Axis shall have received an opinion of counsel from Xxxxxx
Xxxxx LLP, legal counsel to SMM, dated the Execution Date, substantially to the
effect that:
(a) The incorporation, existence, good standing and
capitalization of SMM are as stated in this Agreement; all outstanding
shares of SMM Common Stock are duly and validly authorized and issued,
fully paid and non-assessable and have not been issued in violation of any
preemptive right of shareholders; and, to the knowledge of such counsel,
there is no existing option, warrant, right, call, subscription or other
agreement or commitment obligating SMM to issue or sell, or to purchase or
redeem any shares of its capital stock other than as stated in this
Agreement.
(b) SMM has full corporate power and authority to execute,
deliver and perform this Agreement and this Agreement has been duly
authorized, executed and delivered by SMM, and (assuming the due and valid
authorization, execution and delivery by Z-Axis) constitutes the legal,
valid and binding agreement of SMM.
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(c) To the knowledge of such counsel, there are no actions, suits
or proceedings, pending or threatened against SMM or its Subsidiaries by
any Governmental Authority which seek to restrain, prohibit or invalidate
the transactions contemplated by this Agreement.
(d) The execution and performance by SMM of this Agreement will
not violate the Articles of Incorporation, as amended, or Bylaws of SMM.
(e) To the knowledge of such counsel, no consent, approval,
authorization or order of any court or Governmental Authority which has not
been obtained is required on behalf of SMM or any of its Subsidiaries for
consummation of the transactions contemplated by this Agreement.
In rendering its opinion, counsel may rely as to factual matters on certificates
of public officials and officers or employees of SMM, provided that copies of
such opinions and certificates shall be delivered with such opinion, and
provided further that in the case of any such reliance, counsel shall state that
it believes that it is justified in relying on such opinions and certificates
for such matters.
11. Securities Filings. New SMM shall be responsible for the preparation,
and filing, of a Form 8-K filing with the SEC disclosing the Exchange and
attaching all required exhibits and financial statements and shall be
responsible for filing audited financial statements in a separate Form 8-K, and
shall be responsible for any and all filings in any jurisdiction where its
stockholders reside which would require a filing with a Governmental Authority
as a result of the transactions contemplated in this Agreement. Following the
Closing, Z-Axis shall provide full cooperation and any information New SMM may
require for inclusion in its filings with the SEC.
12. Indemnification.
12.1 Survival of Representations, Warranties, Covenants and
Agreements. Notwithstanding any right of Z-Axis or SMM (whether or not
exercised) to investigate the affairs of SMM or Z-Axis or a waiver by Z-Axis or
SMM of any condition to Closing set forth in this Agreement, each Party shall
have the right to rely fully upon the representations, warranties, covenants and
agreements of the other Party contained in this Agreement or in any instrument
delivered pursuant to this Agreement. Unless earlier terminated pursuant to
Section 15, all of the representations, warranties, covenants and agreements of
SMM, SMM Subsidiary, Z-Axis, and the Principal Stockholders contained in this
Agreement or in any instrument delivered pursuant to this Agreement shall
survive the Closing and continue until the second anniversary of the Closing,
provided, however, that the representations, warranties and agreements set forth
in Sections 5.14 (Taxes), 6.20 (Taxes) and 7.5 (Tax Cooperation) shall survive
until expiration of the applicable statute of limitations for claims applicable
to the matters covered thereby.
12.2 Indemnification By Z-Axis LLC and the Z-Axis Principal
Stockholders.
(a) Z-Axis LLC and the Z-Axis Principal Stockholders hereby agree
to jointly and severally indemnify and hold harmless New SMM, SMM, New
SMM's and SMM's officers, directors, stockholders, employees and agents,
including any person who is an officer, director, employee or agent of SMM
prior to the Closing, against any and all
44
losses, Claims, damages, Liabilities, costs and expenses (including but not
limited to reasonable attorneys' and expert witness fees and other expenses
of investigation and defense of any Claims or actions) to which they or any
of them may become subject due to, or which results from, any of the
following:
(i) Any breach of Z-Axis' covenants, agreements, warranties
or representations contained in this Agreement as of the date made or as of
the Closing Date.
(ii) Any misstatement of a material fact contained in this
Agreement or in any of the documents executed in connection with
transactions contemplated by this Agreement, but only if the misstatement
relates to information concerning Z-Axis or its operations.
(iii) The omission to state any fact necessary to make the
statements contained in this Agreement or in any of the documents executed
in connection with the transactions contemplated by this Agreement not
misleading, but only if the omission relates to information concerning
Z-Axis or their operations.
(iv) The operations of Z-Axis or Z-Axis LLC, or the acts of
their employees, acting in their capacities as such, prior to the Closing,
and the operations of Z-Axis LLC or the acts of its employees, acting in
their capacities as such, subsequent to the Closing.
(v) The operations of the Z-Axis Business, or the actions or
business of Z-Axis LLC prior to and subsequent to the Closing.
(vi) Actions or inactions of Z-Axis, or the agents of Z-Axis
acting in their capacity as agents, prior to the Closing.
(vii) Any Taxes due and payable by Z-Axis as a result of the
Z-Axis LLC Purchase.
(b) Notwithstanding the foregoing, the maximum liability of each
Z-Axis Principal Stockholder for indemnification in connection with the
foregoing shall not exceed the VWAP of the shares of New SMM stock held by
the applicable Z-Axis Principal Stockholder. If either Z-Axis Principal
Stockholder is obligated to make an indemnification payment pursuant to
this Section 12.2, such Z-Axis Principal Shareholder shall forfeit the
number of shares then held by such Z-Axis Principal Stockholder in an
amount equal to the value of such indemnification payment. For purposes of
this paragraph, the value of shares held by the applicable Z-Axis Principal
Stockholder is to be the VWAP of those shares. In the event the applicable
Z-Axis Principal Stockholder has purchased limited liability company
interests of Z-Axis LLC with shares of New SMM or has otherwise disposed of
the shares of New SMM that he or she owned at Closing, such Z-Axis
Principal Stockholder may substitute either the Z-Axis LLC interests he or
she acquired as part of the purchase of Z-Axis LLC or cash in lieu of
shares of New SMM for any indemnification payment he or she is required to
make. The aggregate amount of all such indemnification required of a Z-Axis
Principal Stockholder will be limited to an amount equal to the VWAP of the
number of shares of Z-Axis Common Stock held by that Z-Axis Principal
Stockholder at the time of Closing.
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(c) Notwithstanding any other provision of this Agreement
including but not limited to Sections 12.2(b) and 12.4, to the extent that
New SMM, SMM or the SMM Principal Stockholders incur any liabilities, costs
or other damages related to (i) the lease concerning the Z-Axis Office or
the Z-Axis LLC's post-Closing office lease or (ii) any Taxes due and
payable by Z-Axis as a result of the Z-Axis LLC Purchase, each Z-Axis
Principal Stockholder shall be liable for indemnification for the total
amount of any such liability, cost or other damage.
12.3 Indemnification by SMM. SMM hereby agrees to indemnify and hold
harmless Z-Axis LLC, Z-Axis' officer, director, employee or agent of Z-Axis
prior to the Closing, and Z-Axis LLC's officers, directors, stockholders,
members, employees, managers, and agents against any and all losses, damages,
Liabilities, costs and expenses (including but not limited to reasonable
attorneys' and expert witness fees and other expenses of investigation and
defense of any Claims or actions) to which they or any of them may become
subject due to, or which result from, any of the following:
(a) Any breach of SMM's or SMM Subsidiary's covenants,
agreements, warranties or representations contained in this Agreement as of
the date made or as of the Closing Date.
(b) Any misstatement of a material fact contained in this
Agreement or in any of the documents executed in connection with
transactions contemplated by this Agreement, but only if the misstatement
related to information concerning SMM, SMM Subsidiary or the operations of
one or both of SMM and SMM Subsidiary.
(c) The omission to state any fact necessary to make the
statements contained in this Agreement or in any of the documents executed
in connection with the transactions contemplated by this Agreement not
misleading, but only if the omission relates to information concerning SMM,
SMM Subsidiary, or the operations of one or both of SMM and SMM Subsidiary.
(d) The operations of SMM, SMM Subsidiary or the acts of their
employees, acting in their capacities as such, prior and subsequent to the
Closing.
(e) The operations of New SMM and SMM Subsidiary or the actions
or business of New SMM subsequent to the Closing.
(f) Actions or inactions of SMM, or the agents of SMM acting in
their capacity as agents, prior to the Closing
12.4 Limitations on Indemnification. From and after the Closing, New
SMM, SMM and its officers, directors, stockholders, employees and agents shall
not have the right to be indemnified pursuant to Sections 12.2(a) and 12.2(b)
for breaches of representations, warranties and covenants of Z-Axis and/or
Z-Axis LLC unless and until New SMM and SMM and its officers, directors,
stockholders, employees and agents, including any person who is an officer,
director, employee or agent prior to the Closing, (individually and/or
collectively) shall have incurred on a cumulative basis aggregate Liabilities in
an amount exceeding (and then only to the extent exceeding) $5,000; provided,
however, that in no event shall the limitations set forth in this Section 12.4
apply
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with respect to (i) any fraudulent breach of any such representation or
warranty, where the determination of such fraudulent breach has been made by a
judge or arbitrator in a final, nonappealable or non-appealed judgment or
decision of a judge, jury or arbitrator, (ii) the provisions of Section 12.2(c),
(iii) the Returned Payments made pursuant to Section 12.5 and (iv) any Liability
assumed by Z-Axis LLC under Section 2.2.
12.5 Indemnification and Insurance. For a period through and until
expiration of the statutes of limitations pertaining to any Claim asserted
against any person who is an officer or director of Z-Axis prior to the Closing
(the "INDEMNIFIED OFFICERS"), New SMM shall indemnify and hold harmless (and
shall also advance expenses, including reasonable attorneys' and expert witness
fees, as incurred to the fullest extent permitted under applicable law to) the
Indemnified Officers, to the fullest extent that Z-Axis would have been
permitted to do so under its Articles of Incorporation and Bylaws as in effect
as of the date hereof, provided, however, that the payment of such expenses
incurred by or on behalf of an Indemnified Officer in advance of the final
disposition of such matter shall be made only upon receipt of (i) a written
affirmation by the Indemnified Officer of such Indemnified Officer's good faith
belief that the standard of conduct described in Section 0-000-000 of the
Colorado Business Corporation Act necessary for indemnification by New SMM as
authorized by this Section 12.5 has been met, and (ii) an undertaking by or on
behalf of such Indemnified Officer to repay all amounts so advanced (the
"RETURNED PAYMENTS") in the event that it shall ultimately be determined that
such Indemnified Officer is not entitled to be indemnified by New SMM as
authorized in this Section 12.5; and further provided that no such advancement
of expenses shall be made under this Section 12.5 if it is determined by a
majority of the Board of Directors of New SMM that (i) the Indemnified Officer
did not act in good faith and in a manner he or she reasonably believed to be
in, or not opposed to, the best interests of Z-Axis, or (ii) with respect to any
criminal action or proceeding, the Indemnified Officer had reasonable cause to
believe his or her conduct was unlawful. Each Indemnified Officer is intended to
be a third party beneficiary of this Section 12.5 and may specifically enforce
its terms. This Section 12.5 shall not limit or otherwise adversely affect any
rights any Indemnified Officer may have under the Company's Articles of
Incorporation or Bylaws as in effect as of the date hereof. This Section 12.5
shall be inapplicable to any action commenced by New SMM in connection with the
transactions contemplated by this Agreement against the Z-Axis Principal
Stockholders in their capacities as such.
12.6 Remedies. The Parties shall retain all rights to bring actions
seeking specific performance as provided in Section 24 below and other equitable
relief, except as expressly provided otherwise in Section 24 below; provided,
however, that from and after the Closing, the rights provided for in this
Section 12 shall be the exclusive remedy of any Party for damages resulting from
the breach of any provision of this Agreement by any other Party except for
damages incurred as a result of fraud, willful misconduct or willful
representation.
13. Notice Of Claim. Should any Party (the "INDEMNIFIED PARTY") suffer any
loss, damage or expense for which the other Party (the "INDEMNIFYING PARTY") is
obligated to indemnify and hold such Indemnified Party harmless pursuant to
Section 12 of this Agreement, the following shall apply: Promptly upon receipt
by the Indemnified Party of notice of any demand, assertion, Claim, action or
proceeding, judicial or otherwise, with respect to any matter as to which the
Indemnifying Party is obligated to indemnify the Indemnified Party under the
provisions of this Agreement, the Indemnified Party shall give prompt notice
thereof to the Indemnifying Party,
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together with a statement of such information respecting such matter as the
Indemnified Party shall then have and a statement advising that the Indemnifying
Party must notify it within 10 days whether the Indemnifying Party will
undertake the defense of such matter. Promptly after receipt by an Indemnified
Party of notice of the commencement of any action, such Indemnified Party will,
if a Claim in respect thereof is to be made by the Indemnified Party against the
Indemnifying Party, notify the Indemnifying Party in writing of the commencement
thereof; but the failure so to notify the Indemnifying Party (i) will not
relieve the Indemnifying Party from liability under this Section except to the
extent that such failure results in prejudice or other damage to the
Indemnifying Party, and (ii) will not, in any event, relieve the Indemnifying
Party from any obligations to any Indemnified Party other than the
indemnification obligation provided above. Notice of the intention of the
Indemnifying Party to contest any such Claim, and the identity of counsel that
the Indemnifying Party intends to employ to contest any such Claim, shall be
given by the Indemnifying Party to the Indemnified Party within 10 days from the
date of receipt by the Indemnifying Party of notice by the Indemnified Party of
the assertion of any such Claim. The Indemnified Party shall have the right to
approve the counsel named in the Notice provided pursuant to the preceding
sentence, provided that such approval shall not be unreasonably withheld. The
Indemnified Party shall have the right to participate in such proceedings and to
be represented by attorneys of its own choosing; however, such representation
shall be at the Indemnified Party's own expense if the Indemnifying Party
selects different counsel of its own choosing. Notwithstanding the Indemnifying
Party's election to appoint counsel to represent the Indemnified Party in an
action, the Indemnified Party shall have the right to employ separate counsel
and the Indemnifying Party shall bear the reasonable fees, costs and expenses of
such separate counsel if (i) the use of counsel chosen by the Indemnifying Party
to represent the Indemnified Party would present such counsel with a conflict of
interest, or (ii) the actual or potential defendants in, or targets of, any such
action include both the Indemnified Party and the Indemnifying Party, the
Indemnifying Party has chosen the same counsel to represent the Indemnified
Party and the Indemnifying Party, and the Indemnified Party shall have
reasonably concluded that there may be legal defenses available to it and/or
other Indemnified Parties which are different from or additional to those
available to the Indemnifying Party. If the Indemnifying Party does not elect to
contest any Claim, the Indemnifying Party shall be bound by the results obtained
with respect thereto by the Indemnified Party, including any settlement of such
Claim. If the Indemnifying Party elects to contest any Claim, the Indemnified
Party shall be bound by the results obtained with respect thereto by the
Indemnifying Party, including any settlement of such Claim. Notwithstanding any
language to the contrary herein, an Indemnifying Party will not, without the
prior written consent of the Indemnified Party, settle or compromise or consent
to the entry of any judgment with respect to any pending or threatened Claim,
action, suit or proceeding in respect of which indemnification may be sought
hereunder (whether or not the Indemnified Party is an actual or potential party
to such Claim or action) unless such settlement, compromise or consent includes
an unconditional release of each Indemnified Party from all Liability arising
out of such Claim, action, suit or proceeding.
14. Closing. Subject to the terms and conditions contained in this
Agreement, the Closing shall take place as described in Section 2.4. At the
Closing, the following shall occur:
14.1 SMM shall deliver to Z-Axis (a) a certificate executed by the
Chief Executive Officer and Secretary of SMM dated as of the Closing certifying
that the representations and warranties of SMM in this Agreement are true and
correct in all material respects at and as of the Closing as though each
representation and warranty had been made on that date; (b) the stock book,
48
stock ledger, minute book and corporate seal of SMM, and (c) such other
documents as are required to be delivered to Z-Axis under the terms of this
Agreement, including the opinion of counsel described in Section 10.
14.2 SMM shall deliver to Z-Axis stock certificates representing the
Acquired Shares that are being exchanged for the Exchange Shares pursuant to
Section 4 of this Agreement together with duly executed stock powers and
assignments transferring those shares to Z-Axis.
14.3 SMM shall deliver to Z-Axis documents representing the Assumed
Purchase Rights that are being exchanged for the Z-Axis Conversion Purchase
Rights pursuant to Section 4 of this Agreement together with duly executed
assignments transferring those purchase rights to Z-Axis.
14.4 Z-Axis shall deliver to SMM (acting on behalf of each of the SMM
Stockholders), upon receipt from SMM by Z-Axis of the stock certificates
described in Section 14.2, stock certificates representing the Exchange Shares
(or irrevocable instructions for book-entry of non-certificated Exchange Shares)
to be issued pursuant to this Agreement in exchange for the Acquired Shares and
the opinion of counsel described in Section 9.
14.5 Z-Axis shall deliver to SMM (a) a certificate executed by the
Chief Executive Officer and Secretary of Z-Axis dated as of the Closing,
certifying that the representations and warranties of Z-Axis in this Agreement
are true and correct in all material respects at and as of the Execution Date,
as though each representation and warranty had been made on that date; (b) the
stock transfer records, minute book and corporate seal of Z-Axis, and (c) such
other documents are required to be delivered to SMM under the terms of this
Agreement.
14.6 Z-Axis shall deliver to SMM (acting on behalf of each SMM
Purchase Rights Holder) upon receipt from SMM by Z-Axis of documents
representing the Assumed Purchase Rights described in Section 14.3, new option
agreements pursuant to Section 2.6 representing the Z-Axis Conversion Purchase
Rights.
14.7 Each of the Parties agrees that it will at any time and from time
to time after the Closing, upon the request of any other Party, perform,
execute, acknowledge and deliver all such further acts, deeds, assignments,
transfers, and assurances as may be required for the purpose of effectuating the
consummation of the transactions contemplated by this Agreement.
15. Termination and Abandonment of the Exchange.
15.1 Termination. Anything herein or elsewhere to the contrary
notwithstanding, this Agreement may be terminated and abandoned at any time
before the consummation of the Exchange:
(a) By the mutual consent of the Parties hereto;
(b) By any of the Parties if the Closing has not occurred by June
30, 2006, subject to extension because of delay resulting from the review
time taken by, or any comments from, the SEC with respect to proxy
materials, subject to any negotiated extensions,
49
subject to the provisions of Section 26 hereof and subject to the
obligation of the terminating party to have exercised its commercially
reasonable best efforts to conclude the Exchange;
(c) By Z-Axis if in its reasonable opinion and that of its
counsel, the Exchange does not qualify for exemption from registration
under applicable federal and state securities Laws;
(d) By the Parties if any of such Parties shall determine in its
sole discretion that the Exchange has become inadvisable or impracticable
by reason of the institution or threat by any Governmental Authority or by
any other person of material Litigation or proceedings concerning the
Exchange against any Party (it being understood and agreed that a written
request by any Governmental Authority for information with respect to the
Exchange, which information could be used in connection with such
Litigation or proceedings, may be deemed to be a threat of material
Litigation or proceedings regardless of whether such request is received
before or after the signing of the Agreement); and
(e) By Z-Axis or SMM if the business or assets or financial
condition of the other party, taken as a whole, have been materially and
adversely affected, whether by the institution of Litigation, regulatory
proceedings or by reason of Material Adverse Change in the operations or
business of such other Party.
15.2 Effect Of Termination. In the event of termination and
abandonment under Section 15.1, this Agreement shall forthwith become void and
there shall be no Liability on the part of any Party or its respective officers
and directors, except that the provisions of the second sentence of Section 7.1
hereof and the provisions of Section 22 hereof shall continue in effect.
16. Amendment Or Waiver. This Agreement may be amended, modified or
superseded, and any of the terms, covenants, representations, warranties or
condition hereof may be waived, but only by a written instrument executed by
each of the Parties. No approval of stockholders shall be required for any
amendment, modification or waiver. No waiver of any nature, in any one or more
instances, shall be deemed to be or construed as a further or continued waiver
of any condition or any breach of any other term, representation or warranty in
this Agreement.
17. Entire Agreement. This Agreement, together with the Schedules and
Exhibits hereto, and the documents referred to herein, constitutes the entire
agreement among the Parties with respect to the Exchange, and supersedes all
prior agreements, arrangements or understandings with respect thereto.
18. Notice. All notices, requests, demands, directions and other
communications ("NOTICES") provided for in this Agreement shall be in writing
and shall be mailed or delivered personally or sent by telecopier or facsimile
to the applicable Party at the address of such Party set forth below in this
Section 18. When mailed, each such Notice shall be sent by first class,
certified mail, return receipt requested, enclosed in a postage prepaid wrapper,
and shall be effective on the third business day after it has been deposited in
the mail. When delivered personally, each such Notice shall be effective when
delivered to the address for the respective Party set forth in this Section 18.
When sent by telecopier or facsimile, each such Notice shall be effective on the
first business day
50
on which or after which it is sent. Each such Notice shall be addressed to the
Party to be notified as shown below:
SMM:
Silicon Mountain Memory, Incorporated
Attn: Xxx Xxxxx
0000 Xxxxxx Xxxxxx
Xxxxxxx, XX 00000
Facsimile: (000) 000-0000
Copy to:
Xxxxxx Xxxxx LLP
Attn: Xxxx Xxxxxxxxx, Esq.
0000 Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, XX 00000
Facsimile: (000) 000-0000
Z-AXIS:
Z-Axis Corporation
Attn: Xxxx Xxxxxxxx
0000 XXX Xxxxxxx, Xxxxx 000
Xxxxxxxxx Xxxxxxx, XX 00000
Facsimile: 000-000-0000
Copy to:
Xxxxxx X. Xxxxxx, P.C.
Attn: Xxxxxx X. Xxxxxx, Esq.
0000 X. Xxxxxxxx Xxxxxx
Xxxxxxxxx Xxxxxxx, XX 00000
Facsimile: (000) 000-0000
SMM HOLDERS:
Silicon Mountain Memory, Incorporated
Attn: Xxx Xxxxx
0000 Xxxxxx Xxxxxx
Xxxxxxx, XX 00000
Facsimile: (000) 000-0000
Any Party may change his or its respective address for purposes of this
Section 18 by giving the other Party Notice of the new address in the manner set
forth above.
51
19. Severability. Whenever possible, each provision of this Agreement shall
be interpreted in such a manner as to be effective and valid under applicable
Law, and if any provision of this Agreement shall be or become prohibited or
invalid in whole or in part for any reason whatsoever, that provision shall be
ineffective only to the extent of such prohibition or invalidity without
invalidating the remaining portion of that provision or the remaining provisions
of this Agreement.
20. Headings. The headings to this Agreement are for convenience only; they
form no part of this Agreement and shall not affect its interpretation.
21. Counterparts. This Agreement may be executed in any number of
counterparts, and each such counterpart shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
22. Expenses. SMM agrees that it will reimburse Z-Axis for reasonable
expenses incurred with respect to the Exchange of up to $37,500 however, that
any single expense greater than $1000 will require pre-approval of SMM in
writing or email (collectively, the "EXPENSE REIMBURSEMENTS"). If Z-Axis incurs
professional, mailing, and printing expenses or other expenses such as filing
fees that collectively exceed the amount of the Expense Reimbursements, even if
all such Expense Reimbursements have been approved in advance by SMM, the amount
of such excess expenses shall be borne solely by Z-Axis. Z-Axis shall provide to
SMM an accounting of all expenses to which the Expense Reimbursements are or
have been applied on request of SMM. Except as otherwise provided above, each of
the Parties shall bear its own costs and expenses associated with the
transactions contemplated hereby.
23. Benefits And Assignment. The provisions of this Agreement shall be
binding upon and inure to the benefit of and be enforceable by the Parties
hereto and their respective successors and assigns. The Parties agree that this
Agreement is made solely for the benefit of the Parties and their respective
successors and assigns, and no other person shall acquire or have any right
under or by virtue of this Agreement. The terms "successor" or the term
"successors and assigns" as used in this Agreement shall not include any holders
of the SMM Common Stock, or recipients of the Z-Axis Common Stock pursuant to
this Agreement.
24. Specific Performance. Each Party's obligation under this Agreement is
unique. If any Party should default in its obligations under this Agreement, the
Parties each acknowledge that it would be extremely impracticable to measure the
resulting damages; accordingly, the nondefaulting Party, in addition to any
other available rights or remedies, may xxx in equity for specific performance,
and the Parties each expressly waive the defense that a remedy in damages will
be adequate. Notwithstanding any breach or default by any of the Parties of any
of their respective representations, warranties, covenants or agreements under
this Agreement, if Closing occurs as contemplated, each of the Parties waives
any rights that it or they may have to rescind this Agreement or the
transactions consummated pursuant to it; provided, however, this wavier shall
not affect any other rights or remedies available to the Parties under this
Agreement or under applicable Law.
25. Costs. If any legal action or other proceeding is brought by one of the
Parties to this Agreement against another Party to this Agreement for the
enforcement of this Agreement, or because of an alleged dispute, breach, default
or misrepresentation in connection with any of the provisions of this Agreement,
the prevailing Party shall be entitled to recover reasonable attorneys' fees and
other
52
costs incurred in that portion of the action or proceeding in which it
prevailed, in addition to any other relief to which it or they may be entitled.
26. Termination On Default. If Z-Axis or SMM materially defaults in the due
and timely performance of any of its or their warranties, covenants or
agreements under this Agreement, then the nondefaulting Party may give notice of
termination of this Agreement, in the manner provided in Section 18, and such
notice shall be provided as soon as reasonably practicable following the
nondefaulting Party having determined that a default has occurred. A notice
shall specify with particularity the default or defaults on which the notice is
based. The defaulting Party, however, shall have the right to cure such default
or defaults following receipt of such notice and up to 30 days after the date
initially set for Closing. The termination shall be effective 30 days after the
date initially set for Closing, unless the specific default or defaults have
been cured on or before this effective date for termination.
27. Choice Of Law. This Agreement shall be governed by, construed,
interpreted and the rights of the Parties determined in accordance with the laws
of the State of Colorado without regard to principles of conflicts of laws.
[THE REMAINDER OF THIS PAGE IS LEFT INTENTIONALLY BLANK.]
53
IN WITNESS WHEREOF, the Parties to this Agreement have caused this
Agreement to be executed by their duly authorized representatives on the date
first above written.
SMM:
SILICON MOUNTAIN MEMORY, INCORPORATED
By: /s/ Xxxxxxx (Tre) Xxxxx
------------------------------------
Xxxxxxx (Tre) Xxxxx,
Chief Executive Officer
SMM PRINCIPAL STOCKHOLDERS:
/s/ Xxxxxxx (Tre) Xxxxx
----------------------------------------
Xxxxxxx (Tre) Xxxxx
/s/ Xxxxx Xxxxxx
----------------------------------------
Xxxxx Xxxxxx
Z-AXIS:
Z-AXIS CORPORATION
By: /s/ Xxxx Xxxxxxxx
------------------------------------
Xxxx Xxxxxxxx, Chief Executive Officer
Z-AXIS PRINCIPAL STOCKHOLDERS:
/s/ Xxxx Xxxxxxxx
----------------------------------------
Xxxx Xxxxxxxx
/s/ Xxxxxxxxx Xxxxx
----------------------------------------
Xxxxxxxxx Xxxxx
EXHIBIT LIST
Exhibits
A. SMM Stockholders and Exchange Shares
B. SMM Purchase Rights Holders and Z-Axis Conversion Purchase Rights
C. Form of Z-Axis LLC Purchase Agreement
EXHIBIT A
SMM STOCKHOLDERS AND EXCHANGE SHARES
SHARES OF SMM EXCHANGE SHARES
SMM STOCKHOLDERS COMMON STOCK TO BE ISSUED
---------------- ------------- ---------------
1. Xxxxxx, Xxxxxx 20,000 22,223
2. Xxxxxxxx, Xxxx 100,000 111,116
3. Xxxxx, Xxxxx 105,000 116,671
4. Xxxxxx, Xxxx 47,000 52,224
5. Xxxxxxxx, Xxxxxx 3,000 3,333
6. Xxxxx, Xxxxxxx Xxxxx III (Tre) 782,250 869,202
7. Xxxxx, Xxxxxxx Xx. 20,000 22,223
8. Xxxxx, Xxxxxx 299,605 332,906
9. Xxxxx, Xxxx & Xxxx TST 150,000 166,673
10. Xxxxx, Xxxx 20,000 22,223
11. Xxxxxxx, Xxxx 1,526,373 1,696,039
12. CVB Partnership 30,000 33,335
13. Xxxxxxx, Xxxxx and Charlotte 5,000 5,556
14. Xxxx, Xxxxxx 25,000 27,779
15. Xxxxxx, Xxxxx 1,400 1,556
16. Xxxxxxx, Xxxxx 1,500 1,667
17. Xxxxxx, Xxxxxxx 240,625 267,372
18. Xxxxxx Family (4) 20 22
19. Xxxxxx, Xxxxx 400,000 444,463
20. Xxxx, Xxxx 70 78
21. Xxxxxxxxx, Xxxxx 6,000 6,667
22. Norton Commando 175,000 194,451
23. Xxxxxxx, Xxxxxx 3,000 3,333
24. RayneMark Investments LLC 280,000 311,124
25. Xxxxxxx, Xxxxx 8,000 8,889
26. Xxxxxx, Xxxxxx 15,000 16,667
27. Xxxxxx, Xxxxx 100,000 111,116
28. Xxxxxx, Xxxxxx 21,000 23,334
29. Xxxxxx, Xxxxx 69,930 77,703
30. Xxxxxx, Xxxxxxx 6,000 6,667
31. Xxxxxxxx, Xxxx 15,000 16,667
--------- ---------
TOTAL 4,475,773 4,973,284
========= =========
A-1
EXHIBIT B
SMM PURCHASE RIGHTS HOLDERS AND Z-AXIS CONVERSION PURCHASE RIGHTS
INCENTIVE STOCK OPTIONS
RIGHTS Z-AXIS CONVERSION GRANT EXPIRATION EXERCISE
SMM PURCHASE RIGHTS HOLDERS OUTSTANDING PURCHASE RIGHTS CERTIFICATE NO. DATE DATE PRICE
----------------------------- ----------- ----------------- --------------- -------- ---------- --------
1. Xxxxxxx Xxxxx Xxxxx III (Tre) 500,000 556484 1 01/31/04 01/30/09 $0.28
2. Xxxxx Xxxxxx 360,000 400668 3 01/31/04 01/30/09 $0.28
3. Xxxxx Xxxxx 50,000 55648 8 01/31/04 10/28/13 $0.25
4. Xxx Xxxxx 50,000 55648 9 01/31/04 10/28/13 $0.25
5. Xxx Xxxxxx 10,000 11130 10 01/31/04 10/28/13 $0.25
6. Xxxxxxx Xxxxxx 25,000 27824 11 01/31/04 10/28/13 $0.25
7. Xxxxxxx X. Xxxxxxxxx 25,000 27824 13 01/31/04 10/28/13 $0.25
8. Xxxxx X. Xxxxx 25,000 27824 14 01/31/04 10/28/13 $0.25
9. Xxxxx X. Xxxxxx 20,000 22259 15 01/31/04 10/28/13 $0.25
10. Xxxxx Xxxxxxxxx 20,000 22259 16 01/31/04 10/28/13 $0.25
11. Xxxxxxx Xxxxxxx 20,000 22259 17 01/31/04 10/28/13 $0.25
12. Xxxx Xxxxxxx 30,000 33389 18 01/31/04 10/28/13 $0.25
13. Xxxxxx Xxxxx 12,000 13356 19 01/31/04 10/28/13 $0.25
14. Xxxxx X. Xxxxxxx 12,000 13356 21 01/31/04 10/28/13 $0.25
15. Xxxxx X. Xxxxxxxxx 6,000 6678 24 01/31/04 10/28/13 $0.25
16. Xxxxxxxx X. Xxxxx 12,000 13356 26 01/31/04 01/30/09 $0.28
17. Xxxxxxxxx X. Xxxxxxxxxx 9,000 10017 27 01/31/04 10/28/13 $0.25
18. Xxxx X. Xxxxx 6,000 6678 29 01/31/04 10/28/13 $0.25
19. Xxxx X. Xxxx 8,000 8904 30 01/31/04 10/28/13 $0.25
20. Xxxxx X. Xxxxx 6,000 6678 32 01/31/04 10/28/13 $0.25
21. Xxxxxxxx X. Xxxxxx 4,000 4452 36 01/31/04 10/28/13 $0.25
22. Xxx Xxxxxx 3,000 3339 38 01/01/05 01/01/14 $0.75
23. Austin E. Smart 15,000 16695 39 01/01/05 01/01/14 $0.75
24. Xxxx X. Xxxxxx 9,000 10017 40 01/01/05 01/01/14 $0.75
25. Xxxxx X. Xxxxx 9,000 10017 41 01/01/05 01/01/14 $0.75
26. Xxxx X. Xxxxxxxxx 13,500 15025 42 01/01/05 01/01/14 $0.75
27. Xxxxxxx X. Xxxxxx 13,500 15025 43 01/01/05 01/01/14 $0.75
A-1
EXHIBIT B
SMM PURCHASE RIGHTS HOLDERS AND Z-AXIS CONVERSION PURCHASE RIGHTS
INCENTIVE STOCK OPTIONS
RIGHTS Z-AXIS CONVERSION GRANT EXPIRATION EXERCISE
SMM PURCHASE RIGHTS HOLDERS OUTSTANDING PURCHASE RIGHTS CERTIFICATE NO. DATE DATE PRICE
----------------------------- ----------- ----------------- --------------- -------- ---------- --------
28. Xxxx Xxxx 9,000 10017 45 01/01/05 01/01/14 $0.75
29. Xxxxxx Xxxxxxx 4,000 4452 46 01/01/05 01/01/14 $0.75
30. Xxxx Xxxxxxx 10,000 11130 48 01/01/05 01/01/14 $0.75
31. Xxxxxx Xxxxxx 2,000 2226 49 01/01/05 01/01/14 $0.75
32. Xxxxx Xxxxxxx 4,000 4452 50 01/01/05 01/01/14 $0.75
33. Xxxx Xxxxx 35,000 38954 51 01/01/05 01/01/14 $0.75
34. Xxx Xxxxx Xxxxxxxxxx 4,000 4452 53 01/01/05 01/01/14 $0.75
35. Xxxxxxx Xxxxxx 6,000 6678 55 01/01/05 01/01/14 $0.75
36. Xxxxx Xxxxxxxx 4,000 4452 57 01/01/05 01/01/14 $0.75
37. Xxxx Xxxxxxxxx 4,000 4452 58 01/01/05 01/01/14 $0.75
38. Xxxxxx Xxxxxx 6,000 6678 59 01/01/05 01/01/14 $0.75
39. Xxxxx Xxxxx 6,000 6678 60 01/01/05 01/01/14 $0.75
40. Xxxxxx Xxxxxx 4,000 4452 63 01/01/05 01/01/14 $0.75
41. Xxxx Xxxxxx 10,000 11130 65 01/01/05 01/01/14 $0.75
42. Xxxxx Xxxxx 25,000 27824 67 01/01/05 01/01/14 $0.75
43. Xxxxxxxx Xxxxx 4,000 4452 68 01/01/05 01/01/14 $0.75
44. Xxxxx Xxxxxx 140,000 155815 70 01/01/05 01/01/14 $0.75
45. Rock Xxxxxx 2,000 2226 71 01/01/05 01/01/14 $0.75
46. Xxxxxxxxx Xxxxxxx 2,000 2226 72 01/01/05 01/01/14 $0.75
47. Xxxxxxx Xxxxx Xxxxx III (Tre) 40,000 44519 73 03/01/06 02/28/11 $0.83
48. Xxxxx Xxxxxx 25,000 27824 74 03/01/06 10/27/13 $0.75
49. Xxxxx Xxxxxx 25,000 27824 75 03/01/06 10/27/13 $0.75
50. Xxxx Xxxxx 12,500 13912 81 03/01/06 10/27/13 $0.75
---------
TOTAL 1,656,500
=========
B-2
EXHIBIT B
SMM PURCHASE RIGHTS HOLDERS AND Z-AXIS CONVERSION PURCHASE RIGHTS
NON-QUALIFIED STOCK OPTIONS
SMM PURCHASE Z-AXIS CONVERSION
RIGHTS HOLDERS RIGHTS OUTSTANDING PURCHASE RIGHTS CERTIFICATE NO. GRANT DATE EXPIRATION DATE EXERCISE PRICE
---------------- ------------------ ----------------- --------------- ---------- --------------- --------------
1. Xxxx Xxxxxxxx 40,000 44519 4 01/31/04 01/30/09 $0.28
2. Chong Man Xxx 3,000 3339 5 01/31/04 01/30/09 $0.28
3. Xxxx Xxxxxxxx 21,250 18364 76 03/01/06 02/28/11 $0.75
4. Xxxx Xxxxxx 12,500 13912 77 03/01/06 02/28/11 $0.75
5. Xxxxxx Xxxx 14,000 15582 78 03/01/06 02/28/11 $0.75
6. Xxxx Xxxxxxxxxxx 14,000 15582 79 03/01/06 02/28/11 $0.75
7. Xxxxxx Xxxxx 12,500 13912 80 03/01/06 02/28/11 $0.75
8. Xxxxx XxxXxxXxxx 50,000 55648 82 03/01/06 02/28/11 $0.75
9. Chong Man Xxx 14,000 15582 83 4/20/06 4/20/11 $0.75
10. Xxxx Xxxxxxx 12,500 13912 84 4/20/06 4/20/11 $0.75
-------
TOTAL 193,750
=======
B-3
EXHIBIT C
FORM OF Z-AXIS LLC PURCHASE AGREEMENT
C-1
