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SHARE EXCHANGE AGREEMENT
Agreement dated as of ______________, 2001, between Hardrock
Mines, Inc. a corporation organized under the laws of the State
of Nevada, ("HRCK"), and Exotics Acquisition Corp., a corporation
organized under the laws of the State of Nevada ("Exotics"), and
the shareholders of HRCK (the "Shareholders").
The parties agree as follows:
1. The Transaction
1.1. Tender and Exchange. Subject to the terms and conditions of
this Agreement, at the Closing to be held as provided in Section
2, the Shareholders shall tender the HRCK Shares (defined below)
to Exotics, and Exotics shall receive the HRCK Shares from the
Shareholders, free and clear of all encumbrances other than
restrictions imposed by Federal and State securities laws.
1.2. Transaction. The Shareholders will exchange 490,000 shares
of its common stock (the "HRCK Shares") for 7,567,410 shares of
capital stock of Exotics (the "Exotics Shares"). HRCK intends to
effect a 15.8:1 split prior to the Closing. If this split is
completed prior to Closing, 7,742,000 post-split shares of HRCK
common stock shall be exchanged for the Exotic Shares. The HRCK
Shares shall be issued and delivered as directed by Exotics. In
this Agreement, all HRCK share amounts are shown pre-split,
unless otherwise indicated.
1.3. Corporate Actions. Exotics intends to issue common stock,
subsequent to or simultaneously with the Closing, to acquire the
assets and/or common stock of Xxxxxxx.xxx, Inc., a Delaware
corporation.
1.4. Expenses. Exotics acknowledges the expenditures incurred by
HRCK in operating the company and preparing and negotiating the
transaction contemplated by this Agreement. Exotics agrees to
deposit a total of $575,000 to cover these expenses.
2. The Closing.
2.1. Place and Time. The closing of the instant transaction (the
"Closing") shall take place at the offices of Xxxxxxx & Xxxxxxxx,
Ltd. located at 0000 X. Xxxxxxxx Xx., Xxxxx 000, Xxx Xxxxx,
Xxxxxx no later than the close of business (Pacific Daylight
Time) on February 5, 2001, or at such other place, date and time
as the parties may agree in writing.
2.2. Deliveries by Exotics. At the Closing, Exotics shall deliver
the following to HRCK:
a. A certificate representing the Exotics Shares registered in
the name of HRCK (without any legend or other reference to any
Encumbrance) other than those required by federal and or state
securities law.
b. A down payment of $100,000 to be credited against the
expenses discussed in Section 1.4.
c. The documents contemplated by Section 3.
d. All other documents, instruments and writings required by
this Agreement to be delivered by Exotics at the Closing and any
other documents or records relating to Exotics' business
reasonably requested by HRCK in connection with this Agreement.
2.3. Deliveries by HRCK and the Shareholders. At the Closing,
HRCK and the Shareholders shall deliver the following to Exotics.
a. All of the shares of HRCK common stock that are then issued
and outstanding with proper endorsements attached.
b. The documents contemplated by Section 4.
c. The resignations of the officers and directors of Hardrock
Mines, Inc.
d. Certificate of Amendment of the Articles of Incorporation
changing the name of Hardrock Mines, Inc. to Xxxxxxx.xxx, Inc.
e. All other documents, instruments and writings required by
this Agreement to be delivered by HRCK at the Closing and any
other documents or records relating to HRCK's business reasonably
requested by HRCK in connection with this Agreement.
2.4. Post-Closing Deliveries.
a. Within ten (10) trading days following the first trading of
the common stock of the Company, but no later than March 8, 2001,
Exotics shall deliver the balance of the expenses discussed in
Section 1.4 to the Escrow Agent. Upon verification of these
funds, the Escrow Agent shall release these funds to HRCK, and
shall release to Exotics all remaining shares of common stock
then in its possession, other than those shares specified below.
At this time, the resigning directors of HRCK shall participate
in a meeting in which their resignations are tendered and new
directors are appointed, and shall sign minutes to that effect.
b. After sixty (60) calendar days following the first trading
of the common stock of the Company. HRCK's stock transfer agent
shall release all common stock then held in its possession
pursuant to Section 2.5.
2.5. Escrow Agent. Xxxxxxx & Xxxxxxxx, Ltd. shall serve as the
escrow agent. All shares that are to be exchanged as part of this
Agreement shall be given to the Escrow Agent, except for a total
of 25,000 shares which shall be held in escrow by HRCK's stock
transfer agent. At the Closing, assuming that all obligations of
each party have been fulfilled, the Escrow Agent shall complete
the transfer of five percent (5%) of the common stock of HRCK in
its possession, and all of the common stock of Exotics, in
accordance with the terms of this Agreement.
3. Conditions to HRCK's Obligations.
The obligations of HRCK to effect the Closing shall be subject to
the satisfaction at or prior to the Closing of the following
conditions, any one or more of which may be waived by HRCK:
3.1. No Injunction. There shall not be in effect any injunction,
order or decree of a court of competent jurisdiction that
prevents the consummation of the transactions contemplated by
this Agreement, that prohibits HRCK's acquisition of the Exotics
Shares or the HRCK Shares or that will require any divestiture as
a result of HRCK's acquisition of the Exotics Shares or that will
require all or any part of the business of HRCK to be held
separate and no litigation or proceedings seeking the issuance of
such an injunction, order or decree or seeking to impose
substantial penalties on HRCK or Exotics if this Agreement is
consummated shall be pending.
3.2. Representations, Warranties and Agreements. The
representations and warranties of Exotics set forth in this
Agreement shall be true and complete in all material respects as
of the Closing Date as though made at such time, (b) Exotics
shall have performed, and complied in all material respects with
the agreements contained in this Agreement required to be
performed and complied with by it at or prior to the Closing and
(c) HRCK shall have received a certificate to that effect signed
by an authorized representative of Exotics.
3.3. Regulatory Approvals. All licenses, authorizations,
consents, orders and regulatory approvals of Governmental Bodies
necessary for the consummation of HRCK's acquisition of the
Exotics Shares shall have been obtained and shall be in full
force and effect.
4. Conditions to Exotics' Obligations.
The obligations of Exotics to effect the Closing shall be subject
to the satisfaction at or prior to the Closing of the following
conditions, any one or more of which may be waived by Exotics:
4.1. No Injunction. There shall not be in effect any injunction,
order or decree of a court of competent jurisdiction that
prevents the consummation of the transactions contemplated by
this Agreement, that prohibits HRCK's acquisition of the Exotics
Shares or Exotics's receipt of the HRCK Shares or that will
require any divestiture as a result of HRCK's acquisition of the
Shares or Exotics' acquisition of the HRCK Shares or that will
require all or any part of the business of HRCK or Exotics to be
held separate and no litigation or proceedings seeking the
issuance of such an injunction, order or decree or seeking to
impose substantial penalties on HRCK or Exotics if this Agreement
is consummated shall be pending.
4.2. Representations, Warranties and Agreements. The
representations and warranties of HRCK set forth in this
Agreement shall be true and complete in all material respects as
of the Closing Date as though made at such time, (b) HRCK shall
have performed and complied in all material respects with the
agreements contained in this Agreement required to be performed
and complied with by it at or prior to the Closing and (c)
Exotics shall have received a certificate to that effect signed
by an authorized representative of HRCK.
4.3. Legal Opinion. Exotics shall have received an opinion from
appropriate counsel to HRCK dated the Closing Date, to the effect
that HRCK is a corporation duly organized, validly existing and
in good standing under the laws of the State of Nevada and has
the requisite power and authority to own, lease and operate its
properties and corporate power to carry on its business as now
being conducted; all of the outstanding shares of HRCK are duly
and validly issued, fully paid and non-assessable and the
issuance of such shares has complied with the applicable Federal
and State securities laws and the regulations promulgated
thereunder; HRCK is duly qualified and in good standing as a
domestic corporation and is authorized to do business in all
states or other jurisdictions in which such qualification or
authorization is necessary and there has not been any claim by
any other state of jurisdiction to the effect that HRCK is
required to qualify or otherwise be authorized to do business as
a foreign corporation therein; all persons who have executed or
will execute this Agreement on behalf of HRCK or its Shareholders
have been duty authorized to do so; to the best knowledge of such
counsel there is no action, suit or proceeding and no
investigation by any governmental agency pending or threatened
against HRCK or the assets or business of HRCK that could have a
materially adverse effect on the financial condition of HRCK or
Exotics.
4.4. Regulatory Approvals. All licenses, authorizations,
consents, orders and regulatory approvals of Governmental Bodies
necessary for the consummation of HRCK's acquisition of the
Exotics Shares and Exotics's acquisition of the HRCK Shares shall
have been obtained and shall be in full force and effect.
5. Representations and Warranties of Exotics.
Exotics represents and warrants to HRCK that, to the knowledge of
Exotics (which limitation shall not apply to Section 5.3), and
except as set forth in the Exotics Disclosure Letter:
5.1. Organization of Exotics; Authorization. Exotics is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Nevada with full corporate power
and authority to execute and deliver this Agreement and to
perform its obligations hereunder. The execution, delivery and
performance of this Agreement have been duly authorized by all
necessary corporate action of Exotics. This Agreement constitutes
a valid and binding obligation of Exotics enforceable against it
in accordance with its terms.
5.2. Capitalization. The authorized capital stock of Exotics
consists of 25,000,000 shares of common stock, $0.001 par value.
As of the Closing Date, 7,567,410 common shares of Exotics were
issued and outstanding. No shares have been registered under
state or federal securities laws. As of the Closing Date, all of
the issued and outstanding shares of common stock of Exotics are
validly issued, fully paid and nonassessable.
5.3. No Conflict as to Exotics. Neither the execution and
delivery of this Agreement nor the consummation of the sale of
the Exotics Shares to HRCK will (a) violate any provision of the
certificate of incorporation or by-laws of Exotics or (b)
violate, be in conflict with, or constitute a default (or an
event which, with notice or lapse of time or both, would
constitute a default) under any agreement to which Exotics is a
party or (c) violate any statute or law or any judgment, decree,
order, regulation or rule of any court or other Governmental Body
applicable to Exotics.
5.4. Ownership of Exotics Shares. The delivery of certificates to
HRCK provided in Section 2.2 and the delivery of certificates to
Exotics as provided in Section 2.3will result in HRCK's immediate
acquisition of record and beneficial ownership of 7,567,410
common shares of Exotics, free and clear of all Encumbrances
subject to applicable State and Federal securities laws.
5.5. No Conflict as to Exotics and Subsidiaries. Neither the
execution and delivery of this Agreement nor the consummation of
the acquisition of the Exotics Shares to HRCK will (a) violate
any provision of the certificate of incorporation or by-laws (or
other governing instrument) of Exotics or any of its Subsidiaries
or (b) violate, or be in conflict with, or constitute a default
(or an event which, with notice or lapse of time or both, would
constitute a default) under or result in the termination, of, or
accelerate the performance required by, or excuse performance by
any Person of its obligations under, or cause the acceleration of
the maturity of any debt or obligation pursuant to, or result in
the creation or imposition of any Encumbrance upon any property
or assets of Exotics or any of its Subsidiaries under, any
material agreement or commitment to which Exotics or any of its
Subsidiaries is a party or by which any of their respective
property or assets is bound, or to which any of the property or
assets of Exotics or any of its Subsidiaries is subject, or (c)
violate any statute or law or any judgment, decree, order,
regulation or rule of any court or other Governmental Body
applicable to Exotics or any of its Subsidiaries except, in the
case of violations, conflicts, defaults, terminations,
accelerations or Encumbrances described in clause (b) of this
Section 5.5, for such matters which are not likely to have a
material adverse effect on the business or financial condition of
Exotics and its Subsidiaries, taken as a whole.
5.6. Consent and Approvals of Governmental Authorities. Except
with respect to applicable State and Federal securities laws, no
consent, approval or authorization of, or declaration, filing or
registration with, any Governmental Body is required to be made
or obtained by Exotics or any of its Subsidiaries in connection
with the execution, delivery and performance of this Agreement by
Exotics or the consummation of the acquisition of the Exotics
Shares.
5.7. Other Consents. No consent of any Person is required to be
obtained by Exotics prior to the execution, delivery and
performance of this Agreement or the consummation of the
acquisition of the Exotics Shares to HRCK, including, but not
limited to, consents from parties to leases or other agreements
or commitments, except for any consent which the failure to
obtain would not be likely to have a material adverse effect on
the business and financial condition of Exotics.
5.8. Financial Statements. Exotics has delivered to HRCK
consolidated balance sheets of Exotics and its Subsidiaries as at
December 31, 2000, and statements of income and changes in
financial position for the period then ended. Such Exotics
Financial Statements and notes fairly present the consolidated
financial condition and results of operations of Exotics and its
Subsidiaries as at the respective dates thereof and for the
periods therein.
5.9. Title to Properties. Either Exotics or one of its
Subsidiaries owns all the material properties and assets that
they purport to own (real, personal and mixed, tangible and
intangible), including, without limitation, all the material
properties and assets reflected in the Exotics Financial
Statements (except for property sold since the date of the
Exotics Financial Statements in the ordinary course of business
or leased under capitalized leases), and all the material
properties and assets purchased or otherwise acquired by Exotics
or any of its Subsidiaries since the date of the Exotics
Financial Statements. All properties and assets reflected in the
Exotics Financial Statements are free and clear of all material
Encumbrances and are not, in the case of real property, subject
to any material rights of way, building use restrictions,
exceptions, variances, reservations or limitations of any nature
whatsoever except, with respect to all such properties and
assets, (a) mortgages or security interests shown on the Exotics
Financial Statements as securing specified liabilities or
obligations, with respect to which no default (or event which,
with notice or lapse of time or both, would constitute a default)
exists, and all of which are listed in the Exotics Disclosure
Letter, (b) mortgages or security interests incurred in
connection with the purchase of property or assets after the date
of the Exotics Financial Statements (such mortgages and security
interests being limited to the property or assets so acquired),
with respect to which no default (or event which, with notice or
lapse of time or both, would constitute a default) exists, (c) as
to real property, (i) imperfections of title, if any, none of
which materially detracts from the value or impairs the use of
the property subject thereto, or impairs the operations of
Exotics or any of its Subsidiaries and (ii) zoning laws that do
not impair the present or anticipated use of the property subject
thereto, and (d) liens for current taxes not yet due. The
properties and assets of Exotics and its Subsidiaries include all
rights, properties and other assets necessary to permit Exotics
and its Subsidiaries to conduct Exotics's business in all
material respects in the same manner as it is conducted on the
date of this Agreement.
5.10. Buildings, Plants and Equipment. The buildings, plants,
structures and material items of equipment and other personal
property owned or leased by Exotics or its Subsidiaries are, in
all respects material to the business or financial condition of
Exotics and its Subsidiaries, taken as a whole, in good operating
condition and repair (ordinary wear and tear excepted) and are
adequate in all such respects for the purposes for which they are
being used. Exotics has not received notification that it or any
of its Subsidiaries is in violation of any applicable building,
zoning, anti-pollution, health, safety or other law, ordinance or
regulation in respect of its buildings, plants or structures or
their operations, which violation is likely to have a material
adverse effect on the business or financial condition of Exotics
and its Subsidiaries, taken as a whole or which would require a
payment by Exotics or HRCK or any of their subsidiaries in excess
of $2,000 in the aggregate, and which has not been cured.
5.11. No Condemnation or Expropriation. Neither the whole nor
any portion of the property or leaseholds owned or held by
Exotics or any of its Subsidiaries is subject to any governmental
decree or order to be sold or is being condemned, expropriated or
otherwise taken by any Governmental Body or other Person with or
without payment of compensation therefore, which action is likely
to have a material adverse effect on the business or financial
condition of HRCK and its Subsidiaries, taken as a whole.
5.12. Litigation. There is no action, suit, inquiry,
proceeding or investigation by or before any court or
Governmental Body pending or threatened in writing against or
involving Exotics or any of its Subsidiaries which is likely to
have a material adverse effect on the business or financial
condition of Exotics, HRCK, or any of their Subsidiaries, taken
as whole, or which would require a payment by Exotics or its
subsidiaries in excess of $2,000 in the aggregate or which
questions or challenges the validity of this Agreement. Neither
Exotics nor any or its Subsidiaries is subject to any judgment,
order or decree that is likely to have a material adverse effect
on the business or financial condition of Exotics, HRCK or any of
their Subsidiaries, taken as a whole, or which would require a
payment by Exotics or its subsidiaries in excess of $2,000 in the
aggregate.
5.13. Absence of Certain Changes. Except as set forth in
Section 5.13 of the Exotics Disclosure Letter, since the date of
the Exotics Financial Statements, neither Exotics nor any of its
Subsidiaries has, other than for the transactions provided
herein;
a. suffered the damage or destruction of any of its properties
or assets (whether or not covered by insurance) which is
materially adverse to the business or financial condition of
Exotics and its Subsidiaries, taken as a whole, or made any
disposition of any of its material properties or assets other
than in the ordinary course of business;
b. made any change or amendment in its certificate of
incorporation or by-laws, or other governing instruments;
c. issued or sold any Equity Securities or other securities,
acquired, directly or indirectly, by redemption or otherwise, any
such Equity Securities, reclassified, split-up or otherwise
changed any such Equity Security, or granted or entered into any
options, warrants, calls or commitments of any kind with respect
thereto;
d. organized any new Subsidiary or acquired any Equity
Securities of any Person, or any equity or ownership interest in
any business;
e. borrowed any funds or incurred, or assumed or become subject
to, whether directly or by way of guarantee or otherwise, any
obligation or liability with respect to any such indebtedness for
borrowed money;
f. paid, discharged or satisfied any material claim, liability
or obligation (absolute, accrued, contingent or otherwise), other
than in the ordinary course of business;
g. prepaid any material obligation having a maturity of more
than 90 days from the date such obligation was issued or
incurred;
h. canceled any material debts or waived any material claims or
rights, except in the ordinary course of business;
i. disposed of or permitted to lapse any rights to the use of
any material patent or registered trademark or copyright or other
intellectual property owned or used by it;
j. granted any general increase in the compensation of officers
or employees (including any such increase pursuant to any
employee benefit plan);
k. purchased or entered into any contract or commitment to
purchase any material quantity of raw materials or supplies, or
sold or entered into any contract or commitment to sell any
material quantity of property or assets, except (i) normal
contracts or commitments for the purchase of, and normal
purchases of, raw materials or supplies, made in the ordinary
course business, (11) normal contracts or commitments for the
sale of, and normal sales of, inventory in the ordinary course of
business, and (iii) other contracts, commitments, purchases or
sales in the ordinary course of business;
l. made any capital expenditures or additions to property,
plant or equipment or acquired any other property or assets
(other than raw materials and supplies) at a cost in excess of
$25,000 in the aggregate;
m. written off or been required to write off any notes or
accounts receivable in an aggregate amount in excess of $2,000;
n. written down or been required to write down any inventory in
an aggregate amount in excess of $ 2,000;
o. entered into any collective bargaining or union contract or
agreement; or
p. other than in the ordinary course of business, incurred any
liability required by generally accepted accounting principles to
be reflected on a balance sheet and material to the business or
financial condition of Exotics and its subsidiaries taken as a
whole.
5.14. No Material Adverse Change. Since the date of the
Exotics Financial Statements, there has not been any material
adverse change in the business or financial condition of Exotics.
5.15. Contracts and Commitments. Except as set forth in
Section 5.15 of the Exotics Disclosure Letter, neither Exotics
nor any of its Subsidiaries is a party to any:
a. Contract or agreement (other than purchase or sales orders
entered into in the ordinary course of business) involving any
liability on the part of Exotics or one of its Subsidiaries of
more than $25,000 and not cancelable by Exotics or the relevant
Subsidiary (without liability to Exotics or such Subsidiary)
within 60 days;
b. Except with respect to the lease on its business location,
lease of personal property involving annual rental payments in
excess of $25,000 and not cancelable by Exotics or the relevant
Subsidiary (without liability to Exotics or such Subsidiary)
within 90 days;
c. Except with respect to the options referenced above,
Employee bonus, stock option or stock purchase, performance unit,
profit sharing, pension, savings, retirement, health, deferred or
incentive compensation, insurance or other material employee
benefit plan (as defined in Section 2(3) of ERISA) or program for
any of the employees, former employees or retired employees of
Exotics or any of its Subsidiaries;
d. Commitment, contract or agreement that is currently expected
by the management of Exotics to result in any material loss upon
completion or performance thereof;
e. Contract, agreement or commitment that is material to the
business of Exotics and its Subsidiaries, taken as a whole, with
any officer, employee, agent, consultant, advisor, salesman,
sales representative, value added reseller, distributor or
dealer; or
f. Employment agreement or other similar agreement that
contains any severance or termination pay, liabilities or
obligations.
All such contracts and agreements are in full force and effect.
Neither Exotics nor any or its Subsidiaries is in breach of, in
violation of or in default under, any agreement, instrument,
indenture, deed of trust, commitment, contract or other
obligation of any type to which Exotics or any of its
Subsidiaries is a party or is or may be bound that relates to the
business of Exotics or any of its Subsidiaries or to which any of
the assets or properties of Exotics or any of its Subsidiaries is
subject, the effect of which breach, violation or default is
likely to materially and adversely affect the business or
financial condition of Exotics and its Subsidiaries, taken as a
whole. HRCK has not guaranteed or assumed and specifically does
not guarantee or assume any obligations of Exotics or any of its
Subsidiaries.
5.16. Labor Relations. Neither Exotics nor any of its
Subsidiaries is a party to any collective bargaining agreement.
Except for any matter which is not likely to have a material
adverse effect on the business or financial condition of Exotics
and its Subsidiaries, taken as a whole, (a) Exotics and each of
its Subsidiaries is in compliance with all applicable laws
respecting employment and employment practices, terms and
conditions of employment and wages and hours, and is not engaged
in any unfair labor practice, (b) there is no unfair labor
practice complaint against Exotics or any of its Subsidiaries
pending before the National Labor Relations Board, (c) there is
no labor strike, dispute, slowdown or stoppage actually pending
or threatened against Exotics or any of its Subsidiaries, (d) no
representation question exists respecting the employees of
Exotics or any of its Subsidiaries, (e) neither Exotics nor any
of its Subsidiaries has experienced any strike, work stoppage or
other labor difficulty, and (f) no collective bargaining
agreement relating to employees of Exotics or any of its
Subsidiaries is currently being negotiated.
5.17. Employee Benefit Plans. Section 5.17 of the Exotics
Disclosure Letter contains a list of all material employee
pension and welfare benefit plans covering employees of Exotics
and its Subsidiaries. No listed plan is (1) a multi-employer plan
as defined in Section 3(37) of ERISA, or (2) a defined benefit
plan as defined in Section 3(35) of ERISA, any listed individual
account pension plan is duly qualified as tax exempt under the
applicable sections of the Code, each listed benefit plan and
related funding arrangement, if any, has been maintained in all
material respects in compliance with its terms and the provisions
of ERISA and the Code, and the Exotics Disclosure Letter also
lists all material management incentive plans and all material
employment contracts or severance arrangements pertaining to one
or more specific employees.
5.18. Compliance with Law. The operations of Exotics and its
Subsidiaries have been conducted in accordance with all
applicable laws and regulations of all Governmental Bodies having
jurisdiction over them, except for violations thereof which are
not likely to have a material adverse effect on the business or
financial condition of Exotics and its Subsidiaries, taken as a
whole, or which would not require a payment by Exotics or its
Subsidiaries in excess of $2,000 in the aggregate, or which have
been cured. Neither Exotics nor any of its Subsidiaries has
received any notification of any asserted present or past failure
by it to comply with any such applicable laws or regulations.
Exotics and its Subsidiaries have all material licenses, permits,
orders or approvals from the Governmental Bodies required for the
conduct of their businesses, and are not in material violation of
any such licenses, permits, orders and approvals. All such
licenses, permits, orders and approvals are in full force and
effect, and no suspension or cancellation of any thereof has been
threatened.
5.19. Tax Matters.
a. Exotics and each of its Subsidiaries (1) (except with
respect to its 2000 tax return, as to which an extension has been
or may be appropriately filed) has filed all nonconsolidated and
noncombined Tax Returns and all consolidated or combined Tax
Returns that include only Exotics and/or its Subsidiaries and not
Seller or its other Affiliates (for the purposes of this Section
5.19, such tax Returns shall be considered non-consolidated and
non-combined Tax Returns) required to be filed through the date
hereof and has paid any Tax due through the date hereof with
respect to the time periods covered by such non-consolidated and
non-combined Tax Returns and shall timely pay any such Taxes
required to be paid by it after the date hereof with respect to
such Tax Returns and (2) shall prepare and timely file all such
non-consolidated and non-combined Tax Returns required to be
filed after the date hereof and through the Closing Date and pay
all Taxes required to be paid by it with respect to the periods
covered by such Tax Returns; (B) all such Tax Returns filed
pursuant to clause (A) after the date hereof shall, in each case,
be prepared and filed in a manner consistent in all material
respects (including elections and accounting methods and
conventions) with such Tax Return most recently filed in the
relevant jurisdiction prior to the date hereof, except as
otherwise required by law or regulation. Any such Tax Return
filed or required to be filed after the date hereof shall not
reflect any new elections or the adoption of any new accounting
methods or conventions or other similar items, except to the
extent such particular reflection or adoption is required to
comply with any law or regulation.
b. All consolidated or combined Tax Returns (except those
described in subparagraph (a) above) required to be filed by any
person through the date hereof that are required or permitted to
include the income, or reflect the activities, operations and
transactions, of Exotics or any of its Subsidiaries for any
taxable period have been timely filed, and the income,
activities, operations and transactions of Exotics and
Subsidiaries have been properly included and reflected thereon.
Exotics shall prepare and file, or cause to be prepared and
filed, all such consolidated or combined Tax Returns that are
required or permitted to include the income, or reflect the
activities, operations and transactions, of Exotics or any
Subsidiary, with respect to any taxable year or the portion
thereof ending on or prior to the Closing Date, including,
without limitation, Exotics's consolidated federal income tax
return for such taxable years. Exotics will timely file a
consolidated federal income tax return for the taxable year ended
December 31, 2000 and such return shall include and reflect the
income, activities, operations and transactions of Exotics and
Subsidiaries for the taxable period then ended, and hereby
expressly covenants and agrees to file a consolidated federal
income tax return, and to include and reflect thereon the income,
activities, operations and transactions of Exotics and
Subsidiaries for the taxable period through the Closing Date. All
Tax Returns filed pursuant to this subparagraph (b) after the
date hereof shall, in each case, to the extent that such Tax
Returns specifically relate to Exotics or any of its Subsidiaries
and do not generally relate to matters affecting other members of
Exotics's consolidated group, be prepared and filed in a manner
consistent in all material respects (including elections and
accounting methods and conventions) with the Tax Return most
recently filed in the relevant jurisdictions prior to the date
hereof, except as otherwise required by law or regulation.
Exotics has paid or will pay all Taxes that may now or hereafter
be due with respect to the taxable periods covered by such
consolidated or combined Tax Returns.
c. Neither Exotics nor any of its subsidiaries has agreed, or
is required, to make any adjustment (x) under Section 481(a) of
the Code by reason, of a change in accounting method or otherwise
or (y) pursuant to any provision of the Tax Reform Act of 1986,
the Revenue Act of 1987 or the Technical and Miscellaneous
Revenue Act of 1988.
d. Neither Exotics nor any of its Subsidiaries or any
predecessor or Affiliate of the foregoing has, at any time, filed
a consent under Section 341(f)(1) of the Code, or agreed under
Section 341(f)(3) of the Code, to have the provisions of Section
341(f)(2) of the Code apply to any sale of its stock.
e. There is no (nor has there been any request for an)
agreement, waiver or consent providing for an extension of time
with respect to the assessment of any Taxes attributable to
Exotics or its Subsidiaries, or their assets or operations and no
power of attorney granted by Exotics or any of its Subsidiaries
with respect to any Tax matter is currently in force.
f. There is no action, suit, proceeding, investigation, audit,
claim, demand, deficiency or additional assessment in Exotics,
pending or threatened against or with respect to any Tax
attributable to Exotics, its Subsidiaries or their assets or
operations.
g. Except as set forth in the Exotics Disclosure Letter, all
amounts required to be withheld as of the Closing Date for Taxes
or otherwise have been withheld and paid when due to the
appropriate agency or authority.
h. No property of Exotics is "tax-exempt use property" within
the meaning of Section 168(h) of the Code nor property that
Exotics and/or its Subsidiaries will be required to treat as
being owned by another person pursuant to Section 168(f)(8) of
the Internal Revenue Code of 1954, as amended and in effect
immediately prior to the enactment of the Tax Reform Act of 1986.
i. There have been delivered or made available to HRCK true and
complete copies of all income Tax Returns (or with respect to
consolidated or combined returns, the portion thereof) and any
other Tax Returns requested by HRCK as may be relevant to
Exotics, its Subsidiaries, or their assets or operations for any
and all periods ending after December 31, 1999, or for any Tax
years which are subject to audit or investigation by any taxing
authority or entity.
j. There is no contract, agreement, plan or arrangement
including but not limited to the provisions of this Agreement,
covering any employee or former employee of Exotics or its
Subsidiaries that, individually or collectively, could give rise
to the payment of any amount that would not be deductible
pursuant to Section 280G or 162 of the Code.
5.20. Environmental Matters.
a. At all times prior to the date hereof, Exotics and its
Subsidiaries have complied in all material respects with
applicable environmental laws, orders, regulations, rules and.
ordinances relating to the Properties (as hereinafter defined),
the violation of which would have a material adverse effect on
the business or financial condition of Exotics and its
Subsidiaries, taken as a whole, or which would require a payment
by Exotics or its Subsidiaries in excess of $2,000 in the
aggregate, and which have been duly adopted, imposed or
promulgated by any legislative, executive, administrative or
judicial body or officer of any Governmental Body.
b. The environmental licenses, permits and authorizations that
are material to the operations of Exotics and its Subsidiaries,
taken as a whole, are in full force and effect.
c. Neither Exotics nor any of its Subsidiaries has released or
caused to be released on or about the properties currently owned
or leased by Exotics or any of its Subsidiaries (the
"Properties") any (i) pollutants, (ii) contaminants, (iii)
"Hazardous Substances," as that term is defined in Section
101(14) of the Comprehensive Environmental Response Act, as
amended or (iv) "Regulated Substances," as that term in defined
in Section 9001 of the Resource Conservation and Recovery Act, 42
U.S.C. Section 6901, et seq., as amended, which would be required
to be remediated by any governmental agency with jurisdiction
over the Properties under the authority of laws, regulations and
ordinances as in effect and currently interpreted on the date
hereof, which remediation would have a material adverse effect on
the business or financial condition of Exotics and its
Subsidiaries, taken as a whole.
5.21. Absence of Certain Commercial Practices. Neither
Exotics nor any of its Subsidiaries has, directly or indirectly,
paid or delivered any fee, commission or other sum of money or
item of property, however characterized, to any finder, agent,
government official or other party, in the United States or any
other country, which is in any manner related to the business or
operations of Exotics or its Subsidiaries, which Exotics or one
of its Subsidiaries knows or has reason to believe to have been
illegal under any federal, state or local laws of the United
States or any other country having jurisdiction; and neither
Exotics nor any of its Subsidiaries has participated, directly or
indirectly, in any boycotts or other similar practices affecting
any of its actual or potential shareholders in violation of any
applicable law or regulation.
5.22. Transactions with Directors and Officers. Except as set
forth in Section 5.22 of the Exotics Disclosure Letter, Exotics
and its Subsidiaries do not engage in business with any Person in
which any of Exotics's directors or officers has a material
equity interest. No director or officer of Exotics owns any
property, asset or right which is material to the business of
Exotics and its Subsidiaries, taken as a whole.
5.23. Borrowing and Guarantees. Except as set forth in
Section 5.23 of the Exotics Disclosure Letter, Exotics and its
Subsidiaries (a) do not have any indebtedness for borrowed money,
(b) are not lending or committed to lend any money (except for
advances to employees in the ordinary course of business), and
(c) are not guarantors or sureties with respect to the
obligations of any Person.
6. Representations and Warranties of HRCK and the Shareholders.
HRCK and, with respect to Sections 6.4 and 6.21, each of the
Shareholders, represents and warrants to Exotics that, to the
knowledge of HRCK and, with respect to Section 6.4, each of the
Shareholders, (the requirement of knowledge shall not apply to
Section 6.3), and except as set forth in the HRCK Disclosure
Letter:
6.1. Organization of HRCK; Authorization. HRCK is a corporation
duly organized, validly existing and in good standing under the
laws of the State of Nevada with full corporate power and
authority to execute and deliver this Agreement and to perform
its obligations hereunder. The execution, delivery and
performance of this Agreement have been duly authorized by all
necessary corporate action of HRCK. This Agreement constitutes a
valid and binding obligation of HRCK, enforceable against it in
accordance with its terms.
6.2. Capitalization. The authorized capital stock of HRCK
consists of 100,000,000 shares of common stock, $0.001 par value.
As of the Closing Date, 515,000 shares of common stock of HRCK
were issued and outstanding. No shares have been registered under
state or federal securities laws. As of the Closing Date, all of
the issued and outstanding shares of common stock of HRCK are
validly issued, fully paid and nonassessable.
6.3. No Conflict as to HRCK. Neither the execution and delivery
of this Agreement nor the delivery of the HRCK Shares to Exotics
will (a) violate any provision of the certificate of
incorporation or by-laws of HRCK, or (b) violate, be in conflict
with, or constitute a default (or an event which, with notice or
lapse of time or both, would constitute a default) under any
agreement to which HRCK is a party or (c) violate any statute or
law or any judgment, decree, order, regulation or rule of any
court or other Governmental Body applicable to HRCK.
6.4. Ownership of HRCK Shares. The delivery of certificates to
Exotics provided in Section 2.3 will result in Exotics's
immediate acquisition of record and beneficial ownership of
490,000 shares of common stock of HRCK, free and clear of all
encumbrances other than as required by Federal and State
securities laws. There are no outstanding options, rights,
conversion rights, agreements or commitments of any kind relating
to the issuance, sale or transfer of any Equity Securities or
other securities of HRCK. Nothing in this Agreement shall be
deemed to be a representation or warranty as to the tradability
of any of the HRCK Shares under Federal or any States' security
laws.
6.5. No Conflict as to HRCK and Subsidiaries. Neither the
execution and delivery of this Agreement nor the consummation of
the of the instant agreement will (a) violate any provision of
the certificate of incorporation or by-laws (or other governing
instrument) of HRCK or any of its Subsidiaries or (b) violate, or
be in conflict with, or constitute a default (or an event which,
with notice or lapse of time or both, would constitute a default)
under, or result in the termination of, or accelerate the
performance required by, or excuse performance by any Person of
any of its obligations under, or cause the acceleration of the
maturity of any debt or obligation pursuant to, or result in the
creation or imposition of any Encumbrance upon any property or
assets of HRCK or any of its Subsidiaries under any material
agreement or commitment to which HRCK or any of its Subsidiaries
is a party or by which any of their respective property or assets
is bound, or to which any of the property or assets of HRCK or
any of its Subsidiaries is subject, or (c) violate any statute or
law or any judgment, decree, order, regulation or rule of any
court or other Governmental Body applicable to HRCK. or any of
its Subsidiaries except, in the case of violations, conflicts,
defaults, termination's, accelerations or Encumbrances described
in clause (b) of this Section 6.5, for such matters which are not
likely to have a material adverse effect on the business or
financial condition of HRCK and its Subsidiaries, taken as a
whole.
6.6. Consents and Approvals of Governmental Authorities. No
consent, approval or authorization of, or declaration, filing or
registration with, any Governmental Body is required to be made
or obtained by HRCK or any of its Subsidiaries in connection with
the execution, delivery and performance of this Agreement by HRCK
or the consummation of the contemplated transaction.
6.7. Other Consents. No consent of any Person is required to be
obtained by HRCK to the execution, delivery and performance of
this Agreement or the consummation of the contemplated
transaction including, but not limited to, consents from parties
to leases or other agreements or commitments, except for any
consent which the failure to obtain would not be likely to have a
material adverse effect on the business and financial condition
of HRCK.
6.8. Financial Statements. HRCK has delivered to Exotics
consolidated balance sheets of HRCK and its Subsidiaries as at
December 31, 2000, and statements of income and changes in
financial position for the period then ended. Such HRCK Financial
Statements and notes fairly present the consolidated financial
condition and results of operations of HRCK and its Subsidiaries
as at the respective dates thereof and for the periods therein.
6.9. Title to Properties. Either HRCK or one of its Subsidiaries
owns all the material properties and assets that they purport to
own (real, personal and mixed, tangible and intangible),
including, without limitation, all the material properties and
assets reflected in the HRCK Financial Statements and all the
material properties and assets purchased or otherwise acquired by
HRCK or any of its Subsidiaries since the date of the HRCK
Financial Statements. All properties and assets reflected in the
HRCK Financial Statements are free and clear of all material
Encumbrances and are not, in the case of real property, subject
to any material rights of way, building use restrictions,
exceptions, variances, reservations or limitations of any nature
whatsoever except, with respect to all such properties and
assets, (a) mortgages or security interests shown on the HRCK
Financial Statements as securing specified liabilities or
obligations, with respect to which no default (or event which,
with notice or lapse of time or both, would constitute a default)
exists, and all of which are listed in the HRCK Disclosure
Letter, (b) mortgages or security interests incurred in
connection with the purchase of property or assets after the date
of the HRCK Financial Statements (such mortgages and security
interests being limited to the property or assets so acquired),
with respect to which no default (or event which, with notice or
lapse of time or both, would constitute a default) exists, (c) as
to real property, (i) imperfections of title, if any, none of
which materially detracts from the value or impairs the use of
the property subject thereto, or impairs the operations of HRCK
or any of its Subsidiaries and (ii) zoning laws that do not
impair the present or anticipated use of the property subject
thereto, and (d) liens for current taxes not yet due. The
properties and assets of HRCK and its Subsidiaries include all
rights, properties and other assets necessary to permit HRCK and
its Subsidiaries to conduct HRCK's business in all material
respects in the same manner as it is conducted on the date of
this Agreement.
6.10. Buildings, Plants and Equipment. The buildings, plants,
structures and material items of equipment and other personal
property owned or leased by HRCK or its Subsidiaries are, in all
respects material to the business or financial condition of HRCK
and its Subsidiaries, taken as a whole, in good operating
condition and repair (ordinary wear and tear excepted) and are
adequate in all such respects for the purposes for which they are
being used. HRCK has not received notification that it or any of
its Subsidiaries is in violation of any applicable building,
zoning, anti-pollution, health, safety or other law, ordinance or
regulation in respect of its buildings, plants or structures or
their operations, which violation is likely to have a material
adverse effect on the business or financial condition of HRCK and
its Subsidiaries, taken as a whole or which would require a
payment by Exotics or HRCK or any of their subsidiaries in excess
of $2,000 in the aggregate, and which has not been cured.
6.11. No Condemnation or Expropriation. Neither the whole nor
any portion of the property or leaseholds owned or held by HRCK
or any of its Subsidiaries is subject to any governmental decree
or order to be sold or is being condemned, expropriated or
otherwise taken by any Governmental Body or other Person with or
without payment of compensation therefore, which action is likely
to have a material adverse effect on the business or financial
condition of Exotics and its Subsidiaries, taken as a whole.
6.12. Litigation. There is no action, suit, inquiry,
proceeding or investigation by or before any court or
Governmental Body pending or threatened in writing against or
involving HRCK or any of its Subsidiaries which is likely to have
a material adverse effect on the business or financial condition
of Exotics, HRCK, or any of their Subsidiaries, taken as whole,
or which would require a payment by HRCK or its subsidiaries in
excess of $2,000 in the aggregate or which questions or
challenges the validity of this Agreement. Neither HRCK nor any
or its Subsidiaries is subject to any judgment, order or decree
that is likely to have a material adverse effect on the business
or financial condition of Exotics, HRCK, or any of their
Subsidiaries, taken as a whole, or which would require a payment
by HRCK or its subsidiaries in excess of $2,000 in the aggregate.
6.13. Absence of Certain Changes. Except as set forth in
Section 6.13 of the HRCK Disclosure Letter, since the date of the
HRCK Financial Statements, neither HRCK nor any of its
Subsidiaries has, other than for the transactions provided
herein:
a. suffered the damage or destruction of any of its properties
or assets (whether or not covered by insurance) which is
materially adverse to the business or financial condition of HRCK
and its Subsidiaries, taken as a whole, or made any disposition
of any of its material properties or assets other than in the
ordinary course of business;
b. made any change or amendment in its certificate of
incorporation or by-laws, or other governing instruments;
c. issued or sold any Equity Securities or other securities,
acquired, directly or indirectly, by redemption or otherwise, any
such Equity Securities, reclassified, split-up or otherwise
changed any such Equity Security, or granted or entered into any
options, warrants, calls or commitments of any kind with respect
thereto;
d. organized any new Subsidiary or acquired any Equity
Securities of any Person, or any equity or ownership interest in
any business;
e. borrowed any funds or incurred, or assumed or become subject
to, whether directly or by way of guarantee or otherwise, any
obligation or liability with respect to any such indebtedness for
borrowed money;
f. paid, discharged or satisfied any material claim, liability
or obligation (absolute, accrued, contingent or otherwise), other
than in the ordinary course of business;
g. prepaid any material obligation having a maturity of more
than 90 days from the date such obligation was issued or
incurred;
h. canceled any material debts or waived any material claims or
rights, except in the ordinary course of business;
i. disposed of or permitted to lapse any rights to the use of
any material patent or registered trademark or copyright or other
intellectual property owned or used by it;
j. granted any general increase in the compensation of officers
or employees (including any such increase pursuant to any
employee benefit plan);
k. purchased or entered into any contract or commitment to
purchase any material quantity of raw materials or supplies, or
sold or entered into any contract or commitment to sell any
material quantity of property or assets, except (i) normal
contracts or commitments for the purchase of, and normal
purchases of, raw materials or supplies, made in the ordinary
course business, (ii) normal contracts or commitments for the
sale of, and normal sales of, inventory in the ordinary course of
business, and (iii) other contracts, commitments, purchases or
sales in the ordinary course of business;
l. made any capital expenditures or additions to property,
plant or equipment or acquired any other property or assets
(other than raw materials and supplies) at a cost in excess of
$2,000 in the aggregate;
m. written off or been required to write off any notes or
accounts receivable in an aggregate amount in excess of $2,000;
n. written down or been required to write down any inventory in
an aggregate amount in excess of $ 2,000;
o. entered into any collective bargaining or union contract or
agreement; or
p. other than in the ordinary course of business, incurred any
liability required by generally accepted accounting principles to
be reflected on a balance sheet and material to the business or
financial condition of HRCK and its subsidiaries taken as a
whole.
6.14. No Material Adverse Change. Since the, date of the HRCK
Financial Statements, there has not been any material adverse
change in the business or financial condition of HRCK and its
Subsidiaries taken, as a whole, other than changes resulting from
economic conditions prevailing in the United States precious
coins, collectibles and metals industry.
6.15. Contracts and Commitments. Except as set forth in
Section 6.15 of the HRCK Disclosure Letter, neither HRCK nor any
of its Subsidiaries is party to any:
a. Contract or agreement (other than purchase on sales orders
entered into in the ordinary course of business) involving any
liability on the part of HRCK or one of its Subsidiaries of more
than $2,000 and not cancelable by HRCK or the relevant Subsidiary
(without liability to HRCK or such Subsidiary) within 60 days;
b. Lease of personal property involving annual rental payments
in excess of $2,000 and not cancelable by HRCK or the relevant
Subsidiary (without liability to HRCK or such Subsidiary) within
90 days;
c. Employee bonus, stock option or stock purchase, performance
unit, profit-sharing, pension, savings, retirement, health,
deferred or incentive compensation, insurance or other material
employee benefit plan as defined in Section 2(3) of ERISA) or
program for any of the employees, former employees or retired
employees of HRCK or any of its Subsidiaries;
d. Commitment, contract or agreement that is currently expected
by the management of HRCK to result in any material loss upon
completion or performance thereof;
e. Contract, agreement or commitment that is material to the
business of HRCK and its Subsidiaries, taken as a whole, with any
officer, employee, agent, consultant, advisor, salesman, sales
representative , value added reseller, distributor or dealer; or
f. Employment agreement or other similar agreement that
contains any severance or termination pay, liabilities or
obligations.
All such contracts and agreements are in full force and effect.
Neither HRCK nor any or its Subsidiaries is in breach of, in
violation of or in default under, any agreement, instrument,
indenture, deed of trust, commitment, contract or other
obligation of any type to which HRCK or any of its Subsidiaries
is a party or is or may be bound as it relates to the business of
HRCK or any of its Subsidiaries or to which any of the assets or
properties of HRCK or any of its Subsidiaries is subject, the
effect of which breach, violation or default is likely to
materially and adversity affect the business or financial
condition of HRCK and its Subsidiaries, taken as a whole.
6.16. Labor Relations. Neither HRCK nor any of its
Subsidiaries is a party to any collective bargaining agreement.
Except for any matter which is not likely to have a material
adverse effect on the business or financial condition of HRCK and
its Subsidiaries, taken as a whole, (a) HRCK and each of its
Subsidiaries is in compliance with all applicable laws respecting
employment and employment practices, terms and conditions of
employment and wages and hours, and is not engaged in any unfair
labor practice, (b) there is no unfair labor practice complaint
against HRCK or any of its Subsidiaries pending before the
National Labor Relations Board, (c) there is no labor strike,
dispute, slowdown or stoppage actually pending or threatened
against HRCK or any of its Subsidiaries, (d) no representation
question exists respecting the employees of HRCK or any of its
Subsidiaries, (e) neither HRCK nor any of its Subsidiaries has
experienced any strike, work stoppage or other labor difficulty,
and (f) no collective bargaining agreement relating to employees
of HRCK or any of its Subsidiaries is currently being negotiated.
6.17. Employee Benefit Plans. Section 6.17 of the HRCK
Disclosure Letter contains a list of all material employee
pension and welfare benefit plans covering employees of HRCK and
its Subsidiaries. No listed plan is (1) a multi-employer plan as
defined in Section 3(37) of ERISA, or (2) a defined benefit plan
as defined in Section 3(35) of ERISA, any listed individual
account pension plan is duly qualified as tax exempt under the
applicable sections of the Code, each listed benefit plan and
related funding arrangement, if any, has been maintained in all
material respects in compliance with its terms and the provisions
of ERISA and the Code, and the HRCK Disclosure Letter also lists
all material management incentive plans and all material
employment contracts or severance arrangements pertaining to one
or more specific employees.
6.18. Compliance with Law. The operations of HRCK and its
Subsidiaries have been conducted in accordance with all
applicable laws and regulations of all Governmental Bodies having
jurisdiction over them, except for violations thereof which are
not likely to have a material adverse effect on the business or
financial condition of HRCK and its Subsidiaries, taken as a
whole, or which would not require a payment by HRCK or its
Subsidiaries in excess of $2,000 in the aggregate, or which have
been cured. Neither HRCK nor any of its Subsidiaries has received
any notification of any asserted present or past failure by it to
comply with any such applicable laws or regulations. HRCK and its
Subsidiaries have all material licenses, permits, orders or
approvals from the Governmental Bodies required for the conduct
of their businesses, and are not in material violation of any
such licenses, permits, orders and approvals. All such licenses,
permits, orders and approvals are in full force and effect, and
no suspension or cancellation of any thereof has been threatened.
6.19. Tax Matters.
a. HRCK and each of its Subsidiaries (1) has filed all non-
consolidated and non-combined Tax Returns and all consolidated or
combined Tax Returns that include only HRCK and/or its
Subsidiaries and not Seller or its other Affiliates (for the
purposes of this Section 6.19, such tax returns shall be
considered non-consolidated and non-combined Tax Returns)
required to be filed through the date hereof and has paid any Tax
due through the date hereof with respect to the time periods
covered by such non-consolidated and non-combined Tax Returns and
shall timely pay any such Taxes required to be paid by it after
the date hereof with respect to such Tax Returns and (2) shall
prepare and timely file all such non-consolidated and non-
combined Tax Returns required to be filed after the date hereof
and through the Closing Date and pay all Taxes required to be
paid by it with respect to the periods covered by such Tax
Returns; (B) all such Tax Returns filed pursuant to clause (A)
after the date hereof shall, in each case, be prepared and filed
in a manner consistent in all material respects (including
elections and, accounting methods and conventions) with such Tax
Return most recently filed in the relevant jurisdiction prior to
the date hereof, except as otherwise required by law or
regulation. Any such Tax Return filed or required to be filed
after the date hereof shall not reflect, any new elections or the
adoption of any new accounting methods or conventions or other
similar items, except to the extent such particular reflection or
adoption is required to comply with any law or regulation.
b. All consolidated or combined Tax Returns (except those
described in subparagraph (a) above) required to be filed by any
person through the date hereof that are required or permitted to
include the income, or reflect the activities, operations and
transactions, of HRCK or any of its Subsidiaries for any taxable
period have been timely filed, and the income, activities,
operations and transactions of HRCK and Subsidiaries have been
properly included and reflected thereon. HRCK shall prepare and
file, or cause to be prepared and filed, all such consolidated or
combined Tax Returns that are required or permitted to include
the income, or reflect the activities, operations and
transactions, of HRCK or any Subsidiary, with respect to any
taxable yea or the portion thereof ending on or prior to the
Closing Date, including, without limitation, HRCK's consolidated
federal income tax return for such taxable years. HRCK will
timely file a consolidated federal income tax return for the
taxable year ended December 31, 2000 and such return shall
include and reflect the income, activities, operations and
transactions of HRCK and Subsidiaries for the taxable period then
ended, and hereby expressly covenants and agrees to file a
consolidated federal income tax return, and to include and
reflect thereon the income, activities, operations and
transactions of HRCK and Subsidiaries for the taxable period
through the Closing Date. All Tax Returns filed pursuant to this
subparagraph (b) after the date hereof shall, in each case, to
the extent that such Tax Returns specifically relate to HRCK or
any of its Subsidiaries and do not generally relate to matters
affecting other members of HRCK's consolidated group, be prepared
and filed in a manner consistent in all material respects
(including elections and accounting methods and conventions) with
the Tax Return most recently filed in the relevant jurisdictions
prior to the date hereof, except as otherwise required by law or
regulation. HRCK has paid or will pay all Taxes that may now or
hereafter be due with respect to the taxable periods covered by
such consolidated or combined Tax Returns.
c. Neither HRCK nor any of its Subsidiaries has agreed, or is
required, to make any adjustment (x) under Section 481(a) of the
Code by reason of a change in accounting method or otherwise or
(y) pursuant to any provision of the Tax Reform Act of 1986, the
Revenue Act of 1987 or the Technical and Miscellaneous Revenue
Act of 1988.
d. Neither HRCK nor any of its Subsidiaries or any predecessor
or Affiliate of the foregoing has, at any time, filed a consent
under Section 341(f)(1) of the Code, or agreed under Section
341(f)(3) of the Code, to have the provisions of Section
341(f)(2) of the Code apply to any sale of its stock.
e. There is no (nor has there been any request for an)
agreement, waiver or consent providing for an extension of time
with respect to the assessment of any Taxes attributable to HRCK
or its Subsidiaries, or their assets or operations and no power
of attorney granted by HRCK or any of its Subsidiaries with
respect to any Tax matter is currently in force.
f. There is no action, suit, proceeding, investigation, audit,
claim, demand, deficiency or additional assessment in Exotics,
pending or threatened against or with respect to any Tax
attributable to HRCK, its Subsidiaries or their assets or
operations.
g. All amounts required to be withheld as of the Closing Date
for Taxes or otherwise have been withheld and paid when due to
the appropriate agency or authority.
h. No property of HRCK is "tax-exempt use property" within the
meaning of Section 168(h) of the Code nor property that HRCK
and/or its Subsidiaries will be required to treat as being owned
by another person pursuant to Section 168(f)(8) of the Internal
Revenue Code of 1954, as amended and in effect immediately prior
to the enactment of the Tax Reform Act of 1986.
i. There have been delivered or made available to Exotics true
and complete copies of all income Tax Returns (or with respect to
consolidated or combined returns, the portion thereof) and any
other Tax Returns requested by Exotics as may be relevant to
HRCK, its Subsidiaries, or their assets or operations for any and
all periods ending after December 31, 1999, or for any Tax years
which are subject to audit or investigation by any taxing
authority or entity.
j. There is no contract, agreement, plan or arrangement,
including but not limited to the provisions of this Agreement,
covering any employee or former employee of HRCK or its
Subsidiaries that, individually or collectively, could give rise
to the payment of any amount that would not be deductible
pursuant to Section 280G or 162 of the Code.
6.20. Environmental Matters.
a. At all times prior to the date hereof, HRCK and its
Subsidiaries have complied in all material respects with
applicable environmental laws, orders, regulations, rules and
ordinances relating to the Properties (as hereinafter defined),
the violation of which would have a material adverse effect on
the business or financial condition of HRCK and its Subsidiaries,
taken as a whole, or which would require a payment by HRCK or its
Subsidiaries in excess of $2,000 in the aggregate, and which have
been duly adopted, imposed or promulgated by any legislative,
executive, administrative or judicial body or officer of any
Governmental Body.
b. The environmental licenses, permits and authorizations that
are material to the operations of HRCK and its Subsidiaries,
taken as a whole, are in full force and effect.
c. Neither HRCK nor any of its Subsidiaries has released or
caused to be released on or about the properties currently owned
or leased by HRCK or any of its Subsidiaries (the "Properties")
any (i) pollutants, (ii) contaminants, (iii) "Hazardous
Substances," as that term is defined in Section 101(14) of the
Comprehensive Environmental Response Act, as amended or (iv)
"Regulated Substances," as that term in defined in Section 9001
of the Resource Conservation and Recovery Act, 42 U.S.C. Section
6901, et seq., as amended, which would be required to be
remediated by any governmental agency with jurisdiction over the
Properties under the authority of laws, regulations and
ordinances as in effect and currently interpreted on the date
hereof, which remediation would have a material adverse effect on
the business or financial condition of HRCK and its Subsidiaries,
taken as a whole.
6.21. Prohibition on Trading. Prior to the expiration of the
period specified in Section 2.4.b, the HRCK Shareholders shall
refrain from engaging in any "short sales" of the stock. HRCK and
the HRCK Shareholders acknowledge that such sales may harm the
ability of the Company to raise capital. Violation of this
prohibition shall reduce Exotics' obligations under Section
2.4.a.
6.22. Absence of Certain Commercial Practices. Except as set
forth in Section 6.22 of the HRCK Disclosure Letter, neither HRCK
nor any of its Subsidiaries has, directly or indirectly, paid or
delivered any fee, commission or other sum of money or item of
property, however characterized, to any finder, agent, government
official or other party, in the United States or any other
country, which is in any manner related to the business or
operations of HRCK or its Subsidiaries, which HRCK or one of its
Subsidiaries knows or has reason to believe to have been illegal
under any federal, state or local laws of the United States or
any other country having jurisdiction; and neither HRCK nor any
of its Subsidiaries has participated, directly or indirectly, in
any boycotts or other similar practices affecting any of its
actual or potential shareholders in violation of any applicable
law or regulation.
6.23. Transactions with Directors and Officers. Except as set
forth in Section 6.23 of the HRCK Disclosure Letter, HRCK and its
Subsidiaries do not engage in business with any Person in which
any of HRCK's directors or officers has a material equity
interest. No director or officer of HRCK owns any property, asset
or right which is material to the business of HRCK and its
Subsidiaries, taken as a whole.
6.24. Borrowing and Guarantees. Except as set forth in
Section 6.24 of the HRCK Disclosure Letter, HRCK and its
Subsidiaries (a) do not have any indebtedness for borrowed money,
(b) are not lending or committed to lend any money (except for
advances to employees in the ordinary course of business), and
(c) are not guarantors or Sureties with respect to the
obligations of any Person.
6.25. Purchase for Investment. Except as set forth in Section
6.25 of the HRCK Disclosure Letter, HRCK is obtaining the Exotics
Shares solely for its own account for the purpose of investment
and not with a view to, or for sale in connection with, any
distribution of any portion thereof in violation of any
applicable securities law.
6.26. Termination. In the event that this Agreement is
terminated pursuant to Section 10 (other than pursuant to Section
10.1.c), Exotics will cooperate in reversing all corporate
actions taken after the Closing, and will assist HRCK in
regaining its corporate identity that existed prior to the
Closing. HRCK shall bear its own expenses in this regard, but
shall retain the down payment of expenses discussed in Section
2.2.b.
7. Access and Reporting; Filings With Governmental Authorities;
Other Covenants.
7.1. Access between the date of this Agreement and the Closing
Date. Each of Exotics and HRCK shall (a) give to the other's
authorized representatives reasonable access to all of its
plants, offices, warehouse and other facilities and properties,
and to its books and records, (b) permit the other to make
inspections thereof, and (c) cause its officers and its advisors
to furnish the other with such financial and operating data and
other information with respect to the business and properties of
such party and its Subsidiaries and to discuss with such and its
authorized representatives its affairs and those of its
Subsidiaries, as the other may from time to time reasonably
request.
7.2. Exclusivity. From the date hereof until the earlier of the
Closing or the termination of this Agreement, HRCK shall not
solicit or negotiate or enter into any agreement with any other
Person with respect to or in furtherance of any proposal for a
merger or business combination involving, or acquisition of any
interest in, or (except in the ordinary course of business) sale
of assets by, HRCK, except for the exchange of the Shares as
contemplated herein.
7.3. Publicity. Between the date of this Agreement and the
Closing Date, HRCK and Exotics shall discuss and coordinate with
respect to any public filing or announcement or any internal or
private announcement (including any general announcement to
employees) concerning the contemplated transaction.
7.4. Regulatory Matters. Exotics and HRCK shall (a) file with
applicable regulatory authorities any applications and related
documents required to be filed by them in order to consummate the
contemplated transaction and (b) cooperate with each other as
they may reasonably request in connection with the foregoing.
7.5. Confidentiality. Prior to the Closing Date (or at any time
if the Closing does not occur) each of Exotics and HRCK shall
keep confidential and not disclose to any Person (other than its
employees, attorneys, accountants and advisors) or use (except in
connection with the transactions contemplated hereby) all non-
public information obtained pursuant to Section 7.1. Following
the Closing, each of Exotics and HRCK shall keep confidential and
not disclose to any Person (other than its employees, attorneys,
accountants and advisors) or use (except in connection. with
preparing Tax Returns and conducting proceeds relating to Taxes)
any nonpublic information relating to the other. This Section 7.5
shall not be violated by disclosure pursuant to court order or as
otherwise required by law, on condition that notice of the
requirement for such disclosure is given the other party prior to
making any disclosure and the party subject to such requirement
cooperates as the other may reasonably request in resisting it.
If the Closing does not occur, each of Exotics and HRCK shall
return to the other, or destroy, all information it shall have
received from the other in connection with this Agreement and the
transactions contemplated hereby, together with any copies or
summaries thereof or extracts therefrom. Each of Exotics and HRCK
shall use their best efforts to cause their respective
representatives, employees, attorneys, accountants and advisors
to whom information is disclosed pursuant to Section 7.1 to
comply with the provisions of this Section 7.5.
8. Conduct of HRCK's Business Prior to the Closing.
8.1. Operation in Ordinary Course. Between the date of this
Agreement and the Closing Date, HRCK shall conduct its businesses
in all material respects in the ordinary course.
8.2. Business Organization. Between the date of this Agreement
and the Closing Date, HRCK shall (a) preserve substantially
intact the business organization of HRCK; and (b) preserve in all
material respects the present business relationships and good
will of HRCK and each of its Subsidiaries.
8.3. Corporate Organization. Except as required by Exotics,
between the date of this Agreement and the Closing Date, HRCK
shall not cause or permit any amendment of its certificate of
incorporation or by-laws (or other governing instrument) and
shall not:
a. issue, sell or otherwise dispose of any of its Equity
Securities, or create, sell or otherwise dispose of any options,
rights, conversion rights or other agreements or commitments of
any kind relating to the issuance, sale or disposition of any of
its Equity Securities;
b. create or suffer to be created any Encumbrance thereon, or
create, sell or otherwise dispose of any options, rights,
conversion rights or other agreements or commitments of any kind
relating to the sale or disposition of any Equity Securities;
c. reclassify, split up or otherwise change any of its Equity
Securities;
d. be party to any merger, consolidation or other business
combination;
e. sell, lease, license or otherwise dispose of any of its
properties or assets (including, but not limited to rights with
respect to patents and registered trademarks and copyrights or
other proprietary rights), in an amount which is material to the
business or financial condition of HRCK and its Subsidiaries,
taken as a whole, except in the ordinary course of business; or
f. organize any new Subsidiary or acquire any Equity Securities
of any Person or any equity or ownership interest in any
business.
8.4. Other Restrictions. Except as required by Exotics, between
the date of this Agreement and the Closing Date, HRCK shall not:
a. borrow any funds or otherwise become subject to, whether
directly or by way of guarantee or otherwise, any indebtedness
for borrowed money;
b. create any material Encumbrance on any of its material
properties or assets;
c. except in the ordinary course of business, increase in any
manner the compensation of any director or officer or increase in
any manner the compensation of any class of employees;
d. create or materially modify any material bonus, deferred
compensation, pension, profit sharing, retirement, insurance,
stock purchase, stock option, or other fringe benefit plan,
arrangement (any other employee benefit plan as defined in
section 3(3) of ERISA);
e. make any capital expenditure or acquire any property or
assets;
f. enter into any agreement that materially restricts HRCK,
Exotics or any of their Subsidiaries from carrying on business;
g. pay, discharge or satisfy any material claim, liability or
obligation, absolute, accrued, contingent or otherwise, other
than the payment discharge or satisfaction. in the ordinary
course of business of liabilities or obligations reflected in the
HRCK Financial Statements or incurred in the ordinary course of
business and consistent with past practice since the date of the
HRCK Financial Statements; or
h. cancel any material debts or waive any material claims or
rights.
9. Definitions.
As used in this Agreement, the following terms have the meanings
specified or referred to in this Section 9.
9.1. "Business Day" - Any day that is not a Saturday or Sunday or
a day on which banks located in the City of New York are
authorized or required to be closed.
9.2. "Code" - The Internal Revenue Code of 1986, as amended.
9.3. "Disclosure Letter" - A letter dated the date of this
Agreement, executed by either Exotics and HRCK, addressed and
delivered to the other and containing information required by
this Agreement and exceptions to the representations and
warranties under this Agreement.
9.4. "Encumbrances" - any security interest, mortgage, lien,
charge, adverse claim or restriction of any kind, including, but
not limited to, any restriction on the use, voting, transfer,
receipt of income or other exercise of any attributes of
ownership, other than a restriction on transfer arising under
Federal or state securities laws.
9.5. "Equity Securities" - See Rule 3a11-l under the Securities
Exchange Act of 1934.
9.6. "ERISA" - The Employee Retirement Income Security Act of
1974, as amended.
9.7. "Governmental Body" - Any domestic or foreign national,
state or municipal or other local government or multi-national
body (including, but not limited to, the European Economic
Community), any subdivision, agency, commissioner authority
thereof.
9.8. "Knowledge" - Actual knowledge, after reasonable
investigation.
9.9. "Person" - Any individual, corporation, partnership, joint
venture, trust, association, unincorporated organization, other
entity, or Governmental Body.
9.10. "Subsidiary" - With respect to any Person, any
corporation of which securities having the power to elect a
majority of that corporation's Board of Directors (other than
securities having that power only upon the happening of a
contingency that has not occurred) are held by such Person or one
or more of its Subsidiaries.
10. Termination.
10.1. Termination. This Agreement may be terminated only as
follows:
a. By written agreement of Exotics and HRCK at any time.
b. By HRCK, by notice to Exotics at any time, if one or more of
the conditions specified in Section 3 is not satisfied at the
time at which the Closing (as it may be deferred pursuant to
Section 2.1) would otherwise occur or if satisfaction of such a
condition is or becomes impossible.
c. By Exotics, by notice to HRCK at any time, if one or more of
the conditions specified in Section 4 is not satisfied at the
time at which the Closing (as it may be deferred pursuant to
Section 2.1), would otherwise occur or if satisfaction of such a
condition is or becomes impossible.
d. By HRCK if the post-Closing deliveries specified in Section
2.4 have not occurred by the date specified therein.
10.2. Effect of Termination. If this Agreement is terminated
pursuant to Section 10.1, this Agreement shall terminate without
any liability or further obligation of any party to another.
11. Intentionally left blank.
12. Intentionally left blank.
13. Notices. All notices, consents, assignments and other
communications under this Agreement shall be in writing and shall
be deemed to have been duly given when (a) delivered by hand, (b)
sent by telex or facsimile (with receipt confirmed), provided
that a copy is mailed by registered mail, return receipt
requested, or (c) received by the delivery service (receipt
requested), in each case to the appropriate addresses, telex
numbers and facsimile numbers set forth below (or to such other
addresses, telex numbers and facsimile numbers as a party may
designate as to itself by notice to the other parties),
(a) If to HRCK:
Hardrock Mines, Inc.
Facsimile No.:
Attention:
With a copy to:
Facsimile No.:
Attention:
(b) If to Exotics:
Exotics Acquisition Corp.
Facsimile No.:
Attention:
With a copy to:
Xxxxxxx & Xxxxxxxx, Ltd.
0000 X. Xxxxxxxx Xxxx, Xxxxx 000
Xxx Xxxxx, XX 00000
Facsimile No.: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxx, Esq.
14. Miscellaneous.
14.1. Expenses. Each party shall bear its own expenses
incident to the preparation, negotiation, execution and delivery
of this Agreement and the performance of its obligations
hereunder.
14.2. Captions. The captions in this Agreement are for
convenience of reference only and shall not be given any effect
in the interpretation of this agreement,
14.3. No Waiver. The failure of a party to insist upon strict
adherence to any term of this Agreement on any occasion shall not
be considered a waiver or deprive that party of the right
thereafter to insist upon strict adherence to that term or any
other term of this Agreement. Any waiver must be in writing.
14.4. Exclusive Agreement; Amendment. This Agreement
supersedes all prior agreements among the parties with respect to
its subject matter with respect thereto and cannot be changed or
terminated orally.
14.5. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be considered an original,
but all of which together shall constitute the same instrument.
14.6. Governing Law. This Agreement and (unless otherwise
provided) all amendments hereof and waivers and consents
hereunder shall be governed by the internal law of the State of
Nevada, without regard to the conflicts of law principles thereof
14.7. Binding Effect. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their
respective successors and assigns, provided that neither party
may assign. its rights hereunder without the consent of the
other, provided that, after the Closing, no consent of Exotics
shall be needed in connection with any merger or consolidation of
HRCK with or into another entity.
IN WITNESS WHEREOF, the corporate parties hereto have caused this
Agreement to be executed by their respective officers, hereunto
duly authorized, and entered into as of the date first above
written.
Hardrock Mines, Inc. Exotics Acquisition Corp.
By: By:
Shareholders: HRCK represents and warrants that the undersigned
constitute all of the shareholders of HRCK.
Name Signature Number of Shares
