SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (D)
of the
SECURITIES EXCHANGE ACT OF 1934
Date of Report: October 13, 1998
FAS WEALTH MANAGEMENT SERVICES, INC.
(Formerly Executive Wealth Management Services, Inc.)
(Exact name of registrant as specified in its charter)
DELAWARE
(Formerly Florida)
(State or other jurisdiction of incorporation or organization)
33-48017-A 59-2087068
(Commission File Number) (IRS Employer Identification Number)
C/O GUY S. DELLA PENNA
PRESIDENT
2323 STICKNEY POINT ROAD
SARASOTA, FLORIDA 34231
(Address of principal executive offices)
(941) 921-9700
(Registrant's telephone number, including area code)
ITEM 1. CHANGES IN CONTROL OF REGISTRANT
- -------- ------------------------------------
Effective at 9 o'clock A.M. on Monday, August 31, 1998 the proposed merger
between FAS Wealth Management Services, Inc. and Executive Wealth Management
Services, Inc. was consummated. The merger results in the continuation of the
business of Executive Wealth Management Services, Inc., as a wholly owned
subsidiary of FAS Group, Inc., with its name changed to FAS Wealth Management
Services, Inc. and its state of incorporation changed to Delaware.
As of the date of this report, the merger has not resulted in a change of
control of Executive Wealth Management Services, Inc. or effected any other
change except the change of name and state of incorporation.
The effective date of the change of control will be the effective date of
the Registration Statement on Form S-4 filed with the SEC on August 10, 1998
under Registration No. 333-61141 pursuant to which the shares of common stock of
FAS Group, Inc. will be exchanged for one hundred percent (100%) of the
outstanding shares of capital stock of Executive Wealth Management Services,
Inc. The anticipated effective date of the Registration Statement is January 1,
1999 at 9 o'clock A.M. EST.
ITEM 2. ACQUISITION OF ASSETS
- -------- -----------------------
Effective on the same date as the merger, the sale of certain assets and
the transfer of registered representatives from Biltmore Securities to FAS
Wealth Management Services, Inc. was consummated. As a result of the transfer,
FAS Wealth Management Services, Inc. now has 14 independent contractor offices
with a total of 145 independent contractor registered representatives.
ITEM 5. OTHER EVENTS
- -------- -------------
Boru Enterprises, Inc., by its President, Mr. John T. Moran, of Del Rey
Beach, Florida has made a claim against FAS Group, Inc. for compensation in
connection with the purchase of assets and transfer of registered
representatives from Biltmore Securities as well as the private placement of
Units. At the time the purchase and transfer with Biltmore was consummated and
the private offering was completed, management of FAS Group, Inc. and FAS Wealth
Management Services, Inc. believed and still believe there was no agreement to
pay a finder's fee in connection with such transactions. However, the claim for
compensation has been made and FAS Group, Inc. and FAS Wealth Management
Services, Inc., through their outside counsel, are in the process of negotiating
with Mr. Moran's counsel an amicable resolution of his claim.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
- -------- ------------------------------------
Exhibit A - Agreement and Plan of Merger (without schedules and exhibits)
Exhibit B - Asset Purchase Agreement (without schedules and exhibits)
Exhibit C - Index to Financial Statements
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
FAS WEALTH MANAGEMENT SERVICES, INC.
By:/s/Guy S. Della Penna
------------------------
Guy S. Della Penna, President
Date: October 13, 1998
<PAGE>
Exhibit A - Page
EXHIBIT A
AGREEMENT AND PLAN OF MERGER
By and among
FAS GROUP, INC.
THE FOUNDER OF FAS GROUP, INC.
FAS WEALTH MANAGEMENT SERVICES, INC.
and
EXECUTIVE WEALTH MANAGEMENT SERVICES, INC.
and
THE MAJORITY STOCKHOLDER
OF
EXECUTIVE WEALTH MANAGEMENT SERVICES, INC.
May 7, 1998
<PAGE>
Exhibit A - Page
Exhibit A - Page
TABLE OF CONTENTS
RECITALS 6
ARTICLE I NAME OF SURVIVING CORPORATION, CERTIFICATE OF INCORPORATION AND
BY-LAWS, BOARD OF DIRECTORS AND OFFICERS. 6
1.01 Name of Surviving Corporation 6
1.02 Certificate of Incorporation and By-Laws 6
1.03 Board of Directors and Officers 7
ARTICLE II STATUS AND CONVERSION OF SECURITIES 7
2.01 Stock of EWMS and FAS. 7
(a) EWMS Common Stock 7
(b) Dissenters Rights 7
(c) Surrender and Exchange of EWMS Common Stock 8
(d) Transfer Taxes 8
(e) EWMS Stock Transferees 8
2.02 Assumption of Employment Agreements 8
2.03 Capital Stock of FAS 8
2.04 Capital Stock of MergerSub 8
ARTICLE III STOCKHOLDER APPROVAL, BOARD OF DIRECTORS' RECOMMENDATIONS,
FILINGS, EFFECTIVE TIME. 8
3.01 Stockholder Approvals, Board of Director's Recommendations 8
3.02 Filing, Effective Time 9
ARTICLE IV CERTAIN EFFECTS OF MERGER 9
ARTICLE V REPRESENTATIONS AND WARRANTIES 9
5.01 Representations and Warranties of EWMS 9
(a) Security Holders 9
(b) Financial Statements 9
(c) Undisclosed Liabilities 10
(d) Absence of Changes 10
(e) Litigation and Claims 10
(f) NASD Membership, Compliance, Governmental Authorizations 10
(g) Due Organization and Qualification 11
(h) Tax Matters 11
(i) Material Agreements and Employment Contracts 11
(j) Title to Property and Related Matters 11
(k) Corporate Records 11
(l) Licenses, Trademarks and Trade Names 11
(m) Corporate Authority 12
(n) Binding Obligation of EWMS 12
(o) Capitalization 12
(p) Full Disclosure 12
(q) Registration Statement, Prospectus/Information Statement. 12
(r) Finders or Brokers 13
(s) SEC Filings 13
(t) Employment Agreements 13
(u) Share Ownership 13
(v) Approvals Required 13
5.02 Representations and Warranties of Stockholder 14
(a) Undisclosed Liabilities 14
(b) Binding Obligation of Stockholder 14
(c) Full Disclosure 14
(d) Registration Statement, Prospectus/Information Statement. 14
(e) Finders or Brokers 14
(f) Stockholder Authority 14
5.03 Representations and Warranties of FAS and MergerSub 14
(a) Shares of FAS Common Stock 14
(b) Due Authorization and Qualification 15
(c) Financial Statements 15
(d) Undisclosed Liabilities 15
(e) Absence of Changes 15
(f) Litigation and Claims 15
(g) Due Organization and Qualification 16
(h) Tax Matters 16
(i) Breach of Agreements 16
(j) Capitalization 16
(k) Full Disclosure 16
(l) Title to Property and Related Matters 16
(m) Compliance, Governmental Authorization 17
(n) Brokerage Fees 17
(o) Public Statements 17
(p) Regulatory Filings 17
(q) Material Agreements and Employment Contracts 17
(r) Corporate Records 17
(s) Corporate Authority 17
(t) Binding Obligation of FAS and MergerSub 18
(u) Registration Statement, Prospectus/Information Statement. 18
5.04 Representations and Warranties of FAS Founder 18
(a) Undisclosed Liabilities 18
(b) Binding Obligation of FAS Founder 19
(c) Full Disclosure 19
(d) Registration Statement, Prospectus/Information Statement. 19
(e) Finders or Brokers 19
(f) FAS Founder Authority 19
ARTICLE VI COVENANTS 19
6.01 Covenants of EWMS 19
(a) Conduct of Business 19
(b) No Solicitation 21
(c) EWMS and Subsidiary Actions 22
6.02 Covenants of Stockholder 22
(a) No Solicitation 22
(b) Agreement to Vote 22
6.03 Covenants of FAS and MergerSub 23
(a) Conduct of Business 23
(b) No Solicitation 25
(c) FAS and Subsidiary Actions 25
(d) Agreement to Vote 25
6.04 Covenants of FAS Founder 25
(a) No Solicitation 25
(b) Agreement to Vote 26
6.05 Covenants of EWMS, Stockholder, FAS, MergerSub and FAS Founder 26
(a) Access to Information 26
(b) Registration Statement and Information Statement 26
(c) Commercially Reasonable Efforts; Other Efforts 27
(d) Public Announcements 27
(e) Notification of Certain Matters 27
(f) Indemnification 28
(g) Directors' and Officers' Liability Insurance 28
(g) Expenses 28
(h) Stock Exchange Listing 28
(i) Actions Regarding Office and Car Lease Obligations 28
(k) Retroactive Insurance Coverage 28
(l) Failure to Take Action 28
(m) Exhibits, Closing Statements and Schedules 29
ARTICLE VII CONDITIONS PRECEDENT TO OBLIGATIONS OF THE PARTIES 29
7.01 Conditions Precedent to Obligations of EWMS and Stockholder 29
(a) Accuracy of Representations and Warranties 29
(b) Compliance with Covenants 29
(c) Form of New Certificates 29
(d) Audited Financial Statements 29
(e) Approval by Counsel 29
(f) Opinion of Counsel 29
(g) Officer's Certificate 30
(h) Closing Financial Statements 30
(i) Lock-up Agreements 30
(j) Additional Registered Representatives 30
7.02 Conditions Precedent to Obligations of FAS and MergerSub 31
(a) Accuracy of Representations and Warranties 31
(b) Compliance with Covenants 31
(c) Lock Up Agreements 31
(d) Approval by Counsel 31
(e) Opinion of Counsel 31
(f) Officers' Certificate 32
(g) Closing Financial Statements 32
7.03 Conditions Precedent to Obligations of EWMS, Stockholder, FAS,
MergerSub and FAS Founder 32
(a) Registration Statement 32
(b) EWMS Stockholder Approval 32
(c) Listing 32
(d) Certain Proceedings 32
(e) Opinions 33
(f) Stockholder Agreement 33
7.04 Post Merger Incentive Stock Options 33
ARTICLE VIII CLOSING 33
8.01 Time and Place 33
8.04 Documents at Closing 33
(a) Documents by EWMS 33
(b) Documents by FAS 34
8.05 Filings at the Closing 35
ARTICLE IX TERMINATION AND ABANDONMENT 35
9.01 Termination 35
(a) Mutual Consent 35
(b) Failure to Consummate 35
(c) Order of Judicial or Regulatory Authority 35
(d) Exercise of Dissenter's Rights 35
9.02 Termination by EWMS 35
9.03 Termination by FAS 36
9.04 Procedure for Termination 36
9.05 Effect of Termination and Abandonment 36
ARTICLE X DISPUTE RESOLUTION 37
10.1 Agreement Disputes 37
10.2 Arbitration in Accordance with American Arbitration Association Rules
37
10.3 Final and Binding Awards 37
10.4 Costs of Arbitration 37
10.5 Settlement by Mutual Agreement 37
ARTICLE XI OTHER MATTERS 38
11.01 The Closing 38
11.02 Survivability and Investigations 38
11.03 Nature of Representations and Warranties 38
11.05 Further Assurances 38
11.06 Waiver of Compliance and Consents 38
11.07 Notices 38
11.08 Interpretation 39
11.09 Counterparts 39
11.10 Governing Law 39
11.11 Binding Effect 39
11.12 Entire Agreement 39
11.13 Time 39
11.14 Severability 39
11.15 Default Costs 39
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Merger.doc 38 FDraft10/18/93
Exhibit A - Page
Exhibit A - Page
SCHEDULES
I. As to Executive Wealth Management Services, Inc.:
1. Liabilities of EWMS Not Disclosed in Financial Statements
2. Adverse Changes Since the Date of the Financial Statements
3. Litigation
4. Exceptions to Compliance with Laws and Regulations
5. Exceptions with respect to Tax Matters
6. Material Agreements, Employment Contracts and Employee Benefit Plans
7. Exceptions to Title to Properties
8. Licenses, Trademarks and Trade Names.
9. EWMS's Capitalization.
II. As to FAS Group, Inc.:
10. Liabilities of FAS Not Disclosed in Financial Statements
11. Absence of Changes
12. Litigation
13. Exceptions to Title to Properties
14. Exceptions to Compliance with Laws and Regulations
15. Commitments to Issue FAS's Securities
16. Material Agreements, Employment Contracts and Employee Benefit Plans
17. Capitalization of FAS and MergerSub
EXHIBITS
A. EWMS Common Stock Owned by Stockholder and FAS Common Stock to be Issued
B. Form of FAS Common Stock
C. Members of the Board of Directors of FAS at the Effective Time
D. Senior Officers of FAS at the Effective Time
E. Form of Opinion of FAS's Counsel
F. Form of Opinion of EWMS's Counsel
G-1 Form of Lock up Agreement Covering Certain EWMS, FAS and MergerSub
Stockholder
G-2 Form of Lock Up Agreement Covering Dr. Robert E. Windom
H-1 Form of Stockholder Agreement between Jack A. Alexander & Guy S. Della
Penna
H-2 Form of Override Agreement of EWMS
I-1 Form of Officers' Certificate of FAS
I-2 Form of Officers' Certificate of EWMS
J. List of Definitions and Meaning of Terms
<PAGE>
Exhibit A - 38
Exhibit A - Page
Exhibit A - Page
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (the "AgreementAgreement"), dated as of May 7,
1998, among FAS Group, Inc. a Delaware corporation whose address is 14358 Golden
Sunset Lane, Poway, California 92064 ("FASFAS"), the founder of FAS Group, Inc.,
Jack A. Alexander, whose address is 14358 Golden Sunset Lane, Poway, California
92064 ("FAS FounderFAS Founder"), FAS Wealth Management Services, Inc., a
Delaware corporation and a wholly-owned subsidiary of FAS whose address is 14358
Golden Sunset Lane, Poway, California 92064, ("MergerSubMergerSub") and Guy S.
Della Penna, the holder of a majority of the issued and outstanding capital
stock of Executive Wealth Management Services, Inc. ("StockholderStockholder"),
Executive Wealth Management Services, Inc., a Florida corporation whose address
is 2323 Stickney Point Road, Sarasota, Florida 34231 ("EWMSEWMS"), such
corporation in its capacity as the surviving corporation being, herein sometime
called the "Surviving Corporation,Surviving Corporation" and MergerSub and EWMS
being herein sometimes called the "Constituent Corporations.Constituent
Corporations"
RECITALS RECITALS
WHEREAS, the respective Boards of Directors of EWMS, MergerSub and FAS as
well as Stockholder and FAS Founder have approved the merger of MergerSub with
and into EWMS pursuant and subject to the terms and conditions of this Agreement
(the "Merger"), whereby each issued and outstanding share of common stock, par
value $0.002 per share, of EWMS at the Effective Time will be converted into the
right to receive FAS Common Stock; and
WHEREAS, EWMS, Stockholder, MergerSub, FAS and FAS Founder contemplate that the
Merger will be classified as a tax-free reorganization pursuant to Section
368(a)(i)(B) of the Internal Revenue Code of 1986, as amended ("CodeCode"); and
WHEREAS, EWMS, MergerSub and FAS desire to make certain representations,
warranties and agreements in connection with the Merger and also to set forth
the various conditions to the Merger; and
WHEREAS, the respective Boards of Directors of EWMS, MergerSub and FAS have
adopted resolutions approving this Agreement; and
WHEREAS, the terms used in this Agreement shall have the meanings respectively
ascribed to them in Exhibit J hereto.
NOW, THEREFORE, the parties hereto hereby adopt the above recitals and agree as
follows:
ARTICLE I
NAME OF SURVIVING CORPORATION, CERTIFICATE OF INCORPORATION AND BY-LAWS, BOARD
OF DIRECTORS AND OFFICERS.ARTICLE I NAME OF SURVIVING CORPORATION,
CERTIFICATE OF INCORPORATION AND BY-LAWS, BOARD OF DIRECTORS AND OFFICERS.
1.01 NAME OF SURVIVING CORPORATION1.01 Name of Surviving
Corporation. The corporation which shall survive the Merger Merger contemplated
hereby is EWMS which shall be governed under the laws of the State of Delaware.
The name of the Surviving Corporation shall be changed to FAS Wealth Management
Services, Inc.
1.02 CERTIFICATE OF INCORPORATION AND BY-LAWS1.02 Certificate of
Incorporation and By-Laws. The Articles of Incorporation as defined in the
Section 607.0202 of the Florida Business Corporation Act and the By-Laws of EWMS
as in effect at the Effective Time (as defined in Section 3.02) shall from and
after the Effective Time be the Certificate of Incorporation and the By-Laws of
the Surviving Corporation until they are amended.
1.03 BOARD OF DIRECTORS AND OFFICERS1.03 Board of Directors and
Officers. The individuals respectively designated by EWMS and FAS and
identified on Exhibit C to this Agreement, which Exhibit shall be attached to a
certificate signed by both parties and made a part of this Agreement no later
than the time of mailing the Prospectus/Information Statement (as hereinafter
defined) to the stockholders of EWMS, and which individuals shall be identified
in the Prospectus/Information Statement as such, shall comprise all of the
members of the Board of Directors of FAS at the Effective Time. The individuals
identified on Exhibit D to this Agreement shall comprise all of the senior
officers of FAS at the Effective Time and shall hold the positions set forth
opposite their names.
ARTICLE II
STATUS AND CONVERSION OF SECURITIESARTICLE II STATUS AND CONVERSION OF
SECURITIES
2.01 STOCK OF EWMS AND FAS.2.01 Stock of EWMS and FAS.
(a) EWMS Common Stock(a) EWMS Common Stock. All of the outstanding
shares of Common Stock, par value $.002 per share, of EWMS ("EWMS Common
StockEWMS Common Stock") outstanding at the Effective Time shall, subject to
compliance with Section 2.01 (b), be converted into and exchanged for the number
of shares of Class A common stock (as defined below) and Class B common stock
(as defined below), par value $.001 per share of FAS (collectively the "FAS
Common StockFAS Common Stock") set out in Exhibit A, except that shares of EWMS
Common Stock held in EWMS's treasury at the Effective Time shall be cancelled.
(i) Holders of Class A Common Stock ("Class A Common StockClass A Common
Stock") are entitled to one vote per share on all matters to be voted upon by
the shareholders. Except as otherwise provided by law, the holders of shares of
Common Stock vote as one class. Shares of Common Stock do not have
preemptive rights, cumulative voting rights, conversion rights or other
subscription rights. Except, the holders of Class A Common Stock AND Class B
Common Stock issued to the stockholders of EWMS in the Merger are entitled to
additional shares of Class A Common Stock in the event of conversion of any or
all shares of Class A Convertible Exchangeable Preferred Stock or Class B
Convertible Exchangeable Preferred Stock (collectively, the "Preferred
StockPreferred Stock"). The number of additional shares issuable ratably to the
holders of Class A Common Stock and Class B Common Stock issued to the
stockholders of EWMS in the Merger, or their successors, is an amount such that
the percentage of the total of all such shares of Common Stock will be the same
before and after the conversion of the Preferred Stock. In the event of a
liquidation, dissolution or winding up of FAS, the holders of Common Stock share
ratably in all assets remaining after payment of liabilities, subject to prior
liquidation rights of preferred stock, if any, then outstanding.
(ii) Holders of Class B Common Stock ("Class B Common Stock"Class B Common
Stock) are entitled to 50 votes per share on all matters to be voted upon by the
shareholders. Shares of Class B Common Stock convert to shares of Class A
Common Stock in certain circumstances, including (i) upon a sale or other
transfer, except to specified family members as defined in the Stockholders
Agreement referred to in Section 7.03(f), (ii) at the time the holder of such
shares of Class B Common Stock ceases to be affiliated with FAS, (iii) upon the
death of the holder, and (iv) upon the sale of such shares in a registered
public offering. The conversion from Class B Common Stock to Class A Common
Stock may be waived by a majority of the Class B Common Stock held by persons
other than the persons for whose benefit the waiver is requested.
(b) Dissenters Rights(b) Dissenters Rights. Notwithstanding
Section 2.01(a) no shares of FAS Common Stock shall be issued in respect of any
shares of EWMS Common Stock, the holders of which shall object to the Merger in
writing and demand payment of the value of their shares pursuant to Section
607.1302 of the Florida Business Corporation Act and as a result payment
therefore is made, such holders to have only the rights provided by such
Section.
(c) Surrender and Exchange of EWMS Common Stock(c) Surrender
and Exchange of EWMS Common Stock. After the Effective Time, each holder of an
outstanding certificate or certificates (the "Old CertificatesOld Certificates")
theretofore representing shares of EWMS Common Stock, upon surrender thereof to
FAS, shall be entitled to receive and exchange therefore a certificate or
certificates (the "New CertificatesNew Certificates"), which FAS agrees to make
available at the Effective Time, representing the number of whole shares of FAS
Common Stock into and for which the shares of EWMS Common Stock theretofore
represented by such surrendered Old Certificates have been converted. No
certificates or scrip for fractional shares of FAS Common Stock will be issued,
no FAS stock split or dividend shall relate to any fractional share interest and
no such fractional share interest shall entitle the owner thereof to vote or to
any rights of a stockholder of FAS.
(d) Transfer Taxes(d) Transfer Taxes. If any New Certificate
is to be issued in a name other than that in which the Old Certificate
surrendered for exchange is issued, the Old Certificate so surrendered shall be
properly endorsed and otherwise in proper form for transfer and the person
requesting such exchange shall pay to FAS any transfer or other taxes required
by reason of the issuance of the New Certificate in any name other than that of
the registered holder of the Old Certificate surrendered, or established to the
satisfaction of FAS that such tax has been paid or is not payable.
(e) EWMS Stock Transferees(e) EWMS Stock Transferees. As of
the Effective Time, no transfer of the shares of EWMS Common Stock outstanding
prior to the Effective Time shall be made on the stock transfer books of the
Surviving Corporation. If, after the Effective Time, Old Certificates are
presented to FAS or the Surviving Corporation, they shall be exchanged pursuant
to Section 2.01(c).
2.02 ASSUMPTION OF EMPLOYMENT AGREEMENTS2.02 Assumption of
Employment Agreements. FAS shall assume in the Merger all employment,
compensation, and benefit agreements and plans relating to employees of EWMS,
including without limitation, all employment contracts, change of control
agreements, severance, and indemnity agreements with such employees and former
employees, all EWMS employee benefit plans, all grants and awards under EWMS
1995 Stock Option Plan relating to current EWMS employees; and any other
agreements or obligations set forth in Schedule 6.
2.03 CAPITAL STOCK OF FAS2.03 Capital Stock of FAS. All issued and
outstanding shares of capital stock of FAS, whether outstanding or held in the
treasury of FAS, shall continue unchanged as shares of capital stock. All
outstanding FAS warrants and FAS stock options shall continue unchanged as
securities of FAS.
2.04 CAPITAL STOCK OF MERGERSUB2.04 Capital Stock of MergerSub.
All shares of capital stock of MergerSub outstanding at the Effective Time shall
be converted into and exchanged for 100 shares of common stock of the Surviving
Corporation and any shares of capital stock of MergerSub held in its treasury
shall be cancelled.
ARTICLE III
STOCKHOLDER APPROVAL, BOARD OF DIRECTORS' RECOMMENDATIONS, FILINGS, EFFECTIVE
TIME. ARTICLE III STOCKHOLDER APPROVAL, BOARD OF DIRECTORS'
RECOMMENDATIONS, FILINGS, EFFECTIVE TIME.
3.01 STOCKHOLDER APPROVALS, BOARD OF DIRECTOR'S RECOMMENDATIONS3.01
Stockholder Approvals, Board of Director's Recommendations. A notice to the
Stockholder of EWMS shall be provided in accordance with the Florida Business
Corporation Act, as amended, as promptly as possible, stating, among other
things, the adoption and approval of this Agreement, the Merger and the other
transactions contemplated hereby. Subject to its fiduciary duty to
stockholders, the board of directors of EWMS and Stockholder shall adopt and
approve this Agreement, the Merger and the other transactions contemplated
hereby.
3.02 FILING, EFFECTIVE TIME3.02 Filing, Effective Time. As soon as
practical after the adoption and approval of this Agreement, the Merger and the
other transactions contemplated hereby, appropriate certificates of merger in
the form required by Section 607.1105 of the Florida Business Corporation Act,
as amended, shall be executed and filed in the office of the Secretary of State
of the State of Florida and filed and recorded with the Secretary of State of
the State of Delaware as provided in Section 251 of the General Corporation Laws
of Delaware at which time the Merger shall become effective (the "Effective
TimeEffective Time").
ARTICLE IV
CERTAIN EFFECTS OF MERGERARTICLE IV CERTAIN EFFECTS OF MERGER
At the Effective Time, the separate existence of MergerSub shall cease.
MergerSub shall be merged with and into EWMS, the Surviving Corporation, in
accordance with the provisions of this Agreement. Thereafter, the Surviving
Corporation shall possess all the rights, privileges, powers and franchises of,
a public as well as of a private nature, and shall be subject to all the
restrictions, disabilities and duties of each of the Constituent Corporations
and all and singular; the rights, privileges, powers and franchises of each of
the Constituent Corporations, and all property, real, personal and mixed, and
all debts due to either of them on whatever account, shall be vested in the
Surviving Corporation; and all property, rights, privileges, powers and
franchises, and all and every other interest shall be thereafter an effectually
the property of Surviving Corporation, as they were of the respective
Constituent Corporations, and the title to any real estate whether by deed or
otherwise vested in either of the Constituent Corporations, shall not revert to
be in any way impaired by reason of the Merger; buy all rights of creditors and
all liens upon any property of the parties hereto, shall be preserved
unimpaired, and all debts, liabilities and duties of the respective Constituent
Corporations shall thenceforth attach to the Surviving Corporation, and may be
enforced against it to the same extent as if said debts, liabilities and duties
had been incurred or contracted by it.
MergerSub agrees that it will execute and deliver, or cause to be executed
and delivered, all such deeds, assignments and other instruments, and will take
or cause to be taken such further or other action as Surviving Corporation may
deem necessary or desirable in order to vest in and confirm to the Surviving
Corporation title to and possession of all the property rights, privileges,
immunities, powers, purposes and franchises, and all and every other interest,
of MergerSub and otherwise to carry out the intent and purposes of this
Agreement.
ARTICLE V
REPRESENTATIONS AND WARRANTIESARTICLE V REPRESENTATIONS AND WARRANTIES
5.01 REPRESENTATIONS AND WARRANTIES OF EWMS 5.01 Representations
and Warranties of EWMS. EWMS as a material inducement to FAS and MergerSub to
enter into this Agreement and consummate the transactions contemplated hereby,
make the following representations and warranties to FAS and MergerSub, which
representations and warranties will be true and correct in all material respects
at the Effective Time:
(a) Security Holders(a) Security Holders. The stockholders
listed on Exhibit "A" are the only owners, of record and beneficially, of all of
the issued and outstanding shares of EWMS Common Stock.
(b) Financial Statements(b) Financial Statements. EWMS has
delivered audited financial statements of EWMS at December 31, 1996 and December
31, 1997, including balance sheets and income statements and statements of cash
flows (collectively the "Financial Statements").
To the best of EWMS's knowledge and belief, the Financial Statements
fairly and accurately present the financial condition of EWMS as of the date
thereof and the consolidated results of its operations for the period covered;
and have been prepared in accordance with generally accepted accounting
principles, consistently applied, except as otherwise stated therein; and the
books and records, financial and others, of EWMS are in all material respects
complete and correct and have been maintained in accordance with good business
and accounting practices.
(c) Undisclosed Liabilities(c) Undisclosed Liabilities.
Except as set forth in Schedule 1, at the Effective Time: (i) EWMS is aware of
no liabilities or obligations of any nature, fixed or contingent, matured or
unmatured, which are not shown or otherwise provided for in the Financial
Statements except for liabilities and obligations arising in the ordinary course
of business, none of which is materially adverse; and (ii) to the best of
EWMS's knowledge and belief, no reserves have been established by EWMS and,
therefore, are not set forth in the Financial Statements.
(d) Absence of Changes(d) Absence of Changes. Except as set
forth in Schedule 2, since the date of the Financial Statements, to the best of
EWMS's knowledge and belief, the business of EWMS has been operated in the
ordinary course and there has not been:
(i) Any material adverse change in the condition (financial or
otherwise), assets, liabilities, earnings, net worth, business or prospects of
EWMS for such period, in the aggregate, or at any time during such period;
(ii) Any damage, destruction or loss (whether or not covered by
insurance) materially adversely affecting EWMS or its businesses;
(iii) Any declaration, setting aside, or payment of any dividend
or other distribution in respect of any shares of capital stock of EWMS, or any
direct or indirect redemption, purchase or other acquisition of any such stock;
(iv) Any issuance or sale by EWMS or agreement to sell any of its
securities; or
(v) Any statute, rule, regulation or order adopted (including
orders of regulatory authorities with jurisdiction over EWMS or its business)
which materially adversely affects EWMS or its business.
(e) Litigation and Claims(e) Litigation and Claims. Except as
set forth in Schedule 3, or in the Financial Statements; EWMS is aware of no
actions, suits, claims, investigations or legal or administrative or arbitration
proceedings pending or threatened against EWMS, its assets or business, whether
at law or in equity, or before or by any Federal, state, municipal, local,
foreign or other governmental department, commission, board, bureau, agency or
instrumentality; nor does EWMS know of a threat of such litigation or any basis
for any such action, suit, claim, investigation or proceeding.
(f) NASD Membership, Compliance, Governmental Authorizations(f)
NASD Membership, Compliance, Governmental Authorizations. Except as set forth
in Schedule 4, EWMS is a member in good standing of the National Association of
Securities Dealers, Inc., ("NASDNASD")is registered with the U.S. Securities and
Exchange Commission ("SECSEC") as a broker-dealer, has complied with all
Federal, state, local or foreign laws, ordinances, regulations and orders
applicable to its business, including without limitation, Federal and state
securities laws which, if not complied with, would materially and adversely
affect the business of EWMS, and EWMS has all Federal, state, local and foreign
governmental licenses and permits necessary in the conduct of its business, and
such licenses and permits or exemptions are in full force and effect, and EWMS
knows of no violations of any such licenses, permits or exemptions and no
proceedings are pending or threatened to revoke or limit the use of such
licenses, permits or exemptions.
(g) Due Organization and Qualification(g) Due Organization and
Qualification. EWMS is a corporation duly organized, validly existing and in
good standing under the laws of the State of Florida, and is qualified to do
business and is in good standing in each state where it is required to be so
qualified and such qualification is material to its business. EWMS has the
power to own its properties and assets and to carry on its business as now
presently conducted.
(h) Tax Matters(h) Tax Matters. Except as set forth in
Schedule 5, EWMS has filed all federal, state and local tax or related returns
and reports due or required to be filed, which reports accurately reflect in all
material respects the amount of taxes due. EWMS has paid all amounts of taxes
or assessments which would be delinquent if not paid as of the date of this
Agreement, other than taxes or charges being contested in good faith or not yet
finally determined.
(i) Material Agreements and Employment Contracts(i) Material
Agreements and Employment Contracts. Schedule 6 contains a true and complete
list and brief description of all written or oral contracts, agreements
(including employment agreements), mortgages, obligations, understandings,
arrangements, restrictions, and other instruments to which EWMS is a party or by
which EWMS or its assets may be bound. True and correct copies of all items set
forth on Schedule 6 have been or will be made available to FAS and MergerSub
prior to Closing. Except as set forth in Schedule 6, there are no "employee
pension benefit plans" as defined in Section 3(2) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), covering employees (or former
employees), maintained or contributed to by EWMS or any of its Subsidiaries or
any of their ERISA Affiliates (as hereinafter defined), or to which EWMS or any
of its Subsidiaries or any of their ERISA Affiliates contributes or is obligated
to make payments thereunder or otherwise may have any liability ("EWMS Pension
Benefit Plans"). For purposes of this Agreement, "ERISA Affiliate" shall mean
any person (as defined in Section 3(9) of ERISA) that is a member of any group
of persons described in Section 414(b), (c), (m) or (o) of the Code, which
includes the referent person, or its Subsidiaries. No event has occurred which
(whether with or without notice, lapse of time or the happening or occurrence of
any other event) would constitute a default under any of the agreements set
forth in Schedule 6.
(j) Title to Property and Related Matters(j) Title to Property
and Related Matters. EWMS has good and marketable title to all the properties,
interests in properties and assets, real, personal and mixed, reflected as being
owned by it on the Financial Statements or acquired by them after the date of
the Financial Statements, of any kind or character, free and clear of any liens
or encumbrances, except (i) those referred to in the notes to the Financial
Statements, (ii) those set forth in Schedule 7, and (iii) liens for current
taxes not yet delinquent. Except as set forth in said Schedule 7 and except for
matters which may arise in the ordinary course of business, EWMS's assets are in
good operating condition and repair. To the best of knowledge of EWMS, there
does not exist any condition that materially interferes with the use thereof in
the ordinary course of EWMS's business.
(k) Corporate Records(k) Corporate Records. The corporate
minute books, and other documents and records of EWMS are complete and correct.
FAS and MergerSub shall have the right to review all corporate records of EWMS
prior to the Effective Time.
(l) Licenses, Trademarks and Trade Names(l) Licenses,
Trademarks and Trade Names. Schedule 8 contains a true and complete list of all
licenses and all trademarks, trade names, service marks, copyrights, know-how,
patents and applications for any of the foregoing owned by or registered in the
name of EWMS. There is no pending or threatened claim or litigation against
EWMS contesting the right to use any of the trademarks, trade names and know-how
or the validity of any of the licenses, copyrights and patents listed on
Schedule 8, or asserting the misuse of any thereof, nor has there ever been any
such claim or litigation.
(m) Corporate Authority(m) Corporate Authority. EWMS is
authorized to enter into this Agreement and has taken all corporate action
necessary to authorize the execution of this Agreement and consummation of the
transactions contemplated herein. The execution, delivery and performance of
this Agreement by EWMS will not be in conflict with or constitute a default
under any provisions of applicable law, EWMS's Certificate of Incorporation or
By-Laws, or any agreement or instrument to which EWMS is a party or by which it
or its assets are bound.
(n) Binding Obligation of EWMS(n) Binding Obligation of EWMS.
This Agreement constitutes a valid and binding agreement of EWMS, enforceable in
accordance with its terms except as such enforcement may be limited by
applicable bankruptcy, insolvency, moratorium, and other similar laws relating
to, limiting or affecting the enforcement of creditors rights generally; and
neither the execution and delivery of this Agreement nor the consummation by
EWMS of the transactions contemplated hereby, nor compliance with any of the
provisions hereof, will violate any statute, law, rule or regulation or any
order, writ, injunction or decree of any court or governmental authority, or
violate or conflict with or constitute a default under (or give rise to any
right of termination, cancellation or acceleration under) the terms or
conditions or provisions of any note, bond, lease, mortgage, obligation,
agreement, understanding, arrangement or restriction of any kind to which EWMS
is a party or by which EWMS or its properties may be bound.
(o) Capitalization(o) Capitalization. The authorized
capitalization of EWMS is as set forth in the Financial Statements. Except as
set forth in said Schedule 9, there are no outstanding or presently authorized
securities, warrants, preemptive rights, subscription rights, options or related
commitments of any nature to issue any of EWMS's securities which are not
reflected in the Financial Statements or in Schedule 9.
(p) Full Disclosure(p) Full Disclosure. EWMS has, and at the
Effective Time will have, disclosed to FAS all events, conditions and facts
materially affecting the business and prospects of EWMS which are known to EWMS
and EWMS has not and will not have, at the Effective Time, withheld disclosure
of any events, conditions, or facts which it may have knowledge of, or have
reasonable grounds to know, may materially, adversely affect the business and
prospects of EWMS.
(q) Registration Statement, Prospectus/Information Statement(q)
Registration Statement, Prospectus/Information Statement.. None of the
information supplied by EWMS for inclusion or incorporation by reference in the
registration statement under the Securities Act registering FAS Common Stock to
be issued at the Effective Time (such registration statement as amended by any
amendments thereto being referred to herein as the "Registration
StatementRegistration Statement") or the Prospectus/Information Statement to be
sent to the stockholders of EWMS in connection with the Merger, including all
amendments and supplements thereto, shall, in the case of the Registration
Statement, at (i) the time the Registration Statement becomes effective, (ii)
the Closing, (iii) the Effective Time, (iv) in the case of the
Prospectus/Information Statement, on the date or dates the
Prospectus/Information Statement is first mailed to FAS and EWMS stockholders,
(v) at the Closing, and (vi) at the Effective Time, contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements therein not misleading. If
at any time prior to the Effective Time any event with respect to EWMS shall
occur which is required to be described in the Registration Statement or the
Prospectus/Information Statement, such event shall be so described, and after
due consultation with FAS, an amendment or supplement shall be promptly filed
with the SEC and, as required by law, disseminated to the stockholders of EWMS
and FAS. The Registration Statement and the Prospectus/Information Statement
will (with respect to EWMS) comply as to form in all material respects with the
applicable provisions of the Securities Act and the Securities Exchange Act, as
the case may be.
(r) Finders or Brokers. (r) Finders or Brokers Except as set forth
in Schedule 6, neither EWMS nor any Subsidiary of EWMS has employed any
investment banker, broker, finder or intermediary in connection with the
transactions contemplated hereby who might be entitled to a fee or any
commission the receipt of which is conditioned in whole or part upon
consummation of the Merger.
(s) SEC Filings. (s) SEC Filings (i) EWMS has filed with the SEC
all required forms, reports and documents required to be filed by it with the
SEC since December 31, 1993 (collectively, the "EWMS SEC ReportsEWMS SEC
Reports"), all of which, when filed, complied as to form in all material
respects with the applicable provisions of the Securities Act of 1933, as
amended and the rules and regulations promulgated thereunder ("Securities
ActSecurities Act")and the Securities Exchange Act of 1934, as amended and the
rules and regulations promulgated thereunder ("Exchange ActExchange Act"), as
the case may be. As of their respective dates EWMS SEC Reports (including
documents included as exhibits thereto or incorporated by reference therein) did
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.
(ii) EWMS will deliver to FAS as soon as they become available true and
complete copies of any report or statement mailed by EWMS to its security
holders generally or filed by it with the SEC, in each case subsequent to the
date hereof and prior to the Effective Time. As of their respective dates, such
reports and statements (excluding any information therein provided by FAS, as to
which EWMS makes no representation) will comply as to form in all material
respects with the applicable provisions of the Securities Act and the Exchange
Act, will not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they are made, not
misleading, and will further comply in all material respects with all applicable
requirements of law. The audited consolidated financial statements and unaudited
consolidated interim financial statements of EWMS and its Subsidiaries to be
included or incorporated by reference in such reports and statements will be
prepared in accordance with generally accepted accounting principles applied on
a consistent basis throughout the periods involved, and in accordance with all
applicable accounting requirements under the Securities Act and the Exchange
Act, and will fairly present the consolidated financial position of EWMS and its
Subsidiaries as of the dates thereof and the consolidated results of operations
and consolidated cash flow for the periods then ended (subject, in the case of
any unaudited interim financial statements, to normal year-end adjustments and
to the extent they may not include footnotes or may be condensed or summary
statements).
(t) Employment Agreements(t) Employment Agreements. EWMS has
entered into no employment agreements, except those identified on Schedule 6.
(u) Share Ownership(u) Share Ownership. To the best knowledge
of EWMS, the shares of EWMS Common Stock are owned, of record and beneficially,
as specified on Exhibit "A", free and clear of all liens and encumbrances of any
kind and nature, and have not been sold, pledged, assigned or otherwise
transferred except pursuant to this Agreement.
(v) Approvals Required(v) Approvals Required. To the best
knowledge of EWMS no approval, authorization, consent, order or other action of,
or filing with, any person, firm or corporation or any court is required in
connection with the execution and delivery by EWMS of this Agreement or the
consummation of the transactions described herein, except as disclosed herein
and, except to the extent that the parties are required to obtain approval by
any governmental authority or administrative agency or to file reports in
accordance with relevant regulations under Federal and state securities and tax
laws.
5.02 REPRESENTATIONS AND WARRANTIES OF STOCKHOLDER5.02
Representations and Warranties of Stockholder. Stockholder, as a material
inducement to FAS and MergerSub to enter into this Agreement and consummate the
transactions contemplated hereby, makes the following representations and
warranties to FAS and MergerSub, which representations and warranties will be
true and correct in all material respects at the Effective Time:
(a) Undisclosed Liabilities(a) Undisclosed Liabilities.
Except as set forth in Schedule 1, at the Effective Time, Stockholder is aware
of no liabilities or obligations of any nature, fixed or contingent, matured or
unmatured, which are not shown or otherwise provided for in the Financial
Statements except for liabilities and obligations arising in the ordinary course
of business, none of which is materially adverse.
(b) Binding Obligation of Stockholder(b) Binding Obligation of
Stockholder. This Agreement constitutes a valid and binding agreement of
Stockholder, enforceable in accordance with its terms except as such enforcement
may be limited by applicable bankruptcy, insolvency, moratorium, and other
similar laws relating to, limiting or affecting the enforcement of creditors
rights generally.
(c) Full Disclosure(c) Full Disclosure. Stockholder has, and
at the Effective Time will have, disclosed to FAS all events, conditions and
facts materially affecting the business and prospects of EWMS which are known to
Stockholder and Stockholder has not and will not have, at the Effective Time,
withheld disclosure of any events, conditions, or facts which he may have
knowledge of, or have reasonable grounds to know, may materially, adversely
affect the business and prospects of EWMS.
(d) Registration Statement, Prospectus/Information Statement(d)
Registration Statement, Prospectus/Information Statement.. None of the
information supplied by Stockholder for inclusion or incorporation by reference
in the registration statement under the Securities Act registering FAS Common
Stock to be issued at the Effective Time (such registration statement as amended
by any amendments thereto being referred to herein as the "Registration
StatementRegistration Statement") or the Prospectus/Information Statement to be
sent to the stockholders of EWMS in connection with the Merger, including all
amendments and supplements thereto, shall, in the case of the Registration
Statement, at (i) the time the Registration Statement becomes effective, (ii)
the Closing, (iii) the Effective Time, (iv) in the case of the
Prospectus/Information Statement, on the date or dates the
Prospectus/Information Statement is first mailed to FAS and EWMS stockholders,
(v) at the Closing, and (vi) at the Effective Time, contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements therein not misleading.
(e) Finders or Brokers. (e) Finders or Brokers Except as set forth
in Schedule 6, EWMS has not employed any investment banker, broker, finder or
intermediary in connection with the transactions contemplated hereby who might
be entitled to a fee or any commission the receipt of which is conditioned in
whole or part upon consummation of the Merger.
(f) Stockholder Authority(f) Stockholder Authority.
Stockholder has the full right, power and authority to execute and deliver this
Agreement and perform his obligations hereunder.
5.03 REPRESENTATIONS AND WARRANTIES OF FAS AND MERGERSUB5.03
Representations and Warranties of FAS and MergerSub. FAS and MergerSub, as a
material inducement to EWMS and Stockholder to enter into this Agreement and
consummate the transactions contemplated hereby, make the following
representations and warranties to EWMS and Stockholder, which representations
are true and correct at this date, and will be true and correct on the Effective
Time as though made on and as of such date:
(a) Shares of FAS Common Stock(a) Shares of FAS Common Stock.
The New Certificates to be delivered to the Stockholder and EWMS Shareholders at
Closing will be valid and legally issued shares of FAS Common Stock of FAS, free
and clear of all liens, encumbrances, and preemptive rights, and will be
fully-paid and non-assessable shares.
(b) Due Authorization and Qualification(b) Due Authorization
and Qualification. This Agreement has been duly authorized, executed, and
delivered by FAS and MergerSub, and constitutes a legal, valid, and binding
obligation of FAS and MergerSub, enforceable in accordance with its terms; no
consent of any federal, state, municipal or other governmental authority is
required by FAS or MergerSub for the execution, delivery or performance of this
Agreement by FAS and MergerSub; no consent of any party to any contract or
agreement to which FAS or MergerSub is a party or by which any of their
respective property or assets are subject is required for the execution,
delivery or performance of this Agreement by FAS and MergerSub.
(c) Financial Statements(c) Financial Statements. FAS has
delivered to EWMS and Stockholder its pro forma compiled opening balance sheet
(the "StatementsStatements"). The Statements fairly and accurately reflect the
financial condition of FAS as of the dates thereof and the results of operations
for the periods reflected therein. The Statements have been prepared in
accordance with generally accepted accounting principles, consistently applied,
except as otherwise stated therein; and the books and records, financial and
others, of FAS are in all material respects complete and correct and have been
maintained in accordance with good business and accounting practices.
(d) Undisclosed Liabilities(d) Undisclosed Liabilities.
Except as set forth in Schedule 10, FAS: (i) has no material liabilities or
obligations of any nature, fixed or contingent, matured or unmatured, which are
not shown or otherwise provided for in the Statements; and (ii) all reserves
established by FAS and set forth in the Statements are adequate and there are no
material loss contingencies (as such term is used in Statement of Financial
Accounting Standard No. 5 of the Financial Accounting Standards Board) which are
not adequately provided for.
(e) Absence of Changes(e) Absence of Changes. Except as set
forth in Schedule 11, since the date of the Statements, to the best of FAS's and
MergerSub's and FAS Founder's knowledge and belief, the business of FAS or
MergerSub has been operated in the ordinary course and there has not been:
(i) Any material adverse change in the condition (financial or
otherwise), assets, liabilities, earnings, net worth, business or prospects of
FAS and MergerSub for such period, in the aggregate, or at any time during such
period;
(ii) Any damage, destruction or loss (whether or not covered by
insurance) materially adversely affecting FAS or MergerSub or their respective
businesses;
(iii) Any declaration, setting aside, or payment of any dividend
or other distribution in respect of any shares of capital stock of FAS and
MergerSub, or any direct or indirect redemption, purchase or other acquisition
of any such stock;
(iv) Any issuance or sale by FAS or MergerSub or agreement to sell
any of their respective securities; or
(v) Any statute, rule, regulation or order adopted (including
orders of regulatory authorities with jurisdiction over FAS or MergerSub or
their respective businesses) which materially adversely affects FAS or MergerSub
or their respective businesses.
(f) Litigation and Claims(f) Litigation and Claims. Except as
set forth in Schedule 12, or in the Statements; there are no material actions,
suits, claims, investigations or legal or administrative or arbitration
proceedings pending or threatened against FAS, its assets or business, whether
at law or in equity, or before or by any Federal, state, municipal, local,
foreign or other governmental department, commission, board, bureau, agency or
instrumentality; nor does FAS know or have any reason to know of a threat of
such litigation or any basis for any such action, suit, claim, investigation or
proceeding which could materially and adversely affect the business or
properties of FAS.
(g) Due Organization and Qualification(g) Due Organization and
Qualification. FAS is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware, is qualified to business
and in good standing in each state where it is required to be qualified and such
qualification is material and has the corporate power to own its property and to
carry on its business as now being conducted. The Restated Certificate of
Incorporation and By-Laws of FAS, as in effect on the Effective Time, have been
delivered to EWMS and are made a part hereof.
(h) Tax Matters(h) Tax Matters. FAS has filed all Federal,
state and local, tax or related returns and reports due or required to be filed,
which reports accurately reflect in all material respects the amount of taxes
due. FAS has paid all taxes or assessments which have become due, other than
taxes or charges being contested in good faith or not finally determined.
(i) Breach of Agreements(i) Breach of Agreements. FAS has not
breached, or is there any pending or threatened claims or any legal basis for a
claim that FAS has breached, nor has an event occurred which with the passing of
time would constitute a breach of any of the terms or conditions of any
agreements, contracts or commitments to which FAS is a party or by which FAS or
its assets are bound. The execution, delivery and performance of this Agreement
by FAS will not be in conflict with or constitute a default under any provisions
of applicable law, FAS's Certificate of Incorporation or By-Laws, or any
agreement or instrument to which FAS is a party or by which it or its assets are
bound.
(j) Capitalization(j) Capitalization. The authorized
capitalization of FAS and MergerSub are as set forth in the Statements and
Schedule 17. Except as set forth in the Statements or in Schedule 15, there are
no outstanding or presently authorized securities, warrants, preemptive rights,
subscription rights, options or related commitments of any nature to issue any
of FAS's securities which are not reflected in the Statements or in Schedule 15.
All outstanding shares of capital stock have been duly authorized, validly
issued, and are fully-paid and non-assessable, and all such shares were issued
in compliance with all applicable federal and state securities laws. Except as
set forth in the statements or in Schedule 15 and except for the issuances of
securities referred to in this Agreement between FAS, MergerSub, EWMS and
Stockholder with respect to the merger of EWMS, there are no outstanding or
presently authorized securities, warrants, preemptive rights, subscription
rights, options or related commitments of any nature to issue any of FAS's
securities.
(k) Full Disclosure(k) Full Disclosure. FAS has, and at the
Effective Time will have, disclosed to EWMS and Stockholder all events,
conditions and facts materially affecting the business and prospects of FAS; and
FAS has not and will not have, at the Effective Time, withheld disclosure of any
events, conditions, and facts which it may have knowledge of, or have reasonable
grounds to know may materially, adversely affect the business and prospects of
FAS.
(l) Title to Property and Related Matters(l) Title to Property
and Related Matters. FAS and MergerSub have good and marketable title to all
the properties, interests in properties and assets, real, personal and mixed,
reflected as being owned by them on the Statements or acquired by them after the
date of the Statements, of any kind or character, free and clear of any liens or
encumbrances, except (i) those referred to in the notes to the Statements, (ii)
those set forth in Schedule 14, and (iii) liens for current taxes not yet
delinquent. Except as set forth in said Schedule 14 and except for matters
which may arise in the ordinary course of business, FAS and MergerSub's assets
are in good operating condition and repair. To the best of knowledge of FAS and
MergerSub, there does not exist any condition that materially interferes with
the use thereof in the ordinary course of FAS's or MergerSub's respective
businesses.
(m) Compliance, Governmental Authorization(m) Compliance,
Governmental Authorization. Except as set forth in Schedule 14 hereto, FAS has
complied in all respects with all Federal, state, local, or foreign laws,
ordinances, regulations, and orders applicable to its business, including
without limitation Federal and state securities laws applicable to all offerings
prior to the Effective Time. FAS has all Federal, state, local and foreign
governmental licenses and permits material to and necessary in the conduct of
its business, and such licenses and permits or exemptions are in full force and
effect, and FAS knows of no violations of any such licenses, permits or
exemptions, and no proceedings are pending or threatened to revoke or limit the
use of such licenses, permits or exemptions.
(n) Brokerage Fees(n) Brokerage Fees. FAS has not incurred,
nor will it incur, any liability for brokerage or finder's fees or similar
charges in connection with this Agreement or any of the transactions
contemplated hereby.
(o) Public Statements(o) Public Statements. FAS will deliver
to EWMS's management any public documents which report the completion of this
transaction so that EWMS's management can review and, if acceptable, approve the
descriptions contained therein of EWMS and the terms of the transactions
accomplished by this Agreement;
(p) Regulatory Filings(p) Regulatory Filings. FAS will
deliver to EWMS's management, with a copy to its counsel (at the addresses set
forth herein), all reports, registration statements and other documents, as
filed with the Securities and Exchange Commission and or National Association of
Securities Dealers, Inc.;
(q) Material Agreements and Employment Contracts(q) Material
Agreements and Employment Contracts. Schedule 16 contains a true and complete
list and brief description of all written or oral contracts, agreements
(including employment agreements), obligations, understandings, arrangements,
restrictions, and other instruments to which FAS is a party or by which FAS or
its assets may be bound. True and correct copies of all items set forth on
Schedule 16 have been or will be made available to EWMS and Stockholder prior to
Closing. Except as set forth in Schedule 16, there are no "employee pension
benefit plans" as defined in Section 3(2) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), covering employees (or former
employees), maintained or contributed to by FAS or any of its Subsidiaries or
any of their ERISA Affiliates (as hereinafter defined), or to which FAS or any
of its Subsidiaries or any of their ERISA Affiliates contributes or is obligated
to make payments thereunder or otherwise may have any liability ("FAS Pension
Benefit Plans"). For purposes of this Agreement, "ERISA Affiliate" shall mean
any person (as defined in Section 3(9) of ERISA) that is a member of any group
of persons described in Section 414(b), (c), (m) or (o) of the Code that
includes the referent person or its Subsidiaries. No event has occurred which
(whether with or without notice, lapse of time or the happening or occurrence of
any other event) would constitute a default under any of the agreements set
forth in Schedule 16.
(r) Corporate Records(r) Corporate Records. The corporate minute
books, and other documents and records of FAS and MergerSub are complete and
correct. EWMS shall have the right to review all corporate records of FAS and
MergerSub prior to the Effective Time.
(s) Corporate Authority(s) Corporate Authority. FAS and
MergerSub are authorized to enter into this Agreement and have taken all
corporate action necessary to authorize the execution of this Agreement and
consummation of the transactions contemplated herein. The execution, delivery
and performance of this Agreement by FAS and MergerSub will not be in conflict
with or constitute a default under any provisions of applicable law, FAS and
MergerSub's Certificates of Incorporation or By-Laws, or any agreement or
instrument to which FAS or MergerSub are a party or by which it or its assets
are bound.
(t) Binding Obligation of FAS and MergerSub(t) Binding
Obligation of FAS and MergerSub. This Agreement constitutes a valid and binding
agreement of FAS and MergerSub and FAS Founder, enforceable in accordance with
its terms except as such enforcement may be limited by applicable bankruptcy,
insolvency, moratorium, and other similar laws relating to, limiting or
affecting the enforcement of creditors rights generally; and neither the
execution and delivery of this Agreement nor the consummation by FAS and
MergerSub of the transactions contemplated hereby, nor compliance with any of
the provisions hereof, will violate any statute, law, rule or regulation or any
order, writ, injunction or decree of any court or governmental authority, or
violate or conflict with or constitute a default under (or give rise to any
right of termination, cancellation or acceleration under) the terms or
conditions or provisions of any note, bond, lease, mortgage, obligation,
agreement, understanding, arrangement or restriction of any kind to which FAS
and MergerSub are a party or by which FAS and MergerSub or its properties may be
bound. No consent or approval by any governmental authority is required in
connection with the execution and delivery by FAS and MergerSub of this
Agreement or the consummation of the transactions contemplated hereby.
(u) Registration Statement, Prospectus/Information Statement(u)
Registration Statement, Prospectus/Information Statement.. None of the
information supplied by FAS or MergerSub for inclusion or incorporation by
reference in the registration statement under the Securities Act registering FAS
Common Stock to be issued at the Effective Time (such registration statement as
amended by any amendments thereto being referred to herein as the "Registration
StatementRegistration Statement") or the Prospectus/Information Statement to be
sent to the stockholders of EWMS in connection with EWMS Special Meeting,
including all amendments and supplements thereto, shall, in the case of the
Registration Statement, at (i) the time the Registration Statement becomes
effective, (ii) the Closing, (iii) the Effective Time, (iv) in the case of the
Prospectus/Information Statement, on the date or dates the
Prospectus/Information Statement is first mailed to FAS and EWMS stockholders,
(v) at the date or dates of EWMS Special Meeting, (vi) at the Closing, and (vii)
at the Effective Time, contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary in order to
make the statements therein not misleading. If at any time prior to the
Effective Time any event with respect to FAS or MergerSub or any of its
Subsidiaries shall occur which is required to be described in the Registration
Statement or the Prospectus/Information Statement, such event shall be so
described, and after due consultation with EWMS, an amendment or supplement
shall be promptly filed with the SEC and, as required by law, disseminated to
the stockholders of EWMS and FAS. The Registration Statement and the
Prospectus/Information Statement will (with respect to FAS and MergerSub) comply
as to form in all material respects with the applicable provisions of the
Securities Act and the Securities Exchange Act, as the case may be.
5.04 REPRESENTATIONS AND WARRANTIES OF FAS FOUNDER5.04 Representations and
Warranties of FAS Founder. FAS Founder, as a material inducement to EWMS to
enter into this Agreement and consummate the transactions contemplated hereby,
makes the following representations and warranties to EWMS, which
representations and warranties will be true and correct in all material respects
at the Effective Time:
(a) Undisclosed Liabilities(a) Undisclosed Liabilities.
Except as set forth in Schedule 10, at the Effective Time, FAS Founder is aware
of no liabilities or obligations of any nature, fixed or contingent, matured or
unmatured, which are not shown or otherwise provided for in the Financial
Statements except for liabilities and obligations arising in the ordinary course
of business, none of which is materially adverse.
(b) Binding Obligation of FAS Founder (b) Binding Obligation
of FAS Founder. This Agreement constitutes a valid and binding agreement of FAS
Founder, enforceable in accordance with its terms except as such enforcement may
be limited by applicable bankruptcy, insolvency, moratorium, and other similar
laws relating to, limiting or affecting the enforcement of creditors rights
generally.
(c) Full Disclosure(c) Full Disclosure. FAS Founder has, and
at the Effective Time will have, disclosed to EWMS and Stockholder all events,
conditions and facts materially affecting the business and prospects of FAS; and
FAS Founder has not and will not have, at the Effective Time, withheld
disclosure of any events, conditions, and facts which he may have knowledge of,
or have reasonable grounds to know may materially, adversely affect the business
and prospects of FAS.
(d) Registration Statement, Prospectus/Information Statement(d)
Registration Statement, Prospectus/Information Statement.. None of the
information supplied by FAS Founder for inclusion or incorporation by reference
in the registration statement under the Securities Act registering FAS Common
Stock to be issued at the Effective Time (such registration statement as amended
by any amendments thereto being referred to herein as the "Registration
StatementRegistration Statement") or the Prospectus/Information Statement to be
sent to the stockholders of EWMS in connection with the Merger, including all
amendments and supplements thereto, shall, in the case of the Registration
Statement, at (i) the time the Registration Statement becomes effective, (ii)
the Closing, (iii) the Effective Time, (iv) in the case of the
Prospectus/Information Statement, on the date or dates the
Prospectus/Information Statement is first mailed to FAS and EWMS stockholders,
(v) at the Closing, and (vi) at the Effective Time, contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements therein not misleading.
(e) Finders or Brokers. (e) Finders or Brokers Except as set forth
in Schedule 6, FAS Founder has not employed any investment banker, broker,
finder or intermediary in connection with the transactions contemplated hereby
who might be entitled to a fee or any commission the receipt of which is
conditioned in whole or part upon consummation of the Merger.
(f) FAS Founder Authority(f) FAS Founder Authority. FAS
Founder has the full right, power and authority to execute and deliver this
Agreement and perform his obligations hereunder.
ARTICLE VI
COVENANTSARTICLE VI COVENANTS
6.01 COVENANTS OF EWMS. 6.01 Covenants of EWMS EWMS, as a material
inducement to FAS and MergerSub to enter into this Agreement and consummate the
transactions contemplated hereby, covenant and agree as follows:
(a) Conduct of Business. (a) Conduct of Business Except as
contemplated by this Agreement or as expressly agreed to in writing by FAS,
during the period from the date of this Agreement to the Effective Time, EWMS
and its Subsidiaries will each conduct its operations according to its ordinary
and usual course of business consistent with past practice, and will use all
commercially reasonable efforts to preserve intact its business organization, to
keep available the services of its officers and employees and to maintain
satisfactory relationships with registered representatives, clearing firms,
suppliers, customers and others having business relationships with it and will
take no action which would adversely affect its ability to consummate the Merger
or the other transactions contemplated hereby. Without limiting the generality
of the foregoing, and except as otherwise expressly contemplated by this
Agreement, prior to the Effective Time, neither EWMS nor any of its Subsidiaries
will, without the prior written consent of FAS which shall not be unreasonably
withheld:
(i) amend its certificate of incorporation (or other applicable charter
document) or By-laws;
(ii) authorize for issuance, issue, sell, deliver, grant any options for,
or otherwise agree or commit to issue, sell or deliver any shares of any class
of capital stock of EWMS or its Subsidiaries or any securities convertible into
or exchangeable or exercisable for shares of any class of capital stock of EWMS
or its Subsidiaries, other than pursuant to and in accordance with the terms of
EWMS Option Plans listed in Section 5.01(o);
(iii) split, combine or reclassify any shares of its capital stock,
declare, set aside or pay any dividend or other distribution (whether in cash,
stock or property or any combination thereof) in respect of its capital stock or
purchase, redeem or otherwise acquire any shares of its own capital stock or
that of any of its Subsidiaries;
(iv) except in the ordinary course of business and consistent with past
practice (A) create, incur, assume, maintain or permit to exist any long-term
debt or any short-term debt for borrowed money other than under existing lines
of credit; (B) assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, contingently or otherwise) for the obligations of
any other person except wholly owned Subsidiaries of EWMS; or (C) make any
loans, advances or capital contributions to, or investments in, any other
person;
(v) (A) increase in any manner the compensation of any of its directors,
officers or employees, except in the ordinary course of business and consistent
with past practice; (B) pay or agree to pay any pension, retirement allowance or
other employee benefit not required, or enter into or agree to enter into any
agreement or arrangement with any of its past or present employees relating to
any such pension, retirement allowance or other employee benefit, except as
required under currently existing agreements, plans or arrangements; (C) grant
any severance or termination pay to, or enter into any employment or severance
agreement with, any of its past or present employees; (D) except to the extent
permitted by the foregoing clause (A), enter into any contract, agreement or
understanding with any of its past or present directors or officers; (E) except
in the ordinary course of business and consistent with past practice or as may
be required to comply with applicable law, become obligated (other than pursuant
to any new or renewed collective bargaining agreement) under any new pension
plan, welfare plan, multi-employer plan, employee benefit plan, benefit
arrangement, or similar plan, arrangement or policy which was not in existence
on the date hereof, including any bonus, incentive, deferred compensation, stock
purchase, stock option, stock appreciation right, health or group insurance,
severance pay, retirement or other benefit plan, agreement or arrangement, or
employment or consulting agreement with or for the benefit of any person, or
amend any of such plans or any of such agreements in existence on the date
hereof; or (F) enter into any loan or loan guarantee, forgive any loan, extend
the repayment terms, or otherwise modify any loan or extend any credit to any
current or former officer, director, or employee.
(vi) except in the ordinary course of business and consistent with past
practice or as otherwise expressly contemplated hereby, sell, transfer, lease,
license, pledge, mortgage, or otherwise dispose of, or encumber, or agree to
sell, transfer, lease, license, pledge, mortgage or otherwise dispose of or
encumber, any material properties, real, personal or mixed;
(vii) except as otherwise expressly contemplated hereby, enter into any
other agreements, commitments or contracts, except agreements, commitments or
contracts for the purchase, sale or lease of goods or services in the ordinary
course of business and consistent with past practice and having a term of no
more than one year;
(viii) authorize, recommend, propose or announce an intention to authorize,
recommend or propose, or enter into any agreement in principle or an agreement
with respect to, any plan of liquidation or dissolution, any acquisition of a
material amount of assets or securities, any disposition of a material amount of
assets or securities or any material change in its capitalization, or any entry
into a material contract or any amendment or modification of any material
contract or any release or relinquishment of any material contract rights not in
the ordinary course of business and consistent with past practice except as
expressly contemplated by this Agreement;
(ix) except as previously approved by the Board of Directors of EWMS prior
to the date hereof and as identified to FAS prior to the date hereof, authorize
or commit to make capital expenditures in excess of $50,000;
(x) permit any insurance policy naming it as a beneficiary or a loss payee
to be canceled, terminated or materially altered, except in the ordinary course
of business and consistent with past practice and following written notice to
FAS;
(xi) maintain its books and records in a manner not in the ordinary course
of business or inconsistent with past practice;
(xii) except in the ordinary course of business, enter into any hedging,
option, derivative or other similar transaction;
(xiii) change any assumption underlying, or method of calculating, any bad
debt, contingency, provision or other reserve;
(xiv) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, contingent or otherwise), other than the payment, discharge
or satisfaction of liabilities (including accounts payable) in the ordinary
course of business and consistent with past practice, or collect, or accelerate
the collection of, any amounts owed (including accounts receivable) other than
the collection in the ordinary course of business; or
(xv) agree to do any of the foregoing.
(b) No Solicitation. (b) No Solicitation (i) EWMS agrees that
subsequent to the execution date hereof and subject to subsection (ii) below, it
shall not, and shall not authorize or permit any of its Subsidiaries or any of
its or its Subsidiaries' directors, officers, employees, agents or
representatives to, directly or indirectly, solicit, initiate, facilitate or
encourage (including by way of furnishing or disclosing information) any merger,
consolidation, other business combination involving EWMS or its Subsidiaries,
acquisition of all or any substantial portion of the assets or capital stock of
EWMS and its Subsidiaries taken as a whole, or inquiries or proposals concerning
or which may reasonably be expected to lead to, any of the foregoing (an "EWMS
Acquisition TransactionEWMS Acquisition Transaction") or negotiate, explore or
otherwise communicate in any way with any third party (other than FAS or its
affiliates) with respect to any EWMS Acquisition Transaction or enter into any
agreement, arrangement or understanding requiring it to abandon, terminate or
fail to consummate the Merger or any other transactions contemplated by this
Agreement. EWMS shall be obligated to immediately advise FAS of any inquiries or
proposals relating to an EWMS Acquisition Transaction.
(ii) Notwithstanding the foregoing, in the event that there is an
unsolicited written proposal for a EWMS Acquisition Transaction from a bona fide
financially capable third party, EWMS may furnish non-public information to, and
negotiate with, such third party only if (A) EWMS shall have provided two
business days' written notice to FAS of such proposal or (B) EWMS's Board of
Directors, after having received advice from its investment banker or bankers
and outside counsel to EWMS, shall have determined that failure to take the
proposed action, furnish such information or to commence negotiations regarding
a EWMS Acquisition Transaction would be inconsistent with such Board of
Directors' fiduciary duties.
(c) EWMS and Subsidiary Actions. (c) EWMS and Subsidiary Actions
EWMS shall not take or omit to take, and shall not cause or permit any of its
Subsidiaries to take or omit to take, any action within its reasonable control
which would (i) cause a breach of any representation or warranty of EWMS
contained in this Agreement such that the Closing conditions set forth in
Section 7.02(a) would not be satisfied or (ii) prevent fulfillment of the
conditions in Article VII.
6.02 COVENANTS OF STOCKHOLDER. 6.02 Covenants of Stockholder
Stockholder, as a material inducement to FAS and MergerSub to enter into this
Agreement and consummate the transactions contemplated hereby, covenants and
agree as follows:
(a) No Solicitation. (a) No Solicitation (i) Stockholder agrees
that subsequent to the execution date hereof and subject to subsection (ii)
below, he shall not, directly or indirectly, solicit, initiate, facilitate or
encourage (including by way of furnishing or disclosing information) any merger,
consolidation, other business combination involving EWMS or its Subsidiaries,
acquisition of all or any substantial portion of the assets or capital stock of
EWMS and its Subsidiaries taken as a whole, or inquiries or proposals concerning
or which may reasonably be expected to lead to, any of the foregoing (an "EWMS
Acquisition TransactionEWMS Acquisition Transaction") or negotiate, explore or
otherwise communicate in any way with any third party (other than FAS or its
affiliates) with respect to any EWMS Acquisition Transaction or enter into any
agreement, arrangement or understanding requiring it to abandon, terminate or
fail to consummate the Merger or any other transactions contemplated by this
Agreement. EWMS shall be obligated to immediately advise FAS of any inquiries or
proposals relating to an EWMS Acquisition Transaction.
(ii) Notwithstanding the foregoing, in the event that there is an
unsolicited written proposal for a EWMS Acquisition Transaction from a bona fide
financially capable third party, EWMS may furnish non-public information to, and
negotiate with, such third party only if (A) EWMS shall have provided two
business days' written notice to FAS of such proposal or (B) EWMS's Board of
Directors, after having received advice from its investment banker or bankers
and outside counsel to EWMS, shall have determined that failure to take the
proposed action, furnish such information or to commence negotiations regarding
a EWMS Acquisition Transaction would be inconsistent with such Board of
Directors' fiduciary duties.
(b) Agreement to Vote(b) Agreement to Vote3. Stockholder, as the
owner of a majority of the shares of EWMS Common Stock, agrees to vote his
shares of EWMS Common Stock in favor of approving this Agreement and the
transactions contemplated hereby and, except as may be required by subsection
(a) of this Section 6.02, not to approve or support any competing transaction,
6.03 COVENANTS OF FAS AND MERGERSUB. 6.03 Covenants of FAS and
MergerSub FAS and MergerSub, as a material inducement to EWMS and Stockholder to
enter into this Agreement and consummate the transactions contemplated hereby,
covenant and agree as follows:
(a) Conduct of Business. (a) Conduct of Business Except as
contemplated by this Agreement or as expressly agreed to in writing by EWMS,
during the period from the date of this Agreement to the Effective Time, FAS
will and will cause its Subsidiaries each to conduct its operations according to
its ordinary and usual course of business consistent with past practice, and
will use all commercially reasonable efforts to preserve intact its initial
capital, to keep available the services of its officers and employees and to
maintain satisfactory relationships with existing and prospective suppliers,
customers, registered representatives, clearing firms and others having existing
or prospective business relationships with FAS, and will take no action which
would adversely affect its ability to consummate the Merger or the other
transactions contemplated hereby. Without limiting the generality of the
foregoing, and except as otherwise expressly contemplated by this Agreement,
prior to the Effective Time, neither FAS nor any of its Subsidiaries will,
without the prior written consent of EWMS which shall not be unreasonably
withheld:
(i) amend its certificate of incorporation (or other applicable charter
document) or By-laws;
(ii) authorize for issuance, issue, sell, deliver, grant any options for,
or otherwise agree or commit to issue, sell or deliver any shares of any class
of capital stock of FAS or its Subsidiaries or any securities convertible into
or exchangeable or exercisable for shares of any class of capital stock of FAS
except as set forth in Schedule 15;
(iii) split, combine or reclassify any shares of its capital stock,
declare, set aside or pay any dividend or other distribution (whether in cash,
stock or property or any combination thereof) in respect of its capital stock or
purchase, redeem or otherwise acquire any shares of its own capital stock or
that of any of its Subsidiaries, except for intercompany transactions in the
ordinary course of business consistent with past practice and as may be
necessary to facilitate the Merger;
(iv) except in the ordinary course of business and consistent with past
practice (A) create, incur, assume, maintain or permit to exist any long-term
debt or any short-term debt for borrowed money other than under existing lines
of credit; (B) assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, contingently or otherwise) for the obligations of
any other person except EWMS; or (C) make any loans, advances or capital
contributions to, or investments in, any other person;
(v) (A) increase in any manner the compensation of any of its directors,
officers or employees, except in the ordinary course of business and consistent
with past practice; (B) pay or agree to pay any pension, retirement allowance or
other employee benefit not required, or enter into or agree to enter into any
agreement or arrangement with any of its past or present employees relating to
any such pension, retirement allowance or other employee benefit, except as
required under currently existing agreements, plans or arrangements; (C) grant
any severance or termination pay to, or enter into any employment or severance
agreement with, any of its past or present employees; (D) except to the extent
permitted by the foregoing clause (A), enter into any contract, agreement or
understanding with any of its past or present directors or officers; (E) except
in the ordinary course of business and consistent with past practice or as may
be required to comply with applicable law, become obligated (other than pursuant
to any new or renewed collective bargaining agreement) under any new pension
plan, welfare plan, multi-employer plan, employee benefit plan, benefit
arrangement, or similar plan, arrangement or policy which was not in existence
on the date hereof, including any bonus, incentive, deferred compensation, stock
purchase, stock option, stock appreciation right, health or group insurance,
severance pay, retirement or other benefit plan, agreement or arrangement, or
employment or consulting agreement with or for the benefit of any person, or
amend any of such plans or any of such agreements in existence on the date
hereof; or (F) enter into any loan or loan guarantee, forgive any loan, extend
the repayment terms, or otherwise modify any loan or extend any credit to any
current or former officer, director, or employee.
(vi) except in the ordinary course of business and consistent with past
practice or as otherwise expressly contemplated hereby, sell, transfer, lease,
license, pledge, mortgage, or otherwise dispose of, or encumber, or agree to
sell, transfer, lease, license, pledge, mortgage or otherwise dispose of or
encumber, any material properties, real, personal or mixed;
(vii) except as otherwise expressly contemplated hereby, enter into any
other agreements, commitments or contracts, except agreements, commitments or
contracts for the purchase, sale or lease of goods or services in the ordinary
course of business and consistent with past practice and having a term of no
more than one year;
(viii) authorize, recommend, propose or announce an intention to authorize,
recommend or propose, or enter into any agreement in principle or an agreement
with respect to, any plan of liquidation or dissolution, any acquisition of a
material amount of assets or securities, any disposition of a material amount of
assets or securities or any material change in its capitalization, or any entry
into a material contract or any amendment or modification of any material
contract or any release or relinquishment of any material contract rights not in
the ordinary course of business and consistent with past practice except as
expressly contemplated by this Agreement;
(ix) except as previously approved by EWMS prior to the date hereof and as
listed in Section 5.01(i), authorize or commit to make capital expenditures in
excess of $50,000 for which FAS or MergerSub would be responsible subsequent to
the Merger;
(x) permit any insurance policy naming it or any Subsidiary as a
beneficiary or a loss payee to be canceled, terminated or materially altered,
except in the ordinary course of business and consistent with past practice and
following written notice to EWMS;
(xi) maintain its books and records or the books and records of the
Subsidiaries in a manner not in the ordinary course of business or inconsistent
with past practice;
(xii) except in the ordinary course of business, enter into any hedging,
option, derivative or other similar transaction;
(xiii) change any assumption underlying, or method of calculating, any bad
debt, contingency, provision or other reserve;
(xiv) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, contingent or otherwise), other than the payment, discharge
or satisfaction of liabilities (including accounts payable) in the ordinary
course of business and consistent with past practice, or collect, or accelerate
the collection of, any amounts owed (including accounts receivable) other than
the collection in the ordinary course of business; or
(xv) agree to do any of the foregoing.
(b) No Solicitation. (b) No Solicitation (i) FAS agrees that
subsequent to the execution date hereof and subject to subsection (ii) below, it
shall not, and shall not authorize or permit any of its Subsidiaries or any of
its or its Subsidiaries' directors, officers, employees, agents or
representatives to, directly or indirectly, solicit, initiate, facilitate or
encourage (including by way of furnishing or disclosing information) any merger,
consolidation, other business combination involving FAS or its Subsidiaries, an
acquisition primarily relating to all or a substantial portion of the assets or
of the capital stock of FAS or its Subsidiaries or inquiries or proposals
concerning or which may reasonably be expected to lead to, any of the foregoing
(an "FAS Acquisition TransactionFAS Acquisition Transaction") or negotiate,
explore or otherwise communicate in any way with any third party (other than
EWMS or its affiliates) with respect to any FAS Acquisition Transaction or enter
into any agreement, arrangement or understanding requiring it to abandon,
terminate or fail to consummate the Merger or any other transactions
contemplated by this Agreement. FAS shall be obligated to immediately advise
EWMS of any inquiries or proposals relating to a FAS Acquisition Transaction.
(ii) Notwithstanding the foregoing, in the event that there is an
unsolicited written proposal for any merger, consolidation or other business
combination primarily involving the securities brokerage business or inquiries
or proposals concerning which or may reasonably be expected to lead to, any of
the foregoing (a "Broker-Dealer TransactionBroker-Dealer Transaction") from a
bona fide financially capable third party or member of the National Association
of Securities Dealers, Inc., FAS may furnish non-public information to, and
negotiate with, such third party only if (A) FAS shall have provided two
business days' written notice to EWMS of such proposal and EWMS approves the
proposed Broker-Dealer Transaction, or (B) FAS's Board of Directors, after
having received advice from its investment banker or bankers and outside counsel
to FAS, shall have determined that failure to take the proposed action, furnish
such information or to commence negotiations would be inconsistent with such
Board of Directors' fiduciary duties.
(c) FAS and Subsidiary Actions. (c) FAS and Subsidiary Actions FAS
shall not take or omit to take, and shall not cause or permit any of its
Subsidiaries to take or omit to take, any action within its reasonable control
which would (i) cause a breach of any representation or warranty of FAS
contained in this Agreement such that the Closing conditions set forth in
Section 7.01(a) would not be satisfied or (ii) prevent fulfillment of the
conditions in Article VII.
(d) Agreement to Vote(d) Agreement to Vote. FAS, as the owner of all of
the shares of MergerSub Common Stock agrees to vote its shares of MergerSub
Common Stock in favor of approving this Agreement and the transactions
contemplated hereby and, except as may be required by subsection (b) of this
Section 6.03, not to approve or support any competing transaction,
6.04 COVENANTS OF FAS FOUNDER. 6.04 Covenants of FAS Founder FAS
Founder, as a material inducement to EWMS to enter into this Agreement and
consummate the transactions contemplated hereby, covenants and agree as follows:
(a) No Solicitation. (a) No Solicitation (i) FAS Founder agrees
that, prior to the Effective Time and subject to subsection (ii) below, he shall
not, directly or indirectly, solicit, initiate, facilitate or encourage
(including by way of furnishing or disclosing information) any merger,
consolidation, other business combination involving FAS or MergerSub,
acquisition of all or any substantial portion of the assets or capital stock of
FAS and MergerSub taken as a whole, or inquiries or proposals concerning or
which may reasonably be expected to lead to, any of the foregoing (an "FAS
Acquisition TransactionFAS Acquisition Transaction") or negotiate, explore or
otherwise communicate in any way with any third party (other than FAS or its
affiliates) with respect to any FAS Acquisition Transaction or enter into any
agreement, arrangement or understanding requiring it to abandon, terminate or
fail to consummate the Merger or any other transactions contemplated by this
Agreement. FAS shall be obligated to immediately advise FAS of any inquiries or
proposals relating to an FAS Acquisition Transaction.
(ii) Notwithstanding the foregoing, in the event that there is an
unsolicited written proposal for a FAS Acquisition Transaction from a bona fide
financially capable third party, FAS may furnish non-public information to, and
negotiate with, such third party only if (A) FAS shall have provided two
business days' written notice to FAS of such proposal or (B) FAS's Board of
Directors, after having received advice from its investment banker or bankers
and outside counsel to FAS, shall have determined that failure to take the
proposed action, furnish such information or to commence negotiations regarding
an FAS Acquisition Transaction would be inconsistent with such Board of
Directors' fiduciary duties.
(b) Agreement to Vote(b) Agreement to Vote3. FAS Founder, as the
owner of a majority of the shares of FAS Common Stock, agrees to vote his shares
of FAS Common Stock in favor of approving this Agreement and the transactions
contemplated hereby and, except as may be required by subsection (a) of this
Section 6.04, not to approve or support any competing transaction,
6.05 COVENANTS OF EWMS, STOCKHOLDER, FAS, MERGERSUB AND FAS FOUNDER.
6.05 Covenants of EWMS, Stockholder, FAS, MergerSub and FAS Founder EWMS,
Stockholder, FAS, MergerSub and FAS Founder, as a material inducement to enter
into this Agreement and consummate the transactions contemplated hereby,
covenant and agree, each with the other as follows:
(a) Access to Information. (a) Access to Information From the date
of this Agreement until the Effective Time, FAS will give EWMS and its
authorized representatives (including counsel, consultants, accountants,
auditors, and broker-dealer regulatory counsel and agents) reasonable access in
light of the terms of this Agreement during normal business hours to all
facilities, personnel and operations and to all books and records of FAS, will
permit EWMS to make such inspections as it may reasonably require (including
without limitation any agreements for the issuance of securities or agreements
with potential registered representatives deemed necessary by it) and will cause
its officers and counsel to furnish EWMS with such financial and operating data
and other information with respect to the business carried on and proposed to be
carried on by FAS as EWMS may from time to time reasonably request.
From the date of this Agreement until the Effective Time, EWMS will give
FAS and its authorized representatives (including counsel, consultants,
accountants, auditors, and broker-dealer regulatory counsel and agents)
reasonable access in light of the terms of this Agreement during normal business
hours to all facilities, personnel and operations and to all books and records
of EWMS and MergerSub, will permit FAS to make such inspections as it may
reasonably require (including without limitation agreements with registered
representatives, registered investment advisors, affinity groups and clearing
firms) and will cause its officers and counsel and those of its Subsidiaries to
furnish FAS with such financial and operating data and other information with
respect to the businesses and properties of EWMS and its Subsidiaries as FAS may
from time to time reasonably request.
(b) Registration Statement and Information Statement. (b)
Registration Statement and Information Statement FAS and EWMS shall file with
the SEC the Registration Statement in which the Prospectus/Information Statement
shall be included. EWMS and FAS shall use all commercially reasonable efforts
to have the Registration Statement declared effective by the SEC and the
Prospectus/Information Statement cleared by the staff of the SEC as promptly as
practicable. FAS shall also take any action required to be taken under
applicable state blue sky or securities laws in connection with shares of FAS
Common Stock to be issued to the holders of EWMS Common Stock. EWMS and FAS
shall promptly furnish to each other all information, and take such other
actions (including without limitation using all commercially reasonable efforts
to provide any required consents of their respective independent auditors and
investment banking advisors), as may reasonably be requested in connection with
any action by any of them in connection with the actions contemplated by this
Section 6.05.
(c) Commercially Reasonable Efforts; Other Efforts(c) Commercially
Reasonable Efforts; Other Efforts. Subject to the terms and conditions provided
in this Agreement, EWMS and FAS shall use all commercially reasonable efforts to
take, or cause to be taken, all other actions and do, or cause to be done, all
other things necessary, proper or appropriate under applicable laws and
regulations to consummate and make effective the transactions contemplated by
this Agreement, including, without limitation, (i) the filing of the appropriate
notification and request for approval of change of control with the NASD and
using all commercially reasonable efforts to respond as promptly as practicable
to all inquiries received from the NASD for additional information or
documentation and (ii) the obtaining of all necessary third party consents,
approvals or waivers which are required in order to consummate the Merger and
the other transactions contemplated hereby. To such party's knowledge Schedule
6 lists all such material consents, approvals or waivers that must be obtained
by FAS and EWMS, respectively. EWMS shall not take any action that would cause
FAS to fail to perform its obligations hereunder. FAS shall not take any action
that would cause EWMS to fail to perform its obligations hereunder.
FAS shall use all commercially reasonable efforts to cause to be delivered
to EWMS a comfort letter of its independent auditors, dated a date within five
days of the effective date of the Registration Statement, in form reasonably
satisfactory to EWMS and customary in scope and substance for such letters in
connection with similar registration statements.
EWMS shall use all commercially reasonable efforts to cause to be delivered
to FAS a comfort letter of its independent auditors, dated a date within five
days of the effective date of the Registration Statement, in form reasonably
satisfactory to FAS and customary in scope and substance for such letters in
connection with similar registration statements.
(d) Public Announcements(d) Public Announcements. Before issuing
any press release or otherwise making any public statement with respect to the
Merger, or any of the other transactions contemplated hereby, EWMS and FAS will
consult with, and obtain the consent of, each other as to its form and substance
and shall not issue any such press release or make any such public statement
prior to obtaining such consent, except as may be required by law or pursuant to
any order of any court or governmental agency, tribunal or regulatory authority.
(e) Notification of Certain Matters(e) Notification of Certain
Matters. Each of FAS and EWMS shall give prompt notice to the other party of
any notice of, or other communication relating to, a default or event which,
with notice or lapse of time or both, would become a default, received by FAS,
EWMS or any of their respective Subsidiaries subsequent to the date of this
Agreement and prior to the Effective Time, which could be reasonably expected to
have a material adverse effect upon FAS or a material adverse effect upon EWMS.
Each of FAS and EWMS shall give prompt notice to the other party of (a) any
notice or other communication from any third party alleging that the consent of
such third party is or may be required in connection with the Merger or any
other transactions contemplated by this Agreement, or (b) any notice or other
communication from any third party alleging and act or thing which could be
reasonably expected to have a material adverse effect upon FAS or a material
adverse effect upon EWMS.
(f) Indemnification(f) Indemnification. For a period of six years
FAS shall cause the Surviving Corporation to indemnify, defend and hold harmless
the present and former directors, officers and key employees of FAS and EWMS
against all losses, claims, damages, expenses or liabilities arising out of
actions or omissions or alleged actions or omissions occurring at or prior to
the Effective Time, to the same extent and on the same terms and conditions
(including with respect to advancement of expenses) permitted or required under
applicable law, FAS's Certificate of Incorporation and By-laws, and applicable
indemnification agreements listed in Section 5.03(q) between FAS and such
respective individuals, all as in effect at the date hereof.
(g) Directors' and Officers' Liability Insurance(g) Directors' and
Officers' Liability Insurance. The Surviving Corporation shall use its
commercially reasonable best efforts to purchase and maintained in effect
policies of directors' and officers' liability insurance with respect to claims
arising from facts or events which occur after the Effective Time.
(h) Expenses(g) Expenses. Except as set forth in Section 9.05 and
Section 2.02, EWMS, on the one hand, and FAS, on the other hand, shall bear
their respective expenses incurred in connection with the Merger, including,
without limitation, the preparation, execution and performance of this Agreement
and the transactions contemplated hereby, and all fees and expenses of
investment bankers, finders, brokers, agents, representatives, counsel and
accountants. Expenses incurred in printing, mailing and filing (including
without limitation, SEC filing fees, fees related to any state securities or
"blue sky" laws and stock exchange listing application fees), as to the
Prospectus/Information Statement and Registration Statement shall be paid by
FAS.
(i) Stock Exchange Listing(h) Stock Exchange Listing. FAS shall
use all commercially reasonable efforts to have FAS Common Stock to be issued in
connection with the Merger authorized for quotation on The Nasdaq Stock Market,
Inc. or listed on the American Stock Exchange subject to notice of issuance.
(j) Actions Regarding Office and Car Lease Obligations(i) Actions
Regarding Office and Car Lease Obligations. Prior to the Effective Time, FAS
agrees to use its reasonable best efforts to cause the outstanding obligation
for the lease covering the office space at 1800 Second Street, Suite 780,
Sarasota, Florida, the car lease on the 1997 Infiniti Q45 and the car used by
FAS Founder to be restructured, modified or amended, as appropriate, to cause
such obligations to be assumed by MergerSub prior to the Effective Time, and to
obtain all necessary consents, approvals, waivers or other agreements by the
holders of such obligations as may be required in order to effect the assignment
to and assumption by MergerSub of, and release of Stockholder and FAS Founder,
as the case may be, from liability with respect to, such indebtedness. EWMS
agree to indemnify and protect from liability Stockholder and FAS Founder from
and against any claim, cost or expense with respect to the office lease and
Infiniti Q45 lease, as to Stockholder and car lease as to FAS Founder.
(k) Retroactive Insurance Coverage(k) Retroactive Insurance
Coverage. Immediately following the execution hereof, EWMS and FAS will use
their joint best efforts to expeditiously obtain a commitment for retroactive
insurance coverage, which shall be reasonably acceptable to FAS, with respect to
both known liabilities and unreported losses which are related to the securities
business of EWMS which may have occurred or may occur at any time prior to the
Effective Time.
(l) Failure to Take Action(l) Failure to Take Action. Neither FAS
nor EWMS or their respective Subsidiaries will take any action, or fail to take
any action, if such action (or failure to act) would reasonably be expected to
cause the Merger to fail to qualify as a reorganization within the meaning of
Section 368(a) of the Code.
(m) Exhibits, Closing Statements and Schedules. (m) Exhibits,
Closing Statements and SchedulesFAS and EWMS agree that as promptly as possible
upon the execution of this Agreement they will negotiate in good faith, finalize
and attach all necessary exhibits to this Agreement.
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE PARTIESARTICLE VII CONDITIONS
PRECEDENT TO OBLIGATIONS OF THE PARTIES
7.01 CONDITIONS PRECEDENT TO OBLIGATIONS OF EWMS AND STOCKHOLDER7.01
Conditions Precedent to Obligations of EWMS and Stockholder. All obligations of
EWMS and Stockholder under this Agreement are subject to the fulfillment, prior
to or on the Effective Time, of each of the following conditions:
(a) Accuracy of Representations and Warranties(a) Accuracy of
Representations and Warranties. The representations and warranties by or on
behalf of FAS, MergerSub and FAS Founder contained in this Agreement or in any
certificate or document delivered to EWMS or Stockholder pursuant to the
provisions hereof shall be true in all material respects at and as of the
Effective Time as though such representations and warranties were made at and as
of such time.
(b) Compliance with Covenants(b) Compliance with Covenants.
FAS and FAS Founder shall have performed and complied with all covenants,
agreements, and conditions required by this Agreement to be performed or
complied with by it prior to or at the Effective Time.
(c) Form of New Certificates(c) Form of New Certificates. The
New Certificates delivered to Stockholder and the other shareholders of EWMS and
their respective counsel shall conform in all material respects to the form of
such New Certificates attached as Exhibit "B".
(d) Audited Financial Statements(d) Audited Financial
Statements. FAS shall have delivered to EWMS audited financial statements of
FAS showing consolidated stockholders' equity of not less than $5 million
including not less than $500,000 cash. It is the intention of post - Merger
management to allocate $1 million from corporate capital to the Affinity Group
Marketing Division and $500,000 to registered representative development.
(e) Approval by Counsel(e) Approval by Counsel. FAS and
MergerSub shall have delivered all of the exhibits and schedules required herein
to EWMS or Stockholder, as the case may be, and such exhibits and schedules
shall have been reasonably acceptable to EWMS, Stockholder, the other
shareholders of EWMS and their respective counsel.
(f) Opinion of Counsel(f) Opinion of Counsel. FAS and
MergerSub shall have delivered to EWMS an opinion of FAS's counsel in the form
of Exhibit "E", dated the Effective Time, to the effect that:
(i) FAS is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, and MergerSub is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware;
(ii) FAS and MergerSub have the corporate power to carry on their
respective businesses as now being conducted;
(iii) This Agreement has been duly authorized, executed and delivered
by FAS and MergerSub and is a valid and binding obligation of FAS and MergerSub,
enforceable in accordance with its terms, except to the extent that enforcement
is limited by applicable bankruptcy, reorganization, insolvency, moratorium, or
similar laws affecting creditors' rights and remedies generally or by general
equity principles (and excepting specific performance as a remedy);
(iv) FAS and MergerSub have taken all corporate action necessary for
their due performance under this Agreement;
(v) The execution and delivery by FAS and MergerSub of this Agreement
and the consummation of the transactions contemplated hereby will not conflict
with or result in a breach of any provisions of, FAS's Restated Certificate of
Incorporation or By-Laws, MergerSub's Certificate of Incorporation or By-Laws
or, to the best of such counsel's knowledge after inquiry and based upon
information provided by FAS and MergerSub, constitute a default under or give
rise to a right of termination, acceleration, or cancellation under any
agreement under which FAS or MergerSub or any of their properties are bound or
violate any court order, writ or decree of injunction applicable to FAS or
MergerSub;
(vi) Such counsel does not know, after inquiry, of any actions, suits
or other legal proceedings or investigations pending or threatened against or
relating to, materially adversely affecting FAS or MergerSub;
(vii) The authorized and, to such counsel's best knowledge after
inquiry, outstanding capitalization of FAS is as set forth in Section 5.03(j),
all of the outstanding shares of FAS's capital stock are validly issued,
fully-paid and non-assessable, without preemptive rights, and to the best of
counsel's knowledge after inquiry, there are no outstanding subscriptions,
options, rights, warrants or other transfer agreements (whether oral or
written), other than as set forth in Section 5.03(j) of this Agreement.
(g) Officer's Certificate(g) Officer's Certificate. There shall
have been delivered to EWMS an officer's certificate, signed by Jack A.
Alexander, President of FAS and MergerSub, to the effect that all of the
representations and warranties of FAS and MergerSub set forth herein are true
and complete in all material respects as of the Effective Time, and that FAS and
MergerSub have complied in all material respects with their respective covenants
and agreements set forth herein required to be complied with by the Closing Time
substantially in the form of Exhibit "I-1" hereto.
(h) Closing Financial Statements(h) Closing Financial Statements.
There shall have been delivered to EWMS unaudited financial statements (the
"Closing Statements"Closing Statements) dated no earlier than five days prior to
the Effective Time. The Closing Statements shall fairly and accurately reflect
the consolidated financial condition of FAS and MergerSub as of the dates
thereof and the results of operations for the period reflected therein and shall
reflect no material adverse change in the financial condition or results of
operations from the Statements. The Closing Statements shall be prepared in
accordance with generally accepting accounting principles, consistently applied,
except as otherwise stated therein.
(i) Lock-up Agreements.(i) Lock-up Agreements. EWMS shall
have received Lock-up Agreements from the record owners of all the outstanding
shares of capital stock, warrants or options described in Schedule 17 or rights
to acquire capital stock or other securities described in Schedule 15
substantially in the form of Exhibit "G - 1."
(j) Additional Registered Representatives.(j) Additional Registered
Representatives
(i) EWMS shall have received prior to the Effective Time, executed
documents customarily used by EWMS in its Independent Contracting package with
not less than 25 registered representatives referred by FAS Founder, Leland
Dykes or other associates of FAS Founder and who are reasonably acceptable to
EWMS.
(ii) The persons executing the Independent Contracting package described
in subparagraph (i) of this subsection (j) of this Section 7.01 shall each be
covered by an override agreement substantially in the form of Exhibit H-1 which
provides 10% of gross commissions be retained by EWMS prior to the Closing and a
negotiated amount thereafter.
7.02 CONDITIONS PRECEDENT TO OBLIGATIONS OF FAS AND MERGERSUB7.02
Conditions Precedent to Obligations of FAS and MergerSub. All obligations of
FAS and MergerSub under this Agreement are subject to the fulfillment, prior to
or on the Effective Time, of each of the following conditions:
(a) Accuracy of Representations and Warranties(a) Accuracy of
Representations and Warranties. The representations and warranties by EWMS and
Stockholder contained in this Agreement or in any certificate or document
delivered to FAS or MergerSub pursuant to the provisions hereof shall be true in
all material respects at and as of the Effective Time as though such
representations and warranties were made at and as of such time.
(b) Compliance with Covenants(b) Compliance with Covenants.
EWMS and Stockholder shall have performed and complied with all covenants,
agreements, and conditions required by this Agreement to be performed or
complied with by each of them prior to or at the Effective Time;
(c) Lock Up Agreements(c) Lock Up Agreements. The Stockholder
and other stockholders of EWMS named in the respective agreements, shall have
delivered to FAS duly executed Lock Up Agreements in the form attached as
Exhibit "G - 1" and Exhibit "G - 2" respectively.
(d) Approval by Counsel(d) Approval by Counsel. EWMS shall
have delivered all of the exhibits and schedules required herein to FAS or
MergerSub, as the case may be, and such exhibits and schedules shall have been
reasonably acceptable to FAS, MergerSub and their counsel.
(e) Opinion of Counsel(e) Opinion of Counsel. EWMS shall have
delivered to MergerSub an opinion of EWMS's counsel, in the form of Exhibit "F"
hereto, dated the Effective Time, to the effect that:
(i) EWMS is a corporation duly organized, validly existing and in good
standing under the laws of the State of Florida and is duly qualified to do
business in any jurisdiction where so required;
(ii) EWMS has the corporate power to carry on its business as now
being conducted;
(iii) This Agreement has been duly authorized, executed and delivered
by EWMS and Stockholder and is a valid and binding obligation of EWMS and
Stockholder enforceable in accordance with its terms, except to the extent that
enforcement is limited by applicable bankruptcy, reorganization, moratorium,
insolvency or similar laws affecting creditors' rights and remedies generally or
by general equity principles (and excluding specific performance as a remedy),
including limitations on enforcement by reason of fraudulent conveyance and
corporate and other laws restricting indemnification by corporations,
shareholders of a corporation, or its affiliates;
(iv) Except as referred to herein, such counsel knows, after inquiry,
of no actions, suit or other legal proceedings or investigations pending or
threatened against or relating to or materially adversely affecting EWMS its
properties or business;
(v) The execution and delivery by EWMS of this Agreement and the
consummation of the transactions contemplated hereby will not conflict with or
result in a breach of any provisions of EWMS's Certificate of Incorporation or
By-Laws or, to the best of such counsel's knowledge, after inquiry, and based
upon information provided by EWMS and its officers and directors, constitute a
default under or give rise to a right of termination, acceleration, or
cancellation under any agreement under which EWMS or any of is properties are
bound, or violate any court order, writ or decree of injunction applicable to
EWMS; and
(vi) The authorized capitalization of EWMS is as set forth in Section
5.01(o), all of the outstanding shares of capital stock of EWMS are validly
issued, fully-paid and non-assessable, without preemptive rights, and to the
best of counsel's knowledge, after inquiry, there are no outstanding
subscriptions, options, rights, warrants or other transfer agreements (whether
oral or written) obligating EWMS to issue or transfer from treasury any of its
securities except as set forth in Section 5.01(o) of this Agreement. When duly
transferred to FAS as provided herein, to the best of such counsel's knowledge
after inquiry, FAS will own all of the issued and outstanding common stock of
EWMS.
(f) Officers' Certificate(f) Officers' Certificate. There shall
have been delivered to FAS a certificate executed by Guy S. Della Penna, on
behalf of EWMS, to the effect that all of the representations and warranties of
EWMS set forth herein are true and complete in all material respects as of the
Effective Time, and that EWMS has complied in all material respects with their
respective covenants and agreements set forth therein required to be complied
with by the Closing Time substantially in the form of Exhibit "I-2" hereto.
(g) Closing Financial Statements(g) Closing Financial Statements.
There shall have been delivered to FAS and MergerSub unaudited financial
statements (the "Closing Financial Statements"Closing Financial Statements)
dated no earlier than five days prior to the Effective Time. The Closing
Financial Statements shall fairly and accurately reflect the consolidated
financial condition of EWMS as of the dates thereof and the results of
operations for the period reflected therein and shall reflect no material
adverse change in the financial condition or results of operations from the
Financial Statements. The Closing Statements shall be prepared in accordance
with generally accepting accounting principles, consistently applied, except as
otherwise stated therein.
7.03 CONDITIONS PRECEDENT TO OBLIGATIONS OF EWMS, STOCKHOLDER, FAS,
MERGERSUB AND FAS FOUNDER7.03 Conditions Precedent to Obligations of EWMS,
Stockholder, FAS, MergerSub and FAS Founder. The respective obligations of each
party to effect the Merger shall be subject to the fulfillment at or prior to
the Closing of each of the following conditions:
(a) Registration Statement(a) Registration Statement. The
Registration Statement shall have become effective in accordance with the
provisions of the Securities Act. No stop order suspending the effectiveness of
the Registration Statement shall have been issued by the SEC and remain in
effect. All necessary state securities or blue-sky authorizations for the
Merger shall have been received.
(b) EWMS Stockholder Approval.(b) EWMS Stockholder Approval The
approval of the Merger, including the execution and performance of this
Agreement and all of the transactions contemplated hereby, by a majority of the
outstanding shares of EWMS Common Stock shall have been obtained.
(c) Listing.(c) Listing FAS Common Stock issuable in the Merger
shall have been authorized for quotation on The Nasdaq Stock Market, Inc.,
SmallCap or listed on the American Stock Exchange subject to official notice of
issuance.
(d) Certain Proceedings.(d) Certain Proceedings No writ, order,
decree or injunction of a court of competent jurisdiction or governmental entity
shall have been entered against EWMS or FAS which, and no proceedings therefor
shall have been threatened or commenced by any governmental entity which seek
to, prohibit or restrict the consummation of the Merger or would otherwise
restrict FAS's or the Surviving Corporation's exercise of full rights to own and
operate the securities brokerage business of EWMS.
(e) Opinions(e) Opinions. FAS and EWMS shall have received the
opinions of Sonfield & Sonfield, reasonably acceptable to FAS and EWMS, to the
effect that:
(i) the Merger will qualify as a reorganization within the meaning of
Section 368(a) of the Code;
(ii) no gain or loss will be recognized by EWMS or FAS as a result of the
Merger; and
(iii) no gain or loss will be recognized by EWMS's stockholders upon the
receipt of FAS Common Stock solely in exchange for EWMS Common Stock in
connection with the Merger (except with respect to cash received in lieu of a
fractional interest in EWMS Common Stock).
(f) Stockholder Agreement(f) Stockholder Agreement. EWMS shall
have delivered to FAS and FAS shall have delivered to EWMS the shareholders
agreement between Jack A. Alexander and Guy S. Della Penna substantially in the
form of Exhibit "H-2" hereto.
7.04 POST MERGER INCENTIVE STOCK OPTIONS7.04 Post Merger Incentive
Stock Options. Immediately after the Closing, the Board of Directors shall
authorize the issuance of 250,000 Incentive Stock Options each to Guy S. Della
Penna and Jack A. Alexander respectively and 155,000 Incentive Stock Options to
Robert H. DeVore. The options shall vest and be exercisable immediately subject
to the Lock-up Agreement referred to in Section 7.01(i) and 7.02(c) at $0.60 per
share.
ARTICLE VIII
CLOSING ARTICLE VIII CLOSING
8.01 TIME AND PLACE8.01 Time and Place. Subject to the provisions
of Articles VII and IX, the closing of the Merger (the "Closing") shall take
place at the offices of Sonfield & Sonfield, Houston, Texas, or such other place
as the parties may agree upon, as soon as practicable but in no event later than
9:30 A.M., local time, on the second business day after the date on which each
of the conditions set forth in Article VII have been satisfied or waived by the
party or parties entitled to the benefit of such conditions; or at such other
place, at such other time, or on such other date as EWMS and FAS may mutually
agree. The date on which the Closing actually occurs is herein referred to as
the "Closing Date."
8.04 DOCUMENTS AT CLOSING8.04 Documents at Closing. At the
Closing, the following transactions shall occur, all of such transactions being
deemed to occur simultaneously:
(a) Documents by EWMS(a) Documents by EWMS. EWMS will deliver,
or cause to be delivered, to FAS the following:
(i) stock certificates for the shares of common stock of EWMS being
exchanged hereunder, duly endorsed or with stock powers attached in blank but
subject to a customary restrictive stock legend.
(ii) all corporate records of EWMS, including without limitation,
corporate minute books (which shall contain copies of the Certificate of
Incorporation and By-Laws, as amended to the Closing Time), stock books, stock
transfer books, corporate seals, and such other corporate books and records as
may reasonably be requested by FAS and its counsel;
(iii) a certificate of Guy S. Della Penna on behalf of EWMS to the
effect that all representations and warranties made by EWMS under this Agreement
are true and correct as of the Effective Time, as though originally given to FAS
and MergerSub on said date attaching thereto the following;
(A) Certified copy of resolutions of EWMS authorizing
this Agreement;
(B) Certificate of Incorporation of EWMS as amended to
the Closing Time;
(C) By-Laws of EWMS as amended to the Closing Time;
(D) a Certificate from the Secretary of State of Florida
dated at or about the date of Closing that EWMS is in good standing under the
laws of said state;
(iv) the opinions of EWMS's counsel set forth herein; and
(v) such other instruments, documents and certificates, if any, as
are required to be delivered pursuant to the provisions of this Agreement or
which may be reasonably requested in furtherance of the provisions of this
Agreement.
(b) Documents by FAS(b) Documents by FAS. FAS will deliver or
cause to be delivered to EWMS:
(i) the New Certificates, in the form of Exhibit "B" hereto,
representing the shares of FAS Common Stock which FAS has agreed to deliver
pursuant to Section 2.01(a);
(ii) a certificate of Jack A. Alexander, on behalf of FAS and
MergerSub, to the effect that all representations and warranties of FAS and
MergerSub made under this Agreement are reaffirmed at the Effective Time, as
though originally given to Stockholder and EWMS on said date attaching thereto
the following:
(A) Certified copy of resolutions of FAS and MergerSub
authorizing this Agreement;
(B) Certificate of Incorporation of FAS as amended to
the Closing Time;
(C) By-Laws of FAS as amended to the Closing Time;
(D) a Certificate from the Secretary of State of
Delaware dated at or about the date of Closing that FAS is in good standing
under the laws of said state;
(E) Certificate of Incorporation of MergerSub as amended
to the Closing Time; and
(F) By-Laws of MergerSub as amended to the Closing Time.
(iii) the opinions of FAS's and MergerSub's counsel set forth herein;
and
(iv) audited financial statements of FAS showing consolidated
stockholders' equity of not less than $5 million including not less than
$500,000 cash; and
(v) such other instruments and documents, if any, as are required to
be delivered pursuant to the provisions of this Agreement, or which may be
reasonably requested in furtherance of the provisions of this Agreement.
8.05 FILINGS AT THE CLOSING8.05 Filings at the Closing. Subject to
the provisions of Articles VII and IX hereof, FAS, and EWMS shall cause to be
executed at the Closing the Certificates of Merger and shall cause the
Certificates of Merger to be filed and recorded with the Secretary of State of
the State of Delaware as provided in Section 251 of the General Corporation Laws
of Delaware and the Secretary of State of the State of Florida as provided in
Section 607.1105 of the Florida Business Corporation Act, and shall take any and
all other lawful actions and do any and all other lawful things necessary to
cause the Merger to become effective.
ARTICLE IX
TERMINATION AND ABANDONMENT ARTICLE IX TERMINATION AND ABANDONMENT
9.01 TERMINATION. 9.01 Termination This Agreement may be
terminated and the Merger may be abandoned any time prior to the Effective Time,
whether before or after approval by the stockholders of FAS or EWMS:
(a) Mutual Consent(a) Mutual Consent. The Merger may be abandoned
any time prior to the Effective Time by mutual consent of the Boards of
Directors of EWMS and FAS;
(b) Failure to Consummate(b) Failure to Consummate. The Merger may
be abandoned any time prior to the Effective Time by either EWMS or FAS if,
without fault of such terminating party, the Merger shall not have been
consummated on or before June 30, 1998, which date may be extended by mutual
consent of the parties hereto; provided, that if the only conditions remaining
to be satisfied on June 30, 1998 are the conditions expressed in Section 7.03
and if any of such conditions shall not be waived by the party for whose benefit
the condition is expressed, then the date on which either EWMS or FAS may
terminate this Agreement for failure of the Merger to be consummated in
accordance with this Agreement shall be extended to and including December 31,
1998;
(c) Order of Judicial or Regulatory Authority(c) Order of Judicial
or Regulatory Authority. The Merger may be abandoned any time prior to the
Effective Time by either EWMS or FAS, if any court of competent jurisdiction in
the United States or other governmental body in the United States, other than at
the request of the parties, or any affiliate thereof, seeking to terminate this
Agreement pursuant to this clause (c), shall have issued an order (other than a
temporary restraining order), decree or ruling or taken any other action
restraining, enjoining or otherwise prohibiting the Merger, and such order,
decree, ruling or other action shall have become final and nonappealable; or
(d) Exercise of Dissenter's Rights(d) Exercise of Dissenter's
Rights. The Merger may be abandoned any time prior to the Effective Time by
either EWMS or FAS, if either of their respective Boards of Directors determines
that in light of the potential liability that might result from the exercise of
dissenters' rights under Section 607.1302 of the Florida Business Corporation
Act, the Merger would be impracticable, undesirable or not in the best interests
of the their respective shareholders.
9.02 TERMINATION BY EWMS. 9.02 Termination by EWMS This Agreement
may be terminated and the Merger may be abandoned by action of the Board of
Directors of EWMS, at any time prior to the Effective Time, before or after the
approval by the stockholders of EWMS, if (a) FAS shall have failed to comply in
any material respect with any of the covenants or agreements contained in
Articles V and VII of this Agreement to be complied with or performed by FAS at
or prior to such date of termination, (b) there exists a breach or breaches of
any representation or warranty of FAS contained in this Agreement or any of the
Closing conditions set forth in Section 7.01 are not satisfied; provided,
however, that if such breach or breaches are capable of being cured prior to the
Effective Time, such breaches shall not have been cured within 15 calendar days
of delivery to FAS of written notice of such breach or breaches, (c) FAS shall
have furnished or disclosed non-public information to, or commenced negotiations
with, a third party with respect to a FAS Acquisition Transaction or FAS
Business Combination Transaction (as hereinafter defined) or shall have resolved
to do either of the foregoing and publicly disclosed such resolution, (d) the
Board of Directors of FAS shall have withdrawn, changed, modified in any manner
or taken action inconsistent with its recommendation of this Agreement, the
Merger or the other transactions contemplated hereby or thereby or shall have
resolved to do any of the foregoing and publicly disclosed such resolution; or
(e) a definitive agreement with respect to a Broker-Dealer Transaction or EWMS
Business Combination Transaction (as hereinafter defined) shall have been
negotiated and EWMS's Board of Directors, after having received advice from its
investment banker or bankers and outside counsel to EWMS, shall have determined
in good faith that failure to terminate this Agreement would be inconsistent
with the Board's fiduciary duties; provided, however, that two business days'
prior written notice shall have been given to FAS (which notice shall include
the material terms and conditions, and financing arrangements of, and the
identity of the third party proposing, the Broker-Dealer Transaction or EWMS
Business Combination Transaction); (f) the Board of Directors of EWMS determines
that in light of the potential liability of Executive that might result from
EWMS's shareholder(s) exercising their dissenter's rights with respect to the
Merger, the Merger would be impractical, undesireable or not in the best
interest of EWMS shareholders.
9.03 TERMINATION BY FAS9.03 Termination by FAS. This Agreement may
be terminated and the Merger may be abandoned at any time prior to the Effective
Time, before or after the approval by the stockholders of FAS, by action of the
Board of the Directors of FAS, if (a) EWMS shall have failed to comply in any
material respect with any of the covenants or agreements contained in Articles V
and VII of this Agreement to be complied with or performed by EWMS at or prior
to such date of termination, (b) there exists a breach or breaches of any
representation or warranty of EWMS contained in this Agreement such that the
Closing conditions set forth in Section 7.02 would not be satisfied; provided,
however, that if such breach or breaches are capable of being cured prior to the
Effective Time, such breaches shall not have been cured within 15 calendar days
of delivery to EWMS of written notice of such breach or breaches, (c) EWMS shall
have furnished or disclosed non-public information to, or commenced negotiations
with, a third party with respect to a EWMS Acquisition Transaction or EWMS
Business Combination Transaction or shall have resolved to do either of the
foregoing and publicly disclosed such resolution, (d) the Board of Directors of
EWMS shall have withdrawn, changed, modified in any manner or taken action
inconsistent with its recommendation of this Agreement and the Merger or shall
have resolved to do any of the foregoing and publicly disclosed such resolution,
or (e) a definitive agreement with respect to a Broker-Dealer Transaction or a
FAS Business Combination Transaction (as hereinafter defined) shall have been
negotiated and FAS's Board of Directors, after having received advice from its
investment banker or bankers and outside counsel to FAS, shall have determined
in good faith that failure to terminate this Agreement would be inconsistent
with the Board's fiduciary duties; provided, however, that two business days'
prior written notice shall have been given to EWMS (which notice shall include
the material terms and conditions, and financing arrangements of, and the
identity of the third party proposing, the Broker-Dealer Transaction or FAS
Business Combination Transaction).
9.04 PROCEDURE FOR TERMINATION9.04 Procedure for Termination. In
the event of termination and abandonment of the Merger by EWMS or FAS pursuant
to this Article IX, written notice thereof shall forthwith be given to the
other.
9.05 EFFECT OF TERMINATION AND ABANDONMENT9.05 Effect of
Termination and Abandonment. In the event of termination of this Agreement and
abandonment of the Merger pursuant to this Article IX, no party hereto (or any
of its directors or officers) shall have any liability or further obligation to
any other party to this Agreement, except as provided in Section 6.05(g), and
except that nothing herein shall relieve any party from liability for any breach
of this Agreement.
ARTICLE X
DISPUTE RESOLUTION ARTICLE X DISPUTE RESOLUTION
10.1 AGREEMENT DISPUTES. 10.1 Agreement Disputes In the event of a
controversy, dispute or claim arising out of, in connection with, or in relation
to the interpretation, performance, nonperformance, validity or breach of this
Agreement or otherwise arising out of, or in any way related to this Agreement,
including, without limitation, any claim based on contract, tort, statute or
constitution (singly, an "Agreement Dispute" and collectively, "Agreement
Disputes"), the party asserting the Agreement Dispute shall give written notice
to the other party of the existence and nature of such Agreement Dispute.
Thereafter, the general counsels (or other designated representatives) of the
respective parties shall negotiate in good faith for a period no less than 60
days after the date of the notice in an attempt to settle such Agreement
Dispute. If after such 60 calendar day period such representatives are unable
to settle such Agreement Dispute, any party hereto may commence arbitration by
giving written notice to all other party that such Agreement Dispute has been
referred to the American Arbitration Association for arbitration in accordance
with the provisions of this Article.
10.2 ARBITRATION IN ACCORDANCE WITH AMERICAN ARBITRATION ASSOCIATION
RULES. 10.2 Arbitration in Accordance with American Arbitration Association
Rules All Agreement Disputes shall be settled by arbitration in New York, New
York, before a single arbitrator in accordance with the rules of the American
Arbitration Association (the "Rules"). The arbitrator shall be selected by the
mutual agreement of all parties, but if they do not so agree within twenty (20)
days after the date of the notice of arbitration referred to above, the
selection shall be made pursuant to the Rules from the panels of arbitrators
maintained by the American Arbitration Association. The arbitrator shall be an
individual with substantial professional experience with regard to resolving or
settling sophisticated commercial disputes.
10.3 FINAL AND BINDING AWARDS.10.3 Final and Binding Awards Any
award rendered by the arbitrator shall be conclusive and binding upon the
parties hereto; provided, however, that any such award shall be accompanied by a
written opinion of the arbitrator giving the reasons for the award. This
provision for arbitration shall be specifically enforceable by the parties and
the decision of the arbitrator in accordance therewith shall be final and
binding, and there shall be no right of appeal therefrom. The parties agree to
comply with any award made in any such arbitration proceedings that has become
final in accordance with the Rules, and agree to the entry of a judgment in any
jurisdiction upon any award rendered in such proceedings becoming final under
the Rules.
10.4 COSTS OF ARBITRATION. 10.4 Costs of Arbitration In the award
the arbitrator shall allocate, in his or her discretion, among the parties to
the arbitration all costs of the arbitration, including, without limitation, the
fees and expenses of the arbitrator and reasonable attorneys' fees, costs and
expert witness expenses of the parties. Absent such an allocation by the
arbitrator, each party shall pay its own expenses of arbitration, and the
expenses of the arbitrator shall be equally shared.
10.5 SETTLEMENT BY MUTUAL AGREEMENT. 10.5 Settlement by Mutual
Agreement Nothing contained in this Article shall prevent the parties from
settling any Agreement Dispute by mutual agreement at any time.
ARTICLE XI
OTHER MATTERSARTICLE XI OTHER MATTERS
11.01 THE CLOSING11.01 The Closing. The Closing (the
"ClosingClosing") shall take place upon such date (the "Effective Time") as the
parties hereto may mutually agree upon, but shall be no later than December 1,
1998. The Closing shall take place at such place as may be mutually agreed upon
by the parties.
11.02 SURVIVABILITY AND INVESTIGATIONS11.02 Survivability and
Investigations. The respective representations and warranties of EWMS and FAS
contained herein or in any certificates or other documents delivered prior to or
at the Closing shall not be deemed waived or otherwise affected by any
investigation made by any party hereto and shall not survive the Closing.
11.03 NATURE OF REPRESENTATIONS AND WARRANTIES11.03 Nature of
Representations and Warranties. All of the parties hereto are executing and
carrying out the provisions of this Agreement in reliance on the
representations, warranties, covenants and agreements contained in this
Agreement or at the Closing of the transactions herein provided for, and any
investigation which they might have made or any other representations,
warranties, agreements promises or information, written or oral, made by the
other party or any other person shall not be deemed a waiver of any breach of
any such representation, warranty, covenant or agreement.
11.05 FURTHER ASSURANCES11.05 Further Assurances. At any time, and
from time to time, after the Closing, each party will execute such additional
instruments and take such action as may be reasonably requested by the other
party to confirm or perfect title to any property transferred hereunder or
otherwise to carry out the intent and purposes of this Agreement.
11.06 WAIVER OF COMPLIANCE AND CONSENTS11.06 Waiver of Compliance
and Consents. Any failure of EWMS, on the one hand, or FAS, on the other hand,
to comply with any obligation, covenant, agreement or condition herein may be
waived by FAS or EWMS, respectively, only by a written instrument signed by the
party granting such waiver, but such waiver or failure to insist upon strict
compliance with such obligation, covenant, agreement or condition shall not
operate as a waiver of, or estoppel with respect to, any subsequent or other
failure. Whenever this Agreement requires or permits consent by or on behalf of
any party hereto, such consent shall be given in writing in a manner consistent
with the requirements for a waiver of compliance as set forth in this Section
11.06.
11.07 NOTICES11.07 Notices. All notices and other communications
hereunder shall be in writing and shall be deemed to have been given if
delivered in person or sent by prepaid first class registered or certified mail,
return receipt requested to the following addresses, or such other addresses as
are given to other parties in the manner set forth herein:
FAS and MergerSub: FAS Group, Inc.
14358 Golden Sunset Lane
Poway, California 92064
Attn: Jack A. Alexander, President
FAS Founder: Jack A. Alexander
14358 Golden Sunset Lane
Poway, California 92064
With a copy to: Sonfield & Sonfield
770 South Post Oak Lane
Houston, Texas 77056
Attn: Robert L. Sonfield, Jr., Esq.
EWMS: Executive Wealth Management Services, Inc.
SouthTrust Bank Plaza
1800 Second Street, Suite 780
Sarasota, Florida 34236
Attn: Guy S. Della Penna, President
Stockholder: Guy S. Della Penna
SouthTrust Bank Plaza
1800 Second Street, Suite 780
Sarasota, Florida 34236
With a copy to: Michael Hric, P.A.
2801 Fruitville Road, Suite 100
Sarasota, Florida 34237
Attn: Michael Hric, Esq.
11.08 INTERPRETATION11.08 Interpretation. The article and section
headings contained in this Agreement are solely for the purpose of reference,
are not part of the agreement of the parties and shall not in any way affect the
meaning or interpretation of this Agreement. As used in this Agreement, (i) the
term "personPerson" shall mean and include an individual, a partnership, a joint
venture, a corporation, a trust, an association, a company, an unincorporated
organization, a government or any department, political subdivision or agency
thereof; and (ii) the term "SubsidiarySubsidiary" of any specified corporation
shall mean any corporation of which a majority of the outstanding securities
having ordinary voting power to elect a majority of the board of directors is
directly or indirectly beneficially owned by such specified corporation or any
other person of which a majority of the equity interests therein is, directly or
indirectly, owned by such specified corporation.
11.09 COUNTERPARTS11.09 Counterparts. This Agreement may be
executed simultaneously in two or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument.
11.10 GOVERNING LAW11.10 Governing Law. This Agreement shall be
governed by the laws of the State of Delaware.
11.11 BINDING EFFECT11.11 Binding Effect. This Agreement shall be
binding upon the parties hereto and inure to the benefit of the parties, their
respective heirs, administrators, executors, successors and assigns.
11.12 ENTIRE AGREEMENT11.12 Entire Agreement. This Agreement is
the entire agreement of the parties covering everything agreed upon or
understood in the transaction. There are no oral promises, conditions,
representations, understandings, interpretations or terms of any kind as
conditions or inducements to the execution hereof.
11.13 TIME11.13 Time. Time is of the essence.
11.14 SEVERABILITY11.14 Severability. If any part of this
Agreement is determined by a court of competent jurisdiction to be
unenforceable, the balance of the Agreement shall remain in full force and
effect.
11.15 DEFAULT COSTS11.15 Default Costs. In the event any party
hereto has to resort to legal action to enforce any of the terms hereof, such
party shall be entitled to collect attorneys' fees and other costs from the
party in default.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement the day and
year first above written.
Attest: FAS Group, Inc.
By:/s/Jack A. Alexander By:/s/Jack A. Alexander
---------------------- ----------------------
Jack A. Alexander, Secretary Jack A. Alexander, President
Attest: FAS Wealth Management Services, Inc.
By:/s/Jack A. Alexander By:/s/Jack A. Alexander
---------------------- ----------------------
Jack A. Alexander, Secretary Jack A. Alexander, President
Attest: Executive Wealth Management Services, Inc.
By:/s/Bonnis S. Gilmore By:/s/Guy S. Della Penna
---------------------- ------------------------
Bonnie S. Gilmore, Secretary Guy S. Della Penna, President
STOCKHOLDER FAS FOUNDER
/s/Guy S. Della Penna /s/Jack A. Alexander
- ------------------------ ----------------------
Guy S. Della Penna Jack A. Alexander
<PAGE>
<PAGE>
Exhibit B - Page 1
EXHIBIT B
__________________________________
ASSET PURCHASE AGREEMENT
by and among
FAS GROUP, INC.,
A Delaware corporation
and
FAS WEALTH MANAGEMENT SERVICES, INC.
A Delaware corporation
as Purchaser
MIDAS INVESTMENT GROUP, INC.
D/B/A BILTMORE SECURITIES
A Florida corporation
as Seller
__________________________________
August 14, 1998
<PAGE>
Exhibit B - Page 2
Exhibit B - Page 3
TABLE OF CONTENTS
PAGE
1. TERMS OF TRANSFER 2
(a) Properties and Assets 2
(b) Assumption of Liabilities 3
(c) Alternative to Physical Delivery 3
(d) Third Party Consents 3
2. REPRESENTATIONS AND WARRANTIES OF SELLER 3
(a) Properties and Assets 4
(b) Due Authorization, Etc 4
(c) Disclosure of Material Facts 4
(d) Title to Assets 4
(e) Compliance; Governmental Authorization 4
(f) Brokerage Fees 4
3. REPRESENTATIONS AND WARRANTIES OF FAS WEALTH AND FAS GROUP 4
(a) FAS Note 4
(b) Due Authorization, Etc 4
(c) Litigation, Etc 4
(d) Due Organization, Etc 5
(e) Disclosure of Material Facts 5
(f) Compliance; Governmental Authorization 5
(g) Brokerage Fees 5
4. AFFIRMATIVE COVENANTS OF SELLER 5
5. AFFIRMATIVE COVENANTS OF FAS GROUP AND FAS WEALTH 5
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER 5
(a) Accuracy of Representations and Warranties 5
(b) Compliance with Covenants and Conditions 5
(c) Notes and Security Agreements 5
(d) Approval of the Transfer 6
(e) Opinion of FAS Group's Counsel 6
(f) Officer's Certificate of FAS Wealth and FAS Group 6
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF FAS WEALTH AND FAS GROUP 6
(a) Accuracy of Representations and Warranties 6
(b) Compliance with Covenants and Conditions 7
(c) Delivery of Non-Competition Agreement 7
(d) Delivery of Confidentially Agreement 7
(e) Delivery of Bills of Sale 7
(f) Opinion of Seller's Counsel 7
(g) Certificate of Officer of Seller 7
(h) Transfer of Registered Representatives 7
(i) Execution of Registered Representative Agreements 7
(j) Execution of Licensee Agreements 7
8. CLOSING 7
(a) Documents at Closing 7
(i) Deliveries by Seller 7
(ii) Deliveries by FAS 8
(b) Nature of Representations and Warranties 8
9. INDEMNIFICATION 8
(a) Indemnification by Seller 8
(b) Indemnification by FAS Group and FAS Wealth 9
(c) Computation of Losses 9
(d) Notice to Indemnifying Party 9
(e) Defense by Indemnifying Party 10
10. MISCELLANEOUS. 10
(a) Further Assurances 10
(b) Waiver 10
(c) Notices 10
(d) Headings 11
(e) Counterparts 11
(f) Governing Law 11
(g) Binding Effect 11
(h) Entire Purchase Agreement 11
(i) Time 11
(j) Severability 11
(k) Default Costs 11
(l) Construction 11
EXHIBITS
A. Assets sold to FAS Group, Inc. and Agreements and Contracts to be Assumed
B. Assets sold to Florida OSJ and Agreements and Contracts to be Assumed
C. Assets sold to New York OSJ and Agreements and Contracts to be Assumed
D. Form of FAS Note and Security Agreement
E. Form of Florida OSJ Note and Security Agreement
F. Form of New York OSJ Note and Security Agreement
G. Form of FAS Bill of Sale
H. Form of Florida OSJ Bill of Sale
I. Form of New York OSJ Bill of Sale
J. Form of Opinion of FAS Group and FAS Wealth's Counsel
K. Form of Opinion of Seller's Counsel
L. Form of Agreement not to Compete
M. Form of Confidentiality Agreement
<PAGE>
11
<PAGE>
Exhibit B - Page
Exhibit B - Page
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement ("Purchase Agreement") is made and entered
into as of the 14th day of August, 1998, by and among FAS Group, Inc., a
Delaware corporation (hereinafter referred to as "FAS Group"), FAS Wealth
Management Services, Inc., a Delaware corporation (hereinafter referred to as
"FAS Wealth"), Midas Investment Group, Inc. d/b/a Biltmore Securities, a Florida
corporation (hereinafter referred to as "Seller").
R E C I T A L S:
---------------
FAS intends to be a full service, national retail, independent contractor,
investment banking firm focused on retail brokerage, investment banking,
trading, affinity group marketing and asset management. For this purpose FAS
Group and its affiliates will provide certain services to Registered Securities
Principals and Registered Representatives which assist them in performing their
business; and will enter into license agreements with Registered Securities
Principals who desire to operate a general securities business and to engage
Registered Representatives to conduct their business.
The executive offices of FAS is 14358 Golden Sunset, Poway, California 92064;
the telephone number is 619-486-4955.
In order to accomplish its objective, FAS entered into a Merger Agreement
with Executive Wealth Management Services, Inc. ("Executive"), a Sarasota,
Florida based publicly held broker-dealer. Under the terms of the Merger
Agreement, Executive will become a wholly owned subsidiary of FAS with its name
changed to FAS Wealth Management Services, Inc.
Executive is located at 2323 Stickney Point Road, Sarasota, Florida 34231, and
its telephone number is 941-921-9700.
Jack A. Alexander, as a founder and on behalf of FAS, entered into an
Agreement and Plan of Merger dated May 7, 1998 (the "Merger Agreement") among
Executive and certain shareholders of Executive whereby a wholly owned
subsidiary of FAS, newly created under the General Corporation Laws of Delaware,
will merge with and into Executive with Executive surviving the merger (the
"Merger"). The Merger will result in:
Executive being governed by Delaware law;
Certain officers and directors of Executive becoming officers and directors
of FAS;
Executive's name being changed to FAS Wealth Management Services, Inc.; and
Executive becoming a wholly owned subsidiary of FAS.
FAS Group and FAS Wealth, as the post-merger name of Executive, are
sometimes collectively referred to as "FAS."
As a part of the purchase and sale contemplated by this Purchase Agreement
one or more Registered Securities Principals will establish an office in the
vicinity of Ft. Lauderdale, Florida for the purpose of operating a general
securities business and to engage Registered Representatives to conduct their
business out of such office. Such office will be operated as an Office of
Supervisory Jurisdiction (as that term is defined by the National Association of
Securities Dealers, Inc. ("NASD")). Such office in or around Ft. Lauderdale,
Florida is hereinafter referred to as the "Florida OSJ." In addition, as a part
of the Purchase Agreement one or more Registered Securities Principals will
establish an office in the vicinity of New York, New York for the purpose of
operating a general securities business and to engage Registered Representatives
to conduct their business out of such office. Such office will be operated as
an Office of Supervisory Jurisdiction. Such office in or around New York, New
York is hereinafter referred to as the "New York OSJ."
FAS desires to acquire from Seller for itself the Florida OSJ and the New
York OSJ the following described assets and Seller desires to effect such
transfer (the "Transfer").
furniture fixtures and equipment (FF&E") with an agreed value of $580,000;
$100,000 clearing deposit with J.B. Oxford; and
approximately 50 NASD registered representatives (the "Registered Reps").
In addition, FAS desires to assist Seller in the orderly liquidation of
Seller's inventory of marketable securities (the "Securities Inventory").
NOW, THEREFORE, for the mutual consideration set out herein, the parties
hereto agree as follows:
1. TERMS OF TRANSFER1. TERMS OF TRANSFER. On the basis of the
representations, warranties, covenants, and agreements contained in this
Purchase Agreement and subject to the terms and conditions of this Purchase
Agreement:
1(a) PROPERTIES AND ASSETS. (a) Properties and Assets Seller
shall sell, assign, transfer, and convey to FAS Group or FAS Wealth, as
appropriate, all properties and assets of Seller described in Exhibit A (the
"FAS Assets"). Seller shall assign, transfer and convey to the Florida OSJ all
properties and assets of Seller described in Exhibit B (the "Florida Assets").
Seller shall assign, transfer and convey to the New York OSJ all properties and
assets Seller described in Exhibit C (the "New York Assets"). In consideration
for such sale assignment, transfer and conveyance FAS, FAS Wealth, the Florida
OSJ or the New York OSJ, as appropriate, shall deliver to Seller the following:
(i) A Promissory Note and Security Agreement executed by FAS
Group substantially in the form of Exhibit D (the "FAS Note" and the "FAS
Security Agreement");
(ii) A Promissory Note and Security Agreement executed by the
Florida OSJ substantially in the form of Exhibit E (the "Florida OSJ Note" and
the "Florida OSJ Security Agreement"); and
(iii) A Promissory Note and Security Agreement executed by
the New York OSJ substantially in the form of Exhibit F (the "New York OSJ Note"
and the "New York OSJ Security Agreement").
(iv) FAS will assume at the Closing all obligations and
liabilities of Seller in connection with the agreements and the contracts to be
assumed described in Exhibit A, except:
(A) Any tax or other obligation or liability arising out of
or based upon the transactions contemplated by this Purchase Agreement or
incurred by Seller by reason of the execution of this Purchase Agreement; and
(B) Any obligation or liability under any contract,
agreement, instrument, lease, license, understanding, or arrangement which is
assigned by Seller to FAS if (I) failure to obtain a required consent to
assignment by Seller to FAS deprives FAS of the enjoyment of any of Seller's
rights thereunder, (II) that contract, agreement, instrument, lease, license,
understanding or arrangement is not assigned by Seller to FAS as a result of
Section 1(d) or otherwise, or (III) a party is in default thereunder.
(v) The Florida OSJ will assume at the Closing all
obligations and liabilities of Seller in connection with the agreements and the
contracts to be assumed described in Exhibit B, except:
(A) Any tax or other obligation or liability arising out of
or based upon the transactions contemplated by this Purchase Agreement or
incurred by Seller by reason of the execution of this Purchase Agreement; and
(B) Any obligation or liability under any contract,
agreement, instrument, lease, license, understanding, or arrangement which is
assigned by Seller to the Florida OSJ if (I) failure to obtain a required
consent to assignment by Seller to the Florida OSJ deprives the Florida OSJ of
the enjoyment of any of Seller's rights thereunder, (II) that contract,
agreement, instrument, lease, license, understanding or arrangement is not
assigned by Seller to the Florida OSJ as a result of Section 1(d) or otherwise,
or (III) a party is in default thereunder.
(vi) The New York OSJ will assume at the Closing all
obligations and liabilities of Seller in connection with the agreements and the
contracts to be assumed described in Exhibit C, except:
(A) Any tax or other obligation or liability arising out of
or based upon the transactions contemplated by this Purchase Agreement or
incurred by Seller by reason of the execution of this Purchase Agreement; and
(B) Any obligation or liability under any contract,
agreement, instrument, lease, license, understanding, or arrangement which is
assigned by Seller to The New York OSJ if (I) failure to obtain a required
consent to assignment by Seller to The New York OSJ deprives The New York OSJ of
the enjoyment of any of Seller's rights thereunder, (II) that contract,
agreement, instrument, lease, license, understanding or arrangement is not
assigned by Seller to The New York OSJ as a result of Section 1(d) or otherwise,
or (III) a party is in default thereunder.
1(b) ASSUMPTION OF LIABILITIES. (b) Assumption of Liabilities
Except as set forth in Section 1(a)(iv), FAS Wealth shall not assume or be
responsible for any obligation or liability of Seller of any nature, accrued or
contingent. Except as set forth in Section 1(a)(v), the Florida OSJ shall not
assume or be responsible for any obligation or liability of Seller of any
nature, accrued or contingent. Except as set forth in Section 1(a)(vi), the New
York OSJ shall not assume or be responsible for any obligation or liability of
Seller of any nature, accrued or contingent
1(c) ALTERNATIVE TO PHYSICAL DELIVERY. (c) Alternative to
Physical Delivery With respect to any properties or assets sold hereunder that
cannot be physically delivered because they are in the possession of third
parties, or otherwise, Seller shall give irrevocable instructions to the party
in possession thereof, if such be the case, with copies to FAS, that all right,
title, and interest therein have been vested in the party named above and that
the same are to be held for such party's exclusive use and benefit.
1(d) THIRD PARTY CONSENTS. (d) Third Party Consents To the extent
that the assignment by Seller of any contract, agreement, lease, license,
instrument, understanding, or arrangement to be assigned hereunder shall require
the consent of a party other than Seller which has not been obtained by the
Closing and if FAS shall nevertheless elect to consummate the transactions
contemplated by this Purchase Agreement, this Purchase Agreement shall not
constitute an agreement to assign the same if an attempted assignment without
such consent would constitute a breach thereof unless FAS before, at, or after
the Closing elects in a writing delivered to Seller, specifically identifying
such absent consent, to waive such consent.
2. REPRESENTATIONS AND WARRANTIES OF SELLER2. REPRESENTATIONS AND
WARRANTIES OF SELLER. Seller, as a material inducement to FAS Wealth and FAS
Group to enter into this Purchase Agreement and consummate the transactions
contemplated hereby, make the following representations and warranties to FAS
Wealth and FAS Group, which representations are true and correct at this date,
and will be true and correct on the Closing Date as though made on and as of
such date:
2(a) PROPERTIES AND ASSETS. (a) Properties and AssetsThe properties
and assets to be transferred by Seller at Closing will be free and clear of all
liens, mortgages, securities interests, pledges, charges and encumbrances
(except as are listed in Exhibit A, B or C).
2(b) DUE AUTHORIZATION, ETC. (b) Due Authorization, EtcThis
Purchase Agreement has been duly authorized, executed, and delivered by Seller,
and constitutes a legal, valid, and binding obligation of Seller, enforceable in
accordance with its terms; no consent of any federal, state, municipal or other
governmental authority is required by Seller for the execution, delivery or
performance of this Purchase Agreement by Seller; no consent of any party to any
contract or agreement to which Seller is a party or by which any of its property
or assets are subject is required for the execution, delivery or performance of
this Purchase Agreement by Seller.
2(c) DISCLOSURE OF MATERIAL FACTS. (c) Disclosure of Material Facts
Seller has, and at the Closing Date will have, disclosed to FAS Wealth and FAS
Group all events, conditions and facts materially affecting the business and
prospects of Seller; and Seller shall not and will not have, at the Closing
Date, withheld disclosure of any events, conditions, and facts which it may have
knowledge of, or have reasonable grounds to know may materially, adversely
affect the business and prospects of Seller.
2(d) TITLE TO ASSETS. (d) Title to Assets Seller has good and
marketable title to all of its assets agreed to be conveyed free of any liens
and encumbrances.
2(e) COMPLIANCE; GOVERNMENTAL AUTHORIZATION. (e) Compliance;
Governmental Authorization Seller has complied in all respects with all
Federal, state, local, or foreign laws, ordinances, regulations, and orders
applicable to the assets to be conveyed, including without limitation applicable
federal and state securities laws as of the Closing Date.
2(f) BROKERAGE FEES. (f) Brokerage Fees Seller has not incurred, nor
will Seller incur, any liability for brokerage or finder's fees or similar
charges in connection with this Purchase Agreement or any of the transactions
contemplated hereby.
3. REPRESENTATIONS AND WARRANTIES OF FAS WEALTH AND FAS GROUP3.
REPRESENTATIONS AND WARRANTIES OF FAS WEALTH AND FAS GROUP. FAS Wealth and FAS
Group, as a material inducement to Seller to enter into this Purchase Agreement
and consummate the transactions contemplated hereby, makes the following
representations and warranties to Seller, which representations are true and
correct at this date, and will be true and correct on the Closing Date as though
made on and as of such date:
3(a) FAS NOTE. (a) FAS Note The FAS Note to be delivered to Seller
at Closing will be duly authorized, executed, and delivered by FAS Group, and
constitute a legal, valid, and binding obligation of FAS Group, enforceable in
accordance with its terms
3(b) DUE AUTHORIZATION, ETC. (b) Due Authorization, Etc This
Purchase Agreement has been duly authorized, executed, and delivered by FAS
Wealth and FAS Group, and constitutes a legal, valid, and binding obligation of
FAS Wealth and FAS Group, enforceable in accordance with its terms; no consent
of any federal, state, municipal or other governmental authority is required by
FAS Wealth or FAS Group for the execution, delivery or performance of this
Purchase Agreement by FAS Wealth and FAS Group; no consent of any party to any
contract or agreement to which FAS Wealth or FAS Group is a party or by which
any of its property or assets are subject is required for the execution,
delivery or performance of this Purchase Agreement by FAS Wealth and FAS Group.
3(c) LITIGATION, ETC. (c) Litigation, Etc There are no actions,
suits, claims, investigations or legal or administrative or arbitration
proceedings pending or threatened against FAS Wealth, its assets or business,
whether at law or in equity, or before or by any Federal, state, municipal,
local, foreign or other governmental department, commission, board, bureau,
agency or instrumentality; nor does FAS Wealth know or have any reason to know
of a threat of such litigation or any basis for any such action, suit, claim,
investigation or proceeding.
3(d) DUE ORGANIZATION, ETC. (d) Due Organization, Etc FAS Wealth and
FAS Group are both corporations duly organized, validly existing and in good
standing under the laws of the State of Delaware, and has the corporate power to
own their respective properties and to carry on their respective business as now
being conducted and proposed to be conducted after the Closing Date. The
Articles of Incorporation and By-Laws of FAS Wealth and FAS Group as in effect
on the Closing Date, have been delivered to Seller and are made a part hereof.
3(e) DISCLOSURE OF MATERIAL FACTS. (e) Disclosure of Material Facts
FAS Wealth has, and at the Closing Date will have, disclosed to Seller all
events, conditions and facts materially affecting the business and prospects of
FAS Wealth; and FAS Wealth has not and will not have, at the Closing Date,
withheld disclosure of any events, conditions, and facts which it may have
knowledge of, or have reasonable grounds to know may materially, adversely
affect the business and prospects of FAS Wealth.
3(f) COMPLIANCE; GOVERNMENTAL AUTHORIZATION. (f) Compliance;
Governmental Authorization FAS Wealth has complied in all respects with all
Federal, state, local, or foreign laws, ordinances, regulations, and orders
applicable to its business, including without limitation applicable federal and
state securities laws prior to the Closing Date.
3(g) BROKERAGE FEES. (g) Brokerage Fees Neither FAS Wealth nor FAS
Group have incurred, or will either of them incur, any liability for brokerage
or finder's fees or similar charges in connection with this Agreement or any of
the transactions contemplated hereby.
4. AFFIRMATIVE COVENANTS OF SELLER4. AFFIRMATIVE COVENANTS OF SELLER.
Seller covenants to and with FAS Group and FAS Wealth that as a part of the
Transfer, and a condition of closing, Biltmore, as Placement Agent, will
privately offer and sell a $1,500,000 equity offering of FAS in the form of
750,000 units at an offering price of $2.00 per unit (the "Units"). Each Unit
will consist of one share of FAS Class A Common Stock, par value $.001 per share
("FAS Common Stock"), and one common stock purchase warrant each entitling the
holder to purchase one share of FAS Common Stock at a price of $5.00 per share
("FAS Warrants"). The FAS Warrants will be for a term of three years,
immediately exercisable, non callable, contain the customary anti-dilution
provisions and unlimited piggy-back registration rights. The registration
rights will contain the customary market stand off agreement and underwriter
lock up provisions. The offering proceeds will be delivered to FAS Group on the
Closing Date.
5. AFFIRMATIVE COVENANTS OF FAS GROUP AND FAS WEALTH5. AFFIRMATIVE
COVENANTS OF FAS GROUP AND FAS WEALTH. FAS and FAS Wealth covenant to and with
Seller to use its reasonable best commercial efforts to assist the NASD and any
other federal, state, local government, regulatory organization or self
regulatory organization having authority over the business of either Seller, FAS
Group or FAS Wealth to approve the Transfer prior to the Closing Date.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER6. CONDITIONS
PRECEDENT TO OBLIGATIONS OF SELLER. All obligations of Seller under this
Purchase Agreement are subject to the fulfillment, prior to or on the Closing
Date, of each of the following conditions:
6(a) ACCURACY OF REPRESENTATIONS AND WARRANTIES. (a) Accuracy of
Representations and Warranties The representations and warranties by or on
behalf of FAS Wealth and FAS Group contained in this Purchase Agreement or in
any certificate or document delivered to Seller pursuant to the provisions
hereof shall be true in all material respects at and as of the time of Closing
as though such representations and warranties were made at and as of such time.
6(b) COMPLIANCE WITH COVENANTS AND CONDITIONS. (b) Compliance
with Covenants and Conditions FAS Wealth and FAS Group shall have performed and
complied with all covenants, agreements, and conditions required by this
Purchase Agreement to be performed or complied with by them prior to or at the
Closing;
6(c) NOTES AND SECURITY AGREEMENTS. (c) Notes and Security Agreements
FAS Wealth shall have delivered to Seller the duly executed (i) FAS Note and FAS
Security Agreement in the form attached as Exhibit D, (ii) Florida OSJ Note and
Florida OSJ Security Agreement in the form attached as Exhibit E, and (iii) New
York OSJ Note and New York OSJ Security Agreement in the form attached as
Exhibit F.
6(d) APPROVAL OF THE TRANSFER(d) Approval of the Transfer. The NASD
and any other federal, state, local government, regulatory organization or self
regulatory organization having authority over the business of either Seller, FAS
Group or FAS Wealth shall have approved the Transfer.
6(e) OPINION OF FAS GROUP'S COUNSEL. (e) Opinion of FAS Group's
Counsel FAS Group shall have delivered to Seller an opinion of FAS Group's
counsel, in the form of Exhibit H, dated the Closing Date, to the effect that:
(i) FAS Group and FAS Wealth are corporations duly organized,
validly existing and in good standing under the laws of the State of Delaware;
(ii) FAS Wealth is a member in good standing of the NASD and has
the corporate power to carry on its business as now being conducted;
(iii) This Purchase Agreement has been duly authorized, executed
and delivered by FAS Wealth and FAS Group and is a valid and binding obligation
of FAS Wealth and FAS Group, enforceable in accordance with its terms, except to
the extent that enforcement is limited by applicable bankruptcy, reorganization,
insolvency, moratorium, or similar laws affecting creditors' rights and remedies
generally or by general equity principles (and excepting specific performance as
a remedy);
(iv) FAS Wealth and FAS Group have taken all corporate action
necessary for its due performance under this Purchase Agreement;
(v) The execution and delivery by FAS Wealth and FAS Group of
this Purchase Agreement and the consummation of the transactions contemplated
hereby will not conflict with or result in a breach of any provisions of, FAS
Wealth's or FAS Group's Articles of Incorporation or By-Laws or, to the best of
such counsel's knowledge after inquiry and based upon information provided by
FAS Wealth and FAS Group, constitute a default under or give rise to a right of
termination, acceleration, or cancellation under any agreement under which FAS
Wealth or FAS Group or any of their properties are bound or violate any court
order, writ or decree of injunction applicable to FAS Wealth or FAS Group;
(vi) Such counsel does not know, after inquiry, of any actions,
suits or other legal proceedings or investigations pending or threatened against
or relating to or materially adversely affecting FAS Wealth or FAS Group.
6(f) OFFICER'S CERTIFICATE OF FAS WEALTH AND FAS GROUP. (f)
Officer's Certificate of FAS Wealth and FAS Group There shall be delivered to
Seller an officer's certificate, signed by Jack A. Alexander, Chairman & CEO of
FAS Wealth and FAS Group, to the effect that to the best of his knowledge all of
the representations and warranties of FAS Wealth set forth herein are true and
complete in all material respects as of the Closing Date, and that FAS Wealth
and FAS Group have complied in all material respects with its covenants and
agreements set forth herein required to be complied with by the closing.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF FAS WEALTH AND FAS GROUP7.
CONDITIONS PRECEDENT TO OBLIGATIONS OF FAS WEALTH AND FAS GROUP. All
obligations of FAS Wealth and FAS Group under this Purchase Agreement are
subject to the fulfillment, prior to or on the Closing Date, of each of the
following conditions:
7(a) ACCURACY OF REPRESENTATIONS AND WARRANTIES. (a) Accuracy of
Representations and Warranties The representations and warranties by Seller
contained in this Purchase Agreement or in any certificate or document delivered
to FAS pursuant to the provisions hereof shall be true in all material respects
at and as of the time of Closing as though such representations and warranties
were made at and as of such time.
7(b) COMPLIANCE WITH COVENANTS AND CONDITIONS. (b) Compliance with
Covenants and Conditions2 Seller shall have performed and complied with all
covenants, agreements, and conditions required by this Purchase Agreement to be
performed or complied with by them prior to or at the Closing;
7(c) DELIVERY OF NON COMPETITION AGREEMENT. (c) Delivery of
Non-Competition Agreement Seller shall have delivered to FAS a duly executed
Agreement not to Compete in the form attached as Exhibit L.
7(d) DELIVERY OF CONFIDENTIALLY AGREEMENT. (d) Delivery of
Confidentially Agreement Seller shall have delivered to FAS a duly executed
Confidentially Agreement in the form attached as Exhibit M.
7(e) DELIVERY OF BILLS OF SALE. (e) Delivery of Bills of Sale Seller
shall have delivered the FAS Bill of Sale, Florida OSJ Bill of Sale and the New
York OSJ Bill of Sale substantially in the form of Exhibits G, H and I
respectively.
7(f) OPINION OF SELLER'S COUNSEL. (f) Opinion of Seller's Counsel
Seller shall have delivered to FAS Group an opinion of Seller's Counsel
substantially in the form of Exhibit K.
7(g) CERTIFICATE OF OFFICER OF SELLER. (g) Certificate of Officer of
Seller There shall be delivered to FAS Group a certificate executed by Elliot A.
Loewenstern, individually and on behalf of Seller and Richard Bronson to the
effect that all of the representations and warranties of the Seller set forth
herein are true and complete in all material respects as of the Closing Date,
and that Seller has complied in all material respects with its covenants and
agreements set forth therein required to be complied with it by the closing.
7(h) TRANSFER OF REGISTERED REPRESENTATIVES.(h) Transfer of
Registered Representatives With some exceptions, the persons who are registered
with the NASD as representatives of Seller immediately prior to the Closing Date
shall have been transferred to and become Registered Representatives of FAS
Wealth.
7(i) EXECUTION OF REGISTERED REPRESENTATIVE AGREEMENTS. (i)
Execution of Registered Representative Agreements Each Registered
Representative transferred from Seller to FAS Wealth shall have executed a
Registered Representative Agreement, as independent contractor, with FAS Wealth
substantially in the form provided by FAS Wealth.
7(j) EXECUTION OF LICENSEE AGREEMENTS. (j) Execution of Licensee
Agreements One or more of the Registered Principals representing the NY OSJ and
one or more Registered Principals representing the FL OSJ transferred from
Seller to FAS Wealth shall have executed a Licensee Agreement with respect to
the operation of the NY OSJ and FL OSJ respectively, with FAS Wealth
substantially in the form provided by FAS Wealth. The Licensee Agreement will
provide for a payout of gross commissions (as that term is customarily defined
in the Licensee Agreement) of 82% to the NY OSJ and FL OSJ respectively for the
first two years of the respective agreements and 85% thereafter.
8. CLOSING8. CLOSING. The Closing (the "Closing") shall take place
upon such date (the "Closing Date") as the parties hereto may mutually agree
upon, but shall be effective August 31, 1998. The Closing shall take place at
such place as may be mutually agreed upon by the parties.
8(a) DOCUMENTS AT CLOSING(a) Documents at Closing. At the Closing,
the following transactions shall occur, all of such transactions being deemed to
occur simultaneously:
(i) DELIVERIES BY SELLER. (i) Deliveries by Seller Seller will deliver,
or cause to be delivered, to FAS Group the following:
(A) a certificate from the Secretary of the State of Florida
dated at or about the date of the Closing to the effect that Seller is in good
standing under the laws of the said state;
(B) The documents agreed to be delivered by Seller described in
Sections 7(c), 7(d), 7(e) and 7(f).
(C) An assignment in form and substance reasonably acceptable to
counsel for FAS transferring the $100,000 owned by Seller on deposit with J.B.
Oxford & Co. to FAS Wealth.
(D) such other instruments, documents and certificates, if any,
as are required to be delivered pursuant to the provisions of this Purchase
Agreement or which may be reasonably requested in furtherance of the provisions
of this Purchase Agreement.
(ii) DELIVERIES BY FAS. (ii) Deliveries by FAS FAS Wealth or
FAS Group will deliver or cause to be delivered to Seller:
(A) a Certificate from the Secretary of State of Delaware dated at or about
the date of Closing that FAS Wealth and FAS Group are in good standing under the
laws of said state;
(B) the documents agreed to be delivered by FAS Group or FAS
Wealth described in Sections 6(c), 6(e) and 6(f).
(C) an agreement in form and substance reasonably acceptable
to counsel for Seller whereby FAS agrees to assist Seller in the orderly
liquidation of the Securities Inventory. Said agreement shall provide that
neither FAS Group nor FAS Wealth shall assume any risk for fluctuations in
market price of the Securities Inventory.
(D) such other instruments and documents, if any, as are required to be
delivered pursuant to the provisions of this Purchase Agreement, or which may be
reasonably requested in furtherance of the provisions of this Purchase
Agreement.
8(b) NATURE OF REPRESENTATIONS AND WARRANTIES(b) Nature of
Representations and Warranties. All of the parties hereto are executing and
carrying out the provisions of this Purchase Agreement in reliance on the
representations, warranties, covenants and agreements contained in this Purchase
Agreement or at the Closing of the transactions herein provided for, and any
investigation which they might have made or any other representations,
warranties, agreements promises or information, written or oral, made by the
other party or any other person shall not be deemed a waiver of any breach of
any such representation, warranty, covenant or agreement.
9. INDEMNIFICATION9. INDEMNIFICATION.
9(a) Indemnification by Seller(a) Indemnification by Seller. The Seller,
shall indemnify, defend and hold harmless (i) FAS Group and FAS Wealth, and (ii)
each of their respective shareholders, directors, officers, employees, agents,
attorneys and representatives, from and against any and all Losses which may be
incurred or suffered by any such party and which may arise out of or result
from:
(i) provided FAS's claim therefor is instituted by written notice
within two years from the Closing Date, any breach of any representation,
warranty, covenant or agreement of the Seller contained in this Purchase
Agreement or in any other documents executed or delivered in connection with
this Purchase Agreement, including, without limitation, any attempt (whether or
not successful) by any Person to cause or require FAS Group or FAS Wealth to
pay, perform or discharge any debt, obligation, deficiency, liability or
commitment the existence of which constitutes a breach of any such
representation, warranty, covenant or agreement;
(ii) any litigation, arbitration, governmental investigation,
suit, action or other proceeding and any liability, other than those
specifically assumed by FAS Group or FAS Wealth;
(iii) any obligation for taxes of the Seller, other than
those, if any, specifically assumed by Purchaser pursuant to Section 3.1;
(iv) any other debt, liability or obligation of the Seller, direct
or indirect, fixed, contingent or otherwise, now or as of the Effective Time
known or unknown, and whether or not then due or payable, which exists at or as
of the Effective Time or which arises after the Effective Time but which is
based upon or arises from any act, omission, transaction, circumstance, sale of
goods or services, state of facts or other condition which occurred or existed
on or before the Effective Time, except to the extent the same are expressly
assumed by FAS Group or FAS Wealth pursuant to Section 3.1; and
(v) any and all actions, suits, proceedings, claims, demands,
assessments, judgments, arbitration awards, costs and expenses, including,
without limitation, legal fees and expenses, incurred in enforcing this
indemnity.
9(b) INDEMNIFICATION BY FAS GROUP AND FAS WEALTH(b)
Indemnification by FAS Group and FAS Wealth. Provided the Seller's claim
therefor is instituted by written notice within two years from the Closing Date,
FAS Group and FAS Wealth ("FAS") shall indemnify, defend and hold harmless the
Seller from and against any Losses arising out of or due to (i) a breach of any
representation, warranty, covenant or agreement of FAS contained in this
Purchase Agreement or in any document executed in connection herewith; (ii) any
liability or obligation assumed by FAS pursuant to Section 1; and (iii) any
claim, suit, action or proceeding which pertains to the ownership, organization,
operation or conduct of the business by FAS after the Closing (other than a
claim, suit, action or proceeding the likelihood of which should have been
disclosed by the Seller pursuant to any provision of this Purchase Agreement) or
to the other affairs of FAS prior to or after the Closing.
9(c) COMPUTATION OF LOSSES(c) Computation of Losses. For
purposes of calculating any Losses suffered by an indemnified party pursuant to
Sections 9(a) or 9(b) hereof or under any other specific indemnification
covenant contained in this Purchase Agreement, the amount of the Losses suffered
by the indemnified party shall be the net amount of damage so suffered after
giving effect to any insurance proceeds recoverable with respect to such matter
and to any tax benefits attributable to such damage or to be derived therefrom
in the same year or in a subsequent taxable period, and each Loss shall bear
interest at the rate of ten percent (10%) per annum from the date incurred to
the date the indemnification payment with respect thereto is made.
9(d) NOTICE TO INDEMNIFYING PARTY. (d) Notice to Indemnifying
Party If any party (the "Indemnified Party") receives notice of any claim or
other commencement of any action or proceeding with respect to which any other
party (or parties) (the "Indemnifying Party") is obligated to provide
indemnification pursuant to Sections 9(a) or 9(b) or pursuant to any other
specific indemnification covenant contained in this Purchase Agreement, the
Indemnified Party shall promptly give FAS or the Seller (as appropriate),
written notice thereof which notice shall specify, if known, the amount or an
estimate of the amount of the liability arising therefrom. Such notice shall be
a condition precedent to any liability of the Indemnifying Party for
indemnification hereunder. The Indemnified Party shall not settle or compromise
any claim by a third party for which it is entitled to indemnification
hereunder, without the prior written consent of the Indemnifying Party (which
shall not be unreasonably withheld or delayed) unless suit shall have been
instituted against it and the Indemnifying Party shall not have taken control of
such suit after notification thereof as provided in Section 9(d).
9(e) DEFENSE BY INDEMNIFYING PARTY. (e) Defense by Indemnifying
Party In connection with any claim giving rise to indemnity hereunder resulting
from or arising out of any claim or legal proceeding by a person who is not a
party to this Purchase Agreement, the Indemnifying Party at its sole cost and
expense may, upon written notice to the Indemnified Party, assume the defense of
any such claim or legal proceeding using counsel of its choice (subject to the
approval of the Indemnified Party, which approval may not be unreasonably
withheld or delayed) if it acknowledges to the Indemnified Party in writing its
obligations to indemnify the Indemnified Party with respect to all elements of
such claim. The Indemnified Party shall be entitled to participate in (but not
control) the defense of any such action, with its counsel and at its own
expense; provided, however, that if the Indemnified Party, in its sole
discretion, determines that there exists a conflict of interest between the
Indemnifying Party (or any constituent party thereof) and the Indemnified Party,
the Indemnified Party (or such constituent party thereof) shall have the right
to engage separate counsel, the reasonable costs and expenses of which shall be
paid by the Indemnifying Party, but in no event shall the Indemnified Party be
liable to pay for the costs and expenses of more than one (1) such separate
counsel. If the Indemnifying Party does not assume the defense of any such
claim or litigation resulting therefrom, the Indemnified Party may defend
against such claim or litigation, after giving notice of the same to the
Indemnifying Party, on such terms as the Indemnified Party may deem appropriate,
and the Indemnifying Party shall be entitled to participate in (but not control)
the defense of such action, with its counsel and at its own expense. If the
Indemnifying Party thereafter seeks to question the manner in which the
Indemnified Party defended such third-party claim or the amount or nature of any
such settlement, the Indemnifying Party shall have the burden to prove by a
preponderance of the evidence that the Indemnified Party did not defend or
settle such third-party claim in a reasonably prudent manner. Notwithstanding
the foregoing, however, FAS shall in all cases be entitled to control of the
defense of any such action if it (i) may result in injunctions or other
equitable remedies in respect of FAS or the business; (ii) may result in
liabilities which, taken with other then existing claims by FAS under this
Section 9, would not be fully indemnified hereunder; or (iii) may have an
adverse impact on the business or the financial condition of FAS (including an
effect on the tax liabilities, earnings or ongoing business relationships of
FAS) even if the Seller pays all indemnification amounts in full.
10. MISCELLANEOUS.10. MISCELLANEOUS.
10(a) FURTHER ASSURANCES. (a) Further Assurances At any time, and
from time to time, after the Closing, each party will execute such additional
instruments and take such action as may be reasonably requested by the other
party to confirm or perfect title to any property transferred hereunder or
otherwise to carry out the intent and purposes of this Purchase Agreement.
10(b) WAIVER. (b) Waiver Any failure on the part of any party hereto
to comply with any of its obligations, agreements or conditions hereunder may be
waived in writing by the party to whom such compliance is owed.
10(c) NOTICES. (c) Notices All notices and other communications
hereunder shall be in writing and shall be deemed to have been given if
delivered in person or sent by prepaid first class registered or certified mail,
return receipt requested to the following addresses, or such other addresses as
are given to other parties in the manner set forth herein:
FAS Group: FAS Group, Inc.
14358 Golden Sunset Lane
Poway, California 92064
Attention: Jack A. Alexander, Chairman & CEO
With a copy to: Robert L. Sonfield, Jr., Esq.
Sonfield & Sonfield
770 South Post Oak Lane
Houston, Texas 77056
Seller: Midas Investment Group, Inc.
d/b/a Biltmore Securities
6700 North Andrews Avenue, Suite 500
Ft. Lauderdale, Florida 33309
Attention: Elliot A. Loewenstern, Chief Executive Officer
With a copy to: Atlas, Pearlman, Trop & Borkson, P.A.
New River Center, Suite 1900
200 E. Las Olas Blvd.
Ft. Lauderdale, Florida 33301
Attention: Charles B. Pearlman, Esq.
10(d) HEADINGS. (d) Headings The section and subsection headings in
this Purchase Agreement are inserted for convenience only and shall not affect
in any way the meaning or interpretation of this Purchase Agreement.
10(e) COUNTERPARTS. (e) Counterparts This Purchase Agreement may be
executed simultaneously in two or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument. A facsimile signature by any party on a counterpart of this
Purchase Agreement shall be binding and effective for all purposes. Such party
shall, however, subsequently deliver to the other party an original executed
copy of this Purchase Agreement.
10(f) GOVERNING LAW. (f) Governing Law This Purchase Agreement shall
be governed by the laws of the State of Florida.
10(g) BINDING EFFECT. (g) Binding Effect This Purchase Agreement
shall be binding upon the parties hereto and inure to the benefit of the
parties, their respective heirs, administrators, executors, successors and
assigns.
10(h) ENTIRE PURCHASE AGREEMENT. (h) Entire Purchase Agreement This
Purchase Agreement is the entire agreement of the parties covering everything
agreed upon or understood in the transaction. There are no oral promises,
conditions, representations, understandings, interpretations or terms of any
kind as conditions or inducements to the execution hereof.
10(i) TIME. (i) Time Time is of the essence.
10(j) SEVERABILITY. (j) Severability If any part of this Purchase
Agreement is determined by a court of competent jurisdiction to be
unenforceable, the balance of the Purchase Agreement shall remain in full force
and effect.
10(k) DEFAULT COSTS. (k) Default Costs In the event any party hereto
has to resort to legal action to enforce any of the terms hereof, such party
shall be entitled to collect attorneys' fees and other costs from the party in
default.
10(l) CONSTRUCTION (l) Construction There shall be no inference, by
operation of law or otherwise, that any provision of this Agreement shall be
construed against either party. This shall be construed without regard to the
identity of the party that drafted the various provisions hereof. Moreover,
each and every provision of this Agreement shall be construed as though all
parties hereto participated equally in the drafting thereof. As a result of the
foregoing, any rule of construction that a document is to be construed against
the drafting party shall not be applicable.
IN WITNESS WHEREOF, the parties have executed this Purchase Agreement the day
and year first above written.
FAS Group, Inc.
By:/s/Jack A. Alexander
----------------------
Jack A. Alexander, Chairman & CEO
: FAS Wealth Management Services, Inc.
By:/s/Jack A. Alexander
----------------------
Jack A. Alexander, Chairman & CEO
Midas Investment Group, Inc.
d/b/a Biltmore Securities
A Florida corporation
By: /s/Elliot A. Loewenstern
--------------------------
Elliot A. Loewenstern, Chief Executive Officer
<PAGE>
Exhibit C - Page 2
Exhibit C - Page
EXHIBIT C
INDEX TO FINANCIAL STATEMENTS
EXECUTIVE WEALTH MANAGEMENT SERVICES, INC.
Report of Independent Auditors C - 2
Statements of Financial Condition as of December 31, 1997 C - 3
Statement of Income as of December 31, 1997 C - 4
Statement of Changes in Stockholders' Equity as of December 31, 1997 C - 5
Statement of Cash Flows as of December 31, 1997 C - 6
Notes to Financial Statements as of December 31, 1997 C - 7-11
Balance Sheet as of June 30, 1998 (Unaudited) C - 12
Statements of Operation for the six months ended June 30, 1998 (Unaudited) C
- - 13
Statement of Changes in Stockholders' Equity for the six months ended June 30,
1998 (Unaudited) C - 14
Statement of Cash Flows for the six months ended June 30, 1998 (Unaudited) C
- - 15
Notes to Financial Statements for the six months ended June 30, 1998 (Unaudited)
C -16-19
FAS GROUP, INC. - JUNE 25, 1998
Report of Independent Auditors C - 20
Balance Sheet C - 21
Statement of Income C - 22
Statement of Changes in Stockholders' Equity C - 23
Statement of Cash Flows C - 24
Notes to Financial Statements C - 25 - 29
COMPILED PRO FORMA FINANCIAL STATEMENTS - JUNE 30, 1998
Compilation Report C - 30
Compiled Pro Forma Combining Balance Sheets C - 31
Compiled Pro Forma Combined Statements of Operations C - 32
Compiled Pro Forma Combined Statements of Cash Flows C - 33
<PAGE>
[LETTERHEAD OF BOBBITT, PITTENGER & COMPANY, P.A.]
February 6, 1998
BOARD OF DIRECTORS
Executive Wealth Management Services, Inc.
Sarasota, Florida
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
--------------------------------------------
We have audited the accompanying statements of financial condition of Executive
Wealth Management Services, Inc., as of December 31, 1997 and 1996, and the
related statements of income, changes in stockholders' equity, changes in
liabilities subordinated to claims of general creditors, and cash flows for the
years then ended that you are filing pursuant to rule 17a-5 under the Securities
Exchange Act of 1934. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Executive Wealth Management
Services, Inc. as of December 31, 1997 and 1996, and the results of its
operations and its cash flows for the years then ended, in conformity with
generally accepted accounting principles.
/s/Bobbitt, Pittenger & Company, P.A.
- -----------------------------------------
Bobbitt, Pittenger & Company, P.A.
Certified Public Accountants
<PAGE>
Exhibit C - Page 4
Exhibit C - Page
<TABLE>
<CAPTION>
EXECUTIVE WEALTH MANAGEMENT SERVICES, INC.
STATEMENTS OF FINANCIAL CONDITION
December 31,
- -------------------------------------------------
1997 1996
----------- ----------
ASSETS
<S> <C> <C>
Cash $ 127,771 $
Receivables
Broker/dealers 45,406 40,306
Correspondent brokers 68,766 122,201
Customers 13,105 13,000
Affiliates and employees 18,363 3,650
Other 14,847
Furniture, fixtures and equipment
at cost, net of accumulated depreciation 27,343 37,192
Deposits with clearing organizations 45,157 43,742
Other deposits 1,934 1,934
Syndication costs 15,000
-----------
$ 377,692 $ 262,025
=========== ==========
LIABILITIES AND STOCKHOLDERS EQUITY
LIABILITIES:
Accounts payable $ 107,465 $ 36,483
Commissions payable 101,291 143,566
----------- ----------
208,756 180,049
STOCKHOLDERS EQUITY
Common stock - authorized 5,000,000 shares;
par value $.002 in 1997 and $.002 in 1996; issued
and outstanding, 2,615,485 shares and 2,491,490
shares in 1997 and 1996, respectively 5,231 4,983
Preferred stock - authorized 750,000 shares
of $.01 par value; no shares issued
Stock warrants 4,410 4,410
Additional paid-in capital 1,105,639 913,688
Accumulated deficit (946,344) (841,105)
----------- ----------
TOTAL STOCKHOLDERS EQUITY 168,936 81,976
----------- ----------
$ 377,692 $ 262,025
=========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
EXECUTIVE WEALTH MANAGEMENT SERVICES, INC.
STATEMENTS OF INCOME
Year Ended December 31,
- --------------------------------------
1997 1996
----------- -----------
REVENUE
<S> <C> <C>
Commissions $3,723,815 $2,909,749
Underwriting fees 304,002 32,500
Other 144,899 57,795
----------- -----------
4,172,716 3,000,044
EXPENSES
Employer compensation and benefits 406,052 345,561
Commissions 3,131,258 2,275,456
Clearing charges and regulatory fees 346,223 262,542
Occupancy and equipment rental 130,494 125,968
Depreciation 10,811 11,844
Other operating expenses 280,670 214,687
----------- -----------
4,305,508 3,236,058
----------- -----------
OPERATING LOSS (132,792) (236,014)
OTHER INCOME
Rent 27,553 23,969
----------- -----------
LOSS BEFORE INCOME TAXES (105,239) (212,045)
INCOME TAXES
NET LOSS $ (105,239) $ (212,045)
=========== ===========
NET LOSS PER SHARE - basic $ (.041) $ (.088)
=========== ===========
NET LOSS PER SHARE - assuming dilution $ (.038) $ (.079)
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
Exhibit C - Page 6
<TABLE>
<CAPTION>
EXECUTIVE WEALTH MANAGEMENT SERVICES, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
Additional
Common Preferred Paid-in Accumulated Stock
Stock Stock Capital Deficit Warrants Total
- ----------------- ----------- ---------- ------------- ---------- -------
BALANCE,
<S> <C> <C> <C> <C> <C> <C>
January 1, 1996 $ 4,629 $ $ 706,853 $(629,060) $ 4,410 $ 86,832
Issuance of
common stock 354 222,638 222,992
Syndication costs (15,803) (15,803)
Net loss (212,045) (212,045)
----------- ----------
BALANCE,
December 31, 1996 4,983 913,688 (841,105) 4,410 81,976
Issuance of
common stock 248 213,752 214,000
Syndication costs (21,801) (21,801)
Net loss (105,239) (105,239)
----------- ----------
BALANCE,
December 31, 1997 $ 5,231 $ $ 1,105,639 $(946,344) $ 4,410 $168,936
=========== ========== ============= ========== ======= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
EXECUTIVE WEALTH MANAGEMENT SERVICES, INC.
STATEMENTS OF CASH FLOWS
Year Ended December 31,
- ---------------------------------------------
1997 1996
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net loss $(105,239) $(212,045)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation 10,811 11,844
(Increase) decrease in operating assets:
Receivables:
Broker dealers (5,100) (963)
Correspondent brokers 53,435 20,772
Affiliates and employees (14,713) (3,650)
Customers (105) (13,000)
Other (14,847)
Deposits (1,415) (1,318)
Syndication costs (15,000)
(Decrease) increase in operating liabilities:
Accounts payable 70,982 (21,570)
Commissions payable (42,275) (977)
---------- ----------
41,773 (8,862)
---------- ----------
NET CASH USED IN OPERATING ACTIVITIES (63,466) (220,907)
---------- ----------
CASH FLOWS USED BY INVESTING ACTIVITIES
Purchase of furniture, fixtures and equipment (962) (6,685)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from sale of common stock 214,000 222,992
Syndication costs (21,801) (15,803)
---------- ----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 192,199 207,189
---------- ----------
NET INCREASE (DECREASE) IN CASH 127,771 (20,403)
CASH, at beginning of year 20,403
----------
CASH, at end of year $ 127,771 $
========== ==========
Supplemental Disclosures:
Interest Paid $ - $ -
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
Exhibit C - Page 22
Exhibit C - Page 21
EXECUTIVE WEALTH MANAGEMENT SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997 AND 1996
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
- ------------
Executive Wealth Management Services, Inc. (the "Company") is a securities
broker/dealer that transacts business through correspondent brokers and does not
handle any customer securities or funds. Customer security transactions and
related commission revenue and expenses are recorded on the trade date. The
Company also acts as a broker/dealer in selling both public and private
securities offerings on a best efforts basis. The Company receives commissions
and underwriting fees for its services.
Use of Estimates
- ------------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Receivables from Correspondent Brokers and Broker/Dealers
- --------------------------------------------------------------
The receivables from correspondent brokers and broker/dealers represent
commissions earned which had not been received at year-end. Management has
determined that these amounts are fully collectible.
Furniture, Fixtures and Equipment
- ------------------------------------
Furniture, fixtures and equipment are recorded at cost. Depreciation is
provided in amounts sufficient to relate the cost of assets to operations over
their estimated useful lives using the straight-line method.
Investments
- -----------
The Company was issued 55,263 shares of common stock of Flight Sciences, Inc.
This stock was issued to the Company in relation to a private offering of Flight
Sciences' promissory notes. These shares represent 5% of Flight Sciences,
Inc.'s outstanding common stock. The Company has assigned no value to the stock
due to the fact there is no ready market and its value is not determinable.
During 1997, the Company acted as managing placement agent on a best efforts
basis for the Outlet Mall Network, Inc.'s private placement offering of 2.5
million units. The Company earned commissions and placement fees of $111,287
for the year ended December 31, 1997. Additionally, for serving as best efforts
managing placement agent, the Company received warrants to purchase shares of
OMNI's Class "B" Common Stock. The warrants have an exercise price of $2.00 and
expire June 10, 2007. The Company has assigned no value to the warrants due to
the fact that there is no liquid quotable market and therefore, their value is
not determinable.
<PAGE>
EXECUTIVE WEALTH MANAGEMENT SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Earnings per Share
- --------------------
In 1997, the Financial Accounting Standards Board issued Statement No. 128,
"Earnings per Share". Statement 128 replaced the calculation of primary and
fully diluted earnings per share with basic and diluted earnings per share.
Unlike primary earnings per share, basic earnings per share excluded any
dilutive effects of options, warrants and convertible securities. Diluted
earnings per share is very similar to the previously reported fully diluted
earnings per share. All earnings per share amounts for all periods have been
prepared, and where appropriate, restated to conform to the Statement 128
requirements.
Statements of Cash Flows
- ---------------------------
For purposes of reporting cash flows, the Company considers cash and cash
equivalents as those amounts which are not subject to restrictions or penalties
and have an original maturity of three months or less.
Reclassifications
- -----------------
Certain reclassifications have been made to the 1996 financial statements to
conform with the 1997 financial statement presentation. Such reclassifications
had no effect on net income as previously reported.
NOTE B - DEPOSITS WITH CLEARING ORGANIZATIONS
Deposits with clearing organizations represent investments in money market funds
and mutual funds. The investments are required by the Company's clearing
brokers and are in accordance with the correspondent broker agreements between
the parties. Deposits are reflected at their fair market value.
NOTE C - FURNITURE, FIXTURES AND EQUIPMENT
A summary of furniture, fixtures and equipment follows at December 31:
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Furniture and fixtures $ 37,951 $ 37,951
Equipment 34,202 33,240
Leasehold improvements 6,622 6,622
--------- ---------
78,775 77,813
Less accumulated depreciation (51,432) (40,621)
--------- ---------
$ 27,343 $ 37,192
========= =========
</TABLE>
<PAGE>
EXECUTIVE WEALTH MANAGEMENT SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE D - OPERATING LEASE
The Company leases office space under operating lease agreements which expire in
1996 through 1998. Rent expense for the years ended December 31, 1997 and 1996
was $112,403 and $103,452, respectively.
The future minimum rental commitment for the noncancellable lease agreements as
of December 31, 1997 is as follows:
<TABLE>
<CAPTION>
<S> <C>
1998 $103,452
1999 36,000
2000 36,000
2001 36,000
2002 18,000
--------
229,452
========
</TABLE>
NOTE E - NET CAPITAL REQUIREMENT
Pursuant to the net capital provisions of Rule 15c3-1 of the Securities and
Exchange Act of 1934, the Company is required to maintain a minimum net capital
of $5,000. In December, 1991, the National Association of Securities Dealers,
Inc. approved the Company as a fully disclosed broker/dealer. The Company has a
restrictive agreement to maintain the greater of a net capital of 130% of the
minimum requirement or 6 2/3% of aggregate indebtedness for each of the two
years in the period ended December 31, 1997.
The Company had a net capital of $101,615 or 730% and $22,618 or 188% of the
minimum requirement at December 31, 1997 and 1996, respectively. The net
capital rules may effectively restrict the payment of dividends to the Company's
stockholders. The Company operates pursuant to the (K)(2)(ii) exemptive
provisions of the Securities and Exchange Commission's Rule 15c3-3 and does not
hold customer funds or securities.
Rule 15c3-1 also requires that the ratio of aggregate indebtedness to net
capital, both as defined, shall not exceed 15 to 1. The Company's ratio was
2.05 to 1 and 7.85 to 1 at December 31, 1997 and 1996, respectively.
NOTE F - INCOME TAXES
At December 31, 1997, the Company has a net operating loss carryforward of
approximately $769,000 that will be available to offset future taxable income
through 2012. Based on historical operations, management has elected to record
a valuation allowance equal to the deferred tax asset of $285,000, calculated
using an effective income tax rate of 37% for the Company. The Company has no
significant differences between book and taxable income.
NOTE G - NET LOSS PER SHARE
<TABLE>
<CAPTION>
The following sets forth the computation of basic and diluted earnings per
share.
Numerator 1997 1996
----------- -----------
<S> <C> <C>
Net Loss $ (105,239) $ (212,045)
=========== ===========
Denominator
Denominator for basic earnings
per share - weighted average shares 2,560,117 2,413,300
Effect of dilutive securities:
Stock warrants 182,663 257,250
----------- -----------
Denominator for dilutive earnings
per share - adjusted weighted average
shares and assumed conversion 2,742,780 2,670,550
=========== ===========
Basic Net Loss Per Share $ (.041) $ (.088)
=========== ===========
Diluted Net Loss Per Share $ (.038) $ (.079)
=========== ===========
</TABLE>
NOTE H - STOCK-BASED COMPENSATION
The Company adopted SFAS No. 123 "Accounting for Stock-Based Compensation,"
effective January 1, 1997. This statement encourages companies to adopt a fair
value based method of accounting for compensation costs of employee stock
compensation plans. As permitted by SFAS No. 123, the Company will continue to
apply its current accounting policy using the intrinsic value method of
accounting prescribed by Accounting Principles Board Opinion No. 25 with respect
to measuring stock-based compensation. The adoption of SFAS No. 123, therefore,
had no effect on the Company's financial position or results of operations for
1997. Pro forma footnote disclosures of net earnings and earnings per share, as
if the fair value based method of accounting had been applied, have not been
presented as awards have not been granted during the year.
NOTE I - RELATED PARTY TRANSACTIONS
The majority stockholder is the controlling stockholder of a corporation
organized in 1995 to develop and implement a franchise business pursuant to
which the franchisee will purchase residential single family houses for resale.
The Company realized placement and management fees of $32,500 during 1996,
relating to the offering of notes for this corporation.
NOTE I - RELATED PARTY TRANSACTIONS (CONTINUED)
The majority stockholder is the sole stockholder of a corporation formed and
capitalized primarily to originate, underwrite, acquire, hold and deal in a
portfolio of primarily first lien residential mortgage loans. The Company
realized commission and fees of approximately $110,000 and $80,000,
respectively, relating to the offering of notes for this corporation.
During the years ended December 31, 1997 and 1996, companies affiliated with the
Company's majority stockholder shared office space with the Company and paid
rent of $27,500 and $24,000, respectively, for the use of the space.
During the year ended December 31, 1997 and 1996, the Company paid rent of
$36,000 and $36,000, respectively, to the Company's majority stockholder for the
use of office space. The lease with this stockholder expires June, 2002.
Effective June 1, 1997, the Corporation entered into an Independent Contractor
Agreement with a member of the Board of Directors to act as a Director of
Medical Affinity Programs.
In September 1997, the Corporation purchased accounts receivable from an
affiliated corporation. There was no gain or loss on the transaction. The
receivable is believed by management to be fully collectible.
In the ordinary course of business the Company makes and receives loans with
affiliated entities and stockholders. These loans are short term and are
non-interest bearing. Loans made and repaid in 1997 totaled approximately
$230,000.
See Note K for additional related party transactions.
NOTE J - FAIR VALUE OF FINANCIAL INSTRUMENTS IN ACCORDANCE WITH THE
REQUIREMENTS OF SFAS NO. 107
The Corporation's financial instruments consist of all of its assets and
liabilities. The Corporation's management has determined that the fair value of
all of its financial instruments is equivalent to the carrying cost.
NOTE K - COMMON STOCK TRANSACTIONS
During 1995, the Company and its majority stockholder sold 44,100 shares of the
Company's common stock. The price of the stock was $5.90 per share and each
purchaser of a share received a warrant which gave the purchaser the right to
purchase one share of the Company's stock from the Company for $7.00 per share.
The price of the warrants were $.10 each and expire on December 1, 1999. The
proceeds of the warrants were retained by the Company. After the 1996 stock
split there are now 220,500 warrants outstanding with an exercise price of
$1.40.
In November, 1995, the Company approved a plan to grant options to certain
employees to purchase the Company's common stock. The plan provides for the
granting of options to purchase a maximum of 500,000 shares of the Company's
stock at a price to be determined at the time of grant. The price, however,
shall not be greater than $.60 per share. The plan requires a participant to be
employed by the Company for a number of years before exercise. Granted options
expire 10 years from the grant date. At December 31, 1995, all of the options
had been granted. Under the plan the Company has complete discretion in
approving exercise of the options, which encompasses the option price as well as
whether any options will be allowed to be exercised.
On December 15, 1995, the Company and the majority stockholder initiated a
private placement of 80,000 shares of the Company's common stock at a price of
$6.00 per share. The shares contained in the offering are to be drawn equally
from the authorized but unissued shares of the Company and the majority
stockholder. Accordingly, gross proceeds from the sale of the stock will be
shared equally by the Company and the majority stockholder. The proceeds from
this private placement were utilized for additional expansion and working
capital by the Company. During 1996, the Company sold 38,164 shares, of which
10,898 were sold to the majority stockholder. All sales were at $6.00 per
share.
In May 1996, the Board approved a five to one stock split of its common stock
which reduced its par value to $.002. In September 1996 the split became
effective.
In January 1997, the Company authorized the issuance of a maximum of 100,000
shares of its common stock at a price of $1.20 per share. 42,500 shares were
sold to the controlling stockholder. The proceeds from these shares were
utilized for working capital.
In June 1997, the Company initiated a private placement of 250,000 shares of
common stock at a price of $2.00 per share. During 1997, the Company sold
81,500 shares. All sales were at $2.00 per share. The proceeds from these
shares were utilized for expansion and working capital by the Company.
<PAGE>
<TABLE>
<CAPTION>
EXECUTIVE WEALTH MANAGEMENT SERVICES, INC.
BALANCE SHEET
June 30, 1998 (Unaudited)
ASSETS
-----------
CURRENT ASSETS
<S> <C>
Cash $ 11,922
Accounts receivable from
correspondent brokers 144,418
Accounts receivable from affiliates 2,174
Accounts receivable from others 15,852
Prepaid expenses 17,500
-----------
TOTAL CURRENT ASSETS 191,866
INVESTMENTS
Furniture, Fixtures and Equipment -
at cost net of accumulated depreciation 25,711
OTHER ASSETS
Deposits with clearing organizations 40,093
Other deposits 1,934
-----------
TOTAL ASSETS $ 259,604
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
- -----------------------------------------
CURRENT LIABILITIES
Accounts payable $ 10,615
Commissions payable 133,446
-----------
TOTAL CURRENT LIABILITIES 144,061
STOCKHOLDER'S EQUITY
Preferred Stock - authorized 750,000
shares of $.01 par value; no shares
issued or outstanding ---
Common Stock - authorized 5,000,000
shares of $.002 par value; issued and
outstanding 2,615,485 shares 5,231
Additional paid-in capital 1,105,639
Additional paid-in capital, warrants 4,410
Retained earnings (999,737)
-----------
TOTAL STOCKHOLDERS' EQUITY 115,543
-----------
TOTAL LIABILITIES & STOCKHOLDER'S EQUITY $ 259,604
===========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXECUTIVE WEALTH MANAGEMENT SERVICES, INC.
STATEMENTS OF OPERATION
For The Three and Six Months Ended June 30 (Unaudited)
Six Months Ended June 30 Three Months Ended June 30
1998 1997 1998 1997
-------------------------- ---------------------------- --------- -----------
REVENUE
<S> <C> <C> <C> <C>
Commissions $ 1,340,112 $ 1,772,081 $754,479 $ 946,152
Underwriting fees 90,970 73,600 16,160 63,100
Other Income 22,961 70,400 10,924 39,421
-------------------------- ---------------------------- --------- -----------
TOTAL REVENUE 1,454,043 1,916,081 781,563 1,048,673
-------------------------- ---------------------------- --------- -----------
EXPENSES
Advertising 1,920 1,613 1,763 813
Board of Directors fees 12,000 8,000 6,000 4,000
Clearing charges 79,447 136,724 34,752 79,045
Commissions 1,122,940 1,451,188 622,521 781,569
Consulting fees 28,653 23,190 13,482 10,790
Dues and Subscriptions 4,789 4,290 2,441 3,428
Depreciation 5,168 6,061 2,584 3,031
Insurance 1,341 3,203 (696) 2,598
Meetings and seminars (750) 29 (750) ---
Miscellaneous 1,475 17,292 (451) 13,568
Occupancy costs 49,654 43,411 24,837 21,983
Office expenses 15,565 13,129 8,792 6,940
Regulatory 12,739 11,850 3,252 9,188
Rental Equipment 3,010 4,286 2,187 1,645
Salaries and wages 171,446 178,649 87,005 91,788
Taxes 19,580 19,773 9,435 9,504
Travel and lodging 16,500 15,767 10,038 6,040
Utilities 14,491 12,796 6,903 6,564
-------------------------- ---------------------------- --------- -----------
TOTAL
OPERATING EXPENSES 1,559,968 1,951,251 834,095 1,052,494
-------------------------- ---------------------------- --------- -----------
OPERATING
INCOME/(LOSS) (105,925) (35,170) (52,532) (3,821)
-------------------------- ---------------------------- --------- -----------
NET INCOME/(LOSS) $ (105,925) $ (35,170) $(52,532) $ (3,821)
========================== ============================ ========= ===========
NET INCOME/(LOSS)
PER SHARE $ (.04) $ (.02) $ (.02) $ (.01)
========================== ============================ ========= ===========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXECUTIVE WEALTH MANAGEMENT SERVICES, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
For The Six Months Ended June 30 (Unaudited)
Additional
Additional Paid-In Retained
Preferred Common Paid-In Capital Earnings
Stock Stock Capital Warrants (Deficit) Total
----------------- --------- ----------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1997 - $ 4,983 $ 913,687 $ 4,410 $(841,105) $ 81,975
Issuance of common stock 85 50,915 51,000
Net loss for the Six
months ended
June 30, 1997 (35,170) (35,170)
----------------- ---------
Balance at
June 30, 1997 $ - $ 5,068 $ 964,602 $ 4,410 $(876,275) $ 97,805
================= ========= =========== ============ ========== ==========
Additional Retained
Preferred Common Paid-In Earnings Stock
Stock Stock Capital (Deficit) Warrants Total
- -------------------------- ----------------- --------- ----------- ------------ ----------
Balance at
January 1, 1998 $ - $ 5,231 $ 1,105,639 $ (946,344) $ 4,410 $ 168,936
Common Stock Subscribed - 25,000 25,000
Net loss for six
months ended
June 30, 1998 - - - (105,925) - (105,925)
----------------- --------- ----------- ------------ ---------- ----------
Balance at
June 30, 1998 $ - $ 5,231 $ 1,130,639 $(1,052,269) $ 4,410 $ 88,011
================= ========= =========== ============ ========== ==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXECUTIVE WEALTH MANAGEMENT SERVICES, INC.
STATEMENT OF CASH FLOWS
For The Six Months Ended June 30 (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES: 1998 1997
---------- ---------
<S> <C> <C>
Net Income (Loss) $(105,925) $(35,170)
Adjustments to reconcile net income
to net cash used in operating activities:
Depreciation 4,215 6,062
(Increase) decrease in operating assets:
Receivable from correspondent brokers (79,590) (97,206)
Receivable - other 8,210 1,280
Deposits 5,065 (671)
Prepaid expense --- (5,885)
Increase (decrease) in operating liabilities:
Accounts payable (85,998) 23,980
Commissions payable 116,584 63,244
---------- ---------
Net cash provided by (used in) operating activities (137,439) (44,366)
---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase Equipment --- ---
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock --- 51,000
Subscription of Common Stock 25,000 ---
Cash paid for syndication costs 15,000 (5,500)
---------- ---------
Net cash provided by (used in) financing activities 40,000 45,500
---------- ---------
NET INCREASE (DECREASE) IN CASH (97,439) 1,134
CASH AT BEGINNING OF PERIOD 127,179 ---
---------- ---------
CASH AT END OF PERIOD $ 29,740 $ 1,134
========== =========
</TABLE>
<PAGE>
EXECUTIVE WEALTH MANAGEMENT SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
For The Six Months Ended June 30, 1998 and 1997
Note 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- ------- ----------------------------------------------
Organization
- ------------
Executive Wealth Management Services, Inc., (the Company) is a securities
broker/dealer that transacts business through correspondent brokers and does not
handle any customer securities or funds. Customer security transactions and
related commission revenue and expenses are recorded on the trade date. The
Company also acts as a broker/dealer in selling both public and private
securities offerings on a best efforts basis. In addition, the Company receives
commissions, investment banking and underwriting fees for its services.
Receivable from Correspondent Brokers
- ----------------------------------------
The receivable from correspondent brokers and broker/dealers represent
commissions earned which had not been received at June 30, 1998. Management has
determined that these amounts are fully collectible.
Furniture, Fixtures and Equipment
- ------------------------------------
Furniture, fixtures and equipment are recorded at cost. Depreciation is
provided for in amounts sufficient to relate the cost of assets to operations
over their estimated useful lives using the straight-line method.
Investments
- -----------
The Company was issued 55,263 shares of common stock of Flight Sciences, Inc.
This stock was issued to the Company in relation to a private offering of Flight
Sciences' promissory notes. These shares represented 5% of Flight Sciences,
Inc.'s outstanding common stock at the time. The Company has assigned no value
to the stock due to the fact that there is no ready market and its value is not
determinable.
Warrants Outlet Mall Network
- -------------------------------
The Company was issued 24,167 warrants of the Outlet Mall Network, Inc.
("OMNI"). These warrants are being issued in relation to a private offering of
OMNI stock. The warrants have an exercise price of $2.00 and expire June 10,
2002. The Company has assigned no value to the warrants due to the fact that
there is no ready market and its value is not determined.
Loss Per Share
- ----------------
Loss per share is computed based upon 2,615,485 and 2,533,985 shares outstanding
during the periods ended June 30, 1998 and 1997, respectively.
<PAGE>
EXECUTIVE WEALTH MANAGEMENT SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
For The Six months Ended June 30, 1998 and 1997
Note 2 - DEPOSIT WITH CLEARING ORGANIZATION
- ------- -------------------------------------
Deposits with clearing organizations represent investments in money markets. The
investments are required by the Company's clearing brokers and are in accordance
with the correspondent broker agreement between the parties. Deposits are
reflected at fair market value.
Note 3 - FURNITURE, FIXTURES AND EQUIPMENT
- ------- ------------------------------------
<TABLE>
<CAPTION>
A summary of furniture, fixtures and equipment follows:
June 30, 1998
--------------
<S> <C>
Furniture and fixtures $ 37,951
Equipment 34,202
Leasehold improvements 6,622
--------------
78,775
Less: Accumulated Depreciation 55,648
--------------
$ 23,127
==============
</TABLE>
Note 4 - Operating Leases
- ------- -----------------
Rent expense for the six months ended June 30, 1998 and 1997 was $49,654 and
$43,411, respectively.
Note 5 - NET CAPITAL REQUIREMENT
- ------- -------------------------
Pursuant to the net capital provisions of Rule 15c3-1 of the Securities and
Exchange Act of 1934, the Company is required to maintain a minimum net capital
of $5,000. In December of 1991, the National Association of Securities Dealers,
Inc. approved the Company as a fully disclosed broker/dealer. The Company has a
restrictive agreement to maintain a net capital of 130% of the minimum
requirement or 6 2/3% of aggregate indebtedness for each of the six month
periods ended June 30, 1998 and 1997.
The Company had net capital of $54,042 or 340% and $37,864 or 213% of the
minimum requirement at June 30, 1998 and 1997, respectively. The net capital
rules may effectively restrict the payment of dividends to the Company's
stockholders. The Company operates pursuant to the (K) (2) (ii) exemptive
provisions of the Securities and Exchange Commission's Rule 15c3-3 and does not
hold customers funds or securities.
<PAGE>
EXECUTIVE WEALTH MANAGEMENT SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
For The Six months Ended June 30, 1998 and 1997
NOTE 6 - INCOME TAXES
- ------- -------------
At December 31, 1996, the Company had a net operating loss carry forward of
approximately $657,000 that will begin to expire in the year 2009. Due to the
lack of historical operations, management has elected to record a valuation
allowance equal to the deferred tax asset of $240,000, calculated using an
effective income tax rate of 37% for the Company.
.
NOTE 7 - RELATED PARTY TRANSACTIONS
- ------- ----------------------------
During the six months ended June 30, 1998 and 1997, companies affiliated with
the Company's majority stockholder shared office space with the Company and paid
rent of $5,724 and $11,448, respectively, for the use of the space.
During the six months ended June 30, 1998, the Company paid rent of
approximately $18,000 to the Company's majority stockholder for the use of
office space.
NOTE 8 - COMMON STOCK TRANSACTIONS
- ------- ---------------------------
In November, 1995, the Company approved a plan to grant options to certain
employees to purchase the Company's common stock. The plan provided for the
granting of options to purchase a maximum of 500,000 shares of the Company's
stock at a price to be determined at the time of grant. The price, however, is
not greater than $.60 per share. The plan required a participant to be employed
by the
Company for a number of years before exercise. Granted options expire 10 years
from the grant date. At June 30, 1998, none of the options have been
exercised.
During the first quarter of 1997, the majority shareholder purchased 42,500
shares of common stock at $1.20 per share.
In May, 1996, the Board of Directors passed a resolution to split the
outstanding common stock shares of Executive Wealth Management Services, Inc. on
a five for one basis effective September 20, 1996. Common stockholders of
record as of September 20, 1996, were entitled to the five for one forward
common stock split.
On June 9, 1997, the Company initiated a private placement of 250,000 shares of
the Company's Common Stock at a price of $2.00 per share. Net proceeds from the
sale of stock were used for general working capital and expansion of operations.
<PAGE>
EXECUTIVE WEALTH MANAGEMENT SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
For The Six months Ended June 30, 1997 and 1996
NOTE 8 - COMMON STOCK TRANSACTIONS (CONTINUED)
- ------- ----------------------------------------
On March 1, 1998, the Company initiated a private placement of 150,000 shares of
the Company's Common Stock at a price of $2.00 per share. Net proceeds are to
be used for costs of the proposed merger, affinity group marketing programs,
work capital and general corporate purposes. At June 30, 1998 subscriptions
receivable from the offering was $25,000.
<PAGE>
<PAGE>
[LETTERHEAD OF HARPER & PEARSON COMPANY]
To the Board of Directors
FAS Group, Inc.
Poway, California
We have audited the accompanying balance sheet of FAS Group, Inc. (A Development
Stage Company) as of June 25, 1998, and the related statements of income,
changes in stockholders' equity and cash flows for the period ended June 25,
1998. These financial statements are the responsibility of the Company. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above presents fairly, in
all material respects, the financial position of FAS Group, Inc. (A Development
Stage Company) as of June 25, 1998, in conformity with generally accepted
accounting principles.
As more fully discussed in Note A to the financial statements, FAS Group, Inc.
is a development stage enterprise and therefore has no current operations.
Consequently, the Company must raise substantial financing or capital in order
to put its business plan into operation. If the Company is unable to raise
adequate amounts of financing or capital, its operations and continuation as a
going concern may not occur.
/s/HARPER & PEARSON COMPANY
Houston, Texas
June 29, 1998
(except for Note 6 to which
the date is October 9, 1998)
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
FAS GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
JUNE 25, 1998
ASSETS
- ---------------------------------------------------
<S> <C>
MARKETABLE SECURITIES $1,200,000
ORGANIZATION COSTS 2,544
----------
TOTAL ASSETS $1,202,544
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ---------------------------------------------------
LIABILITIES
Federal income tax payable $ 408,000
----------
STOCKHOLDERS' EQUITY
Convertible Preferred Stock, par value $.001 per
share, 1,000,000 shares authorized, no shares
issued and outstanding -0-
Common Stock, Class A, par value $.001 per share,
25,000,000 shares authorized, 1,914,000 shares
issued and outstanding 1,914
Common Stock, Class B, par value $.001 per share,
1,000,000 shares authorized, 630,000 shares
issued and outstanding 630
Retained earnings 792,000
----------
TOTAL STOCKHOLDERS' EQUITY 794,544
----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,202,544
==========
</TABLE>
See accompanying notes.
<PAGE>
<TABLE>
<CAPTION>
FAS GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF INCOME
FOR THE PERIOD ENDED JUNE 25, 1998
<S> <C>
CONSULTING FEE $1,200,000
FEDERAL INCOME TAX EXPENSE 408,000
----------
NET INCOME $ 792,000
==========
</TABLE>
See accompanying notes.
<PAGE>
<TABLE>
<CAPTION>
FAS GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE PERIOD ENDED JUNE 25, 1998
Common Stock Retained
------------
Shares Amount Earnings Total
<S> <C> <C> <C> <C>
ISSUANCE OF CLASS A COMMON STOCK 1,914,000 $ 1,914 $ - $ 1,914
ISSUANCE OF CLASS B COMMON STOCK 630,000 630 - 630
NET INCOME - - 792,000 792,000
------------ ----------- ---------- ----------
BALANCE, JUNE 25, 1998 2,544,000 $ 2,544 $ 792,000 $ 794,544
============ =========== ========== ==========
</TABLE>
See accompanying notes.
<TABLE>
<CAPTION>
FAS GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
FOR THE PERIOD ENDED JUNE 25, 1998
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C>
Net income $ 792,000
------------
Adjustments to reconcile net income to net cash
used by operating activities:
Receipt of marketable securities for brokerage commissions (1,200,000)
Organization costs (2,544)
Change in operating assets and liabilities
Federal income tax payable 408,000
------------
Total adjustments (794,544)
------------
Net cash flows used by operating activities (2,544)
------------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common stock, Class A 1,914
Issuance of common stock, Class B 630
------------
Net cash provided by financing activities 2,544
------------
NET INCREASE IN CASH -0-
CASH AT BEGINNING OF PERIOD -0-
------------
CASH AT END OF PERIOD $ -0-
============
</TABLE>
See accompanying notes.
<PAGE>
FAS GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JUNE 25, 1998
NOTE 1. ORGANIZATION
FAS Group, Inc. (the "Company") was incorporated on June 23, 1998 under the
general corporation laws of the State of Delaware with the intent to combine by
merger or acquisition with a registered broker-dealer that is a member of the
National Association of Securities Dealers, Inc. for the purpose of becoming a
full service investment banking firm including brokerage and asset management.
Accordingly, the Company has no current business operations and no intention of
engaging in active business prior to its anticipated combination with a
broker-dealer registered with the Securities and Exchange Commission.
Nature of Operations - The Company is a development stage enterprise and has
- ----------------------
devoted substantially all of its efforts to financial planning, raising capital
- ---
and identifying business opportunities. The Company is subject to the risks
associated with development stage companies. Substantial financing or capital
investment will be required to continue to fund the Company's activities until a
significant sales volume can be obtained. Because the Company has not yet put
its business plan into operation, there is no assurance that such financing and
additional capital investment will be available when needed, or that the
Company's business plan will be commercially successful when implemented in the
future. If the Company is unable to raise adequate amounts of financing or
capital, its operations and continuation as a going concern may not occur.
Estimates - The preparation of financial statements in conformity with generally
- ---------
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Marketable Securities - On June 25, 1998, the Company was paid a consulting fee
- ----------------------
negotiated by the Company's president, Mr. Jack Alexander, acting as agent and
founder for FAS Group, Inc. Payment of the fee was received in the form of
200,000 shares of stock in the Tollycraft Yacht Corporation. These shares of
stock have been classified as available for sale and are reflected on the
accompanying balance sheet at market value. See Note 6.
NOTE 2. COMMON STOCK
Common Stock. The holders of Class A Common Stock and the holders of Class B
- -------------
Common Stock shall have the respective rights and preferences set forth below.
- ---
Rights and Privileges. Except as provided in this Certificate, the holders of
- -----------------------
the Common Stock shall exclusively possess all voting power. Except as otherwise
provided or as otherwise required by applicable law, all shares of Class A
Common Stock and Class B Common Stock will be identical and will entitle the
holders thereof to the same rights and privileges and shall rank equally, share
ratably, and be identical in all respects as to all matters.
Voting Rights. Except as otherwise required by law: (i) the holders of
--------------
Class A Common Stock will be entitled to one vote per share on all matters to be
voted on by the Corporation's shareholders; (ii) the holders of Class B Common
Stock will be entitled to fifty votes per share on all matters to be voted on by
the Corporation's shareholders; and (iii) the holders of Class A Common Stock
and Class B Common Stock shall vote together as a single voting group.
Payment of Dividends. Whenever there shall have been paid, or declared and set
- ---------------------
aside for payment, to the holders of the outstanding shares of any class or
series of stock having preference over the Common Stock as to the payment of
dividends, the full amount of dividends and sinking fund or retirement fund or
other retirement payments, if any, to which such holders are respectively
entitled in preference to the Common Stock, then dividends may be paid on the
Common Stock, and on any class or series of stock entitled to participate
therewith as to dividends, out of any assets legally available for the payment
of dividends, but only when and as declared by the board of directors of the
Corporation.
Distributions in Liquidation. In the event of any liquidation, dissolution or
- ------------------------------
winding up of the Corporation, after there shall have been paid, or declared and
set aside for payment, to the holders of the outstanding shares of any class
having preference over the Common Stock in any such event, the full preferential
amounts to which they are respectively entitled, the holders of the Class A
Common Stock and Class B Common Stock and of any class or series of stock
entitled to participate therewith, in whole or in part, as to distribution of
assets shall be entitled, after payment or provision for payment of all debts
and liabilities of the Corporation, to participate ratably on a per share basis
in all distributions of the remaining assets of the Corporation available for
distribution, in cash or in kind, as though all shares of Common Stock were of a
single class.
Limitation on Stock Splits, Combinations or Reclassifications.
-------------------------------------------------------------------
(a) The Corporation shall not: (i) subdivide its outstanding Class A Common
Stock by stock dividend or otherwise; or (ii) combine its outstanding Class A
Common Stock into a smaller number of shares; or (iii) reclassify its
outstanding Class A Common Stock (including any reclassification in connection
with a merger, consolidation or other business combination in which the
Corporation is the surviving corporation); unless at the same time the
Corporation subdivides, combines or reclassifies, as applicable, the shares of
outstanding Class B Common Stock on the same basis as the Corporation so
subdivides, combines or reclassifies the outstanding Class A Common Stock.
(b) The Corporation shall not: (i) subdivide its outstanding Class B Common
Stock by stock dividend or otherwise; or (ii) combine its outstanding Class B
Common Stock into a smaller number shares; or (iii) reclassify its outstanding
Class B Common Stock (including any reclassification in connection with a
merger, consolidation or other business combination in which the Corporation is
the surviving corporation); unless at the same time the Corporation subdivides,
combines or reclassifies, as applicable, the shares of outstanding Class A
Common Stock on the same basis as the Corporation so subdivides, combines or
reclassifies the outstanding Class B Common Stock.
Conversion of Shares of Class B Common Stock Into Shares of Class A Common
---------------------------------------------------------------------------
Stock.
- -----
(a) For the purposes of conversion, the following definitions shall apply:
(i) "Employee" means a person employed by the Corporation or by a legal entity
that is controlled, directly or indirectly, by the Corporation;
(ii) "Transfer" means any sale, transfer, gift, assignment, devise or other
disposition, whether directly or indirectly, voluntarily or involuntarily or by
operation of law or otherwise; and
(iii) "Uncertificated Shares" means shares without certificates within the
meaning of the General Corporation Law of Delaware, as it may be amended from
time to time, or any subsequent statute replacing this statute.
(b) At the option of the Corporation: (1) outstanding shares of Class B Common
Stock which are the subject of a Transfer shall be convertible into a number of
shares of Class A Common Stock equal to the number of shares of outstanding
Class B Common Stock subject to the Transfer; and (2) in the event that an
Employee ceases to be an Employee for any reason whatsoever, the outstanding
shares of Class B Common Stock held by such Employee shall be convertible into a
number of shares of Class A Common Stock equal to the number of shares of
outstanding Class B Common Stock held by such Employee. For purposes of Article
V, the conversion of shares of Class B Common Stock as a result of a Transfer
and the conversion of shares of Class B Common Stock as a result of cessation of
an Employee's status as an Employee shall both be referred to as a "Conversion
Event."
(i) Each Conversion Event shall be effective immediately upon transmission or
delivery of a written notice of conversion by the Corporation to the record
holder of such shares (the "Effective Time") at such holder's address as it
appears in the records of the Corporation.
(ii) Each conversion of shares of Class B Common Stock into shares of Class A
Common Stock shall be deemed to be effective upon the Effective Time and at the
Effective Time the rights of the holder of the converted Class B Common Stock as
such holder shall cease and the holder of the converted Class B Common Stock
shall be deemed to have become the holder of record of the shares of Class A
Common Stock into which such shares of Class B Common Stock have been converted
as a result of the applicable Conversion Event.
(iii) The Board of Directors of the Corporation shall have the power to
determine whether a Conversion Event has taken place with respect to any
situation based upon the facts known to it. Each shareholder shall provide such
information that the Corporation may reasonably request in order to ascertain
facts or circumstances relating to a Transfer or proposed Transfer or a
Conversion Event or proposed Conversion Event.
(c) Notwithstanding any other provision of Article V, shares of Class B Common
Stock sold in a public offering of the Corporation's securities registered with
the United States Securities and Exchange Commission (the "Public Offering"),
regardless of the identity of the purchaser, transferee or other recipient of
the disposition in the Public Offering, shall be automatically converted into a
number of shares of Class A Common Stock equal to the number of shares of Class
B Common Stock sold in the Public Offering. Such conversion of shares of Class
B Common Stock into shares of Class A Common Stock shall be deemed to be
effective at such time as the holder of the Class B Common Stock who is selling
such shares in a Public Offering transfers such shares for disposition in the
Public Offering, at which time the rights of the holder of the converted Class B
Common Stock as such holder shall cease and the holder of the converted Class B
Common Stock shall be deemed to have become the holder of record of the shares
of Class A Common Stock into which such shares of Class B Common Stock have been
converted as a result of the Public Offering.
(d) The holder of shares of Class B Common Stock converted shall promptly
surrender the certificate or certificates representing the shares so converted
at the principal office of the Corporation (or such other office or agency of
the Corporation as the Corporation may designate by notice in writing to the
holders of Class B Common Stock) at any time during its usual business hours,
and if such shares of Class B Common Stock are Uncertificated Shares, shall
promptly notify the Corporation in writing of such transfer at the principal
office of the Corporation (or such other office or agency of the Corporation as
the Corporation may designate by notice in writing to the holders of the Class B
Common Stock).
(e) In no event shall the Corporation be liable to any such holder or any third
party arising from any such conversion.
(f) The shares of Class A Common Stock resulting from a conversion of duly
authorized, validly issued, fully paid and nonassessable shares of Class B
Common Stock into shares of Class A Common Stock shall be duly authorized,
validly issued, fully paid and nonassessable. Any share of Class B Common Stock
which is converted into a share of Class A Common Stock shall become an
authorized but unissued share of Class B Common Stock.
(g) The Corporation will at all times reserve and keep available out of its
authorized but unissued shares of Class A Common Stock solely for the purpose of
issue upon conversion of Class B Common Stock, such number of shares of Class A
Common Stock as shall then be issuable upon the conversion of all outstanding
shares of Class B Common Stock.
(h) The issuance of certificates evidencing (or in the case of Uncertificated
Shares, the provision of applicable written statements or other documents with
respect to) shares of Class A Common Stock upon conversion of shares of Class B
Common Stock shall be made without charge to the holders of such shares for any
issue tax in respect thereof or other cost incurred by the Corporation in
connection with such conversion; provided, however, the Corporation shall not be
required to pay any tax that may be payable in respect of any Transfer involved
in the issuance and delivery of any certificate in (or in the case of
Uncertificated Shares, the provision of applicable written statements or other
documents with respect to) a name other than that of the holder of the Class B
Common Stock converted.
NOTE 3. PREFERRED STOCK
Serial Preferred Stock. Except as provided in this Certificate, the board of
- ------------------------
directors of the Corporation is authorized, by resolution or resolutions from
- --
time to time adopted, to provide for the issuance of serial preferred stock in
- --
series and to fix and state the powers, designations, preferences and relative,
participating, optional or other special rights of the shares of each such
series, and the qualifications, limitation or restrictions thereof, including,
but not limited to determination of any of the following:
(1) the distinctive serial designation and the number of shares
constituting such series;
(2) the rights in respect of dividends, if any, to be paid on the shares of
such series, whether dividends shall be cumulative and, if so, from which date
or dates, the payment or date or dates for dividends, and the participating or
other special rights, if any, with respect to dividends;
(3) the voting powers, full or limited, if any, of the shares of such
series;
(4) whether the shares of such series shall be redeemable and, if so, the price
or prices at which, and the terms and conditions upon which such shares may be
redeemed;
(5) the amount or amounts payable upon the shares of such series in the event
of voluntary or involuntary liquidation, dissolution or winding up of the
Corporation;
(6) whether the shares of such series shall be entitled to the benefits of a
sinking or retirement fund to be applied to the purchase or redemption of such
shares, and, if so entitled, the amount of such fund and the manner of its
application, including the price or prices at which such shares may be redeemed
or purchased through the application of such funds;
(7) whether the shares of such series shall be convertible into, or
exchangeable for, shares of any other class or classes or any other series of
the same or any other class or classes of stock of the Corporation and, if so
convertible or exchangeable, the conversion price or prices, or the rate or
rates of exchange, and the adjustments thereof, if any, at which such conversion
or exchange may be made, and any other terms and conditions of such conversion
or exchange;
(8) the subscription or purchase price and form of consideration for which the
shares of such series shall be issued; and
(9) whether the shares of such series which are redeemed or converted shall
have the status of authorized but unissued shares of serial preferred stock and
whether such shares may be reissued as shares of the same or any other series of
serial preferred stock.
Each share of each series of serial preferred stock shall have the same relative
powers, preferences and rights as, and shall be identical in all respects with,
all the other shares of the Corporation of the same series, except the times
from which dividends on shares which may be issued from time to time of any such
series may begin to accrue.
NOTE 4. INCOME TAXES
It is anticipated that the Company will file its federal income tax return as a
"C Corporation." Consequently, federal income taxes have been calculated at a
34% rate and are reflected as a current liability on the accompanying balance
sheet.
NOTE 5. MERGER OF EXECUTIVE AND FAS
Jack Alexander, as founder and on behalf of the Company, entered into an
Agreement and Plan of Merger dated May 7, 1998 (the "Merger Agreement") among
Executive Wealth Management Services, Inc. and certain shareholders of Executive
whereby a wholly owned subsidiary of the Company, newly created under the
General Corporation Laws of Delaware, will merge with and into Executive with
Executive surviving the merger (the "Merger"). The Merger will result in (i)
Executive being governed by Delaware law, (ii) certain officers and directors of
Executive becoming officers and directors of the Company, (iii) Executive's name
being changed to FAS Wealth Management Services, Inc.; and (iv) Executive
becoming a wholly owned subsidiary of the Company.
NOTE 6. SUBSEQUENT EVENTS
On July 4, 1998, the Company agreed to issue 79,500 shares of its preferred
stock in exchange for approximately 400,000 shares of United States Refining &
Petrochemicals, Inc. Class A Convertible Preferred Stock. These shares are
convertible, at the option of the Company, into shares of United States Refining
& Petrochemicals, Inc. common stock with a value at the time of conversion of
$4,000,000.
On October 9, 1998, Tollycraft Yacht Corporation shares were trading at $3.75
per share resulting in a loss in value of approximately $450,000. The current
value of the shares is approximately $750,000 before any costs associated with
selling the shares or the negative impact on the share price of selling a block
of 200,000 shares of stock. This reduction in value has not been reflected in
the accompanying financial statements. If the reduction in value had been
reflected in the accompany financial statements, a valuation allowance would be
recorded in the amount of $450,000; income taxes and net income would be reduced
to $255,000 and $495,000 respectively, and stockholders' equity would amount to
$497,544 after reflecting the reduced stock valuation at the current market
price.
<PAGE>
[LETTERHEAD OF HARPER & PEARSON COMPANY]
The Board of Directors
FAS Group, Inc.
Poway, California
We have compiled the accompanying pro forma combining balance sheets, statements
of operations and cash flows to reflect what the combined entity would look like
if the combination of Executive Wealth Management Services, Inc. (Executive) and
FAS Group, Inc. (FAS) had occurred at June 30, 1998. Because the combination
did not occur at June 30, 1998, no inference should be drawn as to what the
combined entity would have looked like at that date or what the combined
financial position, operations or cash flows would have been if the combination
had taken place at June 30, 1998.
A compilation is limited to presenting in the form of pro forma financial
statements, information that is the representation of management. We have not
audited or reviewed the combined pro forma financial statements and,
accordingly, do not express an opinion or any other form of assurance on the
accompanying statements.
The pro forma financial statements included herein assumes that Executive and
FAS Group, Inc. merge and thereafter operate as a combined entity. The planned
merger has not yet occurred and may not occur.
Management has elected to omit substantially all of the disclosures required by
generally accepted accounting principles. If the omitted disclosures were
included in the financial statements, they might influence the user's
conclusions about the Company's financial position, results of operations, and
cash flows. Accordingly, these financial statements are not designed for those
who are not informed about such matters.
This report was prepared solely for presentation to the Board of Directors in
conjunction with the formation and prospective operations of the Company.
Subsequent to the issuance of this compilation report, the market value of the
Company's investment in Tollycraft Yacht Corporation dropped to approximately
$3.75 per share as opposed to approximately $6.00 per share at the date
received. The reduced values are reflected in Footnote 1 at the bottom of the
combined balance sheets and statements of operations.
/s/Harper & Pearson Company
Houston, Texas
June 25, 1998
<PAGE>
<TABLE>
<CAPTION>
FAS GROUP, INC.
COMBINED BALANCE SHEETS
JUNE 30, 1998
ASSETS
EWMS FAS(1) COMBINED
------------ ----------- -----------
CURRENT ASSETS
<S> <C> <C> <C>
Cash $ 29,740 $ 0 $ 29,740
Accounts receivable from
correspondent brokers 193,762 0 193,762
Accounts receivable from others 38,105 0 38,105
------------ ----------- -----------
TOTAL CURRENT ASSETS 261,607 0 261,607
Furniture, Fixtures and Equipment -
at cost net of accumulated depreciation 23,127 0 23,127
OTHER ASSETS
Deposits with clearing organizations 40,093 0 40,093
Other deposits 1,934 0 1,934
Marketable Securities 0 1,200,000 1,200,000
Organization Costs - 2,544 2,544
------------ ----------- -----------
$ 326,761 $ 1,202,544 $1,529,305
============ =========== ===========
LIABILITIES AND
STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable $ 20,875 $ 0 $ 20,875
Commissions Payable 217,875 0 217,875
Federal Income Tax Payable 0 408,000 408,000
------------ ----------- -----------
TOTAL CURRENT LIABILITIES 238,750 408,000 646,750
------------ ----------- -----------
STOCKHOLDERS' EQUITY
Preferred Stock
Common Stock 5,231 2,544 7,775
Additional Paid-In-Capital 1,130,639 0 1,130,639
Additional Paid-In-Capital, Warrants 4,410 0 4,410
Retained Earnings (1,052,269) 792,000 (260,269)
------------ ----------- -----------
TOTAL STOCKHOLDERS' EQUITY 88,011 794,544 882,555
------------ ----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 326,761 $ 1,202,544 $1,529,305
============ =========== ===========
</TABLE>
SEE ACCOUNTANTS' PRO FORMA COMPILATION REPORT.
(1) IF THE $1,200,000 VALUE OF TOLLYCRAFT YACHT CORPORATION SHOWN ABOVE AS
EQUITY SECURITIES WAS REDUCED TO CURRENT MARKET VALUE AT OCTOBER 9, 1998,
TOLLYCRAFT YACHT CORPORATION EQUITY SECURITIES, RETAINED EARNINGS AND TOTAL
STOCKHOLDERS' EQUITY FOR FAS GROUP, INC. WOULD BE REDUCED TO $750,000, $495,000
AND $497,544 RESPECTIVELY.
<PAGE>
<TABLE>
<CAPTION>
FAS GROUP, INC.
COMBINED STATEMENTS OF OPERATIONS
FOR THE PERIOD ENDED JUNE 30, 1998
EWMS FAS(1) COMBINED
----------- ----------- -----------
REVENUE
<S> <C> <C> <C>
Commissions and Consulting Fees $1,340,112 $1,200,000 $2,540,112
Underwriting Fees 90,970 0 90,970
Other Income 22,961 0 22,961
----------- ----------- -----------
TOTAL REVENUE 1,454,043 1,200,000 2,654,043
----------- ----------- -----------
EXPENSES
Advertising 1,920 0 1,920
Board of Directors Fees 12,000 0 12,000
Clearing Charges 79,447 0 79,447
Commissions 1,122,940 0 1,122,940
Consulting Fees 28,653 0 28,653
Dues and Subscriptions 4,789 0 4,789
Depreciation 5,168 0 5,168
Insurance 1,341 0 1,341
-----------
Meetings and Seminars (750) 0 (750)
===========
Miscellaneous 1,475 0 1,475
Occupancy Costs 49,654 0 49,654
Office Expenses 15,565 0 15,565
Regulatory 12,739 0 12,739
Rental Equipment 3,010 0 3,010
Salaries and Wages 171,446 0 171,446
Taxes 19,580 0 19,580
-----------
Travel and Lodging 16,500 0 16,500
Utilities 14,491 0 14,491
----------- ----------- -----------
TOTAL OPERATING EXPENSES 1,559,968 0 1,559,968
----------- ----------- -----------
OPERATING INCOME (LOSS) (105,925) 1,200,000 1,094,075
----------- ----------- -----------
FEDERAL INCOME TAX EXPENSE 0 (408,000) (408,000)
----------- ----------- -----------
NET INCOME (LOSS) ($105,925) $ 792,000 $ 686,075
=========== =========== ===========
NET INCOME (LOSS) PER SHARE ($0.04) $ 0.31 $ 0.13
=========== =========== ===========
</TABLE>
SEE ACCOUNTANTS' PRO FORMA COMPILATION REPORT.
(1) IF THE PRICE OF THE SHARES OF TOLLYCRAFT YACHT CORPORATION WERE REDUCED
TO CURRENT MARKET ($3.75 PER SHARE AT OCTOBER 9, 1998), FAS GROUP, INC. TAXES
AND NET INCOME WOULD DECREASE TO $255,000 AND $495,000 RESPECTIVELY, AS A RESULT
OF RECORDING A VALUATION ALLOWANCE OF $450,000.
<PAGE>
<TABLE>
<CAPTION>
FAS GROUP, INC.
COMBINED STATEMENTS OF CASH FLOWS
FOR THE PERIOD ENDED JUNE 30, 1998
EWMS FAS COMBINED
----------- ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net Income (Loss) ($105,925) $ 792,000 $ 686,075
Adjustments to Reconcile Net Income
to Net Cash used in Operating Activities:
Depreciation 4,215 0 4,215
Receipt of Marketable Securities,
for Brokerage Commission 0 (1,200,000) (1,200,000)
Organization Costs 0 (2,544) (2,544)
(Increase) Decrease in Operating Assets:
Receivable from correspondent brokers (79,590) 0 (79,590)
Receivable - Other 8,210 0 8,210
Deposits 5,065 0 5,065
Prepaid Expenses
Increase (Decrease) in Operating Liabilities:
Accounts Payable (85,998) 0 (85,998)
------------
Commissions Payable 116,584 0 116,584
Federal Income Tax Payable 0 408,000 408,000
----------- ------------ ------------
Net cash used in operating activities (137,439) (2,544) (139,983)
----------- ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of Common Stock 0 2,544 2,544
Subscription of Common Stock 25,000 0 25,000
Syndication costs, Net 15,000 0 15,000
----------- ------------ ------------
Net cash provided by Financing activities 40,000 2,544 42,544
----------- ------------ ------------
NET (DECREASE) IN CASH (97,439) 0 (97,439)
CASH AT BEGINNING OF PERIOD 127,179 0 127,179
----------- ------------ ------------
CASH AT END OF PERIOD $ 29,740 $ 0 $ 29,740
=========== ============ ============
</TABLE>
SEE ACCOUNTANTS' PRO FORMA COMPILATION REPORT.
