SHARE PURCHASE AGREEMENT
Agreement dated as of _______________, 2001, between Exotics.com,
Inc., a corporation organized under the laws of the State of
Nevada ("EX-NV"), Exotics.com, Inc., a corporation organized
under the laws of the State of Delaware ("EX-DE"), and the owners
of the Common Stock of EX-DE as listed on Exhibit "A" of this
Agreement (the "Delaware Shareholders"), who execute and become a
party to this Agreement.
The parties agree as follows:
1. The Acquisition
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, EX-NV shall tender the Nevada Shares
(defined below) to EX-DE on behalf of the Delaware
Shareholders, and EX-DE shall receive the Nevada Shares
from EX-NV, free and clear of all encumbrances other than
restrictions imposed by Federal and State securities
laws, and the additional restrictions imposed by Section
5.24.
1.2 Transaction. At the Closing, EX-NV will tender up to
8,241,762 shares of its common stock (the "Nevada
Shares") in exchange for shares of capital stock of EX-DE
(the "Delaware Shares"). The exchange ratio shall be two
shares of EX-NV common stock for three shares of EX-DE
common stock. The Nevada Shares shall be issued and
delivered as set forth in Exhibit "A" hereto.
2. The Closing.
2.1 Place and Time. The closing of the instant transaction
(the "Closing") shall take place at the offices of
Chapman & Flanagan, Ltd. located at 2080 E. Flamingo Rd.,
Suite 112, Las Vegas, Nevada no later than the close of
business (Pacific Daylight Time) on March 7, 2001, or at
such other place, date and time as the parties may agree
in writing.
2.2 Deliveries by EX-DE At the Closing, EX-DE and the
Delaware Shareholders shall deliver the following to EX-
NV:
a. Certificates representing the Delaware Shares
registered in the name of EX-NV (without any legend
or other reference to any Encumbrance) other than
those required by federal and or state securities
law.
b. The documents contemplated by Section 3.
c. All other documents, instruments and writings
required by this Agreement to be delivered by EX-DE
at the Closing and any other documents or records
relating to EX-DE's business reasonably requested by
EX-DE in connection with this Agreement.
2.3 Deliveries by EX-NV. At the Closing, EX-NV shall deliver
the following to EX-DE
a. The Nevada Shares as contemplated by section 1, in the
form specified in Exhibit A.
b. The documents contemplated by Section 4.
c. All other documents, instruments and writings required
by this Agreement to be delivered by EX-NV at the Closing
and any other documents or records relating to EX-NV's
business reasonably requested by EX-NV in connection with
this Agreement.
2.4 Escrow Agent. Chapman & Flanagan, Ltd., shall serve as the
escrow agent.
2.4.1 All shares that are to be exchanged as part of this
Agreement shall be given to the Escrow Agent.
2.4.2 At the Closing, assuming that all obligations of each
party have been fulfilled, the Escrow Agent shall complete
the transfer of all property in his possession in accordance
with the terms of this Agreement.
2.4.3 The Escrow Agent shall retain the Delaware Shares and
the Nevada Shares until EX-NV has completed its obligations
under Section 6.26.1.a, and no transfer, assignment, or other
conveyance of the record, beneficial or equitable ownership of
the Delaware Shares or the Nevada Shares shall occur until that
time. If these obligations are not completed within the
appropriate time frames then, upon written notification from EX-
DE, the Escrow Agent shall return the Delaware Shares to EX-DE
and the Nevada Shares to EX-NV.
3. Conditions to EX-NV's Obligations.
The obligations of EX-NV 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 EX-NV:
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 EX-NV's acquisition of the Delaware Shares or
the Nevada Shares or that will require any divestiture as
a result of EX-NV's acquisition of the Delaware Shares or
that will require all or any part of the business of EX-NV
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 EX-NV
or EX-DE if this Agreement is consummated shall be
pending.
3.2 Representations, Warranties and Agreements. The
representations and warranties of EX-DE 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) EX-DE 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) EX-NV shall have
received a certificate to that effect signed by an
authorized representative of EX-DE
3.3 Regulatory Approvals. All licenses, authorizations,
consents, orders and regulatory approvals of Governmental Bodies
necessary for the consummation of EX-NV's acquisition of the
Delaware Shares shall have been obtained and shall be in full
force and effect.
3.4 Shareholder Approval. Shareholders holding a minimum of
ninety percent (90%) of the common stock of EX-DE shall have
approved of and signed this Agreement.
4. Conditions to EX-DE's and the Delaware Shareholders'
Obligations.
The obligations of EX-DE and the Delaware Shareholders 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 EX-DE:
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 EX-NV's acquisition of the Delaware Shares or EX-
DE's receipt of the Nevada Shares or that will require any
divestiture as a result of EX-NV's acquisition of the
Shares or EX-DE's acquisition of the Nevada Shares or that
will require all or any part of the business of EX-NV or
EX-DE 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 EX-NV
or EX-DE if this Agreement is consummated shall be
pending.
4.2 Representations, Warranties and Agreements. The
representations and warranties of EX-NV 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) EX-NV 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) EX-DE shall have
received a certificate to that effect signed by an
authorized representative of EX-NV.
4.3 Legal Opinion. EX-DE shall have received an opinion from
appropriate counsel to EX-NV dated the Closing Date, to
the effect that EX-NV 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 EX-NV 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; EX-NV 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 EX-NV 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 EX-NV 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 EX-NV or the assets or
business of EX-NV that could have a materially adverse
effect on the financial condition of EX-NV or EX-DE
4.4Regulatory Approvals. All licenses, authorizations,
consents, orders and regulatory approvals of Governmental
Bodies necessary for the consummation of EX-NV's
acquisition of the Delaware Shares and EX-DE's acquisition
of the Nevada Shares shall have been obtained and shall be
in full force and effect.
5. Representations and Warranties of EX-DE
EX-DE (and, with respect to section 5.4, each of the Delaware
Shareholders with respect to that shareholder's shares only)
represents and warrants to EX-NV that, to the knowledge of EX-
DE (which limitation shall not apply to Section 5.3), and
except as set forth in the EX-DE Disclosure Letter:
5.1 Organization of EX-DE; Authorization. EX-DE is a
corporation duly organized, validly existing and in good
standing under the laws 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 EX-DE and
this Agreement constitutes a valid and binding obligation
of EX-DE; enforceable against it in accordance with its
terms.
5.2 Capitalization. The authorized capital stock of EX-DE
consists of 100,000,000 shares of common stock, $.0001 par
value, and no shares of preferred stock. As of the date
hereof 12,362,643 of such common shares of EX-DE 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 EX-DE are validly issued, fully paid and
nonassessable.
5.3 No Conflict as to EX-DE Neither the execution and delivery
of this Agreement nor the consummation of the sale of the
Delaware Shares to EX-NV will (a) violate any provision of
the certificate of incorporation or by-laws of EX-DE 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
EX-DE 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 EX-DE
5.4 Ownership of Delaware Shares. The delivery of certificates
to EX-NV provided in Section 2.2 and the delivery of
certificates to EX-DE as provided in Section 2.3 will
result in EX-NV's immediate acquisition of record and
beneficial ownership of 12,362,643 Delaware Shares, free
and clear of all Encumbrances subject to applicable State
and Federal 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
EX-DE
5.5 No Conflict as to EX-DE and Subsidiaries. Neither the
execution and delivery of this Agreement nor the
consummation of the acquisition of the Delaware Shares to
EX-NV will (a) violate any provision of the certificate of
incorporation or by-laws (or other governing instrument)
of EX-DE 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 EX-DE or any of its Subsidiaries under, any material
agreement or commitment to which EX-DE 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 EX-DE 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 EX-DE 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
EX-DE 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 EX-DE or EX-NV
or any of its Subsidiaries in connection with the
execution, delivery and performance of this Agreement by
EX-DE or the consummation of the acquisition of the
Delaware Shares to EX-NV.
5.7 Other Consents. No consent of any Person is required to be
obtained by EX-DE or EX-NV prior to the execution,
delivery and performance of this Agreement or the
consummation of the acquisition of the Delaware Shares to
EX-NV, 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 EX-DE or EX-NV.
5.8 Financial Statements. EX-DE has delivered to EX-NV
consolidated balance sheets of EX-DE and its Subsidiaries
as at December 31, 2000, and statements of income and
changes in financial position for the period then ended.
Such EX-DE Financial Statements and notes fairly present
the consolidated financial condition and results of
operations of EX-DE and its Subsidiaries as at the
respective dates thereof and for the periods therein.
5.9 Title to Properties. Either EX-DE 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 EX-
DE Financial Statements (except for property sold since
the date of the EX-DE 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 EX-DE or any of its Subsidiaries
since the date of the EX-DE Financial. Statements. All
properties and assets reflected in the EX-DE 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 EX-DE 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 EX-DE Disclosure Letter, (b)
mortgages or security interests incurred in connection
with the purchase of property or assets after the date of
the EX-DE 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 EX-DE 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 EX-DE and its
Subsidiaries include all rights, properties and other
assets necessary to permit EX-DE and its Subsidiaries to
conduct EX-DE'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 EX-DE or its
Subsidiaries are, in all respects material to the business
or financial condition of EX-DE 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. EX-DE 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 EX-DE and its Subsidiaries, taken
as a whole or which would require a payment by EX-DE or EX-
NV 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 EX-
DE 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 EX-NV 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
EX-DE or any of its Subsidiaries which is likely to have a
material adverse effect on the business or financial
condition of EX-DE, EX-NV and any of their Subsidiaries,
taken as whole, or which would require a payment by EX-DE
or its subsidiaries in excess of $2,000 in the aggregate or
which questions or challenges the validity of this
Agreement. Neither EX-DE 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 EX-DE, EX-NV or any of their Subsidiaries,
taken as a whole, or which would require a payment by EX-DE
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 EX-DE Disclosure Letter, since the date of the
EX-DE Financial Statements, neither EX-DE nor any of its
Subsidiaries has;
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 EX-DE 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 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 EX-
DE and its subsidiaries taken as a whole.
5.14 No Material Adverse Change. Since the date of the EX-DE
Financial Statements, there has not been any material
adverse change in the business or financial condition of EX-
DE
5.15 Contracts and Commitments. Except as set forth in Section
5.15 of the EX-DE Disclosure Letter, neither EX-DE 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 EX-
DE or one of its Subsidiaries of more than $25,000
and not cancelable by EX-DE or the relevant
Subsidiary (without liability to EX-DE 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 EX-DE or the relevant Subsidiary
(without liability to EX-DE 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 EX-DE or any of its
Subsidiaries;
d. Commitment, contract or agreement that is currently
expected by the management of EX-DE to result in any
material loss upon completion or performance thereof;
e. Contract, agreement or commitment that is material to
the business of EX-DE 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 EX-DE, any of its Subsidiaries, nor any of the Delaware
Shareholders 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
EX-DE or any of its Subsidiaries is a party or is or may be
bound that relates to the business of EX-DE or any of its
Subsidiaries or to which any of the assets or properties of EX-
DE 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 EX-DE
and its Subsidiaries, taken as a whole. EX-NV has not
guaranteed or assumed and specifically does not guarantee or
assume any obligations of EX-DE or any of its Subsidiaries.
5.16 Labor Relations. Neither EX-DE 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 EX-
DE and its Subsidiaries, taken as a whole, (a) EX-DE 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 EX-DE 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
EX-DE or any of its Subsidiaries, (d) no representation
question exists respecting the employees of EX-DE or any of
its Subsidiaries, (e) neither EX-DE 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 EX-DE or any of its
Subsidiaries is currently being negotiated.
5.17 Employee Benefit Plans. Section 5.16 of the EX-DE Disclosure
Letter contains a list of all material employee pension and
welfare benefit plans covering employees of EX-DE 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 EX-DE 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 EX-DE 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 EX-DE and its
Subsidiaries, taken as a whole, or which would not require a
payment by EX-DE or its Subsidiaries in excess of $2,000 in
the aggregate, or which have been cured. Neither EX-DE 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. EX-DE 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. EX-DE 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
EX-DE and/or its Subsidiaries and not Seller or its
other Affiliates (for the purposes of this Section 5.18,
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 EX-DE or
any of its Subsidiaries for any taxable period have been
timely filed, and the income, activities, operations and
transactions of EX-DE and Subsidiaries have been
properly included and reflected thereon. EX-DE 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 EX-DE or
any Subsidiary, with respect to any taxable year or the
portion thereof ending on or prior to the Closing Date,
including, without limitation, EX-DE's consolidated
federal income tax return for such taxable years. EX-DE
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 EX-DE 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 EX-DE 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 EX-DE or any of its
Subsidiaries and do not generally relate to matters
affecting other members of EX-DE'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. EX-DE 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 EX-DE 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 EX-DE 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 EX-DE or its Subsidiaries, or their
assets or operations and no power of attorney granted by
EX-DE 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 EX-DE, pending or threatened against or
with respect to any Tax attributable to EX-DE, its
Subsidiaries or their assets or operations.
g. Except as set forth in the EX-DE 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 EX-DE is "tax-exempt use property" within
the meaning of Section 168(h) of the Code nor property
that EX-DE 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 EX-NV
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
EX-NV as may be relevant to EX-DE, its Subsidiaries, or
their assets or operations for any and all periods
ending after December 31, 1998, 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 EX-DE 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, EX-DE 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 EX-DE and its
Subsidiaries, taken as a whole, or which would require
a payment by EX-DE 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 EX-DE and its
Subsidiaries, taken as a whole, are in full force and
effect.
c. Neither EX-DE nor any of its Subsidiaries has released
or caused to be released on or about the properties
currently owned or leased by EX-DE 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 EX-DE and its
Subsidiaries, taken as a whole.
5.21 Absence of Certain Commercial Practices. Neither EX-DE 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 EX-DE or its Subsidiaries, which
EX-DE 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 EX-DE 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 5.23 of the EX-DE Disclosure Letter, EX-DE
and its Subsidiaries do not engage in business with any
Person in which any of EX-DE's directors or officers has a
material equity interest. No director or officer of EX-DE
owns any property, asset or right which is material to the
business of EX-DE and its Subsidiaries, taken as a whole.
5.23 Borrowing and Guarantees. Except as set forth in Section
5.24 of the EX-DE Disclosure Letter, EX-DE 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.
5.24 Investment Purpose. The Delaware Shareholders represent and
warrant that they are receiving the Nevada Shares for
investment purposes, not with an intent to distribute them.
To that end, the Delaware Shareholders agree that, in
addition to provisions existing under federal or state
securities regulations that place restrictions upon the
transferability of the Nevada Shares, all of the Nevada
Shares shall be restricted from transfer for a period of one
hundred-twenty (120) days following the Closing. If trading
restriction lapse in accordance with Rule 144 promulgated
under the Securities Act of 1933, as amended, the additional
restrictions discussed in this section shall remain in
effect. These additional restrictions shall terminate on a
quarterly basis beginning with the 120th day following the
Closing. For example, if the Rule 144 restrictions lapse 92
days following the Closing, the additional restrictions
terminate on day 120. If the Rule 144 restrictions lapse on
day 121, the additional restrictions terminated on day 210.
6. Representations and Warranties of EX-NV
EX-NV represents and warrants to EX-DE that, to the Knowledge of
EX-NV (which limitation shall not apply to Section 6.3), and
except as set forth in the EX-NV Disclosure Letter:
6.1 Organization of EX-NV; Authorization. EX-NV 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 EX-NV arid this
Agreement constitutes a valid and binding obligation of EX-
NV, enforceable against it in accordance with its terms.
6.2 Capitalization. The authorized capital stock of EX-NV
consists of 25,000,000 shares of common stock, $.001 par
value, and no shares of preferred stock. As of the date
hereof 8,137,000 shares of such common stock of EX-NV 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
EX-DE are validly issued, fully paid and nonassessable.
6.3 No Conflict as to EX-NV. Neither the execution and delivery
of this Agreement nor the consummation of the sale of the
Nevada Shares to EX-DE will (a) violate any provision of the
certificate of incorporation or by-laws of EX-NV, 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 EX-NV 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 EX-NV.
6.4 Ownership of Nevada Shares. The delivery of certificates to
EX-DE provided in Section 2.3 will result in EX-DE's
immediate acquisition of record and beneficial ownership of
the Nevada Shares, 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 EX-NV. Nothing in this Agreement shall be
deemed to be a representation or warranty as to the
tradability of any of the Nevada Shares under Federal or any
States' security laws.
6.5 No Conflict as to EX-NV 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 EX-NV 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 EX-NV or any of its Subsidiaries
under, any material agreement or commitment to which EX-NV
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 EX-NV 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 EX-NV. 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 EX-
NV 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 EX-NV or EX-DE or any of
either of their Subsidiaries in connection with the
execution, delivery and performance of this Agreement by EX-
NV or the consummation of the contemplated transaction.
6.7 Other Consents. No consent of any Person is required to be
obtained by EX-DE or EX-NV 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 EX-DE or EX-NV.
6.8 Financial Statements. EX-NV has delivered to EX-DE
consolidated balance sheets of EX-NV and its Subsidiaries as
at December 31, 2000, and statements of income and changes
in financial position for the period then ended. Such EX-NV
Financial Statements and notes fairly present the
consolidated financial condition and results of operations
of EX-NV and its Subsidiaries as at the respective dates
thereof and for the periods therein.
6.9 Title to Properties. Either EX-NV 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 EX-NV Financial
Statements and all the material properties and assets
purchased or otherwise acquired by EX-NV or any of its
Subsidiaries since the date of the EX-NV Financial
Statements. All properties and assets reflected in the EX-NV
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 EX-NV 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 EX-NV Disclosure Letter, (b)
mortgages or security interests incurred in connection with
the purchase of property or assets after the date of the EX-
NV 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 EX-NV 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 EX-NV and its Subsidiaries include all rights,
properties and other assets necessary to permit EX-NV and
its Subsidiaries to conduct EX-NV'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 EX-NV or its
Subsidiaries are, in all respects material to the business
or financial condition of EX-NV 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. EX-
NV 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 EX-NV and its Subsidiaries, taken as
a whole or which would require a payment by EX-DE or EX-NV
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 EX-NV
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 EX-DE 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 EX-NV
or any of its Subsidiaries which is likely to have a
material adverse effect on the business or financial
condition of EX-DE, EX-NV and any of their Subsidiaries,
taken as whole, or which would require a payment by EX-NV or
its subsidiaries in excess of $2,000 in the aggregate or
which questions or challenges the validity of this
Agreement. Neither EX-NV 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 EX-DE, EX-NV or any of their Subsidiaries,
taken as a whole, or which would require a payment by EX-NV
or its subsidiaries in excess of $2,000 in the aggregate.
6.13 Absence of Certain Changes. Since the date of the EX-NV
Financial Statements, neither EX-NV nor any of its
Subsidiaries has:
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 EX-NV 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 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 EX-NV and its subsidiaries taken as a
whole.
6.14 No Material Adverse Change. Since the date of the EX-NV
Financial Statements, there has not been any material
adverse change in the business or financial condition of EX-
NV and its Subsidiaries taken as a whole.
6.15 Contracts and Commitments. Neither EX-NV 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 EX-
NV or one of its Subsidiaries of more than $2,000 and
not cancelable by EX-NV or the relevant Subsidiary
(without liability to EX-NV or such Subsidiary)
within 60 days;
b. Lease of personal property involving annual rental
payments in excess of $2,000 and not cancelable by EX-
NV or the relevant Subsidiary (without liability to
EX-NV 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 EX-NV or any of its
Subsidiaries;
d. Commitment, contract or agreement that is currently
expected by the management of EX-NV to result in any
material loss upon completion or performance thereof;
e. Contract, agreement or commitment that is material to
the business of EX-NV 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 EX-NV 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 EX-NV or any of its Subsidiaries
is a party or is or may be bound as it relates to the business of
EX-NV or any of its Subsidiaries or to which any of the assets or
properties of EX-NV 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 EX-NV and its Subsidiaries, taken as a whole.
6.16 Labor Relations. Neither EX-NV 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 EX-NV and its Subsidiaries, taken as a whole,
(a) EX-NV 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 EX-NV 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
EX-NV or any of its Subsidiaries, (d) no representation
question exists respecting the employees of EX-NV or any of
its Subsidiaries, (e) neither EX-NV 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 EX-NV or any of its
Subsidiaries is currently being negotiated.
6.17 Employee Benefit Plans. Section 6.17 of the EX-NV
Disclosure Letter contains a list of all material employee
pension and welfare benefit plans covering employees of EX-NV
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
EX-NV 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 EX-NV 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 EX-NV and its
Subsidiaries, taken as a whole, or which would not require a
payment by EX-NV or its Subsidiaries in excess of $2,000 in
the aggregate, or which have been cured. Neither EX-NV 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. EX-NV 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. EX-NV 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 EX-NV and/or its Subsidiaries and not Seller or
its other Affiliates (for the purposes of this
Section 6.18, 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 EX-NV or any of its Subsidiaries for
any taxable period have been timely filed, and the
income, activities, operations and transactions of EX-
NV and Subsidiaries have been properly included and
reflected thereon. EX-NV 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 EX-NV or
any Subsidiary, with respect to any taxable yea or
the portion thereof ending on or prior to the Closing
Date, including, without limitation, EX-NV's
consolidated federal income tax return for such
taxable years. EX-NV 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 EX-NV 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 EX-NV 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 EX-NV or any of
its Subsidiaries and do not generally relate to
matters affecting other members of EX-NV'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. EX-
NV 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 EX-NV 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 EX-NV 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 EX-NV or its Subsidiaries,
or their assets or operations and no power of
attorney granted by EX-NV 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 EX-DE, pending or threatened against or
with respect to any Tax attributable to EX-NV, 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 EX-NV is "tax-exempt use property"
within the meaning of Section 168(h) of the Code nor
property that EX-NV 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 EX-DE
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 EX-DE as may be relevant to EX-NV, its
Subsidiaries, or their assets or operations for any
and all periods ending after December 31, 1998, or
for any Tax years which are subject to audit or
investigation by any taxing authority or entity.
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 EX-NV 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, EX-NV 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 EX-NV and its
Subsidiaries, taken as a whole, or which would
require a payment by EX-NV 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
EX-NV and its Subsidiaries, taken as a whole, are in
full force and effect.
c. Neither EX-NV nor any of its Subsidiaries has
released or caused to be released on or about the
properties currently owned or leased by EX-NV 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 EX-NV and its
Subsidiaries, taken as a whole.
6.21 Registration. EX-NV agrees to file a registration statement
with the Securities and Exchange Commission as soon as possible
following the Closing, and to maintain the effectiveness of the
registration statement for two years. This registration statement
shall cover, at a minimum, all of the Nevada Shares. EX-NV shall
pay all fees and expenses in connection with the Registration
Statement. EX-NV shall take all necessary action, including
payment of necessary fees and expenses, which may be required in
qualifying or registering the Nevada Shares for offering and sale
under the securities or blue sky laws of such states as are
provided for EX-NV's issued and outstanding shares.
6.22 Absence of Certain Commercial Practices. Neither EX-NV
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 EX-NV or its Subsidiaries,
which EX-NV 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 EX-NV 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. EX-NV and its
Subsidiaries do not engage in business with any Person in
which any of EX-NV's directors or officers has a material
equity interest. No director or officer of EX-NV owns any
property, asset or right which is material to the business of
EX-NV and its Subsidiaries, taken as a whole.
6.24 Borrowing and Guarantees. EX-NV 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. EX-NV is obtaining the Delaware
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 Representations and Warranties of EX-NV (post-merger). EX-NV
agrees to effect the following items in a timely manner after the
Closing.
6.26.1 a.) Raising capital. EX-NV will complete a capital
raise from the sale of EX-NV's common stock, with net
proceeds of not less than $2,000,000, within 30
calendar days of the Start of Trading (as defined
below). EX-NV represents and warrants that this raise
of capital will be performed in accordance with all
applicable laws, including, but not limited to state
and federal securities laws. Proceeds shall be placed
with the Escrow Agent, to be held in trust, and shall
be released to EX-NV, in accordance with the following
schedule:
$500,000 within 3 days of the Completion Date (as
defined below);
$500,000 within 30 days of the Completion Date;
$500,000 within 60 days of the Completion Date;
and
$500,000 within 120 days of the Completion Date.
The "Start of Trading" is defined as the date on which
(i) the first trade of EX-NV common stock occurs, (ii)
the trading volume is at least 25,000 shares, (iii)
there are at least four (4) trades, and (iv) there are
at least two (2) market makers. The Start of Trading,
however, shall be no later than March 20, 2001. The
"Completion Date" is defined as the date on which the
proceeds of the capital raise are deposited with the
Escrow Agent.
All proceeds from the $2,000,000 raise shall be used
solely as operating capital for EX-DE and
implementation of its existing business practices of EX-
DE.
b.) Additional Capital. EX-NV will use its best efforts
to raise and advance an additional $500,000 by way of
an equity or debt within 210 days of the Completion
Date. These funds will be placed with the Escrow Agent
for its release. The board of directors may request the
release of the funds on an accelerated basis, should
the board believe it is in the best interest of the
shareholders.
6.26.2 Repayment of out-of-pocket expenses and loans. EX-
NV agrees to repay out-of-pocket expenses and loans
made by St. George Capital Corp., PTC Finance Ltd.,
Andrew Maltin and Gary Thomas existing on the books of
EX-DE, approximately $375,000, over the first three
payments schedules as referred to in Section 6.26.1,
each in equal installments. Maltin and Thomas will each
receive 60/375 of each installment.
6.26.3 Undertakings of further financing. EX-NV agrees to
undertake such further financings, from time to time,
as the market conditions allow in order to meet its
business plan.
6.26.4 Employment Agreement. EX-NV agrees to enter into a
three year employment agreement with Gary Thomas at an
annual compensation level which will be determined by
the board of directors, but which shall be
approximately $120,000 per year.
6.26.5 Salary accruals. EX-NV agrees to pay Gary Thomas
and Andrew Maltin salary accruals of up to $150,000
combined which shall be paid over a three month period
commencing on the advance of the first payment of
$500,000 as referred to in Section 6.26.1.
6.26.6 Nomination of EX-DE Director. EX-NV agrees that
Andrew Maltin, Gary Thomas, and Scott London,
collectively, may appoint one director to serve on EX-
NV's three-person board of directors.
6.26.7 Option Plan. EX-NV agrees to establish an option
plan consistent with industry standards within three
months of the Closing Date for current and future
employees of EX-DE. Notwithstanding the foregoing, EX-
NV hereby agrees to assume the obligations of EX-DE's
existing Option Agreements
6.26.8 Indemnification. EX-NV hereby agrees to indemnify,
defend and hold harmless, EX-DE, its officers,
directors, shareholders, agents, and employees, and
their successors and assigns, against all liabilities,
damages, claims, costs, expenses and losses (including
reasonable attorneys' fees and costs) incurred as a
result of any breach of or failure of EX-NV to fulfill
any representation, warranty, covenant or agreement
made by it under this Agreement.
6.26.9 Insurance. EX-NV agrees to purchase liability insurance
to cover the actions of all officers and directors of EX-NV, and
will have this insurance in effect at the Closing.
6.26.10 Existing Debt. EX-NV will deposit into the EX-DE
accounts funds that are sufficient to pay all outstanding checks
drawn upon those accounts. The total amount to be deposited
pursuant to this section shall not exceed US$ 70,000 and shall be
attributable to payroll taxes and salary accruals.
6.26.11 Consulting Agreement. EX-NV will cause EX-DE to enter
into a consulting agreement with Andrew Maltin. This agreement,
which will be drafted by EX-NV, shall cover a period of six (6)
months, and require Maltin to provide full-time service
(equivalent to 40 hours per week). Mr. Maltin shall receive
monthly payments of $10,000 during the term of the consulting
agreement. Such monthly payments shall be reduced pro-rata if Mr.
Maltin provides less than full-time service.
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 EX-DE and EX-NV shall (a) give to the other
and its authorized representatives reasonable access to all
plants, offices, warehouse and other facilities and
properties of EX-DE or EX-NV, as the case may be, 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, all 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, EX-NV 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, EX-NV, except for
the exchange of the Nevada Shares for the Delaware Shares
from the EX-DE' Shareholders.
7.3 Publicity. Between the date of this Agreement and the
Closing Date, EX-NV and EX-DE 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. EX-DE and EX-NV 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 EX-DE and EX-NV
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 EX-DE and EX-NV 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 EX-DE and EX-NV 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 EX-DE
and EX-NV 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 EX-NV's Business Prior to the Closing.
8.1 Operation in Ordinary Course. Between the date of this
Agreement and the Closing Date. EX-NV shall cause
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, EX-NV shall (a) preserve
substantially intact the business organization of EX-NV;
and (b) preserve in all material respects the present
business relationships and good will of EX-NV and each
of its Subsidiaries.
8.3 Corporate Organization. Between the date of this
Agreement and the Closing Date, EX-NV 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
EX-NV 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. Between the date of this Agreement
and the Closing Date, EX-NV 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
EX-NV, EX-DE 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 EX-NV Financial Statements or
incurred in the ordinary course of business and
consistent with past practice since the date of
the EX-NV 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 EX-DE and EX-NV, 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 3a-11-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 before
the Closing occurs only as follows:
a. By written agreement of EX-DE and EX-NV at any
time.
b. By EX-NV, by notice to EX-DE 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.
c. By EX-DE, by notice to EX-NV 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.
d. By either party, by notice to the other, at any
time after the Start of Trading but prior to
completion of the obligations under Section
6.26.1.a.
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; provided however, EX-NV shall
immediately change its name so as not to be confused
with "Exotics.com." Notwithstanding this section, the
indemnification clause in Section 6.26.8 shall survive
the termination of this Agreement without limitation.
11. Previous Agreements. By entering into this Agreement, EX-NV
and EX-DE (and, where applicable, the Delaware Shareholders)
specifically acknowledge that any and all representations,
warranties, or provisions in prior agreements between the
parties, whether written or oral, are superceded by the terms and
conditions of this Agreement.
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 EX-NV:
Exotics.com, Inc.
Facsimile No.:
Attention:
With a copy to:
Facsimile No.:
Attention:
(b) If to EX-DE:
Exotics.com, Inc.
Facsimile No.:
Attention:
With a copy to:
Chapman & Flanagan, Ltd.
2080 E. Flamingo Road, Suite 112
Las Vegas, NV 89119
Facsimile No.: (702) 650-5667
Attention: Sean P. Flanagan, Esq.
14. Miscellaneous.
14.2 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.
14.3 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,
14.4 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.
14.5 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.
14.6 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.
14.7 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
14.8 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 EX-DE shall be needed in
connection with any merger or consolidation of EX-NV
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.