Exhibit 2.5
Stock Purchase Agreement dated as of February 8, 2002 between
Capital Equities, Inc. and Silk ▇▇▇▇▇▇▇▇▇▇.▇▇▇, Inc.
STOCK PURCHASE AGREEMENT
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THIS STOCK PURCHASE AGREEMENT, made as of the 8th day of February,
2002, by and among SILK ▇▇▇▇▇▇▇▇▇▇.▇▇▇, INC., a Florida corporation
("Buyer"), CAPITAL EQUITIES GROUP INC., a Nevada corporation
("Company"), and ▇▇▇▇▇ INDUSTRIES INC. and GALDAR INVESTMENTS, INC.
(hereinafter referred to individually as a "Shareholder" and,
collectively, as the "Shareholders");
BACKGROUND
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A. Shareholders own ONE HUNDRED PERCENT (100%) of the issued
and outstanding shares of capital stock of Company, the number of such
shares owned by each of the Shareholders is set forth opposite the
names of the respective Shareholders on Exhibit A(1);
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B. Buyer desires to acquire ONE HUNDRED PERCENT (100%) of the
issued and outstanding capital stock of Company held by the
Shareholders in exchange solely for shares of voting stock of Buyer on
the terms and conditions hereinafter set forth; and
C. Company has certain revenue streams and businesses and
business opportunities that Buyer desires to acquire (the "Business");
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants hereinafter set forth, the parties hereto, intending to be
legally bound, hereby agree as follows:
1. Acquisition of Stock; Restrictions on Transfer. On the
Closing Date (as hereinafter defined), the Shareholders shall convey,
transfer and assign, upon the terms and conditions herein set forth, to
Buyer, free and clear of all liens, security interests, pledges, claims
and encumbrances of every kind, nature and description, and Buyer shall
accept from the Shareholders, ONE HUNDRED PERCENT (100%) of the
outstanding capital stock of Company held by the Shareholders in
exchange for TEN MILLION (10,000,000) shares of Buyer's Common Stock on
the Closing Date to be delivered as defined in Exhibit D to each
Shareholder in the amount set forth on Exhibit A(2). Buyer Stock is
deemed "Restricted Securities" as defined by Rule 144 of the 1933 Act
(as defined herein). This Stock Purchase Agreement is intended as a
plan of reorganization within the provisions of Sec. 368(a) of the
Internal Revenue Code of 1986, as amended.
2A. Representations and Warranties of Buyer with Respect to Buyer.
As material inducement to Company to enter into this Agreement and to
close hereunder, Buyer hereby makes the following representations,
warranties and agreements to and with Company:
2A.1 Due Organization; Capitalization and Articles, Bylaws
and Records.
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Buyer is a corporation duly organized, validly existing and in
good standing under the laws of the State of Florida and has the full
corporate power and authority to own its properties, carry on its
business as it is now being conducted and perform its obligations
under all Contracts (as herein defined), and is duly qualified to do
business as a foreign corporation in the jurisdictions specified in
Part 2.1 of the Disclosure Schedule ("Disclosure Schedule" shall mean
the schedule (dated as of the date of the Agreement) attached hereto as
Exhibit "B" which is attached to the Agreement and incorporated in the
Agreement by reference), which constitutes all the jurisdictions in
which Company conducts any business. The authorized capital stock of
Company consists of FIFTY MILLION (50,000,000) shares of Preferred
Stock, $.001 par value per share, of which SIX MILLION FOUR HUNDRED
EIGHTY NINE THOUSAND ONE HUNDRED NINETEEN (6,489,119) shares are
presently issued and outstanding; and each of the convertible shares
converts to one (1) share of common stock ); and THREE HUNDRED MILLION
(300,000,000) shares of Common Stock, $.001 par value per share, of
which TWENTY SIX MILLION THREE HUNDRED TWENTY ONE THOUSAND FOUR
HUNDRED FIFTY FIVE(26,321,455shares are outstanding, free and clear
of all liens, encumbrances, security agreements options, claims,
charges and restrictions, all of which outstanding shares are validly
issued, fully paid and non-assessable. Buyer is a Section 12g
reporting company, under the Securities Exchange Act, which trades on
the OTC Bulletin Board under the symbol 'SILK'.
There are no shares of Buyer's capital stock held in its
treasury. Other than as described in Buyer's report on Form 10-QSB for
the period ended November 30, 2001, and in subsequent reports filed
with the Securities Exchange Commission, there are no options,
warrants, rights, shareholder agreements or other instruments or
agreements outstanding giving any person the right to acquire any
shares of capital stock of Buyer, nor are there any commitments to
issue or execute any such options, warrants, rights, shareholder
agreements or other instruments or agreements. There are no
outstanding stock appreciation rights or similar rights measured with
respect to any of Buyer's capital stock, nor are there any
instruments, or agreements giving anyone the right to acquire any such
rights. The minute books and stock records of Buyer are complete and
accurate and all signatures included therein are the genuine
signatures of the persons indicated as signing. Buyer is not in
default under or in violation of any provision of its Articles of
Incorporation or its Bylaws. The books of account, stock records,
minute books and other records of Buyer are accurate, up-to-date and
complete, and have been maintained in accordance with sound and
prudent business practices.
2A.2 Authority; Binding Nature of Agreements.
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1.1.1 Buyer has the absolute and unrestricted right,
power and authority to enter into and to perform its obligations under
this Agreement and all other agreements, certificates and instruments
contemplated to be executed and delivered by Buyer in connection with
SILK/CAPITAL EQUITIES STOCK PURCHASE AGREEMENT
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this Agreement, and the execution, delivery and performance by Buyer
of this Agreement and such other agreements, certificates and
instruments have been duly authorized by all necessary action on the
part of Buyer and its shareholders, Board of Directors and officers.
Each of this Agreement and such other agreements, certificates and
instruments constitutes, or upon execution and delivery will
constitute, the legal, valid and binding obligation of Buyer,
enforceable against Buyer in accordance with its terms, except as
enforceability may be limited by bankruptcy and other similar laws
affecting creditors rights.
2A.3 Non-Contravention; Consents. To the best knowledge of
Company, neither the execution and delivery of any of this Agreement,
nor the consummation or performance of any of the transactions
contemplated hereby, will directly or indirectly (with or without
notice or lapse of time):
2A.3.1 Contravene, conflict with or result
in a violation of (i) any of the provisions of Buyer's articles of
incorporation or Bylaws, or (ii) any resolution adopted by Buyer's
shareholders, Buyer's Board of Directors or any committee of Buyer's
Board of Directors;
2A.3.2 Contravene, conflict with or
result in a violation of, or give any Governmental Body or other
Person the right to challenge any of the transactions contemplated
hereby or to exercise any remedy or obtain any relief under, any Legal
Requirement or any Order to which Buyer, or any of the assets owned or
used by Buyer, is subject;
2A.3.3 Cause Company to become subject to,
or to become liable for the payment of, any Tax;
2A.3.4 Contravene, conflict with or result in
a violation or breach of, or result in a default under, any provision
of any of the Contracts;
2A.3.5 Give any Person the right to
(i) declare a default or exercise any remedy under any Contract,
(ii) accelerate the maturity or performance of any Contract, or
(iii) cancel, terminate or modify any Contract;
2A.3.6 Give any Person the right to any
payment by Buyer or give rise to any acceleration or change in the
award, grant, vesting or determination of options, warrants, rights,
severance payments or other contingent obligations of any nature
whatsoever of Buyer in favor of any Person, in any such case as a
result of the change in control of Buyer or otherwise resulting from
the transactions contemplated hereby;
2. Representations and Warranties of Company with Respect to
Company. As material inducement to Buyer to enter into this Agreement
and to close hereunder, Company hereby makes the following
SILK/CAPITAL EQUITIES STOCK PURCHASE AGREEMENT
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representations, warranties and agreements to and with Buyer:
2.1 Due Organization; Capitalization and Articles, Bylaws
and Records.
Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Nevada and has the full
corporate power and authority to own its properties, carry on its
business as it is now being conducted and perform its obligations
under all Contracts (as herein defined), and is duly qualified to do
business as a foreign corporation in the jurisdictions specified in
Part 2.1 of the Disclosure Schedule ("Disclosure Schedule" shall mean
the schedule (dated as of the date of the Agreement) attached hereto as
Exhibit "B" which is attached to the Agreement and incorporated in the
Agreement by reference), which constitutes all the jurisdictions in
which Company conducts any business. The authorized capital stock of
Company consists of TWENTY FIVE THOUSAND (25,000) shares of Common
Stock, no par value per share, of which TWENTY FIVE THOUSAND (25,000)
shares are outstanding and owned by the Shareholders, free and clear
of all liens, encumbrances, security agreements options, claims,
charges and restrictions, all of which outstanding shares are validly
issued, fully paid and non-assessable.
There are no shares of Company's capital stock held in its
treasury. There are no options, warrants, rights, shareholder
agreements or other instruments or agreements outstanding giving any
person the right to acquire any shares of capital stock of Company,
nor are there any commitments to issue or execute any such options,
warrants, rights, shareholder agreements or other instruments or
agreements. There are no outstanding stock appreciation rights or
similar rights measured with respect to any of Company's capital
stock, nor are there any instruments, or agreements giving anyone the
right to acquire any such rights. Each Shareholder has delivered to
the Buyer accurate and complete copies of the stock certificates
evidencing the Shares. The minute books and stock records of Company
are complete and accurate and all signatures included therein are the
genuine signatures of the persons indicated as signing. True, correct
and complete copies of Company's minute books and stock records,
including Company's Articles of Incorporation and Bylaws and all
amendments to both, have been delivered to the Buyer. Company is not
in default under or in violation of any provision of its Articles of
Incorporation or its Bylaws. The books of account, stock records,
minute books and other records of Company are accurate, up-to-date and
complete, and have been maintained in accordance with sound and
prudent business practices.
2.2 Authority; Binding Nature of Agreements.
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2.2.1 Company has the absolute and unrestricted
right, power and authority to enter into and to perform its
obligations under this Agreement and all other agreements,
certificates and instruments contemplated to be executed and delivered
by Company in connection with this Agreement, and the execution,
delivery and performance by Company of this Agreement and such other
agreements, certificates and instruments have been duly authorized by
all necessary action on the part of Company and the Shareholders,
Board of Directors and officers. Each of this Agreement and such other
agreements, certificates and instruments constitutes, or upon
execution and delivery will constitute, the legal, valid and binding
obligation of Company, enforceable against Company in accordance with
its terms, except as enforceability may be limited by bankruptcy and
other similar laws affecting creditors rights.
2.2.2 Each of the Shareholders has the absolute and
unrestricted right, power and capacity to enter into and to perform
their respective obligations under this Agreement and all other
agreements, certificates and instruments contemplated to be executed
and delivered by each Shareholder in connection with this Agreement,
and the execution, delivery and performance by such Shareholder of
this Agreement and such other agreements, certificates and instruments
have been duly authorized by all necessary action on the part of the
respective Shareholder. Each of this Agreement and such other
agreements, certificates and instruments constitutes, or upon
execution and delivery will constitute, the legal, valid and binding
obligation of each Shareholder, enforceable against such Shareholder
in accordance with its terms, except as enforceability may be limited
by bankruptcy and other similar laws affecting creditors rights.
2.3 Non-Contravention; Consents. To the best knowledge of
Company, neither the execution and delivery of any of this Agreement,
nor the consummation or performance of any of the transactions
contemplated hereby, will directly or indirectly (with or without
notice or lapse of time):
2.3.1 Contravene, conflict with or result in a
violation of (i) any of the provisions of Company's articles of
incorporation or Bylaws, or (ii) any resolution adopted by the
Shareholders, Company's Board of Directors or any committee of
Company's Board of Directors;
2.3.2 Contravene, conflict with or result in a
violation of, or give any Governmental Body or other Person the right
to challenge any of the transactions contemplated hereby or to
exercise any remedy or obtain any relief under, any Legal Requirement
or any Order to which Company or any Shareholder, or any of the assets
owned or used by Company, is subject;
2.3.3 Cause Company to become subject to, or to become
liable for the payment of, any Tax;
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2.3.4 Contravene, conflict with or result in a
violation or breach of, or result in a default under, any provision of
any of the Contracts;
2.3.5 Give any Person the right to (i) declare a
default or exercise any remedy under any Contract, (ii) accelerate the
maturity or performance of any Contract, or (iii) cancel, terminate or
modify any Contract;
2.3.6 Give any Person the right to any payment by
Company or give rise to any acceleration or change in the award, grant,
vesting or determination of options, warrants, rights, severance
payments or other contingent obligations of any nature whatsoever of
Company in favor of any Person, in any such case as a result of the
change in control of Company or otherwise resulting from the
transactions contemplated hereby;
2.4 Financial Statements.
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2.4.1 Company has delivered to the Buyer the following
financial statements and notes, which are included in Part 2.4 of the
Disclosure Schedule (collectively, the "Financial Statements"):
(a) The unaudited balance sheets of Company as
of February 1, 2002 (the "Unaudited Interim Balance Sheet").
(b) The Financial Statements are complete and
correct, in accordance with the books and records of Company, present
fairly and accurately the financial position of Company as of the
respective dates thereof and the results of operations and changes in
shareholder's equity and fund balance and cash flows of Company and
the Selling Shareholder for the respective periods covered thereby,
and have been prepared in conformity with GAAP applied on a consistent
basis, subject, in the case of the unaudited financial statements, to
normal recurring year-end adjustments, the effect of which will not be
material, and the absence of notes.
2.5 Liabilities.
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2.5.1 Company has no Liabilities, except for:
(a) liabilities reflected as part of the
Unaudited Interim Balance Sheet;
(b) liabilities (of the type required to be
reflected as current liabilities on a balance sheet prepared in
accordance with GAAP incurred by Company in the ordinary course of
business since February 1, 2002, none of which individually or in the
SILK/CAPITAL EQUITIES STOCK PURCHASE AGREEMENT
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aggregate had or will have an material adverse effect on the business
of Company or its property, assets, financial condition, earnings,
profits or prospects; and
(c) Company's obligations under the Contracts
listed in Part 2.5 of the Disclosure Schedule and under Excluded
Contracts.
2.5.2 Part 2.5 of the Disclosure Schedule:
(a) provides an accurate and complete breakdown
and aging of Company's accounts payable as of February 1, 2002;
(b) provides an accurate and complete breakdown
of all customer deposits and other deposits held by Company as of ;
(c) provides an accurate and complete breakdown
of Company's long term debt as of the date of this Agreement; and
(d) accurately identifies, and provides an
accurate and complete breakdown of the amounts paid to, each supplier
or other Person that received more than $5,000 from Company from July
30, 2001 through February 1, 2002. Except as disclosed in Part 2.5 of
the Disclosure Schedule, neither Company nor the Shareholder has any
notice of or reason to believe that any of the suppliers listed in this
Part 2.5 of the Disclosure Schedule will not continue to be suppliers
of Company after the Closing.
2.6 Absence of Changes.
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2.6.1 Except as set forth in Part 2.6 of the Disclosure
Schedule since February 1, 2002:
(a) To the best of Company's knowledge, there
has not been any material adverse effect in Company's business,
condition, assets, liabilities, operations, financial performance,
results of operations or prospects, and to Company's or any
Shareholder's knowledge, no event has occurred that likely would have
an adverse effect on Company's business, condition, assets,
liabilities, operations, financial performance, results of operations
or prospects;
(b) To the best of Company's knowledge, Company
has not entered into any transaction of any kind or taken any other
action outside the ordinary course of business;
(c) To the best of Company's knowledge, Company
has not implemented any change affecting the banking and safe deposit
arrangements or powers of attorney or grants of agency in effect for
Company, any new bank accounts or safe deposit boxes opened for
SILK/CAPITAL EQUITIES STOCK PURCHASE AGREEMENT
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Company, or any new powers of attorney or grants of agency executed or
made by Company;
(d) To the best of Company's knowledge, Company
has not failed to perform any of its obligations in any material
respect or suffering or permitting any default to exist under, or
receipt of a notice of termination, breach or default with respect to
any contract to which any of them is a party or by which it or any of
its property may be bound or affected;
(e) To the best of Company's knowledge, Company
has not transferred or granted any rights in or entered into any
settlement regarding its proprietary assets;
(f) To the best of Company's knowledge, Company
has used its best efforts to preserve its business organization
intact, to keep available the services of its employees and to
preserve its relationships with its customers, suppliers and others
with whom it deals; and
(g) To the best of Company's knowledge, Company
has not agreed or committed (in writing or otherwise), to take any of
the actions referred to in clauses "c" through "f" above.
2.7 Real Estate.
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2.7.1 To the best of Company's knowledge, Company has
no right, title or interest in, or any obligation or duty relating to,
any real estate or real property, except for its interest as an owner
(in any legal capacity: partner, limited partner, joint tenancy, etc.)
or as tenant, lessee, subtenant or sublessee under the leases
disclosed on Part 2.7 of the Disclosure Schedule (the "Real
Property/Leases");
2.7.2 (1) All written and oral leases or subleases
(collectively, the "Leases") of the Leased Properties are disclosed on
Part 2.7 of the Disclosure Schedule, including for each its date, the
name of the landlord (and owner if different than the landlord), the
name of the lessee and any sublessee, the location and use of the
property, the monthly base rental payment, any scheduled or formula
increases in base rent, a description of any provisions for tax or
expense pass-throughs, the amount of any security deposit, the lease
expiration date, all options to renew and whether there are any non-
disturbance agreements from mortgagees or paramount lessors;
(2) Company has delivered to the Buyer true and complete copies of all
Leases, all amendments and supplements thereto and all such non-
disturbance agreements; (3) Company is not and, to the Knowledge of
Company each Shareholder each landlord under any Lease, is not in
material default under any Lease, and no event has occurred which,
with the giving of notice or passage of time or both, would constitute
a material default by Company to the knowledge of Company and each
Shareholder, any landlord under any Lease; and (4) neither the
SILK/CAPITAL EQUITIES STOCK PURCHASE AGREEMENT
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execution or performance of this Agreement nor the consummation of any
of the transactions contemplated herein will result in a breach of or
constitute a default under any of the Leases.
2.8 Title to Assets. Except as set forth in Part 2.8 of
the Disclosure Schedule, to the best of Company's knowledge, Company
owns, free and clear of Encumbrances:
2.8.1 All assets reflected on the Unaudited Interim
Balance Sheet (except for inventory sold by Company since February 1,
2002, in the ordinary course of business);
2.8.2 All assets acquired by Company since December 31,
2001 (except for inventory sold by Company since February 1, 2002, in
the ordinary course of business);
2.8.3 All assets referred to in Parts 2.9 and 2.10 of
the Disclosure Schedule and all of Company's rights under Contracts;
and
2.8.4 All other assets reflected in Company's books and
records as being owned by Company.
2.9 Receivables.
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2.9.1 To the best of Company's knowledge, Part 2.9 of
the Disclosure Schedule provides an accurate and complete breakdown and
aging of all accounts and notes receivable and a list of all other
receivables of Company as of July 31, 2001;
2.9.2 Except as set forth in Part 2.9 of the Disclosure
Schedule, all existing accounts receivable of Company (including those
accounts receivable reflected on the Unaudited Interim Balance Sheet
that have not yet been collected and those accounts receivable that
have arisen since July 31, 2001, and have not yet been collected):
(a) Represent valid obligations of customers of
Company arising from bona fide transactions entered into in the
ordinary course of business;
(b) Are current and where known collection
problems exist, such problems have been disclosed;
2.10 Equipment, etc.
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2.10.1 Part 2.10 of the Disclosure Schedule
consists of a Company capital equipment and depreciation schedule,
which describes historical cost and depreciation information with
respect to all of Company's capital equipment, furniture, fixtures,
improvements and other tangible personal property. Part 2.10 also
accurately identifies all material tangible personal property leased
to Company;
2.10.2 Each material asset of Company:
(a) Is free of defects and deficiencies and in
good condition and repair, consistent with its age and intended use
(ordinary wear and tear excepted);
(b) Complies in all material respects and, to
Company's and each Shareholder's Knowledge, is being operated and
otherwise used in full compliance with all applicable Legal
Requirements;
(c) Is adequate for the uses to which it is
being put;
(d) Is adequate for the conduct of Company's
business in the manner in which such business is currently being
conducted;
(e) Has been maintained in accordance with
reasonable maintenance schedules;
(f) Is owned by Company free and clear of any
Encumbrance; and
(g) Is located at Company's principal business
office.
2.11 Tax Matters.
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2.11.1 To the best of Company's knowledge, except
as set forth in Part 2.11 of the Disclosure Schedule, each Tax
required to have been paid, or claimed by any Governmental Body to be
payable, by Company (whether pursuant to any Tax Return or otherwise)
has been duly paid in full on a timely basis. Any Tax required to have
been withheld or collected by Company has been duly withheld and
collected, and (to the extent required) each such Tax has been paid to
the appropriate Governmental Body;
2.11.2 To the best of Company's knowledge,
Part 2.11 of the Disclosure Schedule accurately identifies all Tax
Returns required to be filed by or on behalf of Company with any
Governmental Body with respect to any taxable period ending on or
before the Closing Date ("Company Returns"). All Company Returns
(including monthly payroll returns) (i) have been or will be filed
SILK/CAPITAL EQUITIES STOCK PURCHASE AGREEMENT
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when due, and (ii) have been, or will be when filed, accurately and
completely prepared in full compliance with all applicable Legal
Requirements. All amounts shown on Company Returns to be due on or
before the Closing Date, and all amounts otherwise payable in
connection with Company Returns on or before the Closing Date, have
been or will be paid on or before the Closing Date. Company has
delivered to the Buyer accurate and complete copies of Company Returns
(other than monthly payroll returns) filed by Company;
2.11.3 To the best of Company's knowledge, except
as disclosed in Part 2.11 of the Disclosure Schedule, Company's
liability for unpaid Taxes for all periods ending on or before the
date of the Unaudited Interim Balance Sheet does not, in the
aggregate, exceed the amount of the current liability accruals for
Taxes (excluding reserves for deferred taxes) reported in the
Unaudited Interim Balance Sheet;
2.11.4 To the best of Company's knowledge,
Part 2.11 of the Disclosure Schedule accurately identifies each
examination or audit of any Company Return that has been conducted by
any Governmental Body. Company has delivered to the Buyer accurate and
complete copies of all audit reports and similar documents (to which
Company has access) relating to Company Returns. Except as set forth
in Part 2.11 of the Disclosure Schedule, no extension or waiver of the
limitation period applicable to any of Company Returns has been
granted (by Company or any other Person), and no such extension or
waiver has been requested from Company;
2.11.5 To the best of Company's knowledge, except
as set forth in Part 2.14 of the Disclosure Schedule, no claim or
other Proceeding is pending or has been threatened against or with
respect, to Company or the Selling Shareholder in respect of any Tax.
There are no unsatisfied Liabilities for Taxes (including liabilities
for interest, additions to tax and penalties thereon and related
expenses) with respect to any notice of deficiency or similar document
received by the Selling Shareholder or Company. Company has not
entered into or become bound by any agreement or consent pursuant to
Sec. 341(f) of the Internal Revenue Code of 1986, as amended (the "Code").
Company has not been, and will not be, required to include any
adjustment in taxable income for any tax period (or portion thereof)
pursuant to Sec. 481 or 263A of the Code or any comparable provision
under state or foreign Tax laws as a result of transactions or events
occurring, or accounting methods employed, prior to the Closing;
2.11.6 To the best of Company's knowledge, there
is no agreement, plan, arrangement or other Contract covering any
employee or independent contractor or former employee or independent
contractor of Company that, individually or collectively, could give
rise directly or indirectly to the payment of any amount that would
not be deductible pursuant to Sec. 280G or Sec. 162 of the Code;
SILK/CAPITAL EQUITIES STOCK PURCHASE AGREEMENT
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2.11.7 To the best of Company's knowledge, Company
is not, and has never been, a party to or bound by any tax indemnity
agreement, tax sharing agreement, tax allocation agreement or similar
Contract;
2.11.8 To the best of Company's knowledge, Company
is not a United States real property holding corporation within the
meaning of Sec. 897(c)(2) of the Code and has not been a United States
real property holding corporation within the applicable period
specified in Sec. 897(c)(1)(A)(ii) of the Code;
2.11.9 To the best of Company's knowledge, except
as set forth in Part 2.11 of the Disclosure Schedule, Company has no
net operating losses or other tax attributes presently subject to
limitation under Code Sections 382, 383 or 384 or the federal
consolidated return regulations;
2.11.10 To the best of Company's knowledge, all
Taxes required to be withheld from employees, deemed employees or
other persons up to and through the Closing Date will have been
withheld and timely deposited prior to the Closing;
2.11.11 To the best of Company's knowledge, the
requirements of Sec. 274 of the Code (disallowance of certain
entertainment and similar expenses) have been complied with in all
material respects;
2.11.12 To the best of Company's knowledge, no non-
deductible expenses have been deducted on the federal income Tax Return
for any year open to audit by the Internal Revenue Service;
2.11.13 To the best of Company's knowledge, except
as set forth in Part 2.11 of the Disclosure Schedule, no Internal
Revenue Service or state, county or local tax audit is currently in
progress;
2.11.14 To the best of Company's knowledge, Company
is not a party to any safe harbor lease within the meaning of Sec.
168(f)(8) of the Code, as in effect prior to amendment by the Tax
Equity and Fiscal Responsibility Act of 1982. Company has not
participated in an international boycott as defined in Code Sec. 999.
Company does not have a permanent establishment in any foreign
country, as defined in any applicable Tax treaty or convention between
the United States of America and such foreign country, and Company is
not a party to any joint venture, partnership or other agreement,
contract or arrangement (either in writing or verbally, formally or
informally) which could be treated as a partnership for federal income
tax purposes;
2.11.15 To the best of Company's knowledge, Company
has filed all reports and has created and/or retained all records
required under Sec. 6038A of the Code with respect to its ownership by
and transactions with related parties. The Shareholders all related
SILK/CAPITAL EQUITIES STOCK PURCHASE AGREEMENT
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foreign persons and Company have maintained all records required to be
maintained under Sec. 6038A with respect to transactions between Company
and [the Selling Shareholder or] the related foreign persons. All
documents that are required to be created and/or preserved by the
Shareholder and related foreign persons with respect to transactions
with Company are either maintained in the United States, or Company is
exempt from the record maintenance requirements of Sec. 6038A with respect
to such transactions under Treasury Regulation Sec. 1.6038A-1. Company is
not a party to any record maintenance agreement with the Internal
Revenue Service with respect to Sec. 6038A. Each of the Shareholders and
related foreign persons that has engaged in transactions with Company
has authorized Company to act as its limited agent solely for purposes
of Sections 7602, 7603 and 7604 of the Code with respect to any request
by the Internal Revenue Service to examine records or produce testimony
related to any transaction with Company, and each such authorization
remains in full force and effect.
2.12 Contracts.
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2.12.1 To the best of Company's knowledge,
part 2.12 of the Disclosure Schedule identifies each material Contract
(the "Contracts"). Except as identified in Part 2.15 of the Disclosure
Schedule, all material Contracts are in writing. Company has delivered
to Buyer accurate and complete copies of all written material Contracts
identified in Part 2.12 of the Disclosure Schedule, including all
amendments thereto;
2.12.2 To the best of Company's knowledge, each
Contract is valid and in full force and effect, and is enforceable by
Company in accordance with its terms;
2.12.3 To the best of Company's knowledge, except
as set forth in Part 2.11 of the Disclosure Schedule:
(a) no person acting for Company has violated or
breached, or declared or committed any default under, any Contract;
(b) no event has occurred, and no circumstance
or condition exists, that likely would (with or without notice or lapse
of time) (A) result in a violation or breach of any of the provisions
of any Contract, (B) give any Person the right to declare a default or
exercise any remedy or hinder any Contract, (C) give any Person the
right to accelerate the maturity or performance of any Contract, or
(D) give any Person the right to cancel, terminate or modify any
Contract;
(c) Company has not waived any of its rights
under any Contract.
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2.12.4 To the best of Company's knowledge, each
Person against which Company has or may acquire any rights under any
Contract is solvent and is able to satisfy all of such Person's current
and future monetary obligations and other obligations and Liabilities
to Company;
2.12.5 To the best of Company's knowledge, except
as set forth in Part 2.12 of the Disclosure Schedule:
(a) Company has never guaranteed or otherwise
agreed to cause, insure or become liable for, and has never pledged any
of its assets to secure, the performance or payment of any obligation
or other Liability of any other Person except in the ordinary course of
business; and
(b) Company has never been a party to or bound
by (A) any joint venture agreement, partnership agreement, profit
sharing agreement, cost sharing agreement, loss sharing agreement or
similar Contract, or (B) any Contract that creates or grants to any
Person, or provides for the creation or grant of, any stock
appreciation right, phantom stock right or similar right or interest.
2.12.6 To the best of Company's knowledge, the
performance of the Contracts will not result in any violation of or
failure to comply with any Legal Requirement;
2.12.7 To the best of Company's knowledge, except
as identified in Part 2.12 of the Disclosure Schedule, no Person is
materially renegotiating, or has the contractual right to materially
renegotiate, any amount paid or payable to Company under any Contract
or any other term or provision of any Contract;
2.12.8 To the best of Company's knowledge, the
Contracts identified in Part 2.12 of the Disclosure Schedule and the
Excluded Contracts collectively constitute all of the Contracts
necessary to enable Company to conduct its business in the manner in
which its business is currently being conducted and in the manner in
which its business is proposed to be conducted;
2.12.9 To the best of Company's knowledge, except
as set forth in Part 2.12 of the Disclosure Schedule: (i) the Contracts
of Company, including but not limited to those described in Part 2.12
of the Disclosure Schedule, are legally valid, binding and enforceable
agreements of Company, except as enforceability may be limited by
bankruptcy and other similar laws affecting creditors rights, and, to
the Knowledge of Company and each Shareholder, the other parties
thereto; Company is not and, to the Knowledge of Company and each
Shareholder, no other party to any such Contract is in violation of or
in default under such Contracts and no event or circumstances have
occurred which constitute, or after notice or lapse of time or both
would constitute, a violation or default thereunder on the part of
Company or, to the Knowledge of Company and each Shareholder, any other
SILK/CAPITAL EQUITIES STOCK PURCHASE AGREEMENT
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party thereto or result in a right to accelerate or loss of rights; and
such Contracts will continue to be binding in accordance with their
terms after the Closing, assuming any Consents listed in Part 2.12 of
the Disclosure Schedule are obtained; (ii) Company has fulfilled all
obligations required pursuant to each Contract to have been performed
by it, and Company and the Shareholders have no reason to believe that
Company will not be able to fulfill all of its obligations under the
Contracts which remain to be performed after the date hereof, and
(iii) none of the payments required to be made under any Contract has
been prepaid by more than 30 days prior to the due date of such payment
thereunder and the estimated cost to complete any Contract of Company,
plus expenses incurred by them on that Contract, will not exceed the
total Contract price.
2.13 Proprietary Assets.
-------------------
2.13.1 Attached as Part 2.13 of the Disclosure
Schedule is (i) a description of all Proprietary Assets owned by,
licensed to or used in the business of Company together with a
designation of ownership, and (ii) a listing of all agreements or
arrangements which affect the ownership or use of any Proprietary
Asset. Except as set forth in Part 2.13 of the Disclosure Schedules,
Company is, or upon consummation of the transactions contemplated
hereby will be, the owner of all right, title and interest in and to
each such Proprietary Asset free and clear of all Encumbrances or has
the right to use, free and clear of royalties or any claims or rights
of others, such Proprietary Assets;
2.13.2 To the best of Company's knowledge, Company
has taken all measures and precautions necessary to protect the
confidentiality and value of each Proprietary Asset identified or
required to be identified in Part 2.13 of the Disclosure Schedule;
2.13.3 To the best of Company's knowledge, except
as set forth in Part 2.13 of the Disclosure Schedule, all current and
former employees and consultants of Company have executed an agreement
regarding confidentiality and proprietary information substantially in
the form or forms attached as Exhibit "C." To Company's and each
Shareholder's Knowledge, none of the employees or consultants of
Company is in violation thereof;
2.13.4 To the best of Company's knowledge, Company
is not infringing, and has not at any time infringed or received any
notice or other communication (in writing or otherwise) of any actual,
alleged, possible or potential infringement of, any Proprietary Asset
owned or used by any other Person. To the best Knowledge of Company
and each Shareholder, no other Person is infringing, and no Proprietary
SILK/CAPITAL EQUITIES STOCK PURCHASE AGREEMENT
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Asset owned or used by any other Person infringes or conflicts with,
any Proprietary Asset owned or used by Company;
2.13.5 To the best of Company's knowledge, the
Proprietary Assets identified in Part 2.13 of the Disclosure Schedule
constitute all of the Proprietary Assets necessary to enable Company to
conduct its business in the manner in which its business is currently
being conducted;
2.13.6 To the best of Company's knowledge, Company
has not licensed or sublicensed any party to use any of the Proprietary
Assets;
2.13.7 To the best of Company's knowledge, there
are no Orders pending against or affecting the Proprietary Assets;
2.13.8 To the best of Company's knowledge, there
is no unexpired valid patent on products or processes that Company uses
in manufacturing its products that Company is not entitled to use;
2.13.9 To the best of Company's knowledge, neither
the Selling Shareholder nor any officer, director or employee of
Company or, to the Knowledge of Company or any Shareholder, any third
party has an interest in any of the Proprietary Assets;
2.13.10 To the best of Company's knowledge, there
is no governmental restriction or limitation, domestic or foreign, on
the manner in which any of the Proprietary Assets may be used.
2.14 Proceedings; Orders.
--------------------
2.14.1 To the best of Company's knowledge, except
as set forth in Part 2.14 of the Disclosure Schedule, there is no
pending Proceeding, and no Person has threatened to commence any
Proceeding:
(a) That involves Company or that otherwise
relates to or likely would affect Company's business or any of the
assets owned or used by Company (whether or not Company is named as a
party thereto); or
(b) That challenges, or that may have the effect
of preventing, delaying, making illegal or otherwise interfering with,
any of the transactions contemplated hereby.
2.14.2 To the best of Company's knowledge, except
as set forth in Part 2.14 of the Disclosure Schedule, no event has
SILK/CAPITAL EQUITIES STOCK PURCHASE AGREEMENT
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occurred, and no claim, dispute or other condition or circumstance
exists, that likely would directly or indirectly give rise to or serve
as a basis for Commencement of any such Proceeding;
2.14.3 To the best of Company's knowledge, except
as set forth in Part 2.14 of the Disclosure Schedule, no Proceeding has
ever been commenced by or against Company, and no Proceeding otherwise
involving or relating to Company has been pending or threatened at any
time;
2.14.4 To the best of Company's knowledge, except
as disclosed in Part 2.14 of the Disclosure Schedule, each Proceeding
listed in Part 2.14 of the Disclosure Schedule is fully covered by
existing policies of insurance; and
2.14.5 To the best of Company's knowledge, except
as disclosed in Part 2.14 of the Disclosure Schedule, Company is not a
party to any Proceeding as a party plaintiff, nor is Company presently
contemplating the initiation of any such Proceeding.
2.15 Bank Accounts.
--------------
To the best of Company's knowledge, Part 2.15 of the Disclosure
Schedule accurately sets forth, with respect to each account maintained
by or for the benefit of Company at any bank or other financial
institution: (a) the name and location of the institution at which such
account is maintained; (b) the name in which such account is maintained
and the account number of such account; (c) a description of such
account, and the purpose for which such account is used; (d) the
current balance in such account; and (e) the names of all individuals
authorized to draw on or make withdrawals from such account and a
description of the authority of each such individual with respect
thereto.
To the best of Company's knowledge, there are no safe deposit
boxes or similar arrangements maintained by or for the benefit of
Company.
2.16 Compliance with Legal Requirements.
-----------------------------------
2.16.1 To the best of Company's knowledge:
(a) Company is in full compliance, in all
material respects with each Legal Requirement that is applicable to it
or to the conduct of its business or the ownership or use of any of its
assets;
(b) No event has occurred, and no condition or
circumstance exists, that likely would (with or without notice or lapse
of time) constitute or result directly or indirectly in any material
violation by Company of, or a failure on the part of Company to comply
with, any Legal Requirement; and
SILK/CAPITAL EQUITIES STOCK PURCHASE AGREEMENT
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(c) Company has not received, at any time, any
notice or other communication (in writing or otherwise) from any
Governmental Body or any other Person regarding (i) any actual,
alleged, possible or potential violation of, or failure to comply with,
any Legal Requirement, or (ii) any actual, alleged, possible or
potential obligation on the part of Company to undertake, or to bear
all or any portion of the cost of, any cleanup or any remedial,
corrective or response action of any nature.
2.17 Environmental Matters.
----------------------
2.17.1 Company is in compliance in all material
respects with all applicable Environmental Laws. Company has not
received any notice or other communication (in writing or otherwise)
that alleges that Company is not in compliance with any Environmental
Law, and there are no circumstances that likely would prevent or
interfere with Company's compliance with any Environmental Law in the
future;
2.17.2 No investigation made and no environmental
assessments obtained by Buyer shall limit or invalidate any
representation or warranty made by or disclosures required under this
Agreement; and
2.17.3 Company has not retained or assumed, either
contractually, by operation of law or otherwise, the liability of any
other person under any Environmental Law.
2.18 Brokers.
--------
No broker or finder has acted for any Shareholder or Company in
connection with this Agreement or the transactions contemplated hereby,
and no broker or finder is entitled to any brokerage or finder's or
similar fees or other commissions in respect of such transactions based
in any way on agreements, arrangements or understandings made by or on
behalf of any Shareholder or Company.
2.19 Selling Shareholders.
---------------------
2.19.1 To the best of Company's knowledge, there
is no Proceeding pending, and no Person has threatened to commence any
Proceeding, that may have an adverse effect on the ability of any
Shareholder to comply with or perform such Shareholder's covenants or
obligations under the Agreement. No event has occurred, and no claim,
dispute or other condition or circumstance exists, that likely would
directly or indirectly give rise to or serve as a basis for the
commencement of any such Proceeding;
2.19.2 To the best of Company's knowledge, no
Consent or Governmental Authorization by any Person is required in
SILK/CAPITAL EQUITIES STOCK PURCHASE AGREEMENT
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connection with the execution, delivery and performance by any
Shareholder of this Agreement or the consummation of the transactions
contemplated hereby;
2.19.3 To the best of Company's knowledge,
assuming consummation of the transactions contemplated hereby, neither
the execution and delivery of this Agreement or any other agreement
herein contemplated to be entered into by each Shareholder, nor the
consummation of such transactions nor the fulfillment of the terms
thereof, violates or will violate, or results or will result in a
Breach of any of the terms and provisions of, or constitutes or will
constitute a default under, or conflicts or will conflict with, or
results or will result in any augmentation or acceleration of rights,
benefits or obligations of any party under any agreement, indenture or
other instrument to which such Shareholder is a party or is bound;
2.19.4 To the best of Company's knowledge,
assuming consummation of the transactions contemplated hereby, each
Shareholder is, and at Closing will be, the record and beneficial owner
and holder of the Shares, free and clear of any Encumbrances
2.20 Full Disclosure.
----------------
2.20.1 To the best of Company's knowledge,
none of the representations and warranties of any Shareholder and
Company in the Agreement or the Disclosure Schedule Updates contains or
will contain any untrue statement of material fact or omits or will
omit to state any fact necessary to make any of the representations,
warranties or statements contained therein not misleading;
2.20.2 To the best of Company's knowledge, as of the
date of this Agreement, Company and each Shareholder have provided the
Buyer and the Buyer's Representatives with full and complete access to
all of Company's records and other documents and data requested by
them.
3. Conduct of the Business of Company Pending Closing. Between
the date hereof and the Closing hereunder, Company and Shareholders
shall use their best efforts to cause Company to:
3.1 Not take or suffer or permit any action which would
render untrue any of the representations or warranties of Company
herein contained, and not omit to take any action, the omission of
which would render untrue any such representation or warranty;
3.2 Conduct its Business in a good and diligent manner in
the ordinary and usual course;
SILK/CAPITAL EQUITIES STOCK PURCHASE AGREEMENT
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3.3 Not enter into any contract, agreement, commitment or
arrangement with any party, other than contracts for the sale of
merchandise or services and contracts for the purchase of materials,
services and supplies in the ordinary and usual course of its Business,
and not amend, modify or terminate any Company Agreement without the
prior written consent of Buyer; and
3.4 Use its best efforts to preserve its business
organization intact, to keep available the services of its employees
and to preserve its relationships with customers, suppliers and others
with whom it deals;
4. Conditions Precedent to Buyer's Obligation to Close. The
following shall be conditions precedent to the obligation of Buyer to
close hereunder, any of which may be waived in whole or in part by Buyer:
4.1 Each of the representations and warranties of Company
and the Shareholders contained in this Agreement is now and, except as
to those expressly limited to the date hereof or some other specific
date, at all times after the date of this Agreement to and including
the time of Closing shall be, true and correct individually and
collectively in all material respects, provided that any references to
materiality in any representation and warranty shall be disregarded for
purposes of this provision;
4.2 Each of the agreements, covenants and undertakings of
Company and the Shareholders contained in this Agreement, except for
those calling for performance after Closing, will have been fully
performed and complied with both individually and collectively in all
material respects at or before Closing;
4.3 All actions, proceedings, instruments and documents
required to enable Company and the Shareholders to perform this
Agreement or matters incident thereto (other than matters for which
Buyer is responsible under the terms of this Agreement), and all other
legal matters not relating to a default by Buyer of its obligations
hereunder, shall have been duly taken, satisfied, executed or
delivered, as the case may be, to the reasonable satisfaction of Buyer;
4.4 All documents required to be delivered by the
Shareholders at or prior to Closing shall have been delivered or shall
be tendered at the time and place of Closing;
4.5 Prior to the execution of this Agreement, Company has
released to Buyer $245,000 in cash and will agree to provide a further
$365,000 in cash before the Closing, and $190,000 within 20 days after
the Closing.
4.6 Company hereby commits to bring into the Company
net proceeds from its Business and other net assets amounting to
$50,000,000 over a period of 24 months after the Closing. This
$50,000,000 will consist of a minimum of $25,000,000 in cash and
SILK/CAPITAL EQUITIES STOCK PURCHASE AGREEMENT
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$25,000,000 in the greater of either auditable assetsor assets
appraised by a certified appraisal firm.
4.7, 4.8 [DELETED}
4.9 Buyer agrees to allow Company, as a wholly owned
subsidiary of Buyer, to co-invest equally with Buyer in particular
projects that may be of interest to the management of Company. Buyer
agrees to consider, on an ongoing basis after the Closing, other
potential acquisitions which the management of the Company shall
present to the Buyer.
4.10 Buyer and Company agree that, as an additional
inducement to the Shareholders to enter into this Agreement, within 36
months after the Closing, the Buyer has the option to "spin out" the
Company as a separate public company with the percentage of ownership
of the Company being retained by the current exchanging/selling
Shareholders to be equivalent to seventy percent (70%) multiplied by
the Value Ratio as defined below (the "Spin Out Interest"). At the end
of the 36 months period, if Buyer does not elect to "spin out" Company
as a separate public company, Buyer will have the right to purchase
from the exchanging Shareholders of Company their Spin Out Interest
based on fair market value.
4.11 Buyer agrees that 70% of all revenues received by
Company after completion of the $800,000 cash payment described above
in paragraph 4.5 will be managed and utilized by the Company, as a
wholly owned subsidiary of Buyer, to develop the Company's current
business plan and meet its costs. The other 30% will immediately be
made available to buyer as it is received to fund the assets and
opportunities of its other wholly owned subsidiaries.
4.12 Simultaneous with the Closing Buyer may agree to
issue up to an additional 2,000,000 shares of restricted Buyer common
stock to acquire from third parties, on behalf of the Company, certain
leasehold interests to further the Business of the Company. This will
be subject to due diligence by the Buyer
4.13 Company and Shareholders agree to the delivery
schedule as described in schedule D in the event that they are unable
to fulfill their financial commitments to Buyer.
SILK/CAPITAL EQUITIES STOCK PURCHASE AGREEMENT
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4.14 The parties hereto shall prepare and mutually agree,
on the terms of a Management Agreement between the parties whereby
the selling Shareholders (all or some of them or their afilliates) of
Company shall manage and operate Company on behalf of Buyer.
4.15 After the Closing, and prior to a contemplated
application to list Buyer common shares on the American Stock
Exchange, Buyer may elect to reverse-split its common stock under an
approximate 2:1 ratio.
5. Conditions Precedent to Company's Obligation to Close. The
following shall be conditions precedent to the obligation of Company to
close hereunder, any of which may be waived in whole or in part by
Company:
5.1 Each of the representations and warranties of Buyer contained
in this Agreement is now and, except as to those expressly limited to
the date hereof or some other specified date, at all times after the
date of this Agreement to and including the time of Closing shall be,
true and correct individually and collectively in all material
respects, provided that any references to materiality in any
representation or warranty shall be disregarded for purposes of this
provision;
5.2 Each of the agreements, covenants and undertakings of Buyer
contained in this Agreement, except for those calling for performance
after Closing, will have been fully performed and complied with both
individually and collectively in all material respects at or before
Closing;
5.3 All documents required to be delivered by Buyer at or prior to
Closing shall have been delivered or shall be tendered at the time and
place of Closing.
6. Closing.
a. Closing Date. The closing of the transactions provided for
in this Agreement (herein sometimes called the "Closing") shall take
place at Buyer's offices at ▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇., #▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇ ▇▇▇▇▇ on April 30, 2002 or such other place and time as shall be
agreed to between the President of Buyer and the President of Company.
The date and time of Closing is sometimes herein called the "Closing
Date;"
b. Deliveries by the Shareholders and Company at Closing. At
Closing, the Shareholders and Company will deliver or cause to be
delivered to Buyer the following:
SILK/CAPITAL EQUITIES STOCK PURCHASE AGREEMENT
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i. Certificates for Twenty Five Thousand (25,000)
shares of Common Stock of Company, endorsed by the Shareholders in
blank, or with stock transfer powers executed by the Shareholders in
blank attached;
ii. Certificates of the President or a Vice-President of
Company and the Shareholders, dated as of the Closing Date, confirming
(a) the truth and correctness of all of the representations and
warranties of Company and the Shareholders contained in Section 2
herein as of the Closing Date and as of all times between the date
hereof and the Closing Date, subject to the provisions of Section 5
hereof, and (b) that all agreements and covenants of Company and the
Shareholders specified herein have been complied with, and (c) that no
Shareholder has filed an application or taken any action with a view to
exercising any rights of repurchase under Nevada Revised Statutes, with
respect to the transactions contemplated hereby;
iii. The Certificate of the Secretary or an Assistant
Secretary of Company, dated the Closing Date, that the necessary
corporate action by the Board of Directors of Company has been taken to
authorize the consummation by Company of the transactions provided for
herein;
iv. The signed resignations of all directors and all
officers of Company, dated and effective as of the Closing Date
v. The stock books and records, corporate minute books
(containing the originals of all minutes and resolutions ever adopted
or consented to or agreed to by the shareholders, directors or any
committee of directors of Company) and the corporate seal of Company;
vi. A "good standing" certificate for Company and a
certified copy of the Articles of Incorporation and all amendments
thereto issued by the Department of State of Nevada and dated as of a
date within five (5) days prior to the Closing Date;
vii. The original copy of each document listed on
Schedules on Exhibit B;
c. Deliveries by Buyer at Closing. At the Closing, Buyer will
deliver or cause to be delivered to the Shareholders the following:
i. Within ten (10) days of the Closing, certificates
for an aggregate number of ONE MILLION (1,000,000) shares of validly
issued, fully paid and non-assessable Buyer Common Stock registered in
the names of the Shareholders on the Closing Date. Such consideration
is to be apportioned in accordance with their respective interests as
set forth on Exhibit A(2); The remaining NINE MILLION shares will be
issued and delivered as described in Exhibit D
SILK/CAPITAL EQUITIES STOCK PURCHASE AGREEMENT
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ii. The Certificate of the President or a Vice-President
of Buyer, dated the Closing Date, confirming the truth and correctness
of all of the representations and warranties of Buyer contained herein
as of the Closing Date and as of all times between the date hereof and
the Closing Date; and
iii. The Certificate of the Secretary or an Assistant
Secretary of Buyer, dated the Closing Date, that the necessary
corporate action by the Board of Directors of Buyer has been taken to
authorize the consummation by Buyer of the transactions provided for
herein.
d. Waiver By Parties of Closing Items. Each of the parties
hereto expressly acknowledges the right of any of the parties to waive
any conditions or obligations of the other parties to that party,
including, without limitation, items to be delivered at Closing and any
conditions precedent to the Closing.
7. Securities Laws Compliance Procedures.
a. Knowledge Respecting Buyer. Each Shareholder represents
and acknowledges that he or she is a sophisticated investor with
knowledge and experience in business and financial matters, knows, or
has had the opportunity to acquire, all information concerning the
business, affairs, financial condition and prospects of Buyer which he
or she deems relevant to make a fully informed decision regarding the
consummation of the transactions contemplated hereby and is able to
bear the economic risk and lack of liquidity inherent in holding the
Buyer Stock. Without limiting the foregoing, each Shareholder
understands and acknowledges that neither Buyer nor anyone acting on
its behalf has made any representations or warranties other than those
contained herein respecting Buyer or the future conduct of Buyer's
business or of Company's business, and no Shareholder has relied upon
any representations or warranties other than those contained herein in
the belief that they were made on behalf of Buyer;
b. Status of Shares to be Issued. Each Shareholder agrees,
acknowledges and confirms that he or she has been advised and
understands as follows:
i. Shareholder is acquiring the shares of Buyer Stock
to be issued to him or her for his or her own account and without a
view to any distribution or resale thereof, other than a distribution
or resale which, in the opinion of counsel for such Shareholder (which
opinion shall be satisfactory in form and substance to Buyer), may be
made without violating the registration provisions of the Securities
Act of 1933, as amended (the "1933 Act") or any applicable blue sky
laws. Shareholder acknowledges that the shares of Buyer Stock are
"restricted securities" within the meaning of Rule 144 under the 1933
Act and have not been registered under the 1933 Act or any state
securities laws and thereafter must be held indefinitely unless they
are subsequently registered under the 1933 Act or an exemption from
SILK/CAPITAL EQUITIES STOCK PURCHASE AGREEMENT
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such registration is available. Buyer is under no obligation to
register the shares of Buyer Stock under the 1933 Act or any state
securities law or to take any action which would make available an
exemption from such registration;
ii. There shall be endorsed on the certificates
evidencing the shares of Buyer Stock delivered at Closing a legend
substantially similar to the following:
"THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND
ARE "RESTRICTED SECURITIES" AS DEFINED BY RULE 144 UNDER THE
ACT. THE SHARES MAY NOT BE OFFERED FOR SALE, SOLD OR
OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT OR PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER THE ACT, THE AVAILABILITY
OF WHICH IS TO BE ESTABLISHED TO THE SATISFACTION OF THE
COMPANY."
iii. Except under certain limited circumstances, the
above restrictions on the transfer of the shares of Buyer Stock will
also apply to any and all shares of capital stock or other securities
issued or otherwise acquired with respect to such shares, including,
without limitation, shares and securities issued or acquired as a
result of any stock dividend, stock split or exchange or any
distribution of shares or securities pursuant to any corporate
reorganization, reclassification or similar event;
iv. Buyer and its transfer agent may refuse to effect a
transfer of any of the shares of Buyer Stock by the Shareholders or any
of their successors, personal representatives or assigns otherwise than
as contemplated hereby.
8. Further Assurances. Buyer and the Shareholders agree to execute
and deliver all such other instruments and take all such other action
as any party may reasonably request from time to time, before or after
Closing and without payment of further consideration, in order to
effectuate the transactions provided for herein. The parties shall
cooperate fully with each other and with their respective counsel and
accountants in connection with any steps required to be taken as part
of their respective obligations under this Agreement, including,
without limitation, the preparation of financial statements and tax
returns.
9. Termination.
a. This Agreement may be terminated at any time prior to the
Closing Date:
i. By the written agreement of Buyer and Company;
SILK/CAPITAL EQUITIES STOCK PURCHASE AGREEMENT
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ii. By either Company or Buyer by written notice to the
other parties if the transactions contemplated hereby shall not have
been consummated pursuant hereto by 5:00 p.m. PST on April 30, 2002
unless such date shall be extended by the mutual written consent of
Company and Buyer, provided that no party may give such notice if its
breach of this Agreement has precluded the consummation of this
Agreement;
iii. By Buyer by written notice to the other parties if
(i) Company fails to deliver the opinion of counsel, as required by
paragraph 6.2.6 hereof; or (ii) the representations and warranties of
Company and the Shareholders shall not have been true and correct in
all respects (in the case of a representation or warranty containing a
materiality qualification) or in all material respects (in the case of
a representation or warranty without a materiality qualification) as of
the date when made, or (iii) any of the conditions set forth in Section
8 shall not have been, or if it becomes apparent that any of such
conditions will not be, fulfilled by 5:00 p.m. PST on April 30, 2002,
unless such failure shall be due to the failure of Buyer to perform or
comply with any of the covenants, agreements or conditions hereof to be
performed or complied with by it prior to the Closing.
b. In the event of the termination of this Agreement pursuant
to Section 9, this Agreement shall become void, without any liability
to any party in respect hereof or of the transactions contemplated
hereby on the part of any party hereto, or any of its directors,
officers, employees, agents, consultants, representatives, advisers,
stockholders or Affiliates, except for any liability resulting from
such party's breach of this Agreement.
10. Miscellaneous.
a. Controlling Law. This Agreement is to be construed in
accordance with and governed by the internal laws of the State of
Florida without giving effect to any choice of law rule that would
cause the application of the laws of any jurisdiction other than the
internal laws of the State of Florida to the rights and duties of the
parties.
b. Notices. All notices, requests, demands and other
communications required or permitted under this Agreement shall be in
writing and shall be deemed to have been duly given, made and received
only (i) when personally delivered, or (ii) on the day specified for
delivery when deposited with a courier service such as Federal Express
for delivery to the intended addressee, or (iii) three (3) days
following the day when deposited in the United States mails, registered
or certified mail, postage prepaid, return receipt requested, addressed
as set forth below::
SILK/CAPITAL EQUITIES STOCK PURCHASE AGREEMENT
26 OF 35
If to: Company
CAPITAL EQUITIES GROUP, INC.
▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
If to Buyer:
Buyer
SILK ▇▇▇▇▇▇▇▇▇▇.▇▇▇, INC.
▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇., #▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
with a copy, given in the manner prescribed above, to:
LAW OFFICES OF ▇▇▇▇ ▇. ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, #▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Any party may alter the address to which communications or copies
are to be sent by giving notice of such change of address to the other
parties in conformity with the provisions of this Section for the
giving of notice.
Notice by mail shall be by courier service guaranteeing delivery
within five (5) days of its receipt of a notice if transmitted from
outside the continental United States.
Any party may alter the address to which communications or copies
are to be sent by giving notice of such change of address to the other
parties in conformity with the provisions of this Section for the
giving of notice.
c. Exhibits and Schedules. All Exhibits and Schedules
attached hereto are hereby incorporated by reference into, and made a
part of, this Agreement.
d. Binding Nature of Agreement; No Assignment. This Agreement
shall be binding upon and inure to the benefit of the parties hereto
and their respective, successors and assigns.
SILK/CAPITAL EQUITIES STOCK PURCHASE AGREEMENT
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e. Assignments Prohibited. Company shall not assign or suffer
or permit an assignment, by operation of law or otherwise, of its
rights or obligations under or interest in this Agreement without the
prior written consent of the other party. For purposes of this
Subsection, the term "assignment" shall be deemed to include a merger
in which Company is not the surviving entity, a consolidation or
division of Company, a sale of all or substantially all of the assets
of Company, or a change of control resulting from a sale or repurchase
of shares or similar transaction involving Company. A "change of
control" shall be deemed to have occurred as a result of a merger or
other transaction in which Company is the surviving entity if some or
all of the shareholders of Company immediately prior to the transaction
do not have sufficient voting power entitling them to elect at least a
majority of the directors of the corporation immediately following the
transaction. In the event of a breach of this provision, the non-
breaching party shall have the option, in addition to any other remedy
available at law or in equity, to terminate this Agreement at any time
after the breach occurs.
f. No Third-Party Beneficiaries. The terms and provisions of
this Agreement are intended solely for the benefit of each party hereto
and its respective successors and assigns, and it is not the intention
of the parties to confer third-party beneficiary rights upon any other
person.
g. Execution in Counterparts. This Agreement may be executed
in any number of counterparts, each of which shall be deemed to be an
original as against any party whose signature appears thereon, and all
of which shall together constitute one and the same instrument. If
executed in multiple counterparts, this Agreement shall become binding
when two or more counterparts hereto, individually or taken together,
bear the signatures of all of the parties reflected hereon as the
signatories. Facsimile counterpart signatures to this Agreement shall
be acceptable at the Closing if the originally executed counterpart is
delivered within a reasonable time thereafter.
h. Provisions Separable. The provisions of this Agreement are
independent of and separable from each other, and no provision shall be
affected or rendered invalid or unenforceable by virtue of the fact
that any other provision may be invalid or unenforceable in whole or in
part for any reason. (Comment: Some courts may decline to narrow or
otherwise rewrite a provision that is determined to be unenforceable as
written, notwithstanding the final sentence in the above provision.)
i. Entire Agreement. This Agreement together with the related
agreements referred to herein contains the entire understanding among
the parties hereto with respect to the subject matter hereof, and
supersedes all prior and contemporaneous agreements and understandings,
inducements or conditions, express or implied, oral or written. The
express terms hereof control and supersede any course of performance
and/or usage of the trade inconsistent with any of the terms hereof.
SILK/CAPITAL EQUITIES STOCK PURCHASE AGREEMENT
28 OF 35
j. Disclaimer of Representations. Except as expressly set
forth in Section Section 2 hereof and the Exhibits referred to
therein, Company has not made any representations or warranties to
Buyer, and Buyer expressly acknowledges that it is not relying on any
other information received from Company or its representatives
(including, without limitation, any projections, forecasts or forward-
looking information).
k. Amendments and Modifications. This Agreement may not be
amended or modified other than by an agreement in writing signed by all
of the parties.
l. Section Headings. The Section and Subsection headings in
this Agreement and the recitals at the beginning of this Agreement are
for convenience only; they form no part of this Agreement and shall not
affect its interpretation.
m. Interpretation. When a reference is made in this Agreement
to a Section, Exhibit or Schedule, such reference shall be to a Section
of, or an Exhibit or Schedule to, this Agreement unless otherwise
indicated. The table of contents and headings contained in this
Agreement and the recitals at the beginning of this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include,"
"includes" or "including" are used in this Agreement, they shall be
deemed, as the context indicates, to be followed by the words "but [is]
[are] not limited to." Where specific language is used to clarify or
illustrate by example a general statement contained herein, such
specific language shall not be deemed to modify, limit or restrict the
construction of the general statement which is being clarified or
illustrated. The language in this Agreement has been chosen by the
parties to express their mutual intent, and no rule of strict
construction shall be applied against any party. The words "herein,"
"hereof," "hereunder" and words of like import shall refer to this
Agreement as a whole including its Schedules and Exhibits, unless the
context clearly indicates to the contrary (for example, that a
particular Section or Exhibit is the intended reference).
n. Expenses of the Parties. Each party shall bear the
expenses incurred by such party in connection with the negotiation and
execution of this Agreement and the consummation of the transactions
contemplated hereby, except that the expenses of Company shall be
deemed to be expenses of, and shall be borne by, Company.
o. Statutory References. A reference in this Agreement to a
statute or statutory provision shall mean such statute or statutory
provision as it has been amended through the date as of which the
particular Agreement provision is to take effect, or to any successor
statute or statutory provision relating to the same subject as the
statutory provision referred to in this Agreement, and to any then
applicable rules or regulations promulgated thereunder.
p. Waiver of Jury Trial. THE PARTIES HEREBY EXPRESSLY WAIVE
THE RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING BROUGHT BY OR
SILK/CAPITAL EQUITIES STOCK PURCHASE AGREEMENT
29 OF 35
AGAINST EITHER OF THEM RELATING TO THIS AGREEMENT. BECAUSE DISPUTES
ARISING IN CONNECTION WITH COMPLEX TRANSACTIONS ARE MORE QUICKLY AND
ECONOMICALLY RESOLVED BY AN EXPERIENCED AND EXPERT PERSON, THE PARTIES
PREFER, BASED ON THE ADVICE OF THEIR COUNSEL, THAT ANY DISPUTE BE
RESOLVED BY A JUDGE APPLYING APPLICABLE LAW.
q. Jurisdiction; Service of Process. Any action or proceeding
seeking to enforce any provision of, or based on any right arising out
of, this Agreement may shall be brought against any of the parties only
in the courts of the State of Florida, , or, if it has or can acquire
the necessary jurisdiction, in a United States District Court for
Florida, and each of the parties consents to the exclusive jurisdiction
of such courts (and of the appropriate appellate courts) in any such
action or proceeding and irrevocably waives any objection to venue laid
therein. Process in any action or proceeding referred to in the
preceding sentence may be served on any party anywhere in the world.
The provisions of this Section shall also apply to any actions
involving directors, officers, shareholders, controlling persons and
affiliates of Buyer brought by or against them in their respective
capacities as such.
r. Enforcement. The parties agree that irreparable damage
would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were
otherwise breached. Accordingly, it is agreed that the parties shall be
entitled to seek an injunction or injunctions to prevent breaches of
this Agreement and to enforce specifically the terms and provisions of
this Agreement in any court of the United States located in the State
of Florida or in any Florida state court, this being in addition to any
other remedy to which they are entitled at law or in equity. In
addition, each of the parties hereto (a) consents to the personal
jurisdiction of any federal court located in the State of Florida or of
any Florida state court in the event any dispute arises out of this
Agreement or any of the transactions contemplated by this Agreement,
(b) agrees that it will not attempt to deny or defeat such personal
jurisdiction by motion or other request for leave from any such court,
and (c) agrees that it will not bring any action relating to this
Agreement or any of the transactions contemplated by this Agreement in
any court other than a federal or state court sitting in the State of
Florida.
s. Recovery of Fees by Prevailing Party. In the event of a
lawsuit to enforce or interpret the provisions of this Agreement, the
prevailing party shall pay the other party reasonable attorneys' fees
and other costs and expenses including expert witness fees in such
amount as the court shall determine. In addition, such non-prevailing
party shall pay reasonable attorneys' fees incurred by the prevailing
party in enforcing, or on appeal from, a judgment in favor of the
prevailing party. The preceding sentence is intended by the parties
hereto to be severable from the other provisions of this Agreement and
to survive and not be merged into such judgment.
SILK/CAPITAL EQUITIES STOCK PURCHASE AGREEMENT
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t. Duty of Cooperation. Each party shall cooperate in good
faith with the other parties generally, and in particular will make
available, as the other parties reasonably request, management
decisions, liaison personnel, information, approvals and acceptances so
that the other parties may properly perform their obligations under
this Agreement.
u. Survival of Agreements, Representations, etc. All
warranties, representations, agreements and covenants made by a party
herein or in any certificate or other instrument [required to be]
delivered by or on behalf of a party in connection with this Agreement,
shall be considered to have been relied upon by the other party and
shall survive the Closing under this Agreement regardless of any
investigation made by any party [or information about any breach known
to any party prior to the Closing; shall continue in full force and
effect; and shall provide a basis for the remedies provided for herein
or otherwise available to the non-breaching party. No representation or
warranty contained herein shall be deemed to have been waived, affected
or impaired by any investigation made by or knowledge of any party to
this Agreement. All statements in any such certificate or other
instrument [delivered at or in connection with the Closing shall
constitute representations and warranties of the party making such
delivery. Each agreement, representation and warranty contained herein
is independent of all other agreements, representations and warranties
contained herein (whether or not covering an identical or a related
subject matter) and must be independently and separately complied with
and satisfied. Exceptions or qualifications to any agreement,
representation or warranty contained herein shall not be construed as
exceptions or qualifications to any agreement, other warranty or
representation.
v. Time of the Essence. With regard to all dates and time
periods set forth or referred to in this Agreement, time is of the
essence.
w. Confidentiality; Publicity. The parties acknowledge that
the transaction described herein is of a confidential nature and shall
not be disclosed prior to the Closing except to consultants, advisors
and Affiliates, or as required by law. None of the parties hereto shall
make any public disclosure of the terms of this Agreement prior to the
Closing, except as required by law, such requirement to substantiated
by a written opinion of counsel. The parties shall endeavor to make
only those press releases or other public disclosures as are required
by law; provided, however, that no press release or other public
disclosure shall be made without a minimum of hours' prior consultation
with the other parties.
x. Construction. The construction of this Agreement shall not
take into consideration the party who drafted or whose representative
drafted any portion of this Agreement, and no canon of construction
shall be applied that resolves ambiguities against the drafter of a
document. The parties acknowledge that they were advised by competent
counsel that each has chosen to represent such party and each party has
had a full opportunity to comment upon and negotiate the terms of this
SILK/CAPITAL EQUITIES STOCK PURCHASE AGREEMENT
31 OF 35
Agreement. The language used in this Agreement shall be deemed to be
[is] the language chosen by the parties hereto to express their mutual
intent as a result of arm's length bargaining.
y. Independent Contractor. For any services provided
hereunder, or under any other arrangement arising out of this
Agreement, each party is acting as an independent contractor and not as
an agent of any other party hereto and nothing in this Agreement shall
be construed as creating a partnership, joint venture or similar
relationship of any kind between among the parties hereto. No party
shall hold itself out as having authority to create binding obligations
for any other party.
z. Conflicting Agreements. No party hereto shall enter into
any other agreement nor shall any party incur any obligations that are
inconsistent with the provisions of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
"COMPANY"
CAPITAL EQUITIES GROUP INC.
By:______________________________
▇▇▇▇ ▇. ▇▇▇▇▇▇ its President
"BUYER"
SILK ▇▇▇▇▇▇▇▇▇▇.▇▇▇, INC.
By:_________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, its President
SHAREHOLDERS
------------
▇▇▇▇▇ Industries, Inc.
By:_________________________________
▇▇▇▇ ▇. ▇▇▇▇▇▇, President
Galdar Investments, Inc.
By:__________________________________
▇▇▇▇ ▇▇▇▇▇▇▇▇▇, President
SILK/CAPITAL EQUITIES STOCK PURCHASE AGREEMENT
32 OF 35
EXHIBIT A(1)
------------
(Shareholders and their current Interests)
SHAREHOLDERS SHARES CURRENTLY OWNED
------------ ----------------------
▇▇▇▇▇ Industries,Inc. 17,500
Galdar Investments,Inc 7,500
EXHIBIT A(2)
(Shareholders and their post-acquisition Interests)
SHAREHOLDERS SHARES OWNED POST-ACQUISITION
------------ ------------------------------
▇▇▇▇▇ Industries ,Inc. 7,000,000
Galdar Investments,Inc. 3,000,000
SILK/CAPITAL EQUITIES STOCK PURCHASE AGREEMENT
33 OF 35
EXHIBIT B
---------
(Disclosure Schedule)
2.1 States in Which Company is Qualified to do Business as a
Foreign Corporation: None
2.2 [Intentionally Omitted].
2.3 [Intentionally Omitted].
2.4 Financial Statements:
2.5 List of Liabilities:
2.6 Material Changes:
2.7 Real Property/Leases:.
2.8 Encumbered Assets:
2.9 Receivables: 20% equity investment in Ozark Ticket and
Travel, Inc. ("OT&T");
2.10 Equipment: None
2.11 Outstanding Tax Obligations: N/A
2.12 Material Contracts: None
2.13 Proprietary Assets: None
2.14 Legal Proceedings: None
2.15 Bank Accounts: Southern Exchange Bank acct. #▇▇▇▇▇▇▇
2.16 Legal Requirements Not Complied With: None
Exhibit C
---------
(Payment Schedule of $800,000 to Buyer)
1) $245,000 has been paid to Buyer prior to entering this Agreement.
SILK/CAPITAL EQUITIES STOCK PURCHASE AGREEMENT
34 OF 35
2) $365,000 shall be paid to Buyer prior to April 30, 2002.
3) $190,000 shall be paid to Buyer within 20 days after Closing.
Exhibit D
---------
Schedule for the delivery to Company shareholders of Shares of Buyer
1,000,000 shares will be delivered immediately on the Closing of this
Agreement in lieu of cash already received by Buyer from Company and
delivery to Buyer of 100% of the shares of Capital Equities Group Inc.
4,000,000 shares will be delivered immediately after the Company
provides all of the following:
1. The balance of the $800,000 as agreed in paragraph 4.5.
2. Documentation, including audited balance sheet, showing that
Capital Equities Group, Inc. is the 100% owner of the Dogwood
Inn through its 100% owned subsidiary, Resort Hotel Inc.
3. A copy of the Leisure Lease product being marketed by Resort
Hotel Inc.
4. A copy of the executed Cendant license agreement guaranteeing
70% occupancy in the Dogwood Inn
5. A copy of the executed agreement between O T&T. Capital Equities
Group Inc. whereby Capital Equities Group Inc. has a minimum 20%
equity interest in O T&T.
5,000,000 shares will be delivered pro-rata over the next 24 months as
the $50M of cash and auditable assets is made available to the Buyer
as described in paragraph 4.6 of the Agreement. These shares will be
delivered at the rate of one share for every $10 of asset value
received by the Buyer to fund the assets and opportunities of its
wholly owned subsidiaries.
SILK/CAPITAL EQUITIES STOCK PURCHASE AGREEMENT
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