Registration of Securities Issued in a Business-Combination Transaction — Form S-4
Filing Table of Contents
Document/Exhibit Description Pages Size
1: S-4 Registration of Securities Issued in a 245± 977K
Business-Combination Transaction
2: EX-3.2 Articles of Incorporation/Organization or By-Laws 2± 7K
3: EX-3.3 Articles of Incorporation/Organization or By-Laws 11± 44K
4: EX-3.4 Articles of Incorporation/Organization or By-Laws 8± 29K
5: EX-4.2 Instrument Defining the Rights of Security Holders 11± 51K
6: EX-5.1 Opinion re: Legality 1 7K
7: EX-8.1 Opinion re: Tax Matters 6± 23K
8: EX-10.1 Material Contract 6± 24K
9: EX-23.1 Consent of Experts or Counsel 1 6K
10: EX-23.2 Consent of Experts or Counsel 1 7K
S-4 — Registration of Securities Issued in a Business-Combination Transaction
Document Table of Contents
As filed with the Securities and Exchange Commission on August 10, 1998
Registration No. ____________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________
FORM S-4
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
_______________
FAS GROUP, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 8111 74-2883579
(State or other jurisdiction of (Primary Standard Industrial
(I.R.S. Employer
incorporation or organization) Classification Code Number)
Identification Number)
JACK A. ALEXANDER, CHAIRMAN & CEO
FAS GROUP, INC.
14358 GOLDEN SUNSET LANE 14358 GOLDEN SUNSET LANE
POWAY, CALIFORNIA 92064 POWAY, CALIFORNIA 92064
(619) 486-4955 (619) 486-4955
(Address, including zip code, and telephone number (Name, address,
including zip code, and
including area code, of registrant's principal executive offices)
telephone number including area code, of agent for service)
Copies to:
ROBERT L. SONFIELD, JR., ESQ. ROBERT H. DEVORE, ESQ.
SONFIELD & SONFIELD EXECUTIVE WEALTH MANAGEMENT SERVICES, INC.
770 S. POST OAK LANE 2323 STICKNEY POINT ROAD
HOUSTON, TEXAS 77056 SARASOTA, FLORIDA 34231
(713) 877-8333 (941) 365-4200
FACSIMILE: (713) 877-1547 FACSIMILE: (941) 366-4840
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after this Registration Statement becomes
effective and all other conditions to the merger (the "Merger") of FAS Wealth
Management Services, Inc. ("FAS Wealth") with and into Executive Wealth
Management Services, Inc. ("Executive") pursuant to the Merger Agreement (as
defined herein) have been satisfied or waived.
If the securities being registered on this Form are being offered in connection
with the formation of a holding company and there is compliance with General
Instruction G, check the following box. [ ]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER
AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL
THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE
COMMISSION, ACTING PURSUANT TO
SAID SECTION 8(A), MAY
DETERMINE
Calculation of Registration Fee
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Title of Each Class of Proposed Maximum Proposed Maximum
Securities to be Amount to be Offering Price Per Aggregate Offering Amount of
Registered Registered Unit(1) Price(1) Registration Fee
---------------------- ---------------- -------------------- ------------------- -----------------
Common Stock 1,961,000 $ 1.44 2,823,840 $ 855.71
====================== ================ ==================== =================== =================
(1) The Registration Fee is based upon the book value of the Common Stock
of FAS at June 25, 1998 pursuant to Rule 457(f)(2).
EXECUTIVE WEALTH MANAGEMENT SERVICES, INC.
------------------------------------------
SouthTrust Bank Plaza 1800 Second Street, Suite 780 Sarasota, Florida
34236
August 10, 1998
DEAR SHAREHOLDER:
Enclosed are materials relating to a Merger of Executive Wealth Management
Services, Inc., a Florida corporation ("Executive"), with a newly formed
wholly-owned Delaware subsidiary ("FAS Wealth") of FAS Group, Inc., a Delaware
corporation, ("FAS") with Executive surviving the merger. The Merger is
intended to be effected on the twentieth day after the date of this Information
Statement and will result in (i) Executive's name being changed to FAS Wealth
Management Services, Inc. (ii) shares of common stock of Executive being
converted into the right to receive .608 shares of common stock of FAS for each
share of common stock of Executive owned by you as of the date of Merger (iii)
Executive to be incorporated under the laws of Delaware after the Merger; and
(iv) Executive being a wholly owned subsidiary of FAS whose Certificate of
Incorporation authorizes FAS to issue (A) 25,000,000 shares of Class A Common
Stock, par vale $.001 per share, (B) 1,000,000 shares of Class B Common Stock;
and (c) 1,000,000 preferred shares with a par value of $.001 per share.
The Board of Directors of FAS and shareholders owning approximately 55.8%
of the outstanding common stock of Executive as of July 31, 1998 carefully
considered means to facilitate the growth of Executive and maximize the
potential of its Affinity Marketing Program and concluded the Merger to be an
integral part of the process and in the best interests of Executive and its
shareholders.
FAS urges you to follow the instructions set forth in the enclosed
Information Statement under the section entitled "Merger with FAS -- How to
Exchange Executive Common Stock for FAS Common Stock" if you elect to surrender
the Executive Certificate(s) representing your shares for certificates
representing shares of common stock of FAS. If you wish to dissent from the
Merger and seek a judicial determination of the value of your shares, you may do
so by following the instructions in the Information Statement section entitled
"Merger with FAS -- Rights of Dissenting Shareholders."
Sincerely,
/s/Guy S. Della Penna
------------------------
Guy S. Della Penna, President
2
SUBJECT TO COMPLETION, DATED AUGUST 10, 1998
INFORMATION CONTAINED HEREIN SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION
STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE
ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS
PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER
TO BUY NOR SHALL THERE BY ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH
SUCH OFFER, SOLICIATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR
QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
INFORMATION STATEMENT OF
EXECUTIVE WEALTH MANAGEMENT SERVICES, INC.
AND
PROSPECTUS OF FAS GROUP, INC.
This Information Statement is being furnished to holders of the common
stock, par value $.002 per share (the "Executive Common Stock"), of Executive
Wealth Management Services, Inc., a Florida corporation (Executive), to inform
the holders that the board of directors of Executive (the "Board of Directors")
and holders of shares representing approximately 55.8% (the "Majority Holders")
of the outstanding shares of Executive Common Stock have authorized, by written
consent dated July 31, 1998, the Merger of Executive with FAS Wealth, a wholly
owned subsidiary of FAS with Executive surviving the merger (the "Merger") as a
Delaware corporation and the change of Executive's name to FAS Wealth Management
Services, Inc., all to be effected on the twentieth day after the date of this
Information Statement or as soon as practicable thereafter (the "Effective
Date"). The close of business on July 31, 1998 has been fixed by the Board of
Directors as the record date for determining the stockholders of Executive
entitled to notice of the Merger.
MANAGEMENT IS NOT ASKING FOR YOUR PROXY AND YOU ARE
REQUESTED NOT TO SEND US YOUR PROXY
On the Effective Date, FAS Wealth, a newly formed wholly owned Delaware
subsidiary of FAS will merge with and into Executive, pursuant to an Agreement
and Plan of Merger (the "Plan of Merger") among Executive, certain stockholders
of Executive, FAS and FAS Wealth dated May 7, 1998.
In the Merger, holders of Executive Common Stock will receive .608 shares
of common stock of FAS, par value $.001, ("FAS Common Stock") for each share of
Executive Common Stock owned by each such holder as of the day preceding the
Effective Date of the Merger with any resulting fractional FAS Common Stock
interests being canceled in exchange for cash in an amount (without interest)
equal to the product of $0.065 and the number of shares of Executive Common
Stock represented by any such fraction (the "Cancellation Price"). No
certificates for fractional shares of FAS Common Stock will be issued and all
such fractional shares of FAS Common Stock interests will be canceled. Holders
of such fractional interests will have only the right to receive the
Cancellation Price in cash for such interests.
Enclosed herewith is a form letter of transmittal with instructions for
effecting the surrender of the certificate or certificates which immediately
prior to the Effective Date represented issued and outstanding shares of
Executive Common Stock ("Executive Certificates"), in exchange for certificates
representing FAS Common Stock ("FAS Certificates"). Upon surrender of an
Executive Certificate for cancellation to FAS together with a duly executed
letter of transmittal, the holder of such Executive Certificate will, subject to
the restrictions applicable to fractional shares, be entitled to receive, as
soon as practicable after the Effective Date, in exchange therefor an FAS
Certificate representing that number of shares of FAS Common Stock into which
the shares of Executive Common Stock theretofore represented by the Executive
Certificate so surrendered will have been converted pursuant to the provisions
of the Plan of Merger, and the Executive Certificate so surrendered will
forthwith be canceled.
The Merger will also result in (i) FAS Wealth being governed by Delaware
law, which may grant officers and directors greater protection from personal
liability than Florida law and provides anti-takeover protections that may not
be available under Florida law and (ii) the officers and directors of Executive
as constituted immediately prior to the Merger becoming officers and directors
of FAS along with the persons who are currently officers and directors of FAS
(the "New Board of Directors"). See "Certain Considerations Related to the
Merger -Directors and Officers of FAS following the Merger."
FAS has adopted the FAS Group, Inc. Stock Incentive Plan (the "Stock
Incentive Plan"). Therefore, upon effectiveness of the Merger, the Stock
Incentive Plan will permit the New Board of Directors or a special committee of
the New Board of Directors to award three types of stock incentives to
directors, officers and certain key employees of FAS and FAS Wealth. Such
discretionary stock incentives could include stock options, stock appreciation
rights, and "restricted" stock. See "Information Concerning FAS - Management of
FAS - Stock Incentive Plan."
The purpose of this Information Statement/Prospectus is to inform holders
of Executive Common Stock who have not given Executive their written Consent to
the foregoing corporate actions of such actions and their effects and, as
required by Florida law, to give any holder of Executive Common Stock who so
desires the right to dissent from the Merger and to receive the "fair value" of
his Executive Common Stock in lieu of FAS Common Stock and any cash for canceled
FAS fractional share interests to which such holder would otherwise be entitled
in the Merger. See "Certain Considerations Related to the Merger - Rights of
Dissenting Shareholders."
As of July 31, 1998, 2,615,485 shares of Executive Common Stock were issued
and outstanding.
iv
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TABLE OF CONTENTS
AVAILABLE INFORMATION 1
INCORPORATION OF DOCUMENTS BY REFERENCE 1
CAUTIONARY STATEMENTS 1
SUMMARY 3
Overview 3
Parties to the Merger 3
FAS Group, Inc. 3
Executive Wealth Management Services, Inc. 3
FAS Wealth Management Services Inc. 3
The Merger 3
Conditions to the Merger 4
Termination 4
Exercise of Dissenter's Rights 4
Delivery of Shares 4
Certain Tax Considerations 4
Effect of the Merger on Employees and Employee Benefits 4
Accounting Treatment and Appraisal Rights 4
Summary Historical Consolidated Financial Data of Executive Wealth Management Services, Inc. 5
Summary Unaudited Pro Forma Financial Data 5
Risk Factors 5
Summary Consolidated Financial Data 6
RISK FACTORS 9
General Securities Business Risks 9
Market Acceptance of Affinity Group Products 9
Reduced Revenues Due to Economic, Political and Market Conditions 9
Reduced Revenues Due to Declining Market Volume, Price or Liquidity 9
Possibility of Losses Associated with Underwriting Activities 10
Net Capital Requirements 10
Potential Reduction in Revenues 10
Significant Fluctuations in Quarterly Operating Results 10
Competition for Retaining and Recruiting Personnel 10
Significant Competition from Larger Securities Firms 11
Regulation 12
Potential Conflicts of Interest 12
Possibility of Losses Associated with Principal and Trading Activities 13
Litigation and Potential Securities Laws Liability 13
Dependence on Affinity Group Marketing Strategy 13
Dependence on Cash Inflows to Mutual Funds 13
Management of Growth 14
Dependence on Systems and Third Parties 14
Dependence Upon Availability of Capital and Funding 14
Uncertainty of Name Availability 15
Absence of Dividends 15
Corporate Governance Controlled by Insiders 15
No Assurance of Public Market for Common Stock 16
Anti-Takeover Provisions 16
Dilution 16
Lack of Independent Fairness Opinion 16
Effect of Exercise of Stock Options Granted Under Stock Incentive Plan 16
Possible Issuance of Additional Shares 17
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS 17
CERTAIN CONSIDERATIONS RELATED TO THE MERGER 20
Background 20
The Merger 20
Executive's Reasons for the Merger; Recommendation of Executive's Board of Directors 21
Opinion of Executive's Board of Directors 21
Directors and Officers of FAS Following the Merger 21
Rights of Dissenting Shareholders 25
THE MERGER 27
General 27
Effective Time; Closing 28
Conditions to Closing 28
Mutual Conditions 28
Conditions to FAS's Obligations 29
Conditions to Executive's Obligations 29
Representations and Warranties 29
Covenants 29
No Solicitation 30
Termination 30
Termination by Mutual Consent or by Either Pary 30
Termination by FAS Only 30
Termination by Executive Only 31
Default Costs 32
Amendment; Wavier 32
Post-Closing Matters 32
Incentive Stock Option 32
Dividend Policy 32
Market for Common Equity and Related Stockholder Matters 32
CERTAIN TAX CONSIDERATIONS 32
Taxpayer Relief Act 34
Back-Up Withholding Requirements 34
INFORMATION CONCERNING FAS 35
FAS Management's Discussion and Analysis of Financial Condition and Results of Operations 35
Overview 35
Liquidity and Capital Resources. 36
Business of FAS 36
Overview 36
The Industry Background 37
Employment 37
Growth Strategy 38
Accounting, Administration and Operations 38
Competition 38
Legal Proceedings 39
Risk Management 40
Regulation 40
Net Capital Requirments 42
Management of FAS 42
Directors and Executive Officers 42
Compensation of Executive Officers 43
Compensation of Directors 43
Stock Incentive Plan 43
General Provisions of the Stock Incentive Plan 43
Stock Options and Stock Appreciation Rights 44
Restricted Stock 45
Tax Information 45
Limitations of Liability and Indemnification of Directors 46
Principal Stockholders of FAS 47
Description of FAS Capital Stock 48
Common Stock 48
Preferred Stock 49
Shares Eligible for Future Sale 50
INFORMATION CONCERNING EXECUTIVE 50
General 50
Operations Office 51
Licensing 51
Objective of Management 51
Affinity Group Marketing Strategy 52
Non-Securities Related Products and Services 54
TaxResources, Inc. 54
Customized Business Owners Insurance 54
Index Annuity 55
Disability Income Trust Product 55
Securities Related Products and Services 55
Variable Annuity 55
Other Securities Products 55
Affinity Group Products Under Development or Consideration 55
Customized Disability Income Insurance 55
Transworld Systems, Inc. 56
Prepaid Legal Services, Inc. (PLS) 56
Affinity Group Customer Base 56
American Medical Association (AMA) 56
Florida Medical Association, Inc. (FLAMEDCO) 56
American Healthcare Alliance, Inc. (AHA) 57
Kentucky Medical Association (KMA) 57
Other Affinity Groups 58
Institute of Electrical and Electronic Engineers (IEEE) 58
Affinity Group Marketing Team 58
Retail Brokerage-Equities-Fixed Income-Mutual Funds-Other 60
Insurance Wholesale Marketing 61
Direct Settlement of Non-Exchange Traded Securities 61
Investment Banking 61
Retirement and Estate Planning 61
Growth Strategy 62
The First Phase 62
The Second Phase 62
Executive Selected Historical Consolidated Financial Data 63
Executive Management's Discussion and Analysis of Financial Condition and Results of Operations 63
Regulatory Net Capital 64
Management of Executive 64
Directors and Executive Officers 64
Employment Agreements 65
Principal Stockholders of Executive 65
COMPARATIVE RIGHTS OF STOCKHOLDERS 65
Significant Changes in Executive's Charter and By-laws to be Implemented by the Merger 65
Change of Corporate Name 65
Limitation of Liability 65
Indemnification 67
Defenses Against Hostile Takeovers 69
Introduction 69
Authorized Shares of Capital Stock 69
Stockholder Meetings 70
Classified Board of Directors and Removal of Directors. 70
Restriction of Maximum Number of Directors and Filling Vacancies on the Board of Directors 70
Stockholder Vote Required to Approve Business Combinations with Related Persons 71
Advance Notice Requirements for Nomination of Directors and Proposal of New Business at Annual Stockholder Meetings 71
Supermajority Voting Requirement for Amendment of Certain Provisions of the Certificate of Incorporation 71
Certain Significant Differences Between the Corporation Laws of Florida and Delaware 72
Dividends 72
Right to Inspect Books and Records 72
Interested Director Transactions 72
Special Meetings of Shareholders 73
Sequestration of Shares 73
Certain Actions 73
Tender Offer and Business Combination Statutes 73
Dissenters' Rights 74
LEGAL MATTERS 75
EXPERTS 75
INDEX TO FINANCIAL STATEMENTS F - 1
Annex A Agreement and Plan of Merger
Annex B Certificate of Incorporation of FAS Group, Inc.
Annex C FAS Stock Incentive Plan
Annex D Florida Statute Describing Dissenters' Rights
Annex E Letter of Transmittal
1
AVAILABLE INFORMATION AVAILABLE INFORMATION
Executive files reports and other information with the Securities and
Exchange Commission (the "Commission") relating to its business, financial
position, results of operations and other matters. Such reports, proxy
statements and other information can be inspected and copied at the Public
Reference Section maintained by the Commission at Judiciary Plaza, 450 Fifth
Street N.W., Washington, D.C. 20549. Copies of such material also can be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. Such reports, proxy
statements and other information can be reviewed through the Commission's
Electronic Data Gathering Analysis and Retrieval System, which is publicly
available through the Commission's Web site (http://www.sec.gov).
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS INFORMATION STATEMENT/PROSPECTUS AND, IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION SHOULD NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY FAS, EXECUTIVE OR ANY OTHER PERSON. THIS INFORMATION
STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF
AN OFFER TO BUY ANY SECURITIES IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
NOT LAWFUL TO MAKE ANY SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER
THE DELIVERY OF THIS INFORMATION STATEMENT/PROSPECTUS NOR ANY DISTRIBUTION OF
THE SECURITIES MADE UNDER THIS INFORMATION STATEMENT/PROSPECTUS SHALL, UNDER ANY
CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF EXECUTIVE OR FAS SINCE THE DATE OF THIS INFORMATION STATEMENT/
PROSPECTUS.
INCORPORATION OF DOCUMENTS BY REFERENCE INCORPORATION OF DOCUMENTS BY REFERENCE
The following documents filed with the Commission by Executive are
incorporated by reference in this Information Statement/Prospectus:
1. Executive's Annual Report on Form 10-K for the year ended December 31,
1997;
2. Executive's Quarterly Report on Form 10-Q for the quarter ended March
31, 1998;
All documents and reports filed by Executive pursuant to the Exchange Act
after the date of this Information Statement/Prospectus and prior to the date
the offering of FAS Common Stock in exchange for Executive Common Stock is
completed, shall be deemed to be incorporated by reference in this Information
Statement/Prospectus and to be a part hereof from the dates of filing of such
documents or reports. Any statement contained in a document incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Information Statement/Prospectus to the extent
that a statement contained herein or in any other subsequently filed document
which also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not constitute a part of this Information Statement/Prospectus, except as so
modified or superseded.
CAUTIONARY STATEMENTS CAUTIONARY STATEMENTS
This Information Statement/Prospectus contains statements relating to
future results of each of FAS, Executive and the Surviving Corporation
(including certain projections and business trends) that are "forward-looking
statements" as defined in the Private Securities Litigation Reform Act of 1995.
Actual results may differ materially from those projected as a result of certain
risks and uncertainties, including, but not limited to, changes in political and
economic conditions; regulatory conditions; integration of acquisitions; and
competitive product and pricing pressures, as well as other risks and
uncertainties, including but not limited to those detailed from time to time in
the filings of FAS, Executive and the Surviving Corporation made with the
Commission.
When used in this Information Statement/Prospectus with respect to each of
FAS, Executive and the Surviving Corporation the words "estimate," "project,"
"intend," "expect" and similar expressions are intended to identify
forward-looking statements. Such statements are subject to risks and
uncertainties that could cause actual results to differ materially from those
contemplated in such forward-looking statements. Readers are cautioned not to
place undue reliance on these forward-looking statements, which speak only as of
the date hereof. Such risks and uncertainties include those risks,
uncertainties and risk factors identified in this Information
Statement/Prospectus under the headings "Risk Factors," "FAS Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Executive Management's Discussion and Analysis of Financial Condition and
Results of Operations." Neither FAS nor Executive undertakes any obligation to
publicly release any revisions to these forward-looking statements to reflect
events or circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
SUMMARY SUMMARY
The following is a summary of certain information contained elsewhere in
this Information Statement/Prospectus. This summary is not intended to be
complete and is qualified in all respects by reference to the more detailed
information and financial statements contained elsewhere or incorporated by
reference in this Information Statement/Prospectus and the Annexes hereto.
Stockholders are urged to read this Information Statement/Prospectus and the
Annexes hereto in their entirety.
OVERVIEW Overview
PARTIES TO THE MERGER Parties to the Merger
Three companies and their shareholders are affected by the Merger described in
this Prospectus.
FAS Group, Inc. FAS Group, Inc.("FAS"). FAS was incorporated under the
business corporation laws of the State of Delaware on June 23, 1998. The
founder of FAS, Jack Alexander, pioneered the registered
representative-independent contractor form of doing business to build a
nationwide, full service brokerage firm. He founded First Affiliated Securities
and attracted over 1,000 associated brokers in approximately 400 offices. Firms
in which Mr. Alexander has presided over have been responsible for underwriting
more than 100 new securities issues and raised over $1 billion for companies in
both private and public offerings.
FAS intends to be a full service investment banking firm focused on
investment banking, institutional brokerage and asset management.
Executive Wealth Management Services, Inc.Executive Wealth Management
Services, Inc. ("Executive"). Executive is a Florida corporation engaged in the
development, marketing and distribution of non-securities and securities related
products and services to affinity groups and the public at large. Executive is
capable of engaging in substantially all aspects of the life and health
insurance business and the securities business. Executive is registered as a
securities broker/dealer pursuant to the provisions of the Securities Exchange
Act of 1934, as amended, as a Registered Investment Advisor under the Investment
Advisor Act of 1940, as amended, and also is registered as such under various
state securities laws. The Company is a member of the National Association of
Securities Dealers, Inc., Securities Investor Protection Corporation and the
Municipal Securities Rule Making Board. After consummation of the Merger,
Executive intends to expand its business activities with respect to marketing
its non-securities and securities related products and services.
The business office of Executive is, and after completion of the Merger
will continue to be, located at 2323 Stickney Point Road, Sarasota, Florida
34231. Its telephone number is 941-365-4200.
FAS Wealth Management Services Inc. FAS Wealth Management Services Inc.("FAS
Wealth"). FAS Wealth was incorporated under the laws of the State of Delaware
June 23, 1998, for the sole purpose of the Merger described in this Prospectus.
FAS Wealth has no business operations or significant capital and has no
present intention of engaging in any active business except to merge with and
into Executive.
THE MERGER The Merger
Upon the satisfaction or waiver of the conditions to the Merger, FAS Wealth
will be merged with and into Executive, with Executive continuing as the
Surviving Corporation. The Merger will become effective upon filing, with the
Secretary of State of the State of Delaware and the Department of State of the
State of Florida, a duly executed Certificate of Merger, in the form required by
and in accordance with the Delaware General Corporation Law ("DGCL") and the
Florida Business Corporation Act ("BCA"), or at such time thereafter as is
provided in the Certificate of Merger.
Pursuant to the Merger Agreement, at the effective time of the Merger
("Effective Time") each share of Executive Common Stock, issued and outstanding
immediately prior to the Effective Time will be converted into the right to
receive the .608 duly authorized, validly issued, fully paid and nonassessable
shares of FAS Common Stock.
CONDITIONS TO THE MERGER Conditions to the Merger
TerminationTermination. The Merger may be abandoned any time prior to the
Effective Time by EWMS or FAS if, without fault of such terminating party, the
Merger shall not have been consummated on or before August 31, 1998, which date
may be extended by mutual consent of the parties hereto; provided, that if the
only conditions remaining to be satisfied on August 31, 1998 are the conditions
expressed in Section 7.03 of the Merger Agreement 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 EWMS or FAS may terminate the Merger Agreement for
failure of the Merger to be consummated in accordance with the Merger Agreement
shall be extended to and including December 31, 1998.
Exercise of Dissenter's RightsExercise 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
Delivery of SharesDelivery of Shares. Each holder of an outstanding
certificate of Executive Common Stock, upon surrendering thereof to the Transfer
Agent, shall be entitled to receive in exchange therefor a certificate or
certificates of FAS at any time after the Effective Time. The certificate or
certificates representing shares of FAS Common Stock will represent the number
of whole shares of FAS Common Stock into and for which the shares of Executive
Common Stock represented by the surrendered certificate have been converted.
Certain Tax ConsiderationsCertain Tax Considerations. Executive and FAS
will receive, prior to the Effective Time of the Merger, the opinion of Sonfield
& Sonfield 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 FAS or Executive as a result of the Merger; and (iii) no gain or
loss will be recognized by Executive's stockholders upon the receipt of FAS
Common Stock solely in exchange for Executive Common Stock in connection with
the Merger (except with respect to cash received in lieu of a fractional
interest in FAS Common Stock). See "Certain Tax Considerations."
Effect of the Merger on Employees and Employee BenefitsEffect of the Merger
on Employees and Employee Benefits. FAS shall assume in the Merger all
employment, compensation, and benefit agreements and plans relating to employees
of Executive, including without limitation, all employment contracts, change of
control agreements, severance, and indemnity agreements with such employees and
former employees, all Executive employee benefit plans, all grants and awards
under Executive 1995 Stock Option Plan relating to current Executive employees;
and any other agreements or obligations set forth in the Agreement and Plan of
Merger.
Appraisal RightsAccounting Treatment and Appraisal Rights. No shares of
FAS Common Stock shall be issued in respect of any shares of Executive Common
Stock, the holders of which shall object to the Merger in writing and demand
payment of the value of their shares pursuant to the Florida Business
Corporation Act (the "Act") and as a result payment therefore is made, such
holders to have only the rights provided by such Act.
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SUMMARY HISTORICAL FINANCIAL DATA OF
EXECUTIVE WEALTH MANAGEMENT SERVICES, INC. Summary Historical Consolidated Financial Data of
Executive Wealth Management Services, Inc.
YEAR ENDED DECEMBER 31
1993 1994 1995 1996 1997
Statement of Operations Data:
Revenue $825,433 $1,866,299 $2,797,172 $3,000,044 $4,172,716
Operating Loss $455,835 $ 96,772 $ 140,477 $ 236,014 $ 132,792
Net Loss $ 446101 $ 67,080 $ 115,879 $ 212,045 $ 105,239
Net Loss Per Share $ (1.055) $ (.158) $ (.254) $ (.088) $ (.04)
Weighted Average Shares
Outstanding 423,000 440,833 462,833 2,491,490 2,675,485
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SUMMARY UNAUDITED PRO FORMA FINANCIAL DATASummary Unaudited Pro Forma Financial Data
The following table presents summary pro forma combined financial data for Executive,
as adjusted for the effect of the Merger as if the Merger were consummated on December 31,
1997:
YEAR ENDED DECEMBER 31
1993 1994 1995 1996 1997(1)
Statement of Operations Data:
Revenue $825,433 $1,866,299 $2,797,172 $3,000,044 $4,172,716
Operating Loss $455,835 $ 96,772 $ 140,477 $ 236,014 $ 132,792
Net Loss $ 446101 $ 67,080 $ 115,879 $ 212,045 $ 105,239
Net Loss Per Share $ (1.055) $ (.158) $ (.254) $ (.088) $ (.04)
Weighted Average Shares
Outstanding 423,000 440,833 462,833 2,491,490 2,675,485
<FN>
___________________________
(1) Because FAS Group, Inc. had no operations prior to and in 1997, Executive Wealth
Management Services, Inc.'s operations are the same as the pro forma combined statement of
RISK FACTORS Risk Factors
The securities offered hereby are speculative and involve a high degree of
risk and immediate and substantial dilution. Potential risks include, among
others: FAS is in the development stage, lack of assurance of public market,
dependence on key personnel, sale of less than the maximum offering, evaluation
of prospective financing opportunities, possible price volatility of the shares
and no payments of dividends. See "Risk Factors."
SUMMARY CONSOLIDATED FINANCIAL DATA Summary Consolidated Financial Data
The following summary historical consolidated financial data of Executive
has been derived from the historical financial statements and should be read in
conjunction with such financial statements and notes thereto, which are included
elsewhere herein. The unaudited pro forma combining balance sheet at December
31, 1997 has been derived from the audited financial statements of Executive for
the year ended December 31, 1997 and the audited financial statements of the
Company as of June 25, 1998. The unaudited pro forma combining balance sheet
gives effect to the Merger as if it occurred on December 31, 1997. The pro
forma data should be read in conjunction with the pro forma condensed
consolidated Executive financial statements, and notes thereto included
elsewhere herein.
[Enlarge/Download Table]
FAS GROUP, INC.
PRO FORMA COMBINING BALANCE SHEETS
December 31, 1997
-------------------
ASSETS DEC. 31 HISTORICAL PRO FORMA PRO FORMA
1996 EWMS FAS Combined
---------- ------------ ---------- -----------
Cash $ - $ 127,771 $ - $ 127,791
Organization Costs - - 2,544 2,544
Receivables
Broker dealers 40,306 45,406 - 45,406
Correspondent brokers 122,201 68,766 - 68,766
Customers 13,000 13,105 - 13,105
Affiliates and employees 3,650 18,363 - 18,363
Other 14,847 - 14,847
Furniture, fixtures and
Equipment at cost, net of
Accumulated depreciation 37,192 27,343 - 27,343
Deposits with clearing organizations 43,742 45,157 - 45,157
Other deposits 1,934 1,934 - 1,934
Syndication costs - 15,000 - 15,000
Equity Securities - -0- 5,200,000 5,200,000
---------- ------------ ---------- -----------
$ 262,025 $ 377,692 $5,202,544 $5,580,236
========== ============ ========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Accounts payable $ 36,483 $ 107,465 - $ 107,465
Commissions payable 143,566 101,291 - 101,291
Federal Income Tax Payable - - 408,000 408,000
180,049 208,756 408,000 616,756
---------- ------------ ---------- -----------
STOCKHOLDERS' EQUITY
Preferred Stock -0- -0- -0- -0-
Common Stock 4,983 5,231 2,544 7,775
Stock warrants 4,410 4,410 -0- 4,410
Additional paid-in-capital 913,688 1,105,639 4,000,000 5,105,639
----------
Accumulated deficit (841,105) (946,344) 792,544 (154,344)
---------- ------------ ---------- -----------
TOTAL STOCKHOLDERS' EQUITY 81,976 168,936 4,794,544 4,963,480
---------- ------------ ---------- -----------
$ 262,025 $ 377,692 $5,202,544 $5,580,236
========== ============ ========== ===========
<FN>
NOTE TO READER: FAS GROUP, INC. DOES NOT OWN $4,000,000 OF THE EQUITY SECURITIES; ARE
REFLECTED ABOVE TO SHOW THE PRO FORMA EFFECTS ON THE PRO FORMA COMBINED BALANCE SHEET AS IF
THE SECURITIES WERE OWNED BY FAS GROUP, INC.
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FAS GROUP, INC.
PRO FORMA COMBINED STATEMENT OF OPERATIONS
December 31, 1997
-------------------
DECEMBER HISTORICAL PRO FORMA PRO FORMA
1996 EXECUTIVE FAS COMBINED
----------- ------------ ---------- -----------
REVENUE
Commissions $2,909,749 $ 3,723,815 $ - $3,723,815
Underwriting Fees 32,500 304,002 - 304,002
Other 57,795 144,899 - 144,899
Consulting Fee - - 1,200,000 1,200,000
----------- ------------ ---------- -----------
3,000,044 4,172,716 1,200,000 5,372,716
----------- ------------ ---------- -----------
EXPENSES
Employer compensation and benefits 345,561 406,052 - 406,052
Commissions 2,275,456 3,131,258 - 3,131,258
Clearing charges and regulatory fees 262,542 346,223 - 346,223
Occupancy and equipment rental 125,968 130,494 - 130,494
Depreciation 11,844 10,811 - 10,811
Other Operating Expenses 214,687 280,670 - 280,670
----------- ------------ ---------- -----------
3,236,058 4,305,508 - 4,305,508
----------- ------------ ---------- -----------
OPERATING INCOME (LOSS) (236,014) (132,792) 1,200,000 1,067,208
OTHER INCOME
Rent 23,969 27,553 - 27,553
FEDERAL INCOME TAX - - 408,000 (408,000)
----------- ------------ ---------- -----------
NET INCOME (LOSS) $ (212,045) $ (105,239) $ 792,000 $ 686,761
=========== ============ ========== ===========
[Enlarge/Download Table]
FAS GROUP, INC.
PRO FORMA COMBINED STATEMENTS OF CASH FLOWS
December 31, 1997
-------------------
December 31 HISTORICAL PRO FORMA PRO FORMA
1996 EWMS FAS COMBINED
------------- ------------ ----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss $ (212,045) $ (105,239) $ -0- $ (105,239)
------------- ------------ ----------- -----------
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation 11,844 10,811 10,811
(Increase) decrease in operating assets:
Receivables:
Broker dealers (963) (5,100) (5,100)
Correspondent brokers 20,772 53,435 53,435
Customers (13,000) (105) (105)
Affiliates and employees (3,650) (14,847) (14,847)
Deposits (1,318) (1,415) (1,415)
Syndication costs (15,000) (15,000)
(Decrease) increase in operating liabilities:
Accounts payable (21,570) 70,982 70,982
Commissions payable (977) (42,275) _________ (42,275)
------------- ------------ -----------
(8,862) 41,773 -0- 41,773
------------- ------------ ----------- -----------
NET CASH USED IN OPERATING ACTIVITIES (220,907) (63,466) -0- (63,466)
------------- ------------ ----------- -----------
CASH FLOWS USED BY INVESTING ACTIVITIES
Purchase of furniture, fixtures and equipment (6,685) (962) -0- (962)
------------- ------------ ----------- -----------
NET CASH USED BY INVESTING ACTIVITIES (6,685) (962) -0- (962)
------------- ------------ ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds form Sale of Preferred Stock -0- -0- -0- -0-
Proceeds from sale of common stock 222,992 214,000 120 214,120
Syndication costs (15,803) (21,801) -0- (21,801)
------------- ------------ ----------- -----------
NET CASH PROVIDED BY FINANCING
ACTIVITIES 207,189 192,199 120 192,319
------------- ------------ ----------- -----------
NET INCREASE IN CASH (20,403) 127,771 120 127,891
CASH, at beginning of year 20,403 -0- -0- -0-
------------- ------------ ----------- -----------
CASH, at end of year $ -0- $ 127,771 $ 120 $ 127,891
============= ============ =========== ===========
75
RISK FACTORS RISK FACTORS
The shareholders of Executive, by accepting shares in the Merger, are
making an investment decision that involves a high degree of risk and should
carefully consider the following factors in evaluating FAS and its business in
addition to the other information contained in this Information
Statement/Prospectus.
GENERAL SECURITIES BUSINESS RISKSGeneral Securities Business Risks
The securities business is, by its nature, subject to numerous and
substantial risks, particularly in volatile or illiquid markets, and in markets
influenced by sustained periods of low or negative economic growth, including
the risk of losses resulting from the underwriting or ownership of securities,
trading, principal activities, counterparty failure to meet commitments,
customer fraud, employee errors, misconduct and fraud (including unauthorized
transactions by traders), failures in connection with the processing of
securities transactions, litigation, the risks of reduced revenues in periods of
reduced demand for public offerings or reduced activity in the secondary markets
and the risk of reduced spreads on the trading of securities.
MARKET ACCEPTANCE OF AFFINITY GROUP PRODUCTSMarket Acceptance of Affinity Group
Products
The success of the Company is, in part, dependent upon its ability to
expand business operations through the marketing, on an exclusive, non-exclusive
and endorsed basis, various insurance, financial, non-securities and
securities-related products, and other services to members of large medical
Affinity Groups and associations. Although Executive has committed significant
financial and personnel resources to analysis of the viability of such business
operations, there can be no assurance that an adequate demand for such products
or services will develop in the future. Further, there can be no assurance with
respect to the length of time experienced prior to receipt of an Affinity Group
endorsement or the type or nature of any criteria that may be established by
Affinity Groups prior to granting any endorsements.
REDUCED REVENUES DUE TO ECONOMIC, POLITICAL AND MARKET CONDITIONS Reduced
Revenues Due to Economic, Political and Market Conditions
Reductions in public offering, merger and acquisition and securities
trading activities, due to any one or more changes in economic, political or
market conditions could cause FAS's revenues from investment banking, trading
and sales activities to decline materially. The amount and profitability of
these activities are affected by many national and international factors,
including economic, political and market conditions; level and volatility of
interest rates; legislative and regulatory changes; currency values; inflation;
flows of funds into and out of mutual and pension funds; and availability of
short-term and long-term funding and capital.
REDUCED REVENUES DUE TO DECLINING MARKET VOLUME, PRICE OR LIQUIDITY Reduced
Revenues Due to Declining Market Volume, Price or Liquidity
FAS's revenues may decrease in the event of a decline in market volume,
prices or liquidity. Declines in the volume of securities transactions and in
market liquidity generally result in lower revenues from trading activities and
commissions. Lower price levels of securities may also result in a reduced
volume of underwriting transactions, and could cause a reduction in revenue from
corporate finance fees, as well as losses from declines in the market value of
securities held in trading, investment and underwriting positions, reduced asset
management fees and withdrawals of funds under management. Sudden sharp
declines in market values of securities can result in illiquid markets and the
failure of issuers and counterparties to perform their obligations, as well as
increases in claims and litigation. In such markets, FAS may incur reduced
revenues or losses in its principal trading and market-making activities.
POSSIBILITY OF LOSSES ASSOCIATED WITH UNDERWRITING ACTIVITIES Possibility of
Losses Associated with Underwriting Activities
Participation in underwritings involves both economic and regulatory risks.
An underwriter may incur losses if it is unable to resell the securities it is
committed to purchase or if it is forced to liquidate its commitment at less
than the agreed purchase price. In addition, the trend, for competitive and
other reasons, toward larger commitments on the part of lead underwriters means
that, from time to time, an underwriter (including a co-manager) may retain
significant position concentrations in individual securities. Increased
competition has eroded and is expected to continue to erode underwriting
spreads. Another result of increased competition is that revenues from
individual underwriting transactions have been increasingly allocated among a
greater number of co-managers, which has resulted in reduced revenues for
certain transactions. However, FAS's underwriting business is expected to be
very competitive and is expected to remain so in the near future.
NET CAPITAL REQUIREMENTS Net Capital Requirements
Underwriting commitments require a charge against net capital and,
accordingly, FAS's ability to make underwriting commitments may be limited by
the requirement that it must at all times be in compliance with the applicable
net capital regulations. See "Information Concerning FAS - Net Capital
Requirements."
POTENTIAL REDUCTION IN REVENUES Potential Reduction in Revenues
Securities offerings can vary significantly from industry to industry due
to economic, legislative, regulatory and political factors. Underwriting
activities in a particular industry can decline for a number of reasons.
Underwriting and brokerage activity can also be materially adversely affected
for a company or industry segment by disappointments in quarterly performance
relative to analysts' expectations, or by changes in long-term prospects for
particular companies, industries or industry segments.
SIGNIFICANT FLUCTUATIONS IN QUARTERLY OPERATING RESULTSSignificant Fluctuations
in Quarterly Operating Results
FAS's revenues and operating results may fluctuate from quarter to quarter
and from year to year due to a combination of factors, including the number of
underwriting and merger and acquisition transactions completed by FAS's clients,
access to public markets for companies in which FAS has invested as a principal,
the valuations of FAS's principal investments and the investments of funds
managed by FAS, the level of institutional and retail brokerage transactions,
the timing of recording of asset management fees and special allocations of
income, variations in expenditures for personnel, litigation expenses, and
expenses of establishing new business units. FAS's revenues from an
underwriting transaction are recorded only when the underwritten security
commences trading, and revenues from merger and acquisition transactions are
recorded only when retainer fees are received or the transaction closes.
Accordingly, the timing of FAS's recognition of revenue from a significant
transaction can materially affect FAS's quarterly operating results. Due to the
foregoing and other factors, there can be no assurance that FAS will be able to
sustain profitability on a quarterly or annual basis. See "Information
Concerning FAS - FAS Management's Discussion and Analysis of Financial Condition
and Results of Operations."
COMPETITION FOR RETAINING AND RECRUITING PERSONNEL Competition for Retaining and
Recruiting Personnel
FAS's business will be dependent on the highly skilled, and often highly
specialized, individuals it employs. Retention of investment banking, sales and
trading, venture capital, and management and administrative professionals is
particularly important to FAS's prospects. FAS's strategy is to establish
relationships with FAS's prospective corporate clients in advance of any
transaction, and to maintain such relationships over the long term by providing
advisory services to corporate clients in equity, debt and merger and
acquisition transactions. Such relationships depend in part upon the individual
employees who represent FAS in its dealings with such clients. In addition,
corporate finance professionals contribute significantly to FAS's ability to
secure a role in managing public offerings and in executing trades in the
secondary market. From time to time, other companies in the securities industry
have experienced losses of investment banking and sales and trading
professionals, including recent losses of analysts. The level of competition
for key personnel has increased recently, particularly due to the market entry
efforts of certain non-brokerage financial services companies, commercial banks
and other investment banks targeting or increasing their efforts in some of the
same industries that FAS intends to serve. The loss of an investment banking or
sales and trading professional, particularly a senior professional with a broad
range of contacts in an industry, could materially and adversely affect FAS's
operating results.
FAS expects further growth in the number of its personnel, particularly if
current markets remain favorable to investment banking transactions.
Competition for employees with the qualifications desired by FAS is intense,
especially with respect to investment banking professionals with expertise in
industries in which underwriting or advisory activity is robust. There can be
no assurance that FAS will be able to recruit a sufficient number of new
employees with the desired qualifications in a timely manner. The failure to
recruit new employees could materially and adversely affect FAS's future
operating results.
While FAS generally does not have employment agreements with its employees
except executive officers, it will attempt to retain its employees with
incentives, such as bonus plans and the ability to buy Company stock that vest
over a number of years of employment. These incentives, however, may be
insufficient in light of the increasing competition for experienced
professionals in the securities industry, particularly if the value of FAS's
stock declines or fails to appreciate sufficiently to be a competitive source of
a portion of professional compensation. See "Information Concerning FAS -
Management of FAS."
SIGNIFICANT COMPETITION FROM LARGER SECURITIES FIRMS Significant Competition
from Larger Securities Firms
FAS will engage in the highly competitive securities brokerage and
financial services businesses. It will compete directly with large Wall Street
securities firms, securities subsidiaries of major commercial bank holding
companies, major regional firms and smaller "niche" players.
Competition from commercial banks has increased because of recent
acquisitions of securities firms by commercial banks, as well as internal
expansion by commercial banks into the securities business. In addition, FAS
expects competition from domestic and international banks to increase as a
result of recent and anticipated legislative and regulatory initiatives in the
United States to remove or relieve certain restrictions on commercial banks.
Such competition could adversely affect FAS's operating results, as well as its
ability to attract and retain highly skilled individuals.
Many other companies have greater personnel and financial resources than
FAS. Larger competitors are able to advertise their products and services on a
national or regional basis and may have a greater number and variety of
distribution outlets for their products, including retail distribution.
Discount brokerage firms market their services through aggressive pricing and
promotional efforts. In addition, some competitors have a much longer history
of investment banking activities than FAS and, therefore, may possess a relative
advantage with regard to access to deal flow and capital.
Recent rapid advancements in computing and communications technology are
substantially changing the means by which financial services are delivered.
These changes are providing consumers with more direct access to a wide variety
of financial and investment services including market information and on-line
trading and account information. Advancements in technology also create demand
for more sophisticated levels of client services. Provision of these services
may entail considerable cost without an offsetting source of revenue. See
"Information Concerning FAS - Competition."
REGULATION Regulation
The securities business is subject to extensive regulation under federal
and state laws in the United States. One of the most important regulations with
which FAS's broker-dealer subsidiaries must continually comply is the Securities
and Exchange Commission (the "SEC") Rule 15c3-1 (the "Net Capital Rule") which
requires the broker-dealer subsidiaries of FAS to maintain a minimum amount of
net capital, as defined under such regulations.
Compliance with many of the regulations applicable to FAS involves a number
of risks, particularly in areas where applicable regulations may be subject to
interpretation. In the event of non-compliance with an applicable regulation,
governmental regulators and the NASD may institute administrative or judicial
proceedings that may result in censure, fine, civil penalties (including treble
damages in the case of insider trading violations), issuance of cease-and-desist
orders, deregistration or suspension of the non-compliant broker-dealer or
investment adviser, suspension or disqualification of the broker-dealer's
officers or employees or other adverse consequences. The imposition of any such
penalties or orders on FAS could have a material adverse effect on FAS's
operating results and financial condition.
The regulatory environment in which FAS operates is subject to change. FAS
may be adversely affected as a result of new or revised legislation or
regulations imposed by the SEC, other United States or foreign governmental
regulatory authorities or the NASD. FAS also may be adversely affected by
changes in the interpretation or enforcement of existing laws and rules by these
governmental authorities and the NASD.
Additional regulation, changes in existing laws and rules, or changes in
interpretations or enforcement of existing laws and rules often affect directly
the method of operation and profitability of securities firms. FAS cannot
predict what effect any such changes might have. Furthermore, FAS's businesses
may be materially affected not only by regulations applicable to it as a
financial market intermediary, but also by regulations of general application.
For example, the volume of FAS's underwriting, merger and acquisition and
principal investment businesses in a given time period could be affected by,
among other things, existing and proposed tax legislation, antitrust policy and
other governmental regulations and policies (including the interest rate
policies of the Board of Governors of the Federal Reserve System (the "Federal
Reserve Board")) and changes in interpretation or enforcement of existing laws
and rules that affect the business and financial communities. The level of
business and financing activity in each of the industries on which FAS focuses
can be affected not only by such legislation or regulations of general
applicability, but also by industry- specific legislation or regulations. See
"Information Concerning FAS - Regulation."
POTENTIAL CONFLICTS OF INTEREST Potential Conflicts of Interest
Executive officers, directors and employees of FAS will from time to time
invest, or receive a profit interest, in investments in private or public
companies or investment funds in which FAS, or an affiliate of FAS, is an
investor or for which FAS carries out investment banking assignments, publishes
acts as a market maker. FAS will have in place compliance procedures and
practices designed to ensure that such inside information is not used for making
investment decisions on behalf of the hedge funds and to monitor hedge fund
investment in FAS's investment banking clients. No assurance can be provided
that these procedures and practices will be effective. In addition, this
conflict and these procedures and practices may limit the freedom of such
officials to make potentially profitable investments on behalf of those hedge
funds. See "Information Concerning FAS - Asset Management."
POSSIBILITY OF LOSSES ASSOCIATED WITH PRINCIPAL AND TRADING ACTIVITIES
Possibility of Losses Associated with Principal and Trading Activities
FAS's securities trading and market-making activities will be primarily
conducted by FAS as principal and subject FAS's capital to significant risks,
including market, credit, leverage, counterparty and liquidity risks. These
activities often involve the purchase, sale or short sale of securities as
principal in markets that may be characterized by relative illiquidity or that
may be particularly susceptible to rapid fluctuations in liquidity and price.
FAS from time to time may have large position concentrations in securities of,
or commitments to, a single issuer, or issuers engaged in a specific industry,
particularly as a result of FAS's underwriting activities. FAS intends to
concentrate its trading positions in a more limited number of industry sectors
and companies than some other broker-dealers, which might result in higher
trading losses than would occur if FAS's positions and activities were less
concentrated. See "Information Concerning FAS - Risk Management."
Much of FAS's market-making business will involve securities traded on
Nasdaq. Nasdaq has recently begun trading securities in sixteenths of a dollar
(rather than in eighths). This change and further changes in this regard may
adversely affect FAS's revenues from brokerage activities.
LITIGATION AND POTENTIAL SECURITIES LAWS LIABILITY Litigation and Potential
Securities Laws Liability
Many aspects of FAS's business involve substantial risks of liability. An
underwriter is exposed to substantial liability under federal and state
securities laws, other federal and state laws and court decisions, including
decisions with respect to underwriters' liability and limitations on
indemnification of underwriters by issuers. For example, a firm that acts as an
underwriter may be held liable for material misstatements or omissions of fact
in a Memorandum used in connection with the securities being offered or for
statements made by its securities analysts or other personnel. While FAS has
never been subject to litigation based upon a material misstatement or omission
of fact in a Memorandum, in recent years there has been an increasing incidence
of litigation involving the securities industry, including class actions that
seek substantial damages. FAS is also subject to the risk of litigation from
its other intended business activities, including litigation that may be without
merit. As FAS intends to actively defend any such litigation, significant legal
expenses could be incurred. An adverse resolution of any future lawsuits
against FAS could materially adversely affect FAS's operating results and
financial condition. See "Information Concerning FAS - Legal Proceedings."
DEPENDENCE ON AFFINITY GROUP MARKETING STRATEGYDependence on Affinity Group
Marketing Strategy
The business of Executive will be highly dependent on its strategy for
marketing securities and non-securities products to Affinity Group. There can
be no assurance that such strategy will be successful. See "Information
Concerning Executive - Affinity Group Marketing Strategy."
DEPENDENCE ON CASH INFLOWS TO MUTUAL FUNDS Dependence on Cash Inflows to Mutual
Funds
A slowdown or reversal of cash inflows to mutual funds and other pooled
investment vehicles could lead to lower underwriting and brokerage revenues for
FAS since mutual funds purchase a significant portion of the securities offered
in public offerings and traded in the secondary markets. The recent demand for
new equity offerings has been driven in part by institutional investors,
particularly large mutual funds, seeking to invest cash received from the
public. The public may withdraw additional cash from mutual funds as a result
of a decline in the market generally or as a result of a decline in mutual fund
net asset values. To the extent that a decline in cash inflows into mutual
funds or a decline in net asset values of these funds reduces demand by fund
managers for initial public or secondary offerings, FAS's business and results
of operations could be materially adversely affected. Moreover, a slowdown in
investment activity by mutual funds may have an adverse effect on the securities
markets generally.
MANAGEMENT OF GROWTH Management of Growth
After the Merger, FAS expects to experience significant growth in its
business activities and the number of its employees. This growth will require
increased investment in management personnel, financial and management systems
and controls and facilities, which, in the absence of continued revenue growth,
would cause FAS's operating margins to decline. In addition, as is common in
the securities industry, FAS will be highly dependent on the effective and
reliable operation of its communications and information systems. FAS believes
that its anticipated future growth will require implementation of new and
enhanced communications and information systems and training of its personnel to
operate such systems. In addition, the scope of procedures for assuring
compliance with applicable regulations and NASD rules will change as the size
and complexity of FAS's business changes. As FAS grows, FAS will implement
additional formal compliance procedures to reflect such growth. Any difficulty
or significant delay in the implementation or operation of existing or new
systems, compliance procedures or the training of personnel could adversely
affect FAS's ability to manage growth. See "Information Concerning FAS -
Management's Discussion and Analysis of Financial Condition and Results of
Operations" and " - Accounting, Administration and Operations."
DEPENDENCE ON SYSTEMS AND THIRD PARTIES Dependence on Systems and Third Parties
FAS's business is highly dependent on communications and information
systems, including certain systems provided by its clearing broker. Any failure
or interruption of FAS's systems, systems of FAS's clearing broker or third
party trading systems, could cause delays or other problems in FAS's securities
trading activities, which could have a material adverse effect on FAS's
operating results. Such failures and interruptions may result from the
inability of certain computing systems (including those of FAS, its clearing
broker, and other third party vendors) to recognize the year 2000. There can be
no assurance that the year 2000 issue can be resolved prior to the upcoming
change in the century. Although FAS may incur substantial costs, particularly
costs resulting from charges by its third party service providers, in correcting
year 2000 issues, such costs are not sufficiently certain to estimate at this
time. In addition, FAS's principal disaster recovery system is provided by its
clearing broker. There can be no assurance that FAS or its clearing broker will
not suffer any systems failure or interruption, including one caused by an
earthquake, fire, other natural disaster, power or telecommunications failure,
act of God, act of war or otherwise, or that FAS's or its clearing broker's
back-up procedures and capabilities in the event of any such failure or
interruption will be adequate. See "Information Concerning FAS - Accounting,
Administration and Operations."
DEPENDENCE UPON AVAILABILITY OF CAPITAL AND FUNDING Dependence Upon Availability
of Capital and Funding
FAS's business is dependent upon the availability of adequate funding and
regulatory capital under applicable regulatory requirements. FAS intends to
satisfy these needs from internally generated funds and loans from third
parties. There can be no assurance that any, or sufficient, funding or
regulatory capital will continue to be available to FAS in the future on terms
that are acceptable to it. See "Information Concerning FAS - Regulation," " -
Management's Discussion and Analysis of Financial Condition and Results of
Operations - Overview," and " - Liquidity and Capital Resources."
UNCERTAINTY OF NAME AVAILABILITY Uncertainty of Name Availability
There are several companies throughout the United States whose corporate
names are similar to FAS's. Therefore, other companies may contest the use by
FAS of its name. The existence and use of such names may detract from FAS's
marketing efforts. Although FAS intends to register its name as a trade and/or
service mark with the U.S. Patent and Trademark Office, there is no assurance
that it will be successful in doing so.
ABSENCE OF DIVIDENDSAbsence of Dividends
FAS anticipates that earnings will be retained for the development of FAS's
business, and that no dividends will be declared on the Common Stock in the
foreseeable future. It is anticipated that FAS will seek to obtain a working
capital credit facility from one or more lenders, although, as of the date of
this Information Statement/Prospectus, no firm arrangements have been made. It
is likely that any agreement with respect to any financing will contain
covenants that may, under certain circumstances, restrict payment of dividends
by FAS, including dividends on the Common Stock. See and "Information
Concerning FAS - FAS Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Liquidity and Capital Resources."
CORPORATE GOVERNANCE CONTROLLED BY INSIDERSCorporate Governance Controlled by
Insiders
Following the Merger, FAS will have outstanding two classes of Common
Stock: Class A Common Stock, which has one vote per share, and Class B Common
Stock, which has fifty votes per share. The shares issued the shareholders in
the Merger are shares of Class A Common Stock. All of the outstanding shares of
Class B Common Stock will be held by Jack A. Alexander and Guy S. Della Penna.
As a result, Messrs. Alexander and Della Penna will be able to control 92% of
the voting power of FAS following the Merger. The ownership of the Class B
Common Stock, and the related voting power, will be held 63% by Mr. Alexander
and 37% by Mr. Della Penna. Therefore, Mr. Alexander will be able to control
the outcome of all corporate actions requiring shareholder approval (other than
corporate actions required to be approved by a vote of holders of shares of
Common Stock voting as a separate class). Accordingly, prospective investors
should realize that their ownership of Common Stock will not provide them with
any ability to determine the outcome of matters requiring a shareholder vote,
including the election of directors. In addition, Mr. Alexander will have
control over the operations of FAS, including significant control over
compensation decisions under FAS's benefit and compensation plans, including
plans under which he will be a direct beneficiary. See "Information Concerning
FAS - Management of FAS." Guy S. Della Penna and Jack A. Alexander
(collectively referred to as the "Insider Shareholders") have executed an
agreement to impose certain limitations and restrictions upon the sale,
transfer, gift, pledge, assignment or other disposition of the Class B Common
Stock of the Company currently owned by the Insider Shareholders (all such Class
B Common Stock owned by the Insider Shareholders being hereinafter collectively
referred to as the "Shares"). Terms of the agreement include: (i) in the event
an Insider Shareholder intends or attempts to sell, give, assign, pledge,
encumber or otherwise dispose of any interest or right in the Shares owned by
him, except to a Permitted Transferee, then such Insider Shareholder shall
immediately offer to sell such Shares as he intends or attempts to sell, give,
assign, transfer, pledge, encumber or otherwise dispose of to the other Insider
Shareholder; (ii) the death of an Insider Shareholder shall constitute an offer
by the legal representative of the Insider Shareholder's estate to sell such
Shares to the surviving Insider Shareholder; and (iii) Shares not purchased by
the Insider Shareholder shall become void and exchangeable at a ratio of one for
one (1:1) for Class A Common Stock of the Company.
NO ASSURANCE OF PUBLIC MARKET FOR COMMON STOCKNo Assurance of Public Market for
Common Stock
There is presently no public market for the Common Stock of FAS and there
is no assurance that a public market for such securities will develop after
completion of the Merger, or, if one develops, that it will be sustained.
ANTI-TAKEOVER PROVISIONSAnti-Takeover Provisions
Certain provisions of Delaware law and FAS's Certificate of Incorporation
and By-Laws may have the effect of delaying or preventing a change in control or
acquisition of FAS. FAS's Certificate of Incorporation and By-Laws include
provisions for a classified Board of Directors, "Blank Check" preferred stock
(the terms of which may be fixed by the Board of Directors without stockholder
approval), a prohibition on stockholder action by written consent in lieu of a
meeting, and certain procedural requirements governing stockholder meetings.
See "Comparative Rights of Stockholders - Defenses Against Hostile Takeovers".
DILUTIONDilution
The pro forma net tangible book value of Executive before giving effect to
the Merger as of December 31, 1997 was approximately $168,936 or $.065 per share
before giving effect tot he .608 for one Executive for FAS stock exchange. of
Common Stock. Net tangible book value per share represents the amount of total
tangible assets of the Company less total liabilities, divided by the number of
shares of Common Stock outstanding. After giving effect to the Merger, the pro
forma net tangible book value of the Company as of December 31, 1997 would have
been $4,963,480 or $.94 per share. This represents an immediate increase in pro
forma net tangible book value of $.875 per share to existing Executive
shareholders and an immediate dilution of $.94 per share to the FAS shareholders
before giving effect to the issuance of additional shares.
LACK OF INDEPENDENT FAIRNESS OPINIONLack of Independent Fairness Opinion
The number of shares of FAS Common Stock to be issued in exchange for
shares of Executive Common Stock was determined through negotiations between
Executive and FAS and approved by the Executive Board of Directors and FAS Board
of Directors. No independent third party has expressed its opinion that the
Merger was fair to the holders of Executive Common Stock from a financial point
of view.
EFFECT OF EXERCISE OF STOCK OPTIONS GRANTED UNDER STOCK INCENTIVE PLANEffect of
Exercise of Stock Options Granted Under Stock Incentive Plan
FAS's Stock Incentive Plan provides that up to 500,000 shares of Class A
Common Stock may be issued to employees and directors pursuant to stock options
that are exercisable at a price determined by the Board of Directors at the time
the option is granted and shall not be less than the par value of the shares.
At the time of exercise of the options granted under the Stock Incentive Plan,
the fair market value of the shares issued pursuant thereto may be greater than
the exercise price for such shares. If the fair market value is greater than
the exercise price at the time of exercise, the exercise of the stock options
will have a dilutive effect on the other stockholders of FAS. Furthermore, if
the fair market value is greater, FAS would likely be able to sell the shares
issued pursuant to the exercise of the stock options at a price greater than the
exercise price. As of the date of this Information Statement/Prospectus, no
stock options have been granted under the Stock Incentive Plan. See
"Information Concerning FAS -- Stock Incentive Plan."
POSSIBLE ISSUANCE OF ADDITIONAL SHARESPossible Issuance of Additional Shares
FAS's Certificate of Incorporation authorizes the issuance of 25,000,000
shares of Class A Common Stock, 1,000,000 shares of Class B Common Stock and
1,000,000 shares of Preferred Stock. FAS's Board of Directors has the power to
issue any or all of such additional shares of Common Stock and Preferred Stock
without shareholder approval. FAS's Board of Directors may choose to issue some
or all of such shares to acquire one or more operating businesses or other types
of property in the future, although FAS currently has no commitments, contracts
or intentions to issue any such additional shares.
The issuance of any such shares may result in a reduction of the book value
or market price, if any, of the outstanding shares of FAS's Common Stock. If
FAS issues any additional shares, such issuances will also cause a reduction in
the proportionate ownership and voting power of all other shareholders.
Further, any new issuance of shares may result in a change of control of FAS.
See "Information Concerning FAS - Description of FAS Capital Stock."
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTSUNAUDITED PRO FORMA
COMBINED CONDENSED FINANCIAL STATEMENTS
The following unaudited pro forma combined condensed statements of income
for Executive for the years ended December 31, 1995, 1996 and 1997 have been
derived from the audited financial statements of Executive included elsewhere in
this Information Statement/Prospectus. The unaudited pro forma combined
condensed balance sheet at December 31, 1997 gives effect to the Merger as if it
occurred on December 31, 1997. This pro forma information has been prepared
utilizing the audited historical consolidated financial statements of Executive
for the year ended December 31, 1997 and the audited financial statements of FAS
as of June 25, 1998. The Merger will be accounted for under the pooling method
of accounting for accounting and financial reporting purposes. As a result of
this treatment, the historical pre-Merger financial statements of the Surviving
Corporation will be those of Executive because FAS had no significant operations
prior to the Merger. This information should be read in conjunction with the
historical financial statements and notes thereto of Executive which appear
elsewhere herein. The pro forma financial data are provided for comparative
purposes only and are not necessarily indicative of the results which would have
occurred had the Merger been consummated on December 31, 1997, nor are they
necessarily indicative of future results.
PRO FORMA UNAUDITED COMBINED CONDENSED STATEMENTS OF INCOME
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FAS GROUP, INC.
PRO FORMA COMBINING BALANCE SHEETS
December 31, 1997
-------------------
ASSETS DEC. 31 HISTORICAL PRO FORMA PRO FORMA
1996 EWMS FAS Combined
---------- ------------ ---------- -----------
Cash $ - $ 127,771 $ - $ 127,791
Organization Costs - - 2,544 2,544
Receivables
Broker dealers 40,306 45,406 - 45,406
Correspondent brokers 122,201 68,766 - 68,766
Customers 13,000 13,105 - 13,105
Affiliates and employees 3,650 18,363 - 18,363
Other 14,847 - 14,847
Furniture, fixtures and
Equipment at cost, net of
Accumulated depreciation 37,192 27,343 - 27,343
Deposits with clearing organizations 43,742 45,157 - 45,157
Other deposits 1,934 1,934 - 1,934
Syndication costs - 15,000 - 15,000
Equity Securities - -0- 5,200,000 5,200,000
---------- ------------ ---------- -----------
$ 262,025 $ 377,692 $5,202,544 $5,580,236
========== ============ ========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Accounts payable $ 36,483 $ 107,465 - $ 107,465
Commissions payable 143,566 101,291 - 101,291
Federal Income Tax Payable - - 408,000 408,000
180,049 208,756 408,000 616,756
---------- ------------ ---------- -----------
STOCKHOLDERS' EQUITY
Preferred Stock -0- -0- -0- -0-
Common Stock 4,983 5,231 2,544 7,775
Stock warrants 4,410 4,410 -0- 4,410
Additional paid-in-capital 913,688 1,105,639 4,000,000 5,105,639
----------
Accumulated deficit (841,105) (946,344) 792,544 (154,344)
---------- ------------ ---------- -----------
TOTAL STOCKHOLDERS' EQUITY 81,976 168,936 4,794,544 4,963,480
---------- ------------ ---------- -----------
$ 262,025 $ 377,692 $5,202,544 $5,580,236
========== ============ ========== ===========
<FN>
NOTE TO READER: FAS GROUP, INC. DOES NOT OWN $4,000,000 OF THE EQUITY SECURITIES; ARE
REFLECTED ABOVE TO SHOW THE PRO FORMA EFFECTS ON THE PRO FORMA COMBINED BALANCE SHEET AS IF
THE SECURITIES WERE OWNED BY FAS GROUP, INC.
[Enlarge/Download Table]
FAS GROUP, INC.
PRO FORMA COMBINED STATEMENT OF OPERATIONS
December 31, 1997
-------------------
DECEMBER HISTORICAL PRO FORMA PRO FORMA
1996 EXECUTIVE FAS COMBINED
----------- ------------ ---------- -----------
REVENUE
Commissions $2,909,749 $ 3,723,815 $ - $3,723,815
Underwriting Fees 32,500 304,002 - 304,002
Other 57,795 144,899 - 144,899
Consulting Fee - - 1,200,000 1,200,000
----------- ------------ ---------- -----------
3,000,044 4,172,716 1,200,000 5,372,716
----------- ------------ ---------- -----------
EXPENSES
Employer compensation and benefits 345,561 406,052 - 406,052
Commissions 2,275,456 3,131,258 - 3,131,258
Clearing charges and regulatory fees 262,542 346,223 - 346,223
Occupancy and equipment rental 125,968 130,494 - 130,494
Depreciation 11,844 10,811 - 10,811
Other Operating Expenses 214,687 280,670 - 280,670
----------- ------------ ---------- -----------
3,236,058 4,305,508 - 4,305,508
----------- ------------ ---------- -----------
OPERATING INCOME (LOSS) (236,014) (132,792) 1,200,000 1,067,208
OTHER INCOME
Rent 23,969 27,553 - 27,553
FEDERAL INCOME TAX - - 408,000 (408,000)
----------- ------------ ---------- -----------
NET INCOME (LOSS) $ (212,045) $ (105,239) $ 792,000 $ 686,761
=========== ============ ========== ===========
[Enlarge/Download Table]
FAS GROUP, INC.
PRO FORMA COMBINED STATEMENTS OF CASH FLOWS
December 31, 1997
-------------------
December 31 HISTORICAL PRO FORMA PRO FORMA
1996 EWMS FAS COMBINED
------------- ------------ ----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss $ (212,045) $ (105,239) $ -0- $ (105,239)
------------- ------------ ----------- -----------
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation 11,844 10,811 10,811
(Increase) decrease in operating assets:
Receivables:
Broker dealers (963) (5,100) (5,100)
Correspondent brokers 20,772 53,435 53,435
Customers (13,000) (105) (105)
Affiliates and employees (3,650) (14,847) (14,847)
Deposits (1,318) (1,415) (1,415)
Syndication costs (15,000) (15,000)
(Decrease) increase in operating liabilities:
Accounts payable (21,570) 70,982 70,982
Commissions payable (977) (42,275) _________ (42,275)
------------- ------------ -----------
(8,862) 41,773 -0- 41,773
------------- ------------ ----------- -----------
NET CASH USED IN OPERATING ACTIVITIES (220,907) (63,466) -0- (63,466)
------------- ------------ ----------- -----------
CASH FLOWS USED BY INVESTING ACTIVITIES
Purchase of furniture, fixtures and equipment (6,685) (962) -0- (962)
------------- ------------ ----------- -----------
NET CASH USED BY INVESTING ACTIVITIES (6,685) (962) -0- (962)
------------- ------------ ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds form Sale of Preferred Stock -0- -0- -0- -0-
Proceeds from sale of common stock 222,992 214,000 120 214,120
Syndication costs (15,803) (21,801) -0- (21,801)
------------- ------------ ----------- -----------
NET CASH PROVIDED BY FINANCING
ACTIVITIES 207,189 192,199 120 192,319
------------- ------------ ----------- -----------
NET INCREASE IN CASH (20,403) 127,771 120 127,891
CASH, at beginning of year 20,403 -0- -0- -0-
------------- ------------ ----------- -----------
CASH, at end of year $ -0- $ 127,771 $ 120 $ 127,891
============= ============ =========== ===========
CERTAIN CONSIDERATIONS RELATED TO THE MERGERCERTAIN CONSIDERATIONS RELATED TO
THE MERGER
BACKGROUNDBACKGROUND
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.
THE MERGERTHE MERGER
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.
EXECUTIVE'S REASONS FOR THE MERGER; RECOMMENDATION OF EXECUTIVE'S BOARD OF
DIRECTORSEXECUTIVE'S REASONS FOR THE MERGER; RECOMMENDATION OF EXECUTIVE'S BOARD
OF DIRECTORS
The Board of Directors of FAS and shareholders owning approximately 55.8%
of the outstanding common stock of Executive as of July 31, 1998 carefully
considered means to facilitate the growth of Executive and maximize the
potential of its Affinity Marketing Program and concluded the Merger to be an
integral part of the process and in the best interests of Executive and its
shareholders.
OPINION OF EXECUTIVE'S BOARD OF DIRECTORSOPINION OF EXECUTIVE'S BOARD OF
DIRECTORS
Executive has not retained any third party to provide an opinion that the
number of shares of FAS Common Stock to be issued in exchange for shares of
Executive Common Stock ("Exchange Ratio") was fair to the holders of Executive
Common Stock from a financial point of view.
The Exchange Ratio was determined through negotiations between Executive
and FAS and was approved by the Executive Board of Directors.
DIRECTORS AND OFFICERS OF FAS FOLLOWING THE MERGERDIRECTORS AND OFFICERS OF FAS
FOLLOWING THE MERGER
In accordance with the terms of the Merger Agreement, the Board of
Directors of FAS will initially consist of seven members named in the Merger
Agreement. Executive has the right to select three individuals and FAS has the
right to select four individuals, respectively, to serve on the initial Board of
Directors. Consummation of the Merger will result in the designated individuals
serving as directors following the Merger until their successors are duly
elected and qualified. The Board of Directors of FAS will be divided into three
classes, with Class 1 directors standing for election in 1998 (and every three
years thereafter), Class 2 directors standing for election in 2000 (and every
three years thereafter), and Class 3 directors standing for election in 2001
(and every three years thereafter). The table below sets forth certain
information concerning each person who is expected to serve as director or
executive officer of the Surviving Corporation.
[Enlarge/Download Table]
NAME POSITION
----------------------------------------------- -----------------------------------------------------------------------------------
Jack A. Alexander(3) Chairman, Chief Executive Officer and Director
Guy S. Della Penna(3) President, Chief Operating Officer, CEO of Affinity Marketing Division and Director
Robert H. DeVore Senior Vice President and Treasurer
Barbara J. Knox Vice President and Chief Compliance Officer
Bonnie S. Gilmore Senior Vice President, Chief Financial Officer and Secretary
Georganne E. Detweiler Director of Branch Operations
Dennis B. Schroeder(2) Director
Robert E. Windom, M.D,(1). Director
Joseph F. "Chip" Langston, Jr.(2) Director
To Be Named
by Jack A. Alexander(1) Director
To Be Named
by Jack A. Alexander(3) Director
<FN>
____________________________________
1 Class 1 Director
2 Class 2 Director
3 Class 3 Director
JACK A. ALEXANDER, age 65, Chairman and Chief Executive Officer of FAS, has
been an acknowledged leader associated with the securities and investment
industry for 38 years. He founded First Affiliated Securities of San Diego in
1974, and served as its president and chief executive officer for the first
fourteen years of its growth. When First Affiliated Securities was acquired by
American First Corporation in 1982, Mr. Alexander became Senior Vice President
of the financial services group and a member of the AFCO Board. Prior to that,
Mr. Alexander was Chairman and President of Robert Scott & Co., members of the
New York Stock Exchange, AMEX, PCSE, CBOT, CBOE and London Exchanges. Mr.
Alexander held seats on CBOT and CBOE. During his career, Mr. Alexander served
as President/CEO of two securities firms and served as a member of the board of
directors of four publicly traded firms. Mr. Alexander's securities companies
have raised over 1 billion in new capital for over 100 companies by public
offerings of equity or debt securities and through private placements. This
success along with his extensive experience in top level management positions
gives him insights and capabilities well beyond the conventional in financial
circles. Mr. Alexander holds NASD Series 7, 24 and 63 licenses. Mr. Alexander
is a Registered Options Principal and former Allied Member of the New York Stock
Exchange. He attend business school at the University of Texas, Austin and is a
graduate of the New York Institute of Finance. Mr. Alexander is an active
member of Regional Investment Bankers Association (RIBA), and former member of
Securities Industry Association (SIA) and Young Presidents Organization (YPO).
GUY S. DELLA PENNA, age 45, has served as Director, Chairman of the Board,
President and Chief Executive Officer of Executive since March 1990. Mr. Della
Penna has been a resident of Sarasota, Florida since 1980. Mr. Della Penna has
been active in the financial industry for over 20 years. Mr. Della Penna is a
General Securities Principal and Financial and Operations Principal pursuant to
NASD Rules. From 1986 to l990, Mr. Della Penna was a registered representative
with Executive Securities, Inc. and a private investor. During the period April
1980 to January 1986, Mr. Della Penna served as the Assistant to the Chairman of
the Board of Snelling & Snelling, Inc., as well as Assistant Treasurer.
Snelling & Snelling, Inc. is a franchiser of an employee recruitment business
franchise. While with such firm, Mr. Della Penna also served as a member of the
Executive, Acquisition and Pension and Profit Sharing Committees. Mr. Della
Penna also served as the personal business manager and financial advisor to the
Snelling family and affiliated entities and in such capacity, was responsible
for cash management, tax and investment analysis and commitments. Snelling
family members are the principal shareholders of Snelling & Snelling, Inc. From
1977, through April 1978, Mr. Della Penna trained in the underwriting and
secondary market trading of municipal bonds at Wertheim and Co., Inc. in New
York, New York. During the period April 1978 through February 1980, Mr. Della
Penna was an investment banker with Lehman Brothers, New York, New York, where
he was involved in the structuring, documentation and marketing of tax exempt
bonds issued by state and local governments. Mr. Della Penna holds a Bachelor
of Science degree in Business Administration from Ithaca College, Ithaca, New
York, and received a Master of Business Administration degree in Finance from
the State University of New York, Albany, New York. Mr. Della Penna holds the
necessary requisite state agent licenses for life, health and variable annuities
representing various companies under specific contracts. He is an NASD industry
arbitrator and holds the NASD Series 7, 22, 24, 27, 39 and 63 securities
licenses.
ROBERT H. DEVORE, age 38, serves Executive in the capacity of Senior Vice
President, General Counsel and Treasurer. Mr. DeVore graduated from the
University of Toledo, College of Law, in 1986, and holds a Juris Doctor degree.
While attending the University of Toledo, College of Law, Mr. DeVore was a
member of the University of Toledo Law Review and received American
Jurisprudence awards for excellent achievement in the studies of Civil Procedure
and Secured Transactions. Mr. DeVore also interned for U. S. Magistrate James
G. Carr. Following graduation from the University of Toledo College of Law, Mr.
DeVore engaged in private practice in Sarasota, Florida and was an associate of
a Sarasota, Florida law firm. Mr. DeVore's practice emphasis related to civil,
commercial and construction litigation. During the period 1993 through March
1996, Mr. DeVore acted as counsel for a Sarasota, Florida based insurance agency
and insurance marketing entity. Mr. DeVore is a member of the Florida Bar and
presently holds life and health insurance and variable annuity licenses issued
by the State of Florida. Mr. DeVore holds the NASD Series 7 General Securities
Representative license.
BARBARA J. KNOX, age 56, serves Executive as Vice President and Chief
Compliance Officer. Prior to joining Executive, Ms. Knox was Vice President and
Managing Partner of Century Securities, a Sarasota based securities firm. In
the preceding period, Ms. Knox was Vice President and Manager of the Equity
Research Department of Marion Bass Securities Corporation, a Charlotte, North
Carolina firm. During this time, Ms. Knox also served as Due Diligence Officer
and Equity Sales Trainer. Ms. Knox also served as Vice President, Compliance
Officer and Chief Operations Manager for Meridian Associates, Inc., a Sarasota
based securities broker-dealer. Ms. Knox has been in the securities business
for over 18 years as an investment executive and commodities broker with firms
such as Shearson American Express, Dean Witter Reynolds, Inc. and Raymond James
& Associates. Ms. Knox holds NASD Series 3,7,24 and 63 licenses and is Florida
Life and Variable Annuity licensed.
BONNIE S. GILMORE, age 36, joined Executive in December 1992. Ms. Gilmore
serves as Senior Vice President, Chief Financial Officer and Corporate
Secretary. Prior to joining Executive, Ms. Gilmore was Vice President and
Assistant Operations Director of Integrity Securities Group, Sarasota, Florida,
a securities broker-dealer. Ms. Gilmore held such position during the period
December 1992 to November 1993. During the period December 1989 to September
1991, Ms. Gilmore was District Manager of Crossland Savings, F.S.B., Sarasota,
Florida, a federal savings bank. During the period July, 1989 through November
1989, Ms. Gilmore was an associate of Meridian Associates, Inc., a securities
broker/dealer. During the period April 1988 through April 1989, Ms. Gilmore
served as Financial and Operations Principal, General Securities Principal and
Municipal Securities Rule Making Board Principal of Financial Information
Centers Brokerage of Sarasota, Florida. Ms. Gilmore also serves in such
capacities with Executive.
GEORGANNE E. DETWEILER, age 31, serves Executive as Director of Branch
Operations. Prior to her association with Executive, Ms. Detweiler was employed
by Smith, Barney, Harris, Upham & Co., Inc. in the capacity of Assistant to the
branch manager, syndicate manager and sales manager. Ms. Detweiler has been
involved in the securities investment industry for 12 years and possesses
extensive knowledge and experience in the retail, operational and compliance
aspects of the securities business. Ms. Detweiler holds NASD Series 4, 7, 11,
24, and 63 securities licenses.
DENNIS B. SCHROEDER, age 60, serves as a director of Executive, and resides in
Naples, Florida. He has over thirty years of experience in the investment
banking industry. After serving in the U.S. Marine Corps and attending the
University of Minnesota, Mr. Schroeder began his extensive career on the trading
desk at Juran & Moody Securities in St. Paul, Minnesota. Mr. Schroeder
continued his investment banking career with a move to Francis I. DuPont in
Minneapolis, Minnesota to head their syndication department. In 1955 Mr.
Schroeder founded Miller & Schroeder Financial, Inc. in Minneapolis, Minnesota.
Miller & Schroeder Financial, Inc. is one of the largest regional investment
banking firms in the U.S. specializing in tax exempt securities and corporate
finance with underwriting totaling billions of dollars annually. Mr. Schroeder
retired from Miller & Schroeder Financial, Inc. in 1988 as Chairman and chief
Executive Officer. From 1988 through 1991, Mr. Schroeder was Chairman of the
Board of Directors and Chief Executive Officer of F & G Consultants, Inc. and
signed a three year contract with USF&G Financial Services, Inc. a division of
USF&G Insurance Company of Baltimore, Maryland (a fifteen billion dollar
company). Mr. Schroeder was responsible for establishing distributorship for
twelve USF&G mutual funds totaling approximately one billion dollars; acting as
President/Chief Executive Officer for coordinating the marketing and
distribution efforts for USF&G Investment Services Inc.; developing a pilot
program for independent property and casualty insurance agencies to sell
securities; and coordinating the sale and divestiture of unprofitable USF&G
companies and divisions. From 1993 to 1997 Mr. Schroeder served as Chairman and
Chief Executive Officer of Lotto World, Inc., a national publishing company.
Mr. Schroeder was instrumental in raising over $14,000,000 in capital for Lotto
World, Inc. through private placements and an Initial Public Offering. Mr.
Schroeder serves on several Board of Directors including Lotto World, Inc.,
Financial Marketing Holding Company, Inc. and FMC Capital Markets, Inc. and is a
former director of Gulf Coast National Bank of Naples, Florida.
ROBERT E. WINDOM, M.D., age 68, is a director of Executive, and resides in
Sarasota, Florida. His Bachelor of Arts Degree and Medical Degree are from Duke
University in 1952 and 1956. His post graduate training was at Parkland
Memorial Hospital, Dallas, Texas. From 1960-1986, he practiced internal
medicine and cardiology in Sarasota. He served as President of the Florida
Medical Association in 1982-3. In 1986, President Ronald Reagan appointed him
to be the Assistant Secretary for Health in the Department of Health and Human
Services. In that capacity he directed the US Public Health Service and
represented the nation internationally in signing bilateral research agreements
for the NIH, CDC and other scientific entities. Since 1989, Dr. Windom has
served as a healthcare consultant, dealing with domestic and international
public and environmental health issues. He currently is Chair of the Florida
Correctional Medical Authority, serving under appointments from two Governors.
He is a member of the Council for Excellence in Government in Washington, D.C.,
is historian for the Florida Medical Association, is a delegate from the Florida
Medical Association to the American Medical Association, and is a member of the
National Legislative Committee of the Florida Medical Association. He is a
Fellow of the American College of Physicians, and also the American College of
Cardiology. He is a past president of the Florida Heart Association, and also
the Sarasota County Chamber of Commerce. He has been a board member of the
following organizations: Power Brands, BESTech, Inc., Boys and Girls Club of
Sarasota County Foundation, and Sarasota Heart Center Foundation. He has been a
Clinical Professor of Internal Medicine at both the University of Miami School
of Medicine, and the University of South Florida School of Medicine. Dr. Windom
has served in numerous community capacities as Chairman of the United Way
Campaign, Chairman of the Goodwill Industries Annual Campaign, Director of Coast
Bank, Advisory Board of SunTrust Bank, Director of Ellis Bank, and Director of
First Presidential Savings and Loan Association. Dr. Windom has authored over
35 medical publications/papers, and is the author of "The Fruit and Vegetable
Lovers' Guide to the Surgeon Generals' Diet." He has been awarded The
Distinguished Alumnus Award of the Duke Medical Center, Distinguished Internist
of the Year by the American Society of Internal Medicine, Patriot of Sarasota,
and Health Communicator of the Year by the Florida Hospital Association. He
remains a member of numerous medical associations. Dr. Windom is compensated
for his services as a director and consultant of Executive.
JOSEPH F. "CHIP" LANGSTON, JR., age 46, resides in Kaufman, Texas. Mr.
Langston has developed numerous successful multi-million dollar ventures,
generated $200,000 million from U.S. investors and $50 million from foreign
investors and managed three corporate reorganizations on behalf of lending and
financing institutions. Mr. Langston has also consolidated 33 limited
partnerships to form a publicly held company. He created two public companies,
both of which were successfully sold, negotiated multi-million dollar contracts,
both as an agent and as a principal as well as consulted with corporations on
strategic planning. Mr. Langston also directed a 20-person accounting and
finance department as senior executive of a 100-person company as well as
developed business plans; devised multi-million dollar quarterly budgets; and
monitored variance analyses. He has successfully raised institutional
financing, debt, equity and venture capital in addition to representing
financial institutions and new equity investors in a variety of corporation
reorganizations, avoiding bankruptcy in every instance while maintaining
business operations. Mr. Langston has held senior executive level experiences
in finance as a lender representative, borrower representative, borrower,
venturer and manager of operating joint ventures. Mr. Langston is currently
founder and President of Search Exploration, Inc. which is a publicly held
exploration company, formed by consolidating 33 limited partnerships and was
founder and President of Langston Investment, Inc., a privately held investment
banking company, specializing in oil and gas corporate finance. He is former
founder and Vice President-Finance of Trans-Western Exploration, Inc., a
publicly held exploration company. Mr. Langston is a certified public
accountant and has a B.B.A. - Accounting and Finance from the University of
Texas at Arlington. Mr. Langston is currently a School Board Trustee at Kaufman
Independent School District and a Deacon and Sunday School Teacher at Kaufman
Church of Christ.
Information describing the background of Directors and Executive Officers
appears under the caption "Certain Considerations Related to the
Merger-Directors and Officers of FAS Following the Merger."
FAS expects that the Board of Directors will establish an Audit Committee
and a Compensation Committee. The members of each committee are expected to be
determined at the first meeting of the Board of Directors following the closing
of the Merger.
RIGHTS OF DISSENTING SHAREHOLDERSRIGHTS OF DISSENTING SHAREHOLDERS
Shareholders who have not consented to the Merger and who comply with the
dissenters' rights provisions of the Florida Business Corporation Act will have
the right to be paid in cash the fair value of their Company Common Stock. Such
fair value will be determined as of the close of business on the day before the
Majority Holders approved the Merger by written consent excluding any
appreciation or depreciation directly or indirectly induced by the Merger or the
authorization of it.
In order to receive cash payment for his Executive Common Stock, a
dissenting shareholder must comply with the procedures specified by Sections
607.1302 to 607.1320 of the Florida BCA, which are attached as Annex D to this
Information Statement/Prospectus. Any shareholder considering exercising his
dissenters' rights is urged to review Sections 607.1302 and 607.1320 carefully.
The following summary of the principal provisions of Sections 607.1302 to
607.1320 is qualified in its entirety by reference to the text thereof.
Further, the following discussion is subject to the possibility that Executive
may abandon the Merger if the Board of directors determines that in light of the
potential liability of Executive that might result from the exercise of
dissenters' rights, the Merger would be impracticable, undesirable or not in the
best interests of Executive's shareholders. If Executive abandons the Merger,
the rights of dissenting shareholders would terminate and such dissenters would
be reinstated to all of their rights as shareholders.
Any shareholder who wishes to dissent from the Merger and receive a cash
payment for his Common Stock, (a) must file with Executive, prior to the
Effective Date, a written objection to the Merger demanding payment for his
Company Common Stock if the Merger is consummated and setting forth his name,
address and the number of shares of Company Common Stock held by him and (b)
must not be one of the Majority Holders who consented to the Merger.
FAILURE TO FILE THE REQUIRED NOTICE OR DEMAND PRIOR TO THE EFFECTIVE DATE
WILL NOT SATISFY THE NOTICE REQUIREMENTS OF SECTION 607.1320 AND WILL RESULT IN
THE FORFEITURE OF DISSENTERS RIGHTS.
COMMUNICATIONS WITH RESPECT TO DISSENTERS' RIGHTS SHOULD BE ADDRESSED TO
EXECUTIVE WEALTH MANAGEMENT SERVICES, INC. AT SOUTHTRUST BANK PLAZA, 1800 SECOND
STREET, SUITE 780, SARASOTA, FLORIDA 34236, TELEPHONE NUMBER (941) 365-4200.
Upon filing a notice of election to dissent a dissenting shareholder will
cease to have any of the rights of a shareholder except the right to be paid the
fair value of his Company Common Stock pursuant to Section 607.1320. If a
shareholder loses his dissenters' rights, either by withdrawal of his demand,
abandonment of the Merger by Executive or otherwise, he will not have the right
to receive a cash payment for his Company Common Stock and will be reinstated to
all of his rights as a shareholder as they existed at the time of the filing of
his demand.
AT THE TIME OF DEMANDING PAYMENT FOR HIS SHARES OF COMPANY COMMON STOCK,
EACH SHAREHOLDER DEMANDING PAYMENT SHALL SUBMIT THE CERTIFICATE OR CERTIFICATES
REPRESENTING HIS SHARES OF COMPANY COMMON STOCKS FOR NOTATION THEREON THAT SUCH
DEMAND HAS BEEN MADE. FAILURE TO DO SO SHALL, AT THE OPTION OF EXECUTIVE,
TERMINATE HIS DISSENTER'S RIGHTS UNLESS A COURT, FOR GOOD CAUSE, DETERMINES
OTHERWISE.
Within 60 days after the Effective Date of the Merger, FAS, as successor to
Executive, will give written notice thereof to each dissenting shareholder who
timely filed a demand and will make a written offer to each such shareholder to
pay for his Executive Common Stock at a specified price determined by Executive
to be the fair value thereof. If, within 30 days after the Merger, FAS and a
dissenting shareholder agree upon the price to be paid for his Executive Common
Stock; FAS shall make such payment within 90 days following the effective date
of the Merger, upon surrender by such shareholder to FAS of the certificates
representing his Executive Common Stock. Upon payment, the dissenting
shareholder shall cease to have any interest in Executive Common Stock.
If FAS and any dissenting shareholder fail to agree upon the price to be
paid for his Executive Common Stock within the aforementioned 30-day period,
then within 30 days after receipt of written demand from any dissenting
shareholder given within 60 days after the date the Merger is effected, FAS
shall, or at any time within such 60 day period FAS may, file an action in any
court of general civil jurisdiction in the county in Florida where the
registered office, of Executive is located, requesting that the fair value of
such Executive Common Stock be found and determined. If FAS fails to institute
the proceeding within such 60-day period, any dissenting shareholder may
institute such proceeding. All dissenting shareholders, except those who have
agreed on the price to be paid for their Executive Common Stock, are required to
be made parties to such a proceeding.
In any such proceeding, the court, at FAS's request, will determine whether
or not any particular dissenting shareholder is entitled to receive payment for
his Executive Common Stock. If FAS does not request such a determination or if
the court finds that a dissenting shareholder is so entitled, the court,
directly or through an appraiser, will fix the value of Executive Common Stock
as of the day prior to the date the Majority Holders consented to the Merger,
excluding any appreciation or depreciation directly or indirectly induced by the
Merger or the proposal to authorize it. The expenses of any such proceeding, as
determined by the court, shall be assessed against FAS, except that the court
may apportion costs to any dissenting shareholder whom it finds to have been
acting arbitrarily, vexatiously or otherwise not in good faith in refusing an
offer by FAS.
THE PROVISIONS OF SECTIONS 607.1302 TO 607.1320 ARE TECHNICAL AND COMPLEX.
IT IS SUGGESTED THAT ANY SHAREHOLDER WHO DESIRES TO EXERCISE HIS/HER RIGHT TO
DISSENT CONSULT HIS LEGAL COUNSEL, AS FAILURE TO COMPLY STRICTLY WITH SUCH
PROVISIONS MAY LEAD TO A LOSS OF DISSENTERS RIGHTS.
THE MERGERTHE MERGER
GENERALGENERAL
Executive will merge with FAS Wealth, a wholly owned subsidiary of FAS.
The Merger is intended to be effected on July 13, 1998 and will result in (i)
Executive's name being changed to FAS Wealth Management Services, Inc. (ii)
shares of common stock of Executive being converted into the right to receive
.608 shares of common stock of FAS for each share of common stock of Executive
owned as of the date of Merger (iii) Executive to be incorporated under the laws
of Delaware after the Merger; and (iv) Executive being a wholly owned subsidiary
of FAS whose Certificate of Incorporation authorizes FAS to issue (A) 25,000,000
shares of Class A Common Stock, par vale $.001 per share, (B) 1,000,000 shares
of Class B Common Stock; and (c) 1,000,000 preferred shares with a par value of
$.001 per share.
This section of the Information Statement/Prospectus describes certain
aspects of the proposed Merger. To the extent that it relates to the Merger
Agreement, the following description does not purport to be complete and is
qualified by reference to the Merger Agreement, which is attached as Annex A to
this Information Statement/Prospectus and is incorporated herein by reference.
Following the approval and adoption of the Merger Agreement by the
requisite vote of the stockholders of Executive and the satisfaction or waiver
of the other conditions to the Merger, FAS Wealth will be merged with Executive,
with Executive continuing as the Surviving Corporation. The Merger will become
effective upon filing a Certificate of Merger with the Secretary of State of the
State of Delaware and the Secretary of the State of Florida.
The Certificate of Incorporation and Bylaws of FAS Wealth as in effect
immediately prior to the Effective Time will be the Certificate of Incorporation
and Bylaws of the Surviving Corporation.
Pursuant to the Merger Agreement, at the Effective Time each share of
Executive Common Stock issued and outstanding immediately prior to the Effective
Time (other than fractional shares to be canceled as described below) will be
converted at the Effective Time into the right to receive that number of duly
authorized, validly issued, fully paid and nonassessable shares of FAS Common
Stock equal to the quotient, calculated to four decimal places, of (a) 1,591,000
divided by (b) the number of shares of Executive Common Stock outstanding
immediately prior to the Effective Time. In the event of any change in Executive
Common Stock or FAS Common Stock by reason of any stock split, readjustment,
stock dividend, exchange of shares, reclassification, reorganization or
otherwise the Conversion Number will be correspondingly adjusted.
Promptly after the Effective Time, FAS will mail to each record holder of
an outstanding certificate or certificates which immediately prior to the
Effective Time represented shares of Executive Common Stock (the
"Certificates"), a form letter of transmittal and instructions for use in
effecting the surrender of the Certificates for exchange.
EXECUTIVE STOCKHOLDERS SHOULD NOT SEND IN THEIR STOCK CERTIFICATES UNTIL THEY
RECEIVE A TRANSMITTAL FORM.
Upon surrender by Executive stockholders to FAS of their Certificates,
(together with such letter of transmittal duly executed together with any other
required documents) the Executive stockholders will be entitled to receive from
FAS the number of shares of FAS Common Stock which such holder has the right to
receive under the Merger Agreement, and such Executive Certificate will then be
canceled. Under the DGCL, the failure of a Executive stockholder to surrender
his or her Certificates will not result in the forfeiture of the right to
receive dividends or to vote the FAS Common Stock issuable to such stockholder.
No fractional shares of FAS Common Stock will be issued in the Merger.
Instead, the Merger Agreement provides that each holder of Executive Common
Stock who would otherwise have been qualified to receive a fraction of a share
of FAS Common Stock will be entitled to receive, in lieu thereof, cash (without
interest) in an amount equal to the fraction of a share to which such holder
would otherwise have been entitled, multiplied by the Market Value of FAS Common
Stock less the amount of any withholding taxes which may be required thereon.
The Merger Agreement provides that for purposes of paying such cash in lieu of
fractional shares, all Certificates surrendered for exchange by a Executive
stockholder will be aggregated, and no such holder will receive cash in lieu of
fractional shares in an amount equal to or greater than the value of one full
share of FAS Common Stock with respect to all such Certificates surrendered.
EFFECTIVE TIME; CLOSINGEFFECTIVE TIME; CLOSING
As soon as practical after the adoption and approval of the Agreement and
Plan of Merger, the Merger and the other transactions contemplated thereby,
appropriate certificates of merger in the form required by the Florida Business
Corporation Act 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 the General Corporation Laws of Delaware
at which time the Merger shall become effective (the "Effective Time").
The Merger will become effective, and the Effective Time will occur, on the
date and at the time that a Certificate of Merger is filed with the Secretary of
State of the State of Delaware, or at such later date and time as the parties
may agree and as may be specified in the Certificate of Merger. The Merger
Agreement provides that the closing of the Merger (the "Closing") will take
place within two days following the first business day on which all the
conditions specified therein are fulfilled or waived, or on such other date as
Executive and FAS may agree. The date upon which the Closing will occur is
herein called the "Closing Date."
CONDITIONS TO CLOSINGConditions to Closing
Mutual ConditionsMutual Conditions. The obligations of each party to
------------------
effect the Merger are subject to, among other things, the fulfillment of the
following conditions:
(1) the effectiveness in accordance with the provisions of the
Securities Act of the Registration Statement of which this Information
Statement/Prospectus is a part;
(2) the requisite vote of the stockholders of Executive and FAS
necessary to approve the Merger and the transactions contemplated thereby;
(3) no writ, order, decree or injunction of a court of competent
jurisdiction or governmental entity will have been entered against FAS or
Executive and no proceedings will have been threatened or commenced by any
governmental entity which seek to prohibit or restrict the consummation of the
Merger or Distribution; and
(4) the receipt of the opinion of Sonfield & Sonfield as to certain tax
matters related to the Merger.
Conditions to FAS's ObligationsConditions to FAS's Obligations. The
----------------------------------
obligation of FAS to consummate the Merger is further subject to the fulfillment
-
or waiver of among other things, the following conditions: the representations
and warranties of Executive contained in the Merger Agreement will be true and
correct in all material respects; Executive will have performed and complied in
all material respects with all of its agreements, obligations and conditions
required by the Merger Agreement; and there will not have occurred since
December 31, 1997 any event, condition, change, occurrence, or circumstance
which has had, or is reasonably likely to have, a material adverse effect on
Executive; and all necessary regulatory and governmental consents and approvals
will have been obtained.
Conditions to Executive's ObligationsConditions to Executive's Obligations.
-------------------------------------
The obligation of Executive to consummate the Merger is further subject to the
fulfillment or waiver of among other things, the following conditions: the
representations and warranties of FAS contained in the Merger Agreement will be
true and correct in all material respects; FAS will have performed and complied
in all material respects with all of its agreements, obligations and conditions
required by the Merger Agreement; and all necessary regulatory and governmental
consents will have been obtained.
REPRESENTATIONS AND WARRANTIESREPRESENTATIONS AND WARRANTIES
The Merger Agreement contains certain customary representations and
warranties by each of FAS and Executive (as to such party) concerning: the
organization and qualification of FAS and Executive and their respective
subsidiaries; the capitalization of each of FAS and Executive; the authority of
each of FAS and Executive relative to the execution and delivery of and
performance of its respective obligations under the Merger Agreement; approval
by the Board of Directors of each of FAS and Executive regarding certain related
matters; obtaining necessary approvals to consummate the transactions
contemplated by the Merger Agreement; the absence of any conflict with, or
violations of the corporate documents and certain binding instruments of each of
FAS and Executive or their respective subsidiaries or with or of any statute,
rule, regulation, order or decree of courts or governmental entities, subject to
certain exceptions; the accuracy of reports and documents filed by Executive
with the Commission since a specified date, and certain financial statements of
each company; the absence of undisclosed liabilities or obligations of FAS,
Executive and each of their respective subsidiaries; the absence of litigation
involving FAS or Executive or their respective subsidiaries that would have a
material adverse effect on the business of either party; and compliance by each
of FAS and Executive and their respective subsidiaries with applicable laws and
agreements.
COVENANTSCOVENANTS
The Merger Agreement provides that, except as contemplated by the Merger
Agreement, or as otherwise previously disclosed to FAS, Executive will be
obligated to conduct its business in the ordinary course of business consistent
with past practice, including specific covenants as to certain permissible
activities. The Merger Agreement also requires that, except as provided in the
Merger Agreement or as otherwise previously disclosed to Executive, FAS and each
of its subsidiaries will be obligated to conduct its business in the ordinary
course of business consistent with past practice, including specific covenants
as to certain permissible activities. Each of Executive and FAS have agreed to
use all commercially reasonable efforts to take or cause to be taken all action
and other things necessary, proper or appropriate under applicable laws and
regulations to consummate the transactions contemplated by the Merger Agreement
and obtaining all necessary third party consents, approvals or waivers that may
be required.
NO SOLICITATIONNO SOLICITATION
Each of FAS and Executive has agreed that, prior to the Effective Time, it
and its subsidiaries will not, and will not give authorization or permission to
any of its or its subsidiaries' directors, officers, employees, agents or
representatives to, and will use all commercially reasonable efforts to see that
such persons do not, directly or indirectly solicit, initiate, facilitate or
encourage (including by way of furnishing or disclosing information): (i) any
merger, consolidation, other business combination involving FAS or its
subsidiaries or Executive or its subsidiaries; (ii) any acquisition of all or
any substantial portion of the assets or capital stock of FAS and its
subsidiaries taken as a whole or Executive and its subsidiaries; or (iii)
inquiries or proposals concerning or which may reasonably be expected to lead
to, any of the foregoing (each an "Acquisition Transaction") or negotiate,
explore or otherwise communicate in any way with any third party (other than
Executive or its affiliates in the case of FAS and FAS and its affiliates in the
case of Executive) with respect to any 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 expressly contemplated
by the Merger Agreement, or contemplated to be a material part thereof.
Notwithstanding the foregoing in the event that there is an unsolicited written
proposal for an Acquisition Transaction from a bona fide financially capable
third party, the party receiving such proposal, in its discretion, will be
permitted to furnish non-public information to and negotiate with any such third
party only if: (i) two business days' written notice will have been given to the
other party; and (ii) the Board of Directors of the party receiving such
proposal will have determined in good faith, after having received advice from
its investment banker and outside legal counsel, that the failure to provide
such non-public information to or negotiate with such third party would be
inconsistent with such Board of Directors' fiduciary duties to the stockholders.
TERMINATIONTERMINATION
Termination by Mutual Consent or by Either PartyTermination by Mutual
------------------------------------------------------
Consent or by Either Pary. The Merger Agreement may be terminated at any time
prior to the Effective Time, whether before or after approval by the
stockholders of Executive and FAS: (a) by mutual consent of the Boards of
Directors of FAS and Executive; (b) by FAS or Executive if without fault of such
terminating party the Merger will not have been consummated on or before August
31, 1998, which date may be extended to December 31, 1998, subject to certain
conditions; (c) by FAS or Executive, if any court of competent jurisdiction in
the United States or other governmental body in the United States will 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 will have become final
and nonappealable; or (d) by FAS or Executive, if the necessary approval of the
stockholders of FAS and Executive is not obtained.
Termination by FAS OnlyTermination by FAS Only. The Merger Agreement may
-------------------------
be terminated and the Merger may be abandoned by action of the Board of
Directors of FAS, at any time prior to the Effective Time, before or after the
approval by the stockholders of FAS, if (a) Executive has failed to comply in
any material respect with any of the covenants or agreements contained in
Articles V and VII of the Merger Agreement to be complied with or performed by
Executive at or prior to such date of termination, (b) there is a breach that
has not been cured following notice of any representation or warranty of
Executive contained in the Merger Agreement or Distribution Agreement such that
the closing conditions of the Merger Agreement would not be satisfied, (c)
Executive has furnished or disclosed non-public information to, or commenced
negotiations with, a third party with respect to any prohibited acquisition
transaction or Executive Business Combination Transaction, as defined below, or
will have resolved to do the foregoing and publicly disclosed such resolution,
(d) the Board of Directors of Executive has withdrawn, changed, modified in any
manner or taken action inconsistent with its recommendation of the Merger
Agreement, the Merger or the other transactions contemplated thereby or has
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) has been negotiated
and FAS's Board of Directors has determined after having received advice from
its investment banker and outside legal counsel that failure to terminate the
Merger Agreement would be inconsistent with such Board's fiduciary duties to the
stockholders of FAS; provided, however, that two business days' prior written
notice will have been given to Executive (which notice will include the material
terms and conditions, and financing arrangements and identity of the third party
proposing the Broker-Dealer Transaction or FAS Business Combination
Transaction).
The term "FAS Acquisition Transaction" is defined as any merger,
consolidation, other business combination involving FAS or its subsidiaries,
acquisition of all or any substantial portion of the assets or capital stock of
FAS 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.
Termination by Executive OnlyTermination by Executive Only. The Merger
--------------------------------
Agreement may be terminated and the Merger may be abandoned by action of the
Board of Directors of Executive, at any time prior to the Effective Time, before
or after the approval by the stockholders of Executive, if (a) FAS has failed to
comply in any material respect with any of the covenants or agreements contained
in Articles V and VII of the Merger Agreement to be complied with or performed
by FAS at or prior to such date of termination, (b) there is a breach that has
not been cured following notice of any representation or warranty of FAS
contained in the Merger Agreement such that the closing conditions in favor of
Executive would not be satisfied, (c) FAS has furnished or disclosed non-public
information to, or commenced negotiations with, a third party with respect to a
FAS Acquisition Transaction or has resolved to do either of the foregoing and
publicly disclosed such resolution, (d) the Board of Directors of FAS has
withdrawn, changed, modified in any manner or taken action inconsistent with its
recommendation of the Merger Agreement, the Merger or the other transactions
contemplated thereby or has resolved to do any of the foregoing and publicly
disclosed such resolution, (e) a definitive agreement with respect to a
Broker-Dealer Transaction or Executive Acquisition Transaction (as defined
below) has been negotiated and Executive's Board of Directors has determined
after having received advice from its investment banker or bankers and outside
legal counsel that failure to terminate the Merger Agreement would be
inconsistent with the Board's fiduciary duties to the stockholders of Executive;
provided, however, that two business days' prior written notice will have been
given to FAS (which notice shall include the material terms and conditions, and
financing arrangements and identity of the third party proposing the
Broker-Dealer Transaction or the Executive Acquisition Transaction), or (f) the
Board of Directors of Executive determines that in light of the potential
liability of Executive that might result from Executive'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 Executive
shareholders.
The term "Broker-Dealer Transaction" is defined in the Merger Agreement as
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. The term "Executive
Acquisition Transaction" is defined as any merger, consolidation, other business
combination involving Executive or its Subsidiaries, acquisition of all or any
substantial portion of the assets or capital stock of Executive 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 or negotiate, explore or
otherwise communicate in any way with any third party (other than FAS or its
affiliates) with respect to any Executive 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 the
Merger Agreement.
DEFAULT COSTSDEFAULT COSTS
The Merger Agreement provides that in the event either Executive or FAS has
to resort to legal action to enforce any of the terms of the Merger Agreement,
neither Executive or FAS shall be entitled to collect attorneys' fees and other
costs from the party in default.
AMENDMENT; WAIVERAmendment; Wavier
Subject to applicable law, the Merger Agreement may be amended, modified or
supplemented only by written agreement of FAS and Executive at any time prior to
the Effective Time with respect to any of the terms contained therein.
Certain of the conditions to the consummation of the Merger are waivable by
either Executive with respect to FAS's conditions to closing or by FAS with
respect to Executive's conditions to closing. In the event that such conditions
are waived, Executive and FAS do not presently intend to resolicit stockholder
consents with respect to the Transactions.
Any failure of FAS or Executive to comply with any obligation, covenant,
agreement or condition contained in the Merger Agreement may be waived by FAS or
Executive, respectively, only by a written instrument signed by the party
granting such waiver, but the waiver or failure to insist upon strict compliance
with such obligation, covenant, agreement or condition will not operate as a
waiver of, or estoppel with respect to, any subsequent or other failure. All
consents are required to be in writing.
POST-CLOSING MATTERSPOST-CLOSING MATTERS
Incentive Stock OptionIncentive Stock Option. 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 at $0.60 per share. In addition, common stock warrants to purchase
22,800 shares of Class A Common Stock are issuable to FMC Capital Markets, Inc.
at $3.29 per share subject to the Lock-Up Agreement.
Dividend PolicyDividend Policy. FAS has never paid dividends on the Common
Stock and it does not anticipate that it will pay dividends or alter its
dividend policy in the foreseeable future. The payment of dividends by FAS on
the Common Stock will depend on its earnings and financial condition, and such
other factors as the Board may consider relevant.
Market for Common Equity and Related Stockholder MattersMarket for Common
Equity and Related Stockholder Matters. Executive's Common Stock is not quoted
on the NASD Over-The-Counter Bulletin Board ("OTCBB") and has not had any
trading activity. A public trading market having the characteristics of depth,
liquidity and orderliness depends upon the existence of market makers as well as
the presence of willing buyers and sellers, which are circumstances over which
FAS does not have control.
FAS has reserved the trading symbol FAS.
CERTAIN TAX CONSIDERATIONSCERTAIN TAX CONSIDERATIONS
The following is a summary description of the material federal income tax
consequences of the Merger. This summary is for general informational purposes
only and is not intended as a complete description of all of the tax
consequences of the Merger and does not discuss tax consequences under the laws
of state or local governments or of any other jurisdiction. Moreover, the tax
treatment of a stockholder may vary depending upon his, her or its particular
situation. In this regard, certain stockholders (including (i) insurance
companies, tax-exempt organizations, financial institutions or broker-dealers,
and persons who are not citizens or residents of the United States or who are
foreign corporations, foreign partnerships or foreign trusts or estates as
defined for United States federal income tax purposes, and (ii) stockholders
that hold shares as part of a position in a "straddle" or as part of a "hedging"
or "conversion" transaction for United States federal income tax purposes and
stockholders with a "functional currency" other than the United States dollar)
may be subject to special rules not discussed below. In addition, this summary
applies only to shares which are held as capital assets. The following
discussion may not be applicable to a stockholder who acquired his or her shares
pursuant to the exercise of stock options or otherwise as compensation.
THE FOLLOWING DISCUSSION IS BASED ON CURRENTLY EXISTING PROVISIONS OF THE
CODE, TREASURY REGULATIONS THEREUNDER, AND CURRENT ADMINISTRATIVE RULINGS AND
COURT DECISIONS. ALL OF THE FOREGOING ARE SUBJECT TO CHANGE WHICH MAY OR MAY
NOT BE RETROACTIVE, AND ANY SUCH CHANGES COULD AFFECT THE TAX CONSEQUENCES
DESCRIBED HEREIN. EACH STOCKHOLDER IS URGED TO CONSULT HIS OR HER OWN TAX
ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES OF THE MERGER DESCRIBED HEREIN,
INCLUDING, THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS,
AND THE POSSIBLE EFFECTS OF CHANGES OF APPLICABLE TAX LAWS.
Executive and FAS will receive, prior to the Effective Time of the Merger,
the opinion of Sonfield & Sonfield to the effect that:
(1) the Merger will qualify as a reorganization within the meaning of
Section 368(a) of the Code;
(2) no gain or loss will be recognized by FAS or Executive as a result
of the Merger; and
(3) no gain or loss will be recognized by Executive's stockholders upon
the receipt of FAS Common Stock solely in exchange for Executive Common Stock in
connection with the Merger (except with respect to cash received in lieu of a
fractional interest in FAS Common Stock).
Tax opinions are not binding on the IRS or any court. Moreover, the tax
opinions are based upon, among other things, certain representations as to
factual matters made by Executive and FAS, which representations, if incorrect
or incomplete in certain material respects, would jeopardize the conclusions
reached in the opinions.
It is expected that the Merger will constitute a reorganization within the
meaning of Section 368(a) of the Code. If the Merger so qualifies, (i) the
holders of Executive Common Stock will not recognize gain or loss upon the
receipt of FAS Common Stock in exchange for their shares of Executive Common
Stock, (ii) each holder of Executive Common Stock will carry over his, her or
its tax basis in the Executive Common Stock to the FAS Common Stock, (iii) the
holding period for each holder of Executive Common Stock will carry over to the
FAS Common Stock, provided that the Executive Common Stock is held as a capital
asset immediately prior to the Effective Time of the Merger, and (iv) any holder
of Executive Common Stock receiving cash in lieu of fractional shares will
recognize capital gain or loss (provided the shares of Executive Common Stock
surrendered are held as capital assets immediately prior to the Effective Time
of the Merger) equal to the difference between the amount of cash received and
the portion of such holder's basis in the shares of Executive Common Stock
allocable to such fractional share interests, and such capital gain or loss will
be long-term capital gain or loss if the holding period for such shares is more
than one year.
If the Merger does not qualify as a reorganization within the meaning of
Section 368(a) of the Code, then each holder of Executive Common Stock will
recognize gain or loss upon the receipt of the FAS Common Stock in exchange for
such Executive Common Stock equal to the difference between the fair market
value of the FAS Common Stock received and such holder's basis in Executive
Common Stock.
If the Merger were not to qualify as a tax-free reorganization under
Section 368 of the Code, then, in general, a corporate level federal income tax
would be payable by the consolidated group of which Executive is the common
parent, which tax would be based upon the gain (computed as the difference
between the fair market value of FAS stock exchanged in the Merger and the
Shareholders of Executive's adjusted basis in such stock) realized by Executive
upon the consummation of the Merger.
TAXPAYER RELIEF ACTTAXPAYER RELIEF ACT
The Taxpayer Relief Act of 1997 ("TRA 1997") was signed into law on August
5, 1997. TRA 1997 contains certain restrictions involving a distribution or
"spin-off" to stockholders of portions of a business enterprise, accompanied by
a merger or acquisition of a specific unit of the business enterprise involving
a third party acquiror. The Merger is not affected by the restrictions imposed
by TRA 1997.
BACK-UP WITHHOLDING REQUIREMENTS BACK-UP WITHHOLDING REQUIREMENTS
United States information reporting requirements and backup withholding at
the rate of 31% may apply with respect to dividends paid on, and proceeds from
the taxable sale, exchange or other disposition of Executive Common Stock,
unless the stockholder (i) is a corporation or comes within certain other exempt
categories, and, when required, demonstrates these facts, or (ii) provides a
correct taxpayer identification number, certifies as to no loss of exemption
from backup withholding and otherwise complies with applicable requirements of
the backup withholding rules. A stockholder who does not supply FAS with his,
her or its correct taxpayer identification number may be subject to penalties
imposed by the IRS. Any amount withheld under these rules will be refunded or
credited against the stockholder's federal income tax liability. Stockholders
should consult their tax advisers as to their qualification for exemption from
backup withholding and the procedure for obtaining such an exemption. If
information reporting requirements apply to a stockholder, the amount of
dividends paid with respect to such shares will be reported annually to the IRS
and to such stockholder.
INFORMATION CONCERNING FASINFORMATION CONCERNING FAS
[Enlarge/Download Table]
FAS GROUP, INC.
PRO FORMA COMBINING BALANCE SHEETS
December 31, 1997
-------------------
ASSETS DEC. 31 HISTORICAL PRO FORMA PRO FORMA
1996 EWMS FAS Combined
---------- ------------ ---------- -----------
Cash $ - $ 127,771 $ - $ 127,791
Organization Costs - - 2,544 2,544
Receivables
Broker dealers 40,306 45,406 - 45,406
Correspondent brokers 122,201 68,766 - 68,766
Customers 13,000 13,105 - 13,105
Affiliates and employees 3,650 18,363 - 18,363
Other 14,847 - 14,847
Furniture, fixtures and
Equipment at cost, net of
Accumulated depreciation 37,192 27,343 - 27,343
Deposits with clearing organizations 43,742 45,157 - 45,157
Other deposits 1,934 1,934 - 1,934
Syndication costs - 15,000 - 15,000
Equity Securities - -0- 5,200,000 5,200,000
---------- ------------ ---------- -----------
$ 262,025 $ 377,692 $5,202,544 $5,580,236
========== ============ ========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Accounts payable $ 36,483 $ 107,465 - $ 107,465
Commissions payable 143,566 101,291 - 101,291
Federal Income Tax Payable - - 408,000 408,000
180,049 208,756 408,000 616,756
---------- ------------ ---------- -----------
STOCKHOLDERS' EQUITY
Preferred Stock -0- -0- -0- -0-
Common Stock 4,983 5,231 2,544 7,775
Stock warrants 4,410 4,410 -0- 4,410
Additional paid-in-capital 913,688 1,105,639 4,000,000 5,105,639
----------
Accumulated deficit (841,105) (946,344) 792,544 (154,344)
---------- ------------ ---------- -----------
TOTAL STOCKHOLDERS' EQUITY 81,976 168,936 4,794,544 4,963,480
---------- ------------ ---------- -----------
$ 262,025 $ 377,692 $5,202,544 $5,580,236
========== ============ ========== ===========
<FN>
NOTE TO READER: FAS GROUP, INC. DOES NOT OWN $4,000,000 OF THE EQUITY SECURITIES; ARE
REFLECTED ABOVE TO SHOW THE PRO FORMA EFFECTS ON THE PRO FORMA COMBINED BALANCE SHEET AS IF
THE SECURITIES WERE OWNED BY FAS GROUP, INC.
FAS MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONSFAS Management's Discussion and Analysis of Financial Condition and
Results of Operations
Overview. OVERVIEWThe Company was organized June 23, 1998 under the
general corporation laws of the state of Delaware and has agreed to combine, by
merger, with Executive, 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
Jack Alexander, as a 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.
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 puts 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.
Liquidity and Capital Resources. 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 valueLiquidity and Capital Resources.
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.
BUSINESS OF FASBusiness of FAS
OverviewOverview. The founder of FAS Group, Inc. ("FAS"), Jack Alexander,
pioneered the independent contractor registered representative to build a
nationwide, full service retail brokerage firm. He founded First Affiliated
Securities and attracted over 1,000 associated brokers in approximately 400
offices. Firms over which Mr. Alexander presided have been responsible for
underwriting more than 100 new securities issues and raised over $1 billion for
companies in both private and public offerings as the managing underwriter. He
has maintained relationships with many of the brokers who were associated with
FAS and has identified a core group of 50 brokers, traders, investment bankers,
corporate finance and compliance professionals, as well as qualified back and
front office support personnel.
FAS intends to be a full service, national retail, independent contractor,
investment banking firm focused on retail brokerage. investment banking,
trading, institutional brokerage, affinity group marketing and asset management.
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. ("FAS Wealth"). Executive was founded in
1981 and is an independent, publicly held, reporting broker/dealer that has been
in continuous, uninterrupted compliance with all net capital requirements
imposed by the Securities Exchange Act of 1934 and the United States Securities
and Exchange Commission. The Company has never experienced any regulatory
difficulties or problems since its incorporation in 1981 and has, as a firm,
never been the subject of any adverse arbitration rulings. The Company
approaches the marketplace with an innovative concept in the broker/dealer
structure. The business strategy of Executive is to offer products and services
to professional business persons and high net worth individuals who are
primarily members of affinity groups. The Company additionally focuses its
growth activities in the areas of the establishment of additional independent
branch offices staffed b 1y brokers who market mutual funds, stocks, bonds,
variable annuities and insurance products as well as wealth management services
to the general public. Executive is a Member of the NASD, SIPC, MSRB and RIBA.
The Industry BackgroundThe Industry Background. Over the past 15 years,
capital markets have evolved in depth and complexity, thereby radically altering
the needs of both investors and the companies accessing those markets.
According to Securities Data Company, in 1982, 122 IPOs were underwritten in the
U.S. for a total of $1.3 billion and total public equity issued equaled $20.6
billion. In 1992, the value of new issues in the U.S. more than doubled the
level achieved in any previous year reaching $39.9 billion, while the total
public equity and high-yield debt raised equaled $95.0 billion and $51.6 billion
respectively. In 1996, 874 initial public offerings were completed in the U.S.,
totaling $50.0 billion, total public equity issued equaled $191.1 billion, and
high-yield debt issued totaled $87.5 billion. A significant portion of this
growth has come from emerging industries that previously had limited access to
the capital markets.
To succeed in the current environment, investment banks must be able to
conceive and to communicate creative solutions which meet the capital needs of
companies and the investment goals of investors.
FAS believes that the increases in recent years, in the depth and
complexity of the capital markets and in the number of non-traditional issuers
coupled with significant inflows of cash into mutual funds and other managed
funds, will lead to greater demand by both issuers and investors for focused
advisory, capital markets, and capital management products and services.
FAS will seek to identify rapidly changing industries and those that are
not fully understood or appropriately valued by the market. Once an industry is
identified, FAS will employ substantial effort to develop a thorough
understanding of the fundamentals and opportunities of that industry. FAS will
employ a team approach in which all of its professionals contribute to and
communicate FAS's expertise in an industry. For each industry on which FAS is
focused, FAS will offer significant underwriting capabilities and brokerage
services as well as advisory services in mergers, acquisitions and strategic
partnerships. In addition, FAS's asset management activities will include hedge
funds and public mutual funds as well as private equity investments and
mezzanine finance in such industries.
FAS will apply its regional focus and team-based approach to its asset
management activities. FAS believes that its revenue growth, as well as the
superior performance of its capital transactions and managed products, will be
the result of FAS's focus and dedication to developing capital markets and asset
management expertise within a growing number of strategic industry sectors. FAS
believes that its superior industry knowledge coupled with its capital markets
expertise will make FAS a leading provider of investment banking, brokerage and
asset management services and the largest independent investment bank in the
rapidly-growing industry.
Employment. EmploymentSecurities and financial services sales
representatives held about 250,000 jobs in 1997. In addition, a substantial
number of people in other occupations sold securities. These include partners
and branch office managers in securities firms as well as insurance agents and
brokers offering securities to their customers.
Securities sales representatives are employed by brokerage and investment
firms in all parts of the country. Many of these firms are very small. Most
sales representatives, however, work for a small number of large firms with main
offices in big cities (especially New York) and approximately 25,000 branch
offices in other areas.
Financial services sales representatives are employed by banks, savings and
loans associations, and other credit institutions.
Growth StrategyGrowth Strategy. FAS believes its strategy and culture will
enable it to succeed in this changing marketplace. FAS will apply its regional
focus and team-based approach to the following business segments:
Strategic Relationship with Banking Institution
Investment Banking and Corporate Finance
Capital Raising Activities
Mergers and Acquisitions Advisory Services
Sales and Trading
Corporate Services
Executive Services
Syndicate
Asset Management
Hedge and Offshore Funds
Private Equity and Venture Capital
Mutual Funds
Fund Distribution
ACCOUNTING, ADMINISTRATION AND OPERATIONS Accounting, Administration and
Operations
FAS's accounting, administration and operations personnel will be
responsible for financial controls, internal and external financial reporting,
office and personnel services, FAS's management information and
telecommunications systems, and the processing of FAS securities transactions.
With the exception of payroll processing, which will be performed by an outside
service bureau, and customer account processing, which will be performed by
FAS's clearing broker, most data processing functions will be performed by FAS's
management information systems department. FAS believes that future growth will
require implementation of new and enhanced communications and information
systems and training of its personnel to operate such systems as well as the
hiring of additional personnel.
COMPETITION Competition
After the Merger, FAS will engage in the highly competitive securities
brokerage and financial services businesses. The Company competes directly with
large Wall Street securities firms, securities subsidiaries of major commercial
bank holding companies, major regional firms and smaller niche players. To an
increasing degree, FAS also competes for various segments of the financial
services business with other institutions, such as commercial banks, savings
institutions, mutual fund companies, life insurance companies and financial
planning firms. The Company believes that following a strategy of offering
superior service and investment advice in particular areas of expertise and to a
particular client base differentiates it from competitors.
In addition to competing for investment clients, companies in the
securities industry compete to attract and retain experienced and productive
investment professionals. See "Risk Factors--Competition for Retaining and
Recruiting Personnel."
Many competitors have greater personnel and financial resources than FAS.
Larger competitors are able to advertise their products and services on a
national or regional basis and may have a greater number and variety of
distribution outlets for their products, including retail distribution.
Discount brokerage firms market their services through aggressive pricing and
promotional efforts. In addition, some competitors have much more extensive
investment banking activities than FAS and therefore may possess a relative
advantage with regard to access to deal flow and capital.
Recent rapid advancements in computing and communications technology are
substantially changing the means by which financial services are delivered.
These changes are providing consumers with more direct access to a wide variety
of financial and investment services, including market information and on-line
trading and account information. Advancements in technology also create demand
for more sophisticated levels of client services. The Company is committed to
utilizing technological advancements to provide a high level of client service.
Provision of these services may entail considerable cost without an offsetting
source of revenue.
LEGAL PROCEEDINGS Legal Proceedings
While FAS is not currently a defendant or plaintiff in any lawsuits or
arbitrations, many aspects of FAS's business involve substantial risks of
liability, litigation and arbitration. An underwriter is exposed to potential
liability under federal and state securities laws, other federal and state laws
and court decisions, including decisions with respect to underwriters' liability
and limitations on indemnification of underwriters by issuers. For example, a
firm that acts as an underwriter may be held liable for material misstatements
or omissions of fact in a prospectus used in connection with the securities
being offered or for statements made by its securities analysts or other
personnel.
If plaintiffs in any future suits against FAS were to prosecute their
claims successfully, or if FAS were to settle such suits by making significant
payments to the plaintiffs, FAS's operating results and financial condition
could be materially and adversely affected. FAS will carry very limited
insurance which may cover only a portion of any such payments.
In recent years, there has been an increasing incidence of litigation
involving the securities industry, including class actions that seek substantial
damages and frequently name as defendants underwriters of a public offering and
investment banks that provide advisory services in merger and acquisition
transactions. The eventual impact of the recently passed Federal Private
Securities Litigation Reform Act of 1995 on securities class action litigation
is not yet known. FAS is not currently a defendant in any such lawsuits, and
has never been named a defendant in a class action lawsuit or other suit
alleging underwriter liability.
In addition to these financial costs and risks, the defense of litigation
or arbitration may divert the efforts and attention of FAS's management and
staff, and FAS may incur significant legal expenses in defending such litigation
or arbitration. This may be the case even with respect to claims and litigation
which management believes to be frivolous, and FAS intends to defend vigorously
any frivolous claims against it. The amount of time that management and other
employees may be required to devote in connection with the defense of litigation
could be substantial and might materially divert their attention from other
responsibilities within FAS.
FAS also may become a defendant in civil actions and arbitrations arising
out of its other activities as a broker-dealer, as an investment adviser, as an
employer and as a result of other business activities. There can be no
assurance that substantial payments in connection with the resolution of
disputed claims will not occur in the future.
In addition, FAS's charter documents allow indemnification of FAS's
officers, directors and agents to the maximum extent permitted under Delaware
law. FAS intends to enter into indemnification agreements with these persons.
FAS has been and in the future may be the subject of indemnification assertions
under these charter documents or agreements by officers, directors or agents of
FAS who are or may become defendants in litigation.
RISK MANAGEMENT Risk Management
FAS will establish various policies and procedures for the management of
its exposure to operating, principal and credit risk. There can be no assurance
that FAS's risk management procedures and internal controls will prevent or
reduce any such risks. Operating risk arises out of the daily conduct of FAS's
business and relates to the possibility that one or more of FAS's personnel
could cause FAS to engage in imprudent business activities. Principal risk
relates to the fact that FAS will hold securities that are subject to changes in
value, and such changes could result in FAS incurring material losses. Credit
risk occurs because FAS will extend credit through its clearing broker to
various of its customers in the form of margin and other types of loan
activities that are normal industry practices.
Operating risk will be monitored by managers of FAS's business groups, and
by the directors of each of FAS's operating subsidiaries. These directors
review the overall business activities of each of FAS's subsidiaries, and issue
directions to address issues which, in the judgment of the directors, could
result in a material loss to FAS.
Principal risk is managed primarily by conducting real-time monitoring of
the amount and types of securities held from time to time by FAS and by limiting
the exposure to any one investment or type of investment. The two most common
categories of securities to be owned are those related to the daily trading
activities of FAS's brokerage operations and those which arise out of FAS's
underwriting activities. FAS will attempt to limit its exposure to market risk
on securities held as a result of its daily trading activities by limiting its
inventory of trading securities to the amount needed to provide the appropriate
level of liquidity in the securities for which it is a market maker. FAS does
not intend to take positions in securities as principal investments, and will
seek to balance trading security inventory positions daily.
Credit risk will be monitored both by FAS's own operations personnel and by
FAS's clearing broker. Margin calls are issued if the value of collateral
declines below established margin requirements, and margin maintenance
requirements are increased in the event that the concentration in a client's
account exceeds certain levels.
REGULATION Regulation
In the United States, a number of federal regulatory agencies are charged
with safeguarding the integrity of the securities and other financial markets
and with protecting the interests of customers participating in those markets.
The SEC is the federal agency that is primarily responsible for the regulation
of broker-dealers and investment advisers doing business in the United States,
and the Federal Reserve Board promulgates regulations applicable to securities
credit transactions involving broker-dealers and certain other institutions in
the United States. Much of the regulation of broker-dealers, however, has been
delegated to self-regulatory organizations ("SROs"), principally the NASD (and
its subsidiaries NASD Regulation, Inc. and Nasdaq), and the national securities
exchanges. These SROs and exchanges adopt rules (which are subject to approval
by the SEC) that govern the industry, monitor daily activity and conduct
periodic examinations of member broker-dealers. While FAS's broker-dealer
subsidiary, FAS Wealth, is not a member of the NYSE, FAS's business is affected
by the NYSE rules.
Securities firms are also subject to regulation by state securities
commissions in the states in which they are required to be registered.
Executive is registered as a broker-dealer with the SEC and in 41 states, and is
a member of, and subject to regulation by, a number of SROs, including the NASD
and the Municipal Securities Rulemaking Board.
As a result of federal and state registration and SRO memberships, FAS will
be subject to overlapping schemes of regulation which cover all aspects of their
securities business. Such regulations cover matters including capital
requirements, uses and safe-keeping of clients' funds, conduct of directors,
officers and employees, record-keeping and reporting requirements, supervisory
and organizational procedures intended to assure compliance with securities laws
and to prevent improper trading on material nonpublic information,
employee-related matters, including qualification and licensing of supervisory
and sales personnel, limitations on extensions of credit in securities
transactions, clearance and settlement procedures, requirements for the
registration, underwriting, sale and distribution of securities, and rules of
the SROs designed to promote high standards of commercial honor and just and
equitable principles of trade. A particular focus of the applicable regulations
concerns the relationship between broker-dealers and their customers. As a
result, the many aspects of the broker-dealer customer relationship are subject
to regulation including, in some instances, "suitability" determinations as to
certain customer transactions, limitations on the amounts that may be charged to
customers, timing of proprietary trading in relation to customers' trades and
disclosures to customers.
FAS will also be subject to "Risk Assessment Rules" imposed by the SEC
which require, among other things, that certain broker-dealers maintain and
preserve certain information, describe risk management policies and procedures
and report on the financial condition of certain affiliates whose financial and
securities activities are reasonably likely to have a material impact on the
financial and operational condition of the broker-dealers. Certain "Material
Associated Persons" (as defined in the Risk Assessment Rules) of the broker-
dealers and the activities conducted by such Material Associated Persons may
also be subject to regulation by the SEC. In addition, the possibility exists
that, on the basis of the information it obtains under the Risk Assessment
Rules, the SEC could seek authority over FAS's unregulated subsidiaries either
directly or through its existing authority over FAS's regulated subsidiaries.
In the event of non-compliance with an applicable regulation, governmental
regulators and the NASD may institute administrative or judicial proceedings
that may result in censure, fine, civil penalties (including treble damages in
the case of insider trading violations), the issuance of cease-and-desist
orders, the deregistration or suspension of the non-compliant broker-dealer or
investment adviser, the suspension or disqualification of the broker-dealer's
officers or employees or other adverse consequences. The imposition of any such
penalties or orders on FAS could have a material adverse effect on FAS's
operating results and financial condition.
Additional legislation and regulations, including those relating to the
activities of broker-dealers and investment advisers, changes in rules
promulgated by the SEC or other United States or foreign governmental regulatory
authorities and SROs or changes in the interpretation or enforcement of existing
laws and rules may adversely affect the manner of operation and profitability of
FAS. FAS's businesses may be materially affected not only by regulations
applicable to it as a financial market intermediary, but also by regulations of
general application. For example, the volume of FAS's underwriting, merger and
acquisition, securities trading and asset management activities in any year
could be affected by, among other things, existing and proposed tax legislation,
antitrust policy and other governmental regulations and policies (including the
interest rate policies of the Federal Reserve Board) and changes in
interpretation or enforcement of existing laws and rules that affect the
business and financial communities.
NET CAPITAL REQUIREMENTSNet Capital Requirments
As a broker-dealer registered with the SEC and as a member firm of the
NASD, FAS Wealth will be subject to the capital requirements of the SEC and the
NASD. These capital requirements specify minimum levels of capital, computed in
accordance with regulatory requirements, that the firm is required to maintain
and also limits the amount of leverage that the firm is able to obtain.
FAS Wealth will compute its net capital requirement under the aggregate
indebtedness method permitted by the SEC. Under this method, FAS Wealth is
required by the SEC to maintain regulatory net capital, computed in accordance
with the SEC's regulations, equal to the greater of $250,000 or such amount that
its aggregate indebtedness does not exceed 1,500% of its net capital.
"Net capital" is essentially defined as net worth (assets minus
liabilities, as determined under generally accepted accounting principles), plus
qualifying subordinated borrowings, less the value of all of a broker-dealer's
assets that are not readily convertible into cash (such as goodwill, furniture,
prepaid expenses and unsecured receivables), and further reduced by certain
percentages (commonly called "haircuts") of the market value of a broker-
dealer's positions in securities and other financial instruments.
The SEC's capital rules also (i) require that broker-dealers notify it, in
writing, two business days prior to making withdrawals or other distributions of
equity capital or lending money to certain related persons if those withdrawals
would exceed, in any 30-day period, 30% of the broker-dealer's excess net
capital, and that they provide such notice within two business days after any
such withdrawal or loan that would exceed, in any 30-day period, 20% of the
broker-dealer's excess net capital, (ii) prohibit a broker-dealer from
withdrawing or otherwise distributing equity capital or making related party
loans if after such distribution or loan, the broker-dealer has net capital of
less than $300,000 or if the aggregate indebtedness of the broker-dealer's
consolidated entities would exceed 1,000% of the broker-dealer's net capital and
in certain other circumstances, and (iii) provide that the SEC may, by order,
prohibit withdrawals of capital from a broker-dealer for a period of up to 20
business days, if the withdrawals would exceed, in any 30-day period, 30% of the
broker-dealer's excess net capital and if the SEC believes such withdrawals
would be detrimental to the financial integrity of the firm or would unduly
jeopardize the broker-dealer's ability to pay its customer claims or other
liabilities.
Compliance with regulatory net capital requirements could limit those
operations that require the intensive use of capital, such as underwriting and
trading activities, and also could restrict FAS's ability to withdraw capital
from its affiliated broker-dealers, which in turn could limit its ability to pay
dividends, repay debt and redeem or repurchase shares of its outstanding capital
stock.
A failure of a broker-dealer to maintain its minimum required net capital
would require it to cease executing customer transactions until it came back
into compliance, and could cause it to lose its NASD membership, its
registration with the SEC or require its liquidation. Further, the decline in a
broker-dealer's net capital below certain "early warning levels," even though
above minimum net capital requirements, could cause material adverse
consequences to the broker-dealer.
MANAGEMENT OF FASManagement of FAS
Directors and Executive Officers. Directors and Executive OfficersFAS has
initially fixed the number of directors at seven, including at least one
non-employee director and two employee directors whom FAS anticipates will be
named prior to the closing of the Merger, to begin serving upon closing of the
Merger. The Board of Directors will be divided into three classes with two or
three directors in each class, with each class serving staggered terms. At each
annual meeting of stockholders, directors will be elected by the holders of the
Common Stock to succeed those directors whose terms are expiring.
Information describing the background of Directors and Executive Officers
appears under the caption "Certain Considerations Related to the Merger -
Directors and Officers of FAS Following the Merger."
Compensation of Executive OfficersCompensation of Executive Officers. As
of the date of this Information Statement/Prospectus no compensation has been
paid and a minimal amount has accrued to any of the Executive officers of FAS.
As a part of the Merger, FAS intends to enter into employment agreements
with Guy S. Della Penna, Jack A. Alexander, Robert H. DeVore, Georgeanne
Detweiler, Bonnie S. Gilmore and Andrea Smeltzer.
Compensation of DirectorsCompensation of Directors. FAS intends to pay
each director who is not an officer or employee of FAS an annual director's fee
plus an attendance fee for each meeting of the Board of Directors or committee
thereof that such director actually attends. In addition, FAS will reimburse
directors for their reasonable expenses incurred in attending meetings of the
Board and its committees. Directors' compensation may be changed at any time by
the Board.
Stock Incentive PlanStock Incentive Plan. The board of directors and
stockholders of FAS have approved and adopted by written consent, the FAS Group,
Inc. Stock Incentive Plan (the "Stock Incentive Plan"). The purpose of the
Stock Incentive Plan is to provide deferred stock incentives to certain key
employees and directors of FAS and its subsidiaries who contribute significantly
to the long-term performance and growth of FAS. The following description of
the Stock Incentive Plan is qualified by the Stock Incentive Plan itself.
General Provisions of the Stock Incentive PlanGeneral Provisions of the
--------------------------------------------------
Stock Incentive Plan. The Stock Incentive Plan will be administered by the
Board of Directors or a committee of the Board of Directors duly authorized and
given authority by the Board of Directors to administer the Stock Incentive Plan
(the Board of Directors or such designated Committee as administrator of the
Stock Incentive Plan shall be hereinafter referred to as the "Board"). The
Board will have exclusive authority to administer the Stock Incentive Plan
including without limitation, to select the employees to be granted awards under
the Stock Incentive Plan, to determine the type, size and terms of the awards to
be made, to determine the time when awards will be granted, and to prescribe the
form of instruments evidencing awards made under the Stock Incentive Plan. The
Board will be authorized to establish, amend and rescind any rules and
regulations relating to the Stock Incentive Plan as may be necessary for
efficient administration of the Stock Incentive Plan. Any Board action will
require a majority vote of the members of the Board.
Three types of awards are available under the Stock Incentive Plan: (i)
nonqualified stock options or incentive stock, (ii) stock appreciation rights,
and (iii) restricted stock. An aggregate of six hundred fifty five thousand
shares of Common Stock may be issued pursuant to the Stock Incentive Plan,
subject to adjustment to prevent dilution due to merger, consolidation, stock
split or other recapitalization of FAS.
The Stock Incentive Plan will not affect the right or power of FAS or its
stockholders to make or authorize any major corporate transaction such as a
merger, dissolution or sale of assets. If FAS is dissolved, liquidated or
merged out of existence, each participant will be entitled to a benefit as
though he became fully vested in all previous awards to him immediately prior to
or concurrently with such dissolution, liquidation or merger. The Board may
provide that an option or stock appreciation right will be fully exercisable, or
that a share of restricted stock will be free of such restriction upon a change
in control of FAS.
The Stock Incentive Plan may be amended at any time and from time to time by the
Board of Directors but no amendment which increases the aggregate number of
shares of Common Stock that may be issued pursuant to the Stock Incentive Plan
will be effective unless it is approved by the stockholders of FAS. The Stock
Incentive Plan will terminate upon the earlier of the adoption of a resolution
by the Board of Directors terminating the Stock Incentive Plan, or ten years
from the date of the Stock Incentive Plan's approval by the Board of Directors
and stockholders, June 23, 1998.
Stock Options and Stock Appreciation RightsStock Options and Stock Appreciation
--------------------------------------------
Rights. Stock options are rights to purchase shares of Common Stock. Stock
appreciation rights are rights to receive, without payment to FAS, cash and/or
shares of Common Stock in lieu of the purchase of shares of Common Stock under
the stock option to which the stock appreciation right is attached. The Board
may grant stock options in its discretion under the Stock Incentive Plan. The
option price shall be determined by the Board at the time the option is granted
and shall not be less than the par value of such shares.
The Board will determine the number of shares of Common Stock to be subject to
any option awarded. The option will not be transferable by the recipient except
by the laws of descent and distribution. The option period and date of exercise
will be determined by the Board and may not exceed ten years. The option of any
person who dies may be exercised by his executors, administrators, heirs or
distributors if done so within one year after the date of that person's death
with respect to any Common Stock as to which the decedent could have exercised
the option at the time of this death. Upon exercise of an option, the
participant may pay for Common Stock so acquired in cash, with Common Stock (the
value of which will be the fair market value at the date of exercise), in a
combination of both cash and Common Stock, or, in the discretion of the Board,
by promissory note. For purposes of determining the amount, if any, of the
purchase price satisfied by payment with Common Stock, fair market value is the
mean between the highest and lowest sales price per share of Common Stock on a
given day on the principal exchange upon which the stock trades or some other
quotation source designated by the Board.
The Board may, in its discretion, attach a stock appreciation right to an option
awarded under the Stock Incentive Plan. A stock appreciation right is
exercisable only to the extent that the option to which it is attached is
exercisable. A stock appreciation right entitles the optionee to receive a
payment equal to the appreciated value of each share of Common Stock under
option in lieu of exercising the option to which the right is attached. The
appreciated value is the amount by which the fair market value of a share of
Common Stock exceeds the option exercise price for that share of Common Stock.
A holder of a stock appreciation right may receive cash, Common Stock or a
combination of both upon surrendering to FAS the unexercised option to which the
stock appreciation right is attached. FAS must elect its method of payment
within fifteen business days after the receipt of written notice of an intention
to exercise the stock appreciation right.
Any person granted an incentive stock option under the Stock Incentive Plan who
makes a disposition, within the meaning of 425(c) of the Internal Revenue Code
of 1986, as amended ("Code"), and the regulations promulgated thereunder, of any
shares of Common Stock issued to him pursuant to his exercise of an option
within two years from the date of the granting of such option or within one year
after the date any shares are transferred to him pursuant to the exercise of the
incentive stock option must within ten days of the disposition notify FAS and
immediately deliver to FAS any amount of federal income tax withholding required
by law.
A person to whom a stock option or stock appreciation right is awarded will have
no rights as a stockholder with respect to any shares of Common Stock issuable
pursuant to the stock option or stock appreciation rights until actual issuance
of a stock certificate for Common Stock.
Restricted StockRestricted Stock. The Board may in its discretion award Common
-----------------
Stock that is subject to certain restrictions on transferability. This
restricted stock issued pursuant to the Stock Incentive Plan may not be sold,
assigned, transferred, pledged, hypothecated or otherwise disposed of, except by
the laws of descent and distribution, for a period of time as determined by
the Board, from the date on which the award is granted. FAS will have the
option to repurchase the shares of restricted Common Stock at such price as the
Board shall have fixed, in its sole discretion, when the award was made, which
option will be exercisable at such times and upon the occurrence of such events
as the Board shall establish when the restricted stock award is granted. FAS
may also exercise its option to repurchase the restricted Common Stock if prior
to the expiration of the restricted period, the participant has not paid to FAS
amounts required to be withheld pursuant to federal, state or local income tax
laws. Certificates for restricted stock will bear an appropriate legend
referring to the restrictions. A holder of restricted stock may exercise all
rights of ownership incident to such stock including the right to vote and
receive dividends, subject to any limitations the Board may impose.
Tax InformationTax Information. A recipient of an incentive stock option or a
----------------
non-qualified stock option will not recognize income at the time of the grant of
the option. On the exercise of a non-qualified stock option, the amount by
which the fair market value of Common Stock on the date of exercise exceeds the
option price will generally be taxable to the holder as ordinary income, and
will be deductible for tax purposes by FAS. The disposition of Common Stock
acquired upon exercise of a non-qualified option will ordinarily result in
capital gain or loss. In the case of officers who are subject to the
restrictions of Section 16(b) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), the date for measuring the amount of ordinary income to be
recognized upon the exercise of a non-qualified stock option will generally be
six months after exercise rather than the date of exercise.
On the exercise of an option that qualifies as an "incentive stock option"
within the meaning of the Code, the holder will not recognize any income and FAS
will not be entitled to a deduction for tax purposes. However, the difference
between the exercise price and the fair market value of Common Stock received on
the date of the exercise will be treated as an "item of tax preference" to the
holder that may be subject to the alternative minimum tax. The disposition of
Common Stock acquired upon exercise of an incentive stock option will ordinarily
result in capital gain or loss, however if the holder disposes of Common Stock
acquired upon the exercise of an incentive stock option within two years after
the date of grant or one year after the date of exercise (a "disqualifying
disposition"), the holder will recognize ordinary income, and FAS will be
entitled to a deduction for tax purposes in the amount of the excess of the fair
market value of the shares of Common Stock on the date the option was exercised
over the option price (or, in certain circumstances, the gain on sale, if less).
Otherwise, FAS will not be entitled to any deduction for tax purposes upon
disposition of such Common Stock. Any excess of the amount realized by the
holder on the disqualifying disposition over the fair market of Common Stock on
the date of exercise of the option will be capital gain.
If an incentive option is exercised through the use of Common Stock previously
owned by the holder, such exercise generally will not be considered a taxable
disposition of the previously owned Common Stock and thus no gain or loss will
be recognized with respect to such Common Stock upon exercise. However, if the
previously owned Common Stock was acquired by the exercise of an incentive stock
option or other tax qualified stock option and the holding period requirements
for Common Stock were not satisfied at the time the previously owned Common
Stock was used to exercise the incentive option, such use would constitute a
disqualifying disposition of such previously owned Common Stock resulting in the
recognition of ordinary income (but, under proposed Treasury regulations, not
any additional gain in capital gain) in the amount described above.
The amount of any cash or the fair market value of any Common Stock received
upon the exercise of stock appreciation rights under the Stock Incentive Plan
will be subject to ordinary income tax in the year of receipt and FAS will be
entitled to a deduction for such amount. However, if the holder receives Common
Stock upon the exercise of stock appreciation rights and is then subject to the
restrictions of Section 16(b) of the Exchange Act; unless the holder elects
otherwise, the amount of Ordinary income and deduction will be measured at the
time such restrictions lapse.
Generally, a grant of restricted stock under the Stock Incentive Plan will not
result in taxable income to the employee or deduction to FAS in the year of the
grant. The value of Common Stock will be taxable to the employee and
compensation income in the years in which the restrictions on Common Stock
lapse. Such value will be the fair market value of Common Stock on the dates
the restrictions terminate, less any amount the recipient may have paid for
Common Stock at the time of the issuance. An employee, however, may elect to
treat the fair market value of Common Stock on the date of such grant (less
restricted stock, provided the employee makes the election within thirty days
after the date of the grant. If such an election is made and the employee later
forfeits Common Stock to FAS, the employee will not be allowed to deduct at a
later date the amount he had earlier included as compensation income. In any
case, FAS will receive a deduction corresponding in amount and time to the
amount of compensation included in the employee's income in the year in which
that amount is so included.
As of the date of this Information Statement/Prospectus, no stock options have
been granted under the Stock Incentive Plan.
Limitations of Liability and Indemnification of Directors Limitations of
Liability and Indemnification of Directors. FAS's Certificate of Incorporation
provides that directors will not be personally liable to FAS or its stockholders
for monetary damages for breach of their fiduciary duties as directors,
except for liability (i) for breaches of the duty of loyalty to FAS or its
stockholders, (ii) for any acts or omissions not in good faith or involving
intentional misconduct or a knowing violation of law, (iii) under Section 174 of
the DGCL relating to unlawful dividends, or (iv) transactions involving an
improper personal benefit. Moreover, if Delaware law were to change in the
future to permit the further elimination or limitation of the personal liability
of directors, the liability of a director of FAS would be eliminated or limited
to the fullest extent permitted by Delaware law, as so amended. The Certificate
of Incorporation and the Bylaws of FAS also contain provisions to indemnify the
directors, officers, employees or other agents to the fullest extent permitted
by the DGCL. These provisions may have the practical effect in certain cases of
eliminating the ability of stockholders to collect monetary damages from
directors.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of FAS
pursuant to the foregoing provisions, or otherwise, FAS has been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act of 1933 and is,
therefore, unenforceable.
PRINCIPAL STOCKHOLDERS OF FASPrincipal Stockholders of FAS
The following table sets forth certain information, as of July 31, 1998,
with respect to beneficial ownership of the shares of the Common Stock by (i)
each person known by FAS to own beneficially more than 5% of the presently
outstanding Common Stock; (ii) each Director of FAS; and (iii) all Directors and
Officers of FAS as a group, both before and after giving effect to the Merger.
[Enlarge/Download Table]
COMMON STOCK
-------------
NAME OF NUMBER OF PERCENT OF TOTAL(2)(3)
BENEFICIAL OWNER SHARES OWNED(1) BEFORE MERGER AFTER MERGER
--------------------------- --------------------- -----------------------------
Jack A. Alexander 695,000 20.8% 13%
14358 Golden Sunset Lane Class A Common Stock
Poway, California 92064
Jack A. Alexander
14358 Golden Sunset Lane 630,000 18.9% 12%
Poway, California 92064 Class B Common Stock
John J. Garrett, Trustee
u/a/d October 28, 1986 1,060,000 31.8% 20%
P.O. Box 130444 Class A Common Stock
Houston, Texas 77219-0444
Langston Investments, Inc. 53,000
10210 Highway 243 Class A Common Stock 1.6% 1%
Kaufman, Texas 75142
ALL OFFICERS AND DIRECTORS 1,378,000 2.6% 47.4%
AS A GROUP (2 PERSONS)
BEFORE THE MERGER
Guy S. Della Penna
2323 Stickney Point Road 887,778 0% 16.8%
Sarasota, FL 34231 Class A Common Stock
Guy S. Della Penna
2323 Stickney Point Road 370,000 0% 6.9%
Sarasota, FL 34231 Class B Common Stock
ALL OFFICERS AND DIRECTORS 2,666,178 0% 50.31%
AS A GROUP (7 PERSONS)
AFTER THE MERGER
<FN>
(1) Represents the number of shares of Common Stock beneficially owned as of July 31,
1998, except Guy S. Della Penna and other directors of Executive who will acquire shares
in the Merger, by each named person or group, expressed as a percentage of all of the
shares of such class outstanding as of such date.
(2) Based upon the total number of shares of Common Stock outstanding before the
Merger (3,339,000) and after the Merger (5,300,000) including the shares reserved for
issuance on conversion of the Series A Convertible Preferred Stock. Under the rules of
the Securities and Exchange Commission, a person is deemed to be the beneficial owner of
a security if such person has or shares the power to vote or direct the voting of such
security or the power to dispose or direct the disposition of such security. A person is
also deemed to be a beneficial owner of any securities if that person has the right to
acquire beneficial ownership within 60 days. Accordingly, more than one person may be
deemed to be a beneficial owner of the same securities. Unless otherwise indicated by
footnote, the name entities or individuals have sole voting and investment power with
respect to the shares of Common Stock beneficially owned.
(3) Does not include (i) 795,000 shares issuable upon conversion of Series A
Convertible Preferred Stock, (ii) 750,000 shares issuable upon exercise of the Warrants
being offered hereby, (iii) 655,000 shares issuable upon exercise of Incentive Stock
Options as a part of the Merger, or (iv) 22,800 shares issuable upon exercise of common
stock warrants issuable to FMC Capital Markets, Inc. as a part of the Merger.
DESCRIPTION OF FAS CAPITAL STOCKDescription of FAS Capital Stock
The following statements do not purport to be complete and are qualified in
their entirety by reference to the detailed provisions of FAS's Certificate of
Incorporation and By Laws, copies of which will be furnished to an investor upon
written request therefor. The authorized capital stock of FAS consists of 25
million shares of Class A Common Stock, 1 million shares of Class B Common
Stock, and 1 million shares of Preferred Stock, $.001 par value per share. See
"Additional Information."
Common StockCommon Stock . As of the date of this Information
Statement/Prospectus, there are 3,339,000 shares of Common Stock outstanding,
including the shares reserved for issuance on conversion of the Series A
Convertible Preferred Stock, 630,000 of which are Class B shares and 2,709,000
are Class A shares. After the Merger, there will be 5,300,000 shares of Common
Stock outstanding, 1,000,000 of which will be Class B shares and 4,300,000 will
be Class A shares. Holders of Class A Common Stock are entitled to one vote per
share on all matters to be voted upon by the shareholders and holders of Class B
Common Stock are entitled to 50 votes per share. 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 or cumulative voting rights. FAS's
Certificate of Incorporation, provides that the board of directors shall be
divided into three classes, as nearly equal in number as possible, and that at
each annual meeting of stockholders all of the directors of one class shall be
elected for a three-year term. The affirmative vote of not less than 75% of the
outstanding Shares of Common Stock is required to approve a merger or
consolidation, a transfer of substantially all the assets, certain issuances and
transfers of FAS's securities to other entities or a dissolution of FAS, unless
the Board of Directors of FAS has approved the transaction. Additionally,
certain business combinations involving FAS and any holder of 15% or more of
FAS's outstanding voting stock must be approved by at least 66.67% of such
voting stock, exclusive of the stock owned by the 15% stockholders, unless
approved by a majority of the directors not affiliated with such holder or
certain price and procedural requirements are met. These provisions, together
with the authorization to issue preferred stock on terms designated by the Board
of Directors, described above, could be used as anti-takeover devices.
Subject to preferences that may be applicable to any outstanding series of
Preferred Stock the holders of Common Stock are entitled to receive dividends
ratably when, as and if declared by the Board of Directors, and upon liquidation
are entitled to share ratably in FAS's net assets. Payment of dividends on the
Common Stock may be subject to prior payment of dividends on any Preferred Stock
issued in the future. See "Description of Capital Stock - Preferred Stock."
The decision to pay dividends is subject to such other financial considerations
as the Board of Directors of FAS may deem relevant. No assurance can be given
as to the timing or amount of any dividend that FAS may declare on the Common
Stock.
FAS's By-Laws provide that, subject to certain limitations discussed below,
any stockholder entitled to vote in the election of directors generally may
nominate one or more persons for election as directors at a meeting. FAS's
By-Laws also provide that a stockholder must give written notice of such
stockholder's intent to make such nomination or nominations, either by personal
delivery or by United States mail, postage prepaid, to the Secretary of FAS not
later than (i) with respect to an election to be held at an Annual Meeting of
Stockholders, 90 days prior to the anniversary date of the date of the
immediately preceding Annual Meeting, and (ii) with respect to an election to be
held at a Special Meeting of Stockholders for the election of directors, the
close of business on the tenth day following the date on which a written
statement setting forth the date of such meeting is first mailed to stockholders
provided that such statement is mailed no earlier than 120 days prior to the
date of such meeting. Notwithstanding the foregoing, if an existing director is
not standing for re-election to a directorship which is the subject of an
election at such meeting or if a vacancy exists as to a directorship which is
the subject of an election, whether as a result of resignation, death, an
increase in the number of directors, or otherwise, then a stockholder may make a
nomination with respect to such directorship at any time not later than the
close of business on the tenth day following the date on which a written
statement setting forth the fact that such directorship is to be elected and the
name of the nominee proposed by the Board of Directors is first mailed to
stockholders. Each notice of a nomination from a stockholder shall set forth:
(a) the name and address of the stockholder who intends to make the nomination
and of the person or persons to be nominated; (b) a representation that the
stockholder is a holder of record of stock of FAS entitled to vote at such
meeting and intends to appear in person or by proxy at the meeting to nominate
the person or persons specified in the notice; (c) a description of all
arrangements or understandings between the stockholder and each nominee and any
other person or persons (naming such person or persons) pursuant to which the
nomination or nominations are to be made by the stockholder, (d) such other
information regarding each nominee proposed by such stockholder as would be
required to be included in a proxy statement filed pursuant to the Exchange Act
and the rules and regulations thereunder (or any subsequent provisions replacing
such Act, rules or regulations); and (e) the consent of each nominee to serve as
a director of FAS if so elected. The presiding officer of the meeting may
refuse to acknowledge the nomination of any person not made in compliance with
the foregoing procedure.
Preferred StockPreferred Stock . The Certificate of Incorporation of FAS
authorizes the issuance of up to 1,000,000 shares of preferred stock, $.001 par
value (the "Preferred Stock"), of which 79,500 have been designated as Series A
Convertible Preferred Stock and have been reserved for issuance in exchange for
marketable securities with a market value of $4,000,000 pursuant to a letter
agreement with United States Refining and Petrochemicals, Inc. The 79,500
shares of Series A Convertible Preferred Stock is convertible into 795,000
shares of Class A Common Stock. The summary of terms of FAS's preferred stock
contained in this Information Statement/Prospectus does not purport to be
complete and is subject to, and is qualified in its entirety by, the provisions
of FAS's Certificate of Incorporation and the Certificate of Designations of the
Cumulative Convertible Preferred Stock (liquidation preference to be determined
by the Board of Directors of FAS) (the "Certificate of Designations"), which is
available from FAS upon request.
The Board of Directors of FAS is authorized by its Certificate of
Incorporation, without any action on the part of stockholders, to issue
preferred stock in one or more series, with such voting powers, full or limited
but not to exceed one vote per share, or without voting powers, and with such
designations, preferences, limitations, descriptions and terms thereof,
including the extent, if any, to which the holders of the Shares of any such
series will be entitled to vote as a class or otherwise with respect to the
election of directors or otherwise, all as shall, to the extent permitted under
the laws of the State of Delaware, be determined by the Board of Directors of
FAS. Thus, subject to the limitations in the Certificate of Designations, the
Board of Directors, without stockholder approval, may authorize the issuance of
preferred stock (in addition to the Preferred Stock) but not with voting,
conversion, dividend, liquidation or other rights senior to those of the
Preferred Stock, which could make it more difficult for another company to
effect certain business combinations with FAS.
SHARES ELIGIBLE FOR FUTURE SALEShares Eligible for Future Sale
Upon completion of the Merger, FAS will have 5,300,000 shares of Common
Stock outstanding including the shares reserved for issuance on conversion of
the Series A Convertible Preferred Stock. Of these shares, 1,961,000 will be
freely tradable, subject to the limitations imposed upon affiliates, without
restriction or registration under the Securities Act of 1933 as amended (the
"Securities Act"). The remaining 3,339,000 shares (the "Restricted Shares")
were issued and sold by FAS in reliance upon exemptions from registration under
the Securities Act.
Beginning in July 1999, and at various dates thereafter, all of the
Restricted Shares will become eligible for sale pursuant to Rule 144 promulgated
under the Securities Act, if the conditions of the rule have been met. In
general, under Rule 144 as currently in effect, beginning 90 days after the date
of the Merger, a shareholder, including an affiliate of FAS, may sell shares of
Common Stock acquired prior to the Merger after at least one year has elapsed
since such shares were acquired from FAS or an affiliate of FAS. The number of
shares of Common Stock which may be sold within any three-month period is
limited to the greater of one percent of the then outstanding Common Stock or
the average weekly trading volume in the Common Stock during the four calendar
weeks preceding the date on which notice of such sale was filed under Rule 144.
Certain other requirements of Rule 144 concerning availability of public
information, manner of sale and notice of sale must also be satisfied. In
addition, a shareholder who is not an affiliate of FAS (and who has not been an
affiliate for 90 days prior to the sale) and who has beneficially held shares
acquired from FAS or an affiliate of FAS for at least two years, may resell the
shares without compliance with the foregoing requirements under Rule 144.
Prior to the Merger, there has been no public market for the Common Stock,
and no predictions can be made as to the effect, if any, that sales of shares or
the availability of shares for sale will have on the prevailing market price of
the Common Stock. Nevertheless, sales of substantial amounts of Common Stock in
the public market could have an adverse effect on the prevailing market prices.
INFORMATION CONCERNING EXECUTIVEINFORMATION CONCERNING EXECUTIVE
GENERALGeneral
Executive Wealth Management Services, Inc. was founded in 1981 and is an
independent, publicly held broker/dealer focused on Affinity Group marketing
programs. Executive's principal executive office is located at 2323 Stickney
Point Road, Sarasota, Florida 34231, and its telephone number is 941-921-9700.
Executive approaches the marketplace with an innovative concept in the
broker/dealer structure with a marketing focus towards Affinity Groups. The
business strategy of Executive is to offer products and services to professional
business persons and high net worth individuals who are primarily members of
affinity groups. Executive additionally focuses its growth activities in the
areas of the establishment of additional independent branch offices staffed by
brokers who market mutual funds, stocks, bonds, variable annuities and insurance
products as well as wealth management services to the general public.
OPERATIONS OFFICEOperations Office
Executive is located at 2323 Stickney Point Road, Sarasota, Florida 34231, and
its telephone number is 941-921-9700. There are ten (10) branch offices located
in Tampa, Spring Hill, Delray Beach, Longwood, Altamonte Springs and Naples; and
two offices in Sarasota, and one in Safety Harbor and Altamonte Springs as well
as one office in San Diego, California. Management anticipates that Executive
will, either by acquisition, origination or association, add at least twenty
additional branches within the next twenty four (24) months
LICENSINGLicensing
Executive is licensed as a securities broker-dealer in all States except:
Alaska, Arkansas, Delaware, Hawaii, Idaho, Montana, New Hampshire, South Dakota,
Utah and the District of Columbia. As of the date of this Information
Statement/Information Statement/Prospectus, Executive is capable of engaging in
substantially all aspects of the life and health insurance business and
securities business. Executive is registered as a securities broker-dealer
pursuant to the provisions of the Securities Exchange Act of 1934, as amended,
and is registered with the Securities and Exchange Commission as a Registered
Investment Advisor under the Investment Advisor Act of 1940, as amended, and is
also registered as such under various state securities laws. Executive is a
member of the National Association of Securities Dealers ("NASD"), Securities
Investor Protection Corporation ("SIPC") and the Municipal Securities Rule
Making Board ("MSRB").
Executive operates as a fully-disclosed securities broker-dealer and has,
as of the date of this Information Statement/Information Statement/Prospectus,
correspondent clearing relationships with two New York Stock Exchange member
firms, specifically: Raymond James & Associates, Inc. of St. Petersburg,
Florida and J.W. Charles Clearing Corporation in Boca Raton, Florida. It is
anticipated that upon consummation of the Merger, FAS will enter into a clearing
arrangement with Clearing Services Corporation, Inc, New York, New York. In
July 1997, the NASD amended the firm's Restrictive Agreement to eliminate any
restriction on the number of registered representatives who can be licensed by
Executive. Executive is also unrestricted as to the number of branch offices it
may operate. It is Executive's intent to establish Offices of Supervisory
Jurisdiction as may be appropriate to facilitate servicing Affinity Groups and
the public at-large. All administrative functions with respect to Executive's
insurance and securities activities, including compliance, are carried out
and/or are supervised from Executive's administrative offices located in
Sarasota, Florida.
Executive is registered with the United States Securities and Exchange
Commission as a Registered Investment Advisor under the Investment Advisors Act
of 1940 and is registered as such with the states of Florida, Missouri, Kansas
and are pending in the states of New Mexico and Texas.
Executive has been in continuous, uninterrupted compliance with all net
capital requirements imposed by the Securities Exchange Act of 1934 and the
United States Securities and Exchange Commission acting pursuant to the
authority vested in such Commission by such statute. Executive has never
experienced any regulatory difficulties or problems since its incorporation in
1981 and, as of the date of this Summary, has, as a firm, never been the subject
of any adverse arbitration rulings or litigation.
OBJECTIVE OF MANAGEMENT Objective of Management
Management's objective is to create value within Executive that can be measured,
extracted and converted to cash or perhaps to be a potential future acquisition
candidate for a publicly traded financial corporate suitor such as a commercial
bank, insurance company, mutual fund family or national broker/dealer.
Management's goal is to effect strong fundamental financial performance in the
areas of revenue growth, cost containment, earnings increases and enhancement of
book value. The enhancement in value is to be accomplished by calibrated,
sure-footed steps in the implementation of a specifically defined plan of action
over time.
Executive also operates as a specialized investment banking firm, offering
on a best efforts, agency or brokerage basis, investment media and services to
its customers which include common and preferred stocks, corporate and municipal
bonds, United States Treasury obligations, interests in direct participation
programs, shares of mutual funds, investment and comprehensive financial,
retirement, tax, and estate planning, as well as investment analysis and
recommendations. Executive acts as a "fully disclosed" securities
broker/dealer, exercises no custodial or discretionary powers over its customer
accounts and such services are rendered solely in connection with the purchase
or sale of securities or the anticipated purchase or sale of securities, as well
as a variety of insurance products. Such services are provided on an incidental
basis solely in connection with the conduct of its business as a securities
broker/dealer.
For the past three years, Executive has aggressively engaged in, and
committed significant financial and personnel resources towards the development
of business and contractual relationships with medical and non-medical Affinity
Groups. Paramount to this effort has been the selection and due diligence
analysis conducted by Executive of unique, needs driven and/or value added
securities and non-securities related products and services for endorsement by
these Affinity Groups to their members. In this regard, Executive has hired or
associated with personnel (see Affinity Marketing Team) who have unique and
experienced backgrounds in the medical, legal, accounting and affinity group
marketing industries. In addition, Affinity Marketing Team members of Executive
have conducted numerous conferences and meetings with a wide variety of Affinity
Groups and product and service vendors which have resulted in formal contractual
relationships with some of these Affinity Groups and vendors to facilitate
Executive's unique business strategy
AFFINITY GROUP MARKETING STRATEGY Affinity Group Marketing Strategy
Physicians, lawyers, dentists, engineers, and accountants, among others,
often times belong to some professional groups or associations, commonly known
as "Affinity Groups." Executive strategy is to have its products and services
endorsed by the organization's governing body, thereby providing Executive with
potential access to large numbers of qualified and accredited customers. In
this regard, Executive has established contacts and relationships with various
Affinity Groups and has presented comprehensive marketing plans to all of these
organizations wherein various securities and non-securities products and
services are endorsed by the Affinity Groups to offer said products and services
to their membership.
It is management's belief that by focusing on Affinity Group marketing, it
will place Executive in a superior competitive position relative to traditional
broker-dealers because Affinity Group marketing provides and or facilitates:
attracting full service brokers by offering the opportunity to market
quality products to the Affinity Groups;
an affirmative and possibly exclusive endorsement from the
organizations leadership, (i.e. medical, dental and other associations);
access to and development of the size and quality of client accounts
of high net worth individuals, and referrals from these individuals, that
Executive may approach to cross-sell additional products and services;
significant marketing economies of scale;
ability to receive financial marketing support from insurance
companies, mutual funds and other interested product vendors;
an opportunity to establish a brand name from which additional
customized, value added products and services may be offered;
a platform to introduce and develop proprietary financial and
non-financial products;
development and sale of private label specific products and/or
services for endorsing organizations;
insurance products and securities syndication and distribution
activities;
the ability to expand the number of broker/dealer branches and Offices
of Supervisory Jurisdiction;
expansion of its investment banking and related underwriting
activities;
customer loyalty as a result of being endorsed by an association for
one or more items and the resulting tacit approval of all products and services
offered by Executive; and
a revenue stream from a diversified product and service menu directed
at higher net worth individuals which may tend to dampen historic adverse
business cycles experienced by traditional securities broker-dealers.
Executive has researched, analyzed and developed a specific marketing
approach in establishing and developing its relationships with large Affinity
Groups. Executive has recognized that any product and/or service must be one
that is needs driven, unique and of economic benefit to a potential endorsing
organization and its member participants. By introducing Executive to these
potential client groups utilizing, initially, non-securities related products
and services that fulfill the three aforementioned criteria, Executive has been
able to further penetrate some of these groups. Executive has performed
extensive due diligence and analysis on the following related products and
services:
Prepaid tax audit defense service offered by TaxResources, Inc.;
AIG Life Insurance Company Survivorship Insurance Plans;
AIG Long Term Care Insurance;
A Business Owners Casualty Insurance Policy for physicians currently
being developed and research by FAS and Berkley Risk Services of Colorado, Inc.
on a joint venture basis;
A Disability Income Insurance Policy for physicians and others which
is being developed by a third party;
Disability Income Trust offered by Massachusetts Mutual Insurance Company;
and
Pre-paid Legal Services.
It is the intent of Executive to also offer securities related products and
services once the credibility of Executive and the success of the non-securities
related marketing program has been established. Executive will be able to
utilize its current and prospective contingent of registered representatives to
solicit and offer for sale various securities and insurance products to members
of the Affinity Groups on an endorsed basis and through the generation of a
proposed leads program which will help attract high quality brokers who
recognize the benefit of access to high net worth customers.
Executive's marketing approach to Affinity Groups is expected to also
entail a direct mailing system to survey member participants to determine and
focus on their specific areas of concern, needs, interests and requirements as
well as to determine statistically an approximate level of fulfillment
penetration. Once the foregoing has been established, the relationship with
Affinity Group members is intended to be further developed utilizing
telemarketing, web sites, seminars, informational and educational audio and
video tapes, press releases and Company authorized articles in various print
media. Such publicity will also be sought in the respective endorsing
organizations' periodicals and industry publications and by attendance at
Affinity Group meetings and conferences by Executive personnel.
NON-SECURITIES RELATED PRODUCTS AND SERVICESNon-Securities Related Products and
Services
TaxResources, Inc. TaxResources, Inc.("TaxResources"). TaxResources offers
a prepaid tax audit defense program whereby it will provide tax audit defense
for any income tax audit, federal and state, for any tax year, on a prepaid
basis. In addition, TaxResources will, for one annually renewable tax
deductible discounted fee provide the following services:
Expert representation by tax audit professionals before, during, and after
an audit, even through appeals if necessary;
Unrestricted use of toll-free 800 number for tax counseling throughout the
year; and
A quarterly newsletter with tax tips and related topics.
In addition, all of the firm's tax specialists are licensed to appear
before the IRS to represent the members. Furthermore, the firm requires all of
their specialists to be former IRS personnel, tax attorneys, agents, auditors,
or collection officers in one or more of the 20+ IRS audit categories.
FAS has secured exclusive marketing contracts with TaxResources to offer
the tax audit defense program to the following Affinity Groups:
[Download Table]
Membership
-------------------------------------------------------------
American Healthcare Alliance, Inc.; 220,000
American Medical Association; 292,000
American Society of Internal Medicine; 20,000
Texas Medical Association; 33,000
Kentucky Medical Association; 5,500
Medical Society of Delaware; 1,100
Hawaii Medical Association; 1,800
Michigan State Medical Association; 12,300
Iowa Medical Society; 3,700
Columbus Medical Association; 1,166
Institute of Electrical and Electronic Engineers; 200,000
American Bar Association. 328,000
---------
TOTAL 1,118,566
=========
Executive will receive first year commissions on each participant in the
TaxResources program as well as a renewal fee for each subsequent year the
service is renewed by each participant, a portion of which will be reallowed on
a case by case basis to each Affinity Group.
Upon obtaining an endorsement from an Affinity Group, each Affinity Group
provides a mailing list of the names and addresses of its members to
TaxResources who will produce all of the marketing information, solicit the
Affinity Group's members and provide service to those members, all at
TaxResources' expense.
Customized Business Owners Insurance.Customized Business Owners Insurance
This product is a Business Owner's Insurance Policy custom designed with special
coverage for risks that are unique to a doctor's office and is currently being
developed by Berkley Risk Services of Colorado, Inc. for marketing to members of
the Florida Medical Association, Inc. ("FMA") pursuant to a Letter of Intent
between Executive and Florida Medical Association, Inc., a for-profit subsidiary
of FMA. Executive believes that this type of business protection insurance
policy may be applicable to almost any professional business.
The most significant advantage of this type of business protection
insurance policy is that it combines a number of different types of coverage's
into a unified comprehensive program. Some of the features of this product
which could be utilized by the more than 15,250 members of the FMA and later to
the more than 300,000 doctor's offices throughout the United States include
coverage of: (i) professional and office equipment; (ii) off-premises; (iii)
money and securities; (iv) charts and X-rays reproduction; (v) accounts
receivable; (vi) business interruption; (vii) employee dishonesty; (viii) office
liability; (ix) fire and legal liability; (x) personal injury and advertising
liability; (xi) employee's hired and non-owned automobile liability; (xii)
medical payments; and (xiii) employee benefit liability coverage.
Executive believes that a business owners policy that combines the features
outlined above present a superior choice when compared to separate policies of
this type that are currently available on the market. Executive also believes
that this product could represent a significant amount of future revenue due to
the fact that the insurance can be modified to any professional business,
physicians, dentists, attorneys, engineers and accountants.
Index Annuity.Index Annuity This is a fixed, single premium deferred
annuity that provides an end-of-term guarantee of principal by an A+(Superior)
(A.M. Best) rated insurance company, plus interest earnings linked to the
performance of the S&P 500 Stock Index. There is also a no loss of principal
guarantee feature. The Annuity is designed for building long-term wealth
towards retirement.
Disability Income Trust Product.Disability Income Trust Product When an
individual becomes disabled, one losses the ability to earn an income and
additionally one's ability to fund their retirement plan. A traditional
disability income insurance policy replaces the insured's loss of income, but it
does not replace the loss of contributions to a retirement plan. The Disability
Income Trust Product ("D.I. Trust"), an innovative product issued by an A+(A.M.
Best) rated insurance company, was designed specifically to replace the loss,
due to disability, of contributions made to one's retirement plan. In addition,
unlike most disability income insurance plans, the D.I. Trust replaces up to
100% (125% if taxable) of the loss of retirement plan funding. The D.I. Trust
is not a substitute for traditional disability income insurance, but supplements
that insurance.
SECURITIES RELATED PRODUCTS AND SERVICESSecurities Related Products and Services
Variable Annuity.Variable Annuity A Flexible Premium Variable Annuity will
be offered to Affinity Group members through an A+(Superior) (A.M. Best) rated
insurance company. This product offers, in part, the following benefits: tax
deferred growth; twenty (20) investment options offered by one of the largest
mutual fund families in the USA; withdrawal of up to 15% of premium payments per
year free of any contingent deferred sales charges; along with no up front
initial sales charge, and an increasing death benefit through age 80.
Other Securities Products.Other Securities Products Executive also
anticipates offering to Affinity Group members a "load" at "no-load" family of
mutual funds, as well as perhaps a "private label" mutual fund or family of
funds program, in addition to stocks, bonds and government securities.
AFFINITY GROUP PRODUCTS UNDER DEVELOPMENT OR CONSIDERATIONAffinity Group
Products Under Development or Consideration
Customized Disability Income Insurance.Customized Disability Income
Insurance This is an innovative and unique disability insurance policy which
offers, in part, the following benefits:
Non-cancelable contract with guaranteed premiums to age 65.
Benefits payable to age 65.
Waiver of premium during compensable disabilities.
Optional benefits for personalized design including a selection of waiting
periods; extension of "own occupation" benefits to age 65; cost of living
adjustments and future purchase options.
Income replacement upon retirement.
Under current projections, young insureds who are claim free can have a
policy cash reserve at age 65 equal to nearly 100% of the premiums paid during
the policy's life.
Policy reserve is refunded without surrender charges at death and at policy
termination after the 10th year of the policy.
The policy has been developed and the designer of the policy is presently
negotiating with insurance carriers to underwrite part of the risk.
Transworld Systems, Inc. Transworld Systems, Inc.("TSI"). TSI, a national
collection firm, is a subsidiary of the Union Corporation. TSI offers the
combination of both fixed fee and contingency fee collection services. As the
leading company of its type in the industry, TSI has a successful history of
growth which is attributable to the strength of its marketing organization, a
high recovery rate, cost-effectiveness and quality of service. TSI's system
reduces customer's in-house collection costs while providing detailed monthly
status reports for accounting and control purposes. Many clients experience
collection costs as low as five to seven percent of the amount collected, while
at the same time eliminating a good deal of their normal billing expenses. The
combination of low cost and high recovery has resulted in a high customer
renewal rate.
TSI currently has well over 40,000 customers using its services, from small
companies that may purchase a system for 45 accounts to major corporations that
purchase systems for 100,000 accounts at a time.
Prepaid Legal Services, Inc ("PLS"). Prepaid Legal Services, Inc. (PLS)
PLS is based in Ada, Oklahoma and is an American Stock Exchange Listed provider
of legal services which includes 50 hours of attorney's time at no additional
cost when a covered member receives written notice of an IRS audit or are
requested to appear at IRS offices regarding a tax return. Up to 75 hours of
attorney-time is available when a covered person is named a defendant or
respondent in a covered civil or job-related criminal action filed in court. In
addition, the service covers unlimited phone consultations without additional
costs.
AFFINITY GROUP CUSTOMER BASEAffinity Group Customer Base
American Medical Association.("AMA").American Medical Association (AMA)
Founded in 1847, the AMA is the largest national association of physicians and
medical students dedicated to the health of the United States of America. The
AMA is now more than 150 years old and has in excess of 292,000 physician
members. The main functions of the AMA are to establish and maintain medical
educational standards, establish a source of creditable scientific information,
and inform consumers about health care issues and scientific developments.
Executive has solicited AMA Solutions, Inc., a wholly owned subsidiary of
the AMA, concerning the AMA's endorsement of TaxResources to its physician
members. AMA Solutions, Inc. has received all necessary due diligence materials
and has approved the service for presentation to the AMA as a new product for
endorsement. In June 1998, the AMA approved their endorsements of the
TaxResources/Executive business and marketing plan, the AMA will commence
marketing of the product.
Florida Medical Association, Inc. ("FLAMEDCO"). Florida Medical
Association, Inc. (FLAMEDCO) FLAMEDCO is a for profit subsidiary of the Florida
Medical Association, Inc. which has in excess of 15,250 physician members
located throughout the state of Florida.
In August, 1997, the Vice President of FLAMEDCO instructed Executive to
commence the development of a Customized Business Owners Policy to be endorsed
by FLAMEDCO to Florida Medical Association's physician members. Executive, in
conjunction with Berkley Risk Services of Colorado, Inc., who has previously
structured and successfully marketed a Customized Business Owners Policy for
dentists and physicians for the Colorado Dental Association, New Mexico Medical
Association and the Utah Medical Association, are considering several highly
rated insurance carriers to underwrite this policy. Executive is presently
waiting for final approval of marketing the policy to FLAMEDCO members.
American Healthcare Alliance, Inc. ("AHA"). American Healthcare Alliance,
Inc. (AHA)AHA is a for profit corporation that is incorporated in the state of
Delaware. AHA is a nationwide network of Preferred Provider managed healthcare
systems and Preferred Provider Organizations ("PPOs") and is the largest
alliance of its type in the nation.
The providers who participate in the AHA are physicians, dentists,
optometrists, chiropractors, podiatrists, laboratories, pharmacies, home
healthcare providers, hospitals, durable medical equipment providers, ambulatory
centers/surgery centers, mental healthcare facilities, urgent care centers and
other special care facilities. As of September, 1997, the AHA was participating
in excess of 300 major market areas, in more than 100 secondary markets, in
excess of 2,600 acute care and/or tertiary care hospitals and in excess of 500
specialty hospitals and over 1,000 ancillary facility provider locations such as
surgical centers, birthing centers, outpatient clinics, sports clinics, women's
clinics, and urgent care centers, among others. There are in excess of 220,000
physician members included in the AHA provider systems and approximately
16,250,000 individuals being served by AHA.
As a result of almost three years of extensive negotiations and
development, AHA has endorsed the TaxResources prepaid tax audit defense program
which was introduced by Executive and AHA has provided a list of 180,000 names
and addresses of its physician members to TaxResources. As a result of the AHA
Agreement, TaxResources' conducted an initial test mailing to 10,000 of these
physicians offering participation in TaxResources prepaid tax audit defense
program. The actual results of the test mailing was less than the historic paid
response rates experienced by TaxResources' for similar type mailings. As a
result, TaxResources, Executive and AHA are revising the mailing strategy for
AHA member physicians to include further endorsement by individual preferred
provider organizations along with the AHA endorsement.
In addition, Executive has been named the exclusive provider of financial
products and services and other products and services as approved by AHA and
recommended to the physician providers on a nationally and regionally endorsed
basis through the PPOs. AHA has also executed a Nondisclosure and
Non-Circumvention Agreement which will prohibit AHA from contracting with
providers of services and products introduced to AHA by Executive, so as to
effectively reinforce Executive's ability to market the products and services to
the physicians on an exclusive basis.
Kentucky Medical Association ("KMA").Kentucky Medical Association (KMA) The
KMA is a state medical association located in Louisville, Kentucky with in
excess of 5,500 physician members.
Executive has introduced TaxResources tax audit defense program to the KMA
and has provided the KMA with all necessary due diligence materials. The KMA
has conducted due diligence review of the program and has indicated its approval
of the service. However, since the KMA has not previously been involved with
endorsement of products and services to its members, they have indicated that
they must first establish a review committee before final approval.
Other Affinity Groups.Other Affinity Groups The president of TaxResources
has indicated his willingness to introduce Executive to the organizations that
currently endorse TaxResources' services for the purpose of marketing to the
organization's members other products and services offered through Executive.
Those groups are as follows:
American Association of Clinical Endocrinologists;
American College of Emergency Physicians, Alabama and California Chapters;
Bureau of Wholesale Sales Representatives;
Florida Chiropractic Association;
Florida Medical Association;
Florida Osteopathic Medical Association;
Florida Pharmacy Association;
Florida Society of Dermatology;
Florida Radiology Society;
Florida Restaurant Association;
Health Services Credit Union;
Los Angeles County Medical Association;
Life University Alumni Association;
Medical Association of Georgia;
Medical Association of the State of Alabama;
Mississippi State Medical Association;
Missouri State Medical Association;
National Business Association;
Northeast Association of Realtors
Northeast Osteopathic Association;
North Carolina Medical Society;
Northeast Florida Builders Association;
Oklahoma State Medical Association;
Orange County Medical Association;
Re/Max International;
Resident Agents of Nevada;
San Bernardino County Medical Society;
San Diego County Medical Society;
San Francisco Medical Association;
Santa Clara Medical Association;
Tennessee Medical Association;
Texas Osteopathic Association;
Union of American Physicians and Dentists; and
Unabridged Software, Inc.
Institute of Electrical and Electronic Engineers ("IEEE"). Institute of
Electrical and Electronic Engineers (IEEE) The IEEE is a not for profit
association consisting of electrical and electronic engineers with a national
membership base of in excess of 200,000 members. Executive has made a
presentation to the IEEE concerning TaxResources and other financial and
investment products and services and endorsement of the TaxResources tax audit
defense service for IEEE members. A follow-up presentation is expected to be
scheduled in the first quarter of 1999, wherein Executive will seek formal
endorsement by the IEEE of the TaxResources program.
AFFINITY GROUP MARKETING TEAMAFFINITY GROUP MARKETING TEAM
Executive, its consultants and affiliates have developed relationships with
various individuals with significant and specific spheres of influence, who have
obtained certain educational and achieved professional accomplishments as well
as contacts with various groups which have enabled the firm to access and obtain
endorsements with Affinity Group clients, particularly in the medical
profession, as well as to obtain favorable contracts and marketing support with
various product and service vendors. Specifically, these individuals include
Dr. Robert E. Windom, Guy S. Della Penna, John B. Hamner, Robert H. DeVore,
Michael E. Zebrowski, Lee W. Hone, Dr. Mearl A. Naponic and Baum G. Harris.
Robert E. Windom, M.D. served in President Ronald Reagan's administration
as the Assistant Under Secretary for Health. He has extensive contacts with a
broad network of influential management personnel of numerous medical groups and
entities on a nation-wide basis. In addition, Dr. Windom served as a past
president of the Florida Medical Association and is a delegate from Florida to
the American Medical Association. Dr. Windom has been active in various
charitable and political organizations on local, statewide, national and
international levels. Dr. Windom is currently a member of the Board of
Directors of Executive and is engaged as a paid consultant to Executive.
Guy S. Della Penna has utilized his contacts in the broker/dealer community
as well as the medical communities for entre into certain potential Affinity
Group clients. Specifically, Mr. Della Penna has assisted the American
Healthcare Alliance, Inc. in developing investment banking contacts which led to
the development of its existing relationship. In addition, Mr. Della Penna's
brother, Dr. Richard D. Della Penna, is a partner with the Permanente Medical
Group in California and heads up the Southern California Permanente
Geriatrics/Hospice Medical Group. Mr. Della Penna also has numerous medical
contacts by virtue of the fact that his Father, now deceased, was a physician
and Fellow of The American College of Surgeons.
Mearl A. Naponic, M.D. is a practicing physician, a Fellow of the American
College of Obstetrics and Gynecology, a member of the American Medical
Association, the California Medical Association, the International College of
Surgeons and received his board certificate in 1974 from the American College of
Obstetrics and Gynecology. He is President of the Grossmont OB-GYN Medical
Group and Vice President and member of the Board of Directors of the East County
Physicians Medical Group, both located in La Mesa, California. Dr. Naponic is
the Founder and Chairman of the Board of Directors of the Women's Center Medical
Group and Chairman of the Task Force on Indigent Health Care at Grossmont
Hospital located in La Mesa, California. He has served as the Chairman and Vice
Chairman of the Department of Obstetrics and Gynecology at Grossmont Hospital
and has been an Assistant Clinical Professor in the Department of Reproductive
Medicine at the University of California at San Diego School of Medicine. Dr.
Naponic has served as Vice Chairman of the Board of Directors of the Cooperative
of American Physicians, Inc./Mutual Protection Trust and is a member of it Board
of Trustees. Dr. Naponic served with the United States Marine Corps in the
Republic of Vietnam from 1969 to 1972. He received his Bachelor of Science
degree in Zoology from the University of Pittsburgh in 1962 and his Doctorate in
Medicine in 1966, from Temple University School of Medicine in Philadelphia,
Pennsylvania.
John B. Hamner has been President of Berkley Risk Services of Colorado,
Inc. since 1989. Mr. Hamner started his career as an insurance agent in 1965,
and by 1970, was the General Agent for the Monarch Life Insurance Company,
Denver, Colorado office. In 1975, he incorporated DIS, Inc. which marketed
disability income insurance, (more than 10,000 policies sold in five years), and
provided management, start-up and operational services to insurance companies.
Mr. Hamner is a consultant to Executive and is, among other things, involved
with the development of a Customized Business Owners Policy to be sold to
Florida Medical Association members through Executive, in association with
Berkley Risk Services of Colorado, Inc. Mr. Hamner has been published in
"Medical Economics", "Best Review". "Physician's Financial News", "The Health
Insurance Underwriter" and "Physicians Management". He has lectured at the
International Association of Financial Planners, and the Continuing Education
Programs at the University of Colorado, University of New Orleans, Colorado
University School of Medicine, University of Notre Dame, Linda University School
of Medicine and Florida State University.
Michael E. Zebrowski acts as a consultant to Executive with respect to the
marketing and servicing of medical Affinity Groups and has been involved with
the conceptualization, creation and establishment of a successful affinity
marketing program for the International Electronic and Electrical Engineers
Association by Chase Bank in New York. Mr. Zebrowski has extensive experience
with Affinity Group marketing and is presently acting as the Managing Director
of Affinity Programs for the Institute of Electrical and Electronic Engineers
(IEEE). Mr. Zebrowski designed and implemented a highly successful financial
services program for IEEE members which offers simplified access to a broad menu
of value added products and services including home loans, home equity loans,
educational loans, auto loans and leases, investment advisory services, mutual
funds, stocks, bonds, annuities and retirement and financial planning services.
Mr. Zebrowski has in excess of twenty years of banking experience, including in
excess of ten years in retail and commercial lending and in excess of ten years
in retail and institutional distribution and marketing of investment products
including investment advisory services, mutual funds, stocks, bonds, annuities,
retirement programs and financial planning. Mr. Zebrowski holds a Bachelor of
Arts degree from St. Bonaventure University, and holds NASD Series 7 and 63
securities licenses.
Robert H. DeVore, J.D., Senior Vice President and General Counsel, has been
actively involved in the negotiations and establishment of contractual
relationships with Affinity Groups, marketing groups and other vendors of
products and services and has extensive contacts with personnel of larger
insurance companies and insurance marketing groups.
Lee W. Hone serves as head of strategic planning for American Healthcare
Alliance, Inc., the largest nationwide network of preferred provider managed
healthcare systems and organizations ("PPO"). Lee W. Hone was the past Chief
Executive Officer of Sun Health Care Plans of Florida ("Sun Health"). Sun
Health is owned by the Sun Health Alliance Hospitals of Florida, a for profit
organization. Prior to joining Sun Health, Mr. Hone served as President and CEO
of the California Foundation of Medical Care, a PPO with over 29,000 providers.
His extensive career in the healthcare industry includes: President of
Professional Associates, San Francisco, California; Vice President of Operations
and contract manager for Fischer-Mangold group, Pleasonton, California;
Administrator for Newark Emergency Care Center, Newark, Delaware; Business
Manager for the Wilmington Professional Associates, Inc., Wilmington, Delaware;
and Director-Provider Relations for Blue Cross and Blue Shield of Delaware, Inc.
Baum G. Harris, President of TaxResources, Inc., has been active in
affinity marketing for a number of years and has been able to penetrate
approximately 20 medical groups and 8 non-medical related entities for
endorsement of his company's services. He is in the process of introducing
Executive and its various products and services to endorsing organizations with
whom he has established credible relationships.
RETAIL BROKERAGE-EQUITIES-FIXED INCOME-MUTUAL FUNDS-OTHERRETAIL
BROKERAGE-EQUITIES-FIXED INCOME-MUTUAL FUNDS-OTHER
Executive offers traditional retail brokerage trading of stocks, bonds,
mutual funds and other debt and equity investments and instruments through its
ten branch offices and over eighty independent brokers. Executive also markets
various fixed and variable life insurance products and annuities, as well as
health and long term care programs.
In addition, on October 6, 1997, Executive entered into an agreement with
Sun Insurance Marketing Network, Inc. ("Sun") whereby Sun, who is the national
marketing agent for the AIG Life Companies, Inc. ("AIG") Long Term Care
Insurance Marketing Program, agreed to refer and recruit Series 6 and Series 7
securities licensed insurance agents to Executive and to encourage said agents
to contract with Executive to place their variable life, variable annuity and
mutual fund business through Executive.
It is anticipated that Sun will be in contact with virtually thousands of
insurance agents in connection with Sun's AIG Long Term Care Insurance Marketing
Program and Executive believes it can contract with a significant number of
these referred agents, that are securities licensed, to place their annuity and
mutual fund business through Executive.
INSURANCE WHOLESALE MARKETINGInsurance Wholesale Marketing
In April, 1996, Executive secured a Super Master General Agent Contract
with AIG Life Insurance Company, an A+ (Superior) (A.M. Best), Aaa (Moody's) and
AAA (Standard & Poors) rated insurance company, to market, on a wholesale level,
the insurance company's Universal Life Insurance, Whole Life Insurance, Term
Insurance, Survivorship Life Insurance and Fixed Annuity products. These
insurance products are marketed by Executive to insurance agents and agencies on
a national level, who in turn offer the products at retail to their clients and
prospects. Executive receives an override commission on each insurance policy
or annuity that is sold by the agents or agencies who license under Executive's
Super Master General Agent Contract. Executive continues to research and
perform due diligence on other insurance companies and their products to add to
Executive's portfolio of relationships, contracts and unique products to be
marketed on a wholesale basis.
DIRECT SETTLEMENT OF NON-EXCHANGE TRADED SECURITIESDirect Settlement of
Non-Exchange Traded Securities
Executive effects direct settlements of instruments not requiring
securities exchange execution such as mutual funds, unit investment trusts,
limited partnerships, private placements and public offering transactions which
are handled directly with the issuer or sponsor of the products. Settling such
trades in this fashion allows Executive to capture the full dealer reallowance
available, rather than the percentage of concession typically allocated to
resellers.
INVESTMENT BANKINGInvestment Banking
Executive sponsors uniquely structured securities offerings with a focus
upon instruments which assure the preservation of capital, income, as well as
capital gains and tax benefits when applicable. In addition, Executive's
expertise in investment banking is sought by potential corporate clients in the
structuring, documentation and marketing of both private placements and public
offerings. Typically, these potential issuers seek capital within the $500,000
to $10,000,000 range. Since 1991, Executive has been involved as a
participating broker/dealer with other firms or on an exclusive basis in the
best efforts underwriting of various corporate securities issues.
RETIREMENT AND ESTATE PLANNINGRetirement and Estate Planning
Executive offers professional planning, personalized attention, and proven
expertise in the structuring of estate and retirement plans. As a General Agent
for various insurance companies, Executive is able to provide fixed and variable
annuities, immediate annuities, as well as disability, health, Medicare
supplement, long-term care and life insurance vehicles for financial, estate and
tax planning purposes. In addition, through its relationship with Retirement
Accounts, Inc., in Denver, Colorado ("RAI"), Executive can provide for the
establishment of Individual Retirement Accounts (IRAs) and Self Employed Plans
(SEPs) which are truly self directed. RAI acts as custodian and trustee, and
Executive's clients are able to retain complete control, flexibility and the
ability to direct the investment of their retirement funds with whomever they
desire.
GROWTH STRATEGYGrowth Strategy
Executive has devised a two phase complementary strategy for the future
growth of Executive.
The first approach involves Executive's development, structuring,
documentation, marketing and distribution of various non-securities and
securities related products and services to members of medical and healthcare
associations and other non-medical, national, state and local or regional
specialty Affinity Groups.
The second approach involves the controlled growth of Executive's
broker/dealer branches and Offices of Supervisory Jurisdiction and the
development of related investment banking, underwriting, insurance and
securities syndication and distribution activities.
The First Phase.The First Phase Executive's primary focus is towards
Affinity Group marketing based upon management's belief that it will place
Executive in a superior competitive position relative to traditional
broker-dealers. Affinity Group marketing provides: (i) an affirmative and
exclusive endorsement from the organizations leadership, (i.e. medical, dental
and other associations); (ii) access to and development of the size and quality
of client accounts of high net worth individuals, and referrals from these
individuals, that Executive may approach to cross-sell additional products and
services; (iii) significant marketing economies of scale; (iv) access to receive
financial marketing support from insurance companies, mutual funds and other
significant product vendors; (v) an opportunity to establish a brand name from
which additional customized, value added products and services may be offered;
(vi) a platform to introduce and develop proprietary financial and non-financial
products; (vii) development and sale of private label specific products and/or
services for an endorsing organizations; (viii) insurance products and
securities syndication and distribution activities; (ix) expansion of the number
of broker/dealer branches and Offices of Supervisory Jurisdiction; (x) expansion
of its investment banking and related underwriting activities; (xi) customer
loyalty as a result of being endorsed by an association for one or more items
and the resulting tacit approval of all products and services offered by
Executive; and (xii) a revenue stream from a diversified product and service
menu directed at higher net worth individuals which may tend to dampen historic
business cycles experience by traditional securities broker-dealers.
Executive believes that it may develop a competitive advantage over other
broker-dealers in recruiting and maintaining registered sales representatives
because of the planned lead generating system of high net worth individuals that
is expected to result from the Affinity Group marketing program as well as a
high percentage commission pay out scale. Executive is presently conducting
interviews for expanding its Affiliate Group marketing area as well as personnel
to conduct expansion of Executive's branch system.
The Second Phase. The Second Phase Primarily as a result of expansion of
Affinity Group programs, management of Executive anticipates that Executive
will, either by acquisition, origination, association or alliance, add at least
ten additional branches most likely in the following cities: Chicago, Illinois;
Los Angeles, California; Atlanta, Georgia; Dallas, Texas; Tampa, Florida; and
beyond. The addition of these branch offices may occur within the next nine to
twelve months of the dated date of this Information Statement/Prospectus.
[Enlarge/Download Table]
EXECUTIVE SELECTED HISTORICAL FINANCIAL DATAExecutive Selected Historical Consolidated
Financial Data
YEAR ENDED DECEMBER 31
1993 1994 1995 1996 1997
--------- ----------- ----------- ----------- -----------
Statement of Operations Data:
Revenue $825,433 $1,866,299 $2,797,172 $3,000,044 $4,172,716
Operating Loss $455,835 $ 96,772 $ 140,477 $ 236,014 $ 132,792
Net Loss $ 446101 $ 67,080 $ 115,879 $ 212,045 $ 105,239
Net Loss Per Share $ (1.055) $ (.158) $ (.254) $ (.088) $ (.04)
Weighted Average Shares
Outstanding 423,000 440,833 462,833 2,491,490 2,675,485
EXECUTIVE MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONSExecutive Management's Discussion and Analysis of Financial
Condition and Results of Operations
Executive and its management anticipate continued growth and expansion
throughout the second half of 1998. Executive's revenues increased by
approximately 50% and 7% during 1995 and 1996, respectively, and 28% in 1997.
During 1999, management anticipates increases in transactional revenues,
commissions and service fees. Anticipated growth is expected to be achieved
through servicing of the Affinity Groups, the addition of up to ten (10) branch
and/or satellite offices, greater home office production and increased
investment banking activity.
As of June 1998, Executive has approximately 68 registered representatives
and is in the process of recruiting additional registered representatives and
establishing new branch office locations.
Executive has entered into contracts with TaxResources, Inc., a pre-paid legal
audit defense firm, to market their services, on an exclusive basis, to members
of medical, healthcare and other Affinity Groups and associations.
The Affinity Group marketing efforts of Executive are well underway. In
June 1998, Executive was notified by the AMA Solutions, Inc. that the AMA has
approved TaxResources, Inc.'s service for solicitation and sale to its physician
members.
In October 1997, the American Healthcare Alliance, Inc. ("AHA"), a 220,000
member group, executed a Non-Disclosure and Non-Circumvention Agreement with
Executive which will prohibit AHA from contracting directly with the providers
of services and products introduced to AHA by Executive, thereby effectively
reinforcing Executive's ability to market products and services to AHA members
on an exclusive basis.
As a result of the AHA Agreement, TaxResources' conducted an initial test
mailing to 10,000 AHA physician members offering participation in TaxResources
prepaid tax audit defense program. The actual results of the test mailing were
less than historic paid response rates experienced by TaxResources' for similar
type mailings. TaxResources, Executive and the AHA are revising the mailing
strategy for AHA member physicians to include further endorsement by individual
preferred provider organizations along with the AHA endorsement. TaxResources
will conduct additional test mailings prior to solicitation of the entire
220,000 AHA physician membership.
In 1998, management has and will be implementing several growth and
expansion related initiatives. These initiatives include, but are not limited
to the following: (i) expanded services and marketing to Affinity Groups; (ii)
continued branch development and expansion for Affinity Group servicing and the
public at large; and (iii) possible affiliation, joint venture or merger with
another entity in the securities industry to accelerate the expansion and scope
of Executive's operations.
With the increase of in-house securities/insurance brokers and outside
independent licensed representatives, coupled with increased investment banking
activities and the sale of non-securities related products and services, it is
management's belief that it has and will have the resources to not only sustain
operations, but to become profitable in fiscal 1999 and beyond.
Regulatory Net Capital. Regulatory Net CapitalAs a securities
broker-dealer, Executive is subject to the net capital rules of the Securities
and Exchange Commission (SEC) and similar rules in force in the states where
Executive is registered as a securities broker-dealer. The aggregate
indebtedness of a securities broker-dealer in relation to its net capital is
also subject to SEC rules. Such rules are complex in the manner that regulatory
net capital is calculated. In summary, the calculation of regulatory net
capital relates to the stockholder's equity of Executive, taking into account
deductions from stockholder's equity which relate to non-allowable, non-liquid
assets and reductions in the market value of investment securities owned by
Executive in accordance with rule-prescribed amounts. Under the rules, the
aggregate indebtedness of Executive in relation to its net capital may not
exceed a ratio of 15 to 1.
The table on the next page sets forth Executive's regulatory net capital
and the amount of aggregate indebtedness and the ratio thereof to such
regulatory net capital as of December 31, 1997, 1996, 1995 and 1994.
[Download Table]
Regulatory Net Capital and Aggregate Indebtedness
1994 1995 1996 1997
---------- ---------- ---------- ----------
Net Capital $ 29,510 $ 37,837 $ 22,618 $ 101,615
Aggregate Indebtedness $ 132,481 $ 202,596 $ 177,616 $ 208,756
Ratio of aggregate indebtedness
to net capital 4.49 to 1 5.35 to 1 7.85 to 1 2.05 to 1
The NASD requires certain members, such as Executive, to maintain net
capital equal to the greater of 130% of the SEC's net capital requirement or 6
2/3% of aggregate indebtedness. Executive is in compliance with NASD net
capital requirements.
MANAGEMENT OF EXECUTIVEManagement of Executive
Directors and Executive Officers. Directors and Executive Officers The
business and assets of Executive are governed and administered under the general
supervision of the Board of Directors of Executive. Presently the Board of
Directors consists of three members, Guy S. Della Penna, Robert E. Windom, MD
and Dennis B. Schroeder. Dr. Windom is considered a "public director" as
required by the Bylaws and Schedules thereto of the NASD. The day-to-day
affairs and business of FAS are carried out by its executive officers under the
direction of Guy S. Della Penna who serves as President and Chief Executive
Officer of Executive. Robert H. DeVore, Esquire serves as General Counsel,
Senior Vice President and Treasurer. Bonnie S. Gilmore serves as Senior Vice
President and Chief Financial Officer as well as Secretary of Executive.
Barbara J. Knox serves as Vice President and Chief Compliance Officer of
Executive. Georganne E. Detweiler serves as Director of Branch Operations and
Vice President.
Information describing the background of Directors and Executive Officers
appears under the caption "Certain Considerations Related to the
Merger-Directors and Officers of FAS Following the Merger."
EMPLOYMENT AGREEMENTSEMPLOYMENT AGREEMENTS
Executive has entered into employment agreements with Mr. Della Penna, Mr.
DeVore, Ms. Gilmore and Ms. Detweiler. See "Long-Term Incentive Plans and
Awards in Last Fiscal Year."
The agreements also restrict the employee from engaging in business in
competition with Executive during the term of the agreement and for a period of
two years after termination of employment for any reason. The agreements were
entered into 1997.
PRINCIPAL STOCKHOLDERS OF EXECUTIVEPrincipal Stockholders of Executive
The following table sets forth certain information regarding the
ownership of the Common Stock as of the date of this Information
Statement/Prospectus, and as adjusted to reflect the sale of shares offered
pursuant to this Prospectus.
[Enlarge/Download Table]
Name and Address of Number Percent Number Percent
Beneficial Owner
-------------------
Shares Beneficially Shares Beneficially
Owned Prior to Owned After
the Merger the Merger
------------------- --------------------
Guy S. Della Penna (1)(2) 1,455,835 55.8% 1,257,778 23.7%
2323 Stickney Road
Sarasota, FL 34231
All Directors and
Executive Officers
as a Group
(4 in number): (2) 1,505,835 57.8% 1,288,193 24.3%
<FN>
_______________________________
(1) Mr. Della Penna is Chairman of the Board, Chief Executive Officer and President
of Executive. He is also one of Executive's three directors.
COMPARATIVE RIGHTS OF STOCKHOLDERSCOMPARATIVE RIGHTS OF STOCKHOLDERS
SIGNIFICANT CHANGES IN EXECUTIVE'S CHARTER AND BY-LAWS TO BE IMPLEMENTED BY THE
MERGERSignificant Changes in Executive's Charter and By-laws to be Implemented
by the Merger
Change of Corporate Name. Change of Corporate Name The Merger will effect
a change in Executive's name to "FAS Wealth Management Services, Inc." The
Board of Directors believes that this corporate name is in the best interests of
Executive and its shareholders and that the name continues to reflect the nature
of Executive's present intention to merge with an operating business.
Limitation of Liability. Limitation of Liability The Delaware Certificate
contains a provision limiting or eliminating, with certain exceptions, the
liability of directors to FAS and its shareholders for monetary damages for
breach of their fiduciary duties. The Florida Articles contains no similar
provision. The Board of Directors believes that such provision will better
enable FAS to attract and retain as directors responsible individuals with the
experience and background required to direct FAS's business and affairs. It has
become increasingly difficult for corporations to obtain adequate liability
insurance to protect directors from personal losses resulting from suits or
other proceedings involving them by reason of their service as directors. Such
insurance is considered a standard condition of directors' engagement. However,
coverage under such insurance is no longer routinely offered by insurers and
many traditional insurance carriers have withdrawn from the market. To the
extent such insurance is available, the scope of coverage is often restricted,
the dollar limits of coverage are substantially reduced and the premiums have
risen dramatically.
At the same time directors have been subject to substantial monetary damage
awards in recent years. Traditionally, courts have not held directors to be
insurers against losses a corporation may suffer as a consequence of directors'
good faith exercise of business judgment, even if, in retrospect the directors'
decision was an unfortunate one. In the past, directors have had broad
discretion to make decisions on behalf of the corporation under the "business
judgment rule." The business judgment rule offers protection to directors who,
after reasonable investigation, adopt a course of action that they reasonably
and in good faith believe will benefit the corporation, but which ultimately
proves to be disadvantageous. Under those circumstances, courts have typically
been reluctant to subject directors' business judgments to further scrutiny.
Some recent court cases have, however, imposed significant personal liability on
directors for failure to exercise an informed business judgment with the result
that the potential exposure of directors to monetary damages has increased.
Consequently legal proceedings against directors relating to decisions made by
directors on behalf of corporations have significantly increased in number, cost
of defense and level of damages claimed. Whether or not such an action is
meritorious, the cost of defense can be well beyond the personal resources of a
director.
The Delaware General Assembly considered such developments a threat to the
quality and stability of the governance of Delaware corporations because of the
unwillingness of directors, in many instances, to serve without the protection
which insurance traditionally has provided and because of the deterrent effect
on entrepreneurial decision making by directors who do serve without the
protection of traditional insurance coverage. In response, in 1986 the Delaware
General Assembly adopted amendments to the Delaware GCL which permit a
corporation to include in its charter a provision to limit or eliminate, with
certain exceptions, the Personal liability Of Directors to a corporation and its
shareholders for monetary damages for breach of their fiduciary duties. Similar
charter provisions limiting a director's liability are not permitted under
Florida law.
The Board of Directors believes that the limitation on directors' liability
permitted under Delaware law will assist FAS in attracting and retaining
qualified directors by limiting directors' exposure to liability. The Merger
proposal will implement this limitation on liability of the directors of FAS,
inasmuch as Article XVI of the Delaware Certificate provides that to the fullest
extent that the Delaware GCL now or hereafter permits the limitation or
elimination of the liability of directors, no director will be liable to FAS or
its stockholders for monetary damages for breach of fiduciary duty. Under such
provision, FAS's directors will not be liable for monetary damages for acts or
omissions occurring on or after the Effective Date of the Merger, even if they
should fail through negligence or gross negligence, to satisfy their duty of
care (which requires directors to exercise informed business judgment in
discharging their duties). Article XVI would not limit or eliminate any
liability of directors for acts or omissions occurring prior to the Effective
Date. As provided under Delaware law, Article XVI cannot eliminate or limit the
liability of directors for breaches of their duty of loyalty to FAS; acts or
omissions not in good faith or involving intentional misconduct or a knowing
violation of law, paying a dividend or effecting a stock repurchase or
redemption which is illegal under the Delaware GCL, or transactions from which a
director derived an improper personal benefit. Further, Article XVI would not
====
affect the availability of equitable remedies, such as an action to enjoin or
rescind a transaction involving a breach of a director's duty of care. Article
XVI pertains to breaches of duty by directors acting as directors and not to
breaches of duty by directors acting as officers (even if the individual in
question is also a director). In addition, Article XVI would not affect a
director's liability to third parties or under the federal securities laws.
Article XVI is worded to incorporate any future statutory revisions
limiting directors' liability. It provides, however, that no amendment or
repeal of its provision will apply to the liability of a director for any acts
or omissions occurring prior to such amendment or repeal, unless such amendment
has the affect of further limiting or eliminating such liability.
Executive has not received notice of any lawsuit or other proceeding to
which Article XVI might apply. In addition, Article XVI is not being included
in the Delaware Certificate in response to any director's resignation or any
notice of an intention to resign. Accordingly, Executive is not aware of any
existing circumstances to which Article XVI might apply. The Board of Directors
recognizes that Article XVI may have the effect of reducing the likelihood of
derivative litigation against directors, and may discourage or deter
stockholders from instituting litigation against directors for breach of their
duty of care, even though such an action, if successful, might benefit FAS and
its shareholders. However, given the difficult environment and potential for
incurring liabilities currently facing directors of publicly held corporations,
the Board of Directors believes that Article XVI is in the best interests of FAS
and its stockholders, since it should enhance FAS's ability to retain highly
qualified directors and reduce a possible deterrent to entrepreneurial decision
making. In addition, the Board of Directors believes that Article XVI may have
a favorable impact over the long term on the availability, cost, amount and
scope of coverage of directors' liability insurance, although there can be no
assurance of such an effect.
Article XVI may be viewed as limiting the rights of stockholders, and the
broad scope of the indemnification provisions of FAS's could result in increased
expense to FAS. Executive believes, however, that these provisions will provide
a better balancing of the legal obligations of, and protections for, directors
and will contribute to the quality and stability of FAS's governance. The Board
of Directors has concluded that the benefit to stockholders of improved
corporate governance outweighs any possible adverse effects on stockholders of
reducing the exposure of directors to liability and broad-ening indemnification
rights. Because Article XVI deals with the potential liability of directors,
the members of the Board of Directors may be deemed to have a personal interest
in effecting the Merger.
Indemnification. Indemnification As part of the 1986 legislation
permitting a corporation to limit or eliminate the liability of directors, the
Delaware General Assembly, for the reasons noted under "Limitation of Liability"
above also amended the provisions of the Delaware GCL governing indemnification
to clarify and broaden the indemnification rights which corporations may provide
to their directors, officers and other corporate agents. The Florida BCA also
contains broad indemnification provisions. The Delaware Certificate reflects
the provisions of Delaware law, as recently amended, and, as discussed below,
provides broad rights to indemnification.
In recent years, investigations, actions, suits and proceedings, including
actions, suits and proceedings by or in the right of a corporation to procure a
judgment in its favor (referred to together as "proceedings"), seeking to impose
liability on, or involving as witnesses, directors and officers of publicly-held
corporations have become increasingly common. Such proceedings are typically
very expensive, whatever their eventual outcome. In view of the costs and
uncertainties of litigation in general it is often prudent to settle proceedings
in which claims against a director or officer are made. Settlement amounts,
even if material to the corporation involved and minor compared to the enormous
amounts frequently claimed, often exceed the financial resources of most
individual defendants. Even in proceedings in which a director or officer is
not named as a defendant he may incur substantial expenses and attorneys' fees
if he is called as a witness or otherwise becomes involved in the proceeding.
Although Executive's directors and officers have not incurred any liability or
significant expense as a result of any proceeding to date the potential for
substantial loss does exist. As a result, an individual may conclude that the
potential exposure to the costs and risks of proceedings in which he may become
involved may exceed any benefit to him from serving as a director or officer of
a public corporation. This is particularly true for directors who are not also
officers of the corporation. The increasing difficulty and expense of obtaining
directors' and officers' liability insurance discussed above has compounded the
problem.
The broad scope of indemnification now available under Delaware law will
permit FAS to continue to offer its directors and officers greater protection
against these risks. The Board of Directors believes that such protection is
reasonable and desirable in order to enhance FAS's ability to attract and retain
qualified directors as well as to encourage directors to continue to make good
faith decisions on behalf of FAS with regard to the best interests of FAS and
its stockholders.
The Delaware Certificate is quite different from the Florida Articles and
require indemnification of FAS's directors and officers to the fullest extent
permitted under applicable law as from time to time in affect, with respect to
expenses, liability or loss (including, without limitation, attorneys' fees,
judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid
in settlement) actually and reasonably incurred by any person in connection with
any actual or threatened proceeding by reason of the fact that such person is or
was a director or officer of FAS or is or was serving at the request of FAS as a
director or officer of another corporation or of a partnership, joint venture;
trust, employee benefit plan or other enterprise at the request of FAS. The
right to indemnification includes the right to receive payment of expenses in
advance of the final disposition of such proceeding; consistent with applicable
law from time to time in effect; provided, however, that if the Delaware GCL
requires the payment of such expenses in advance of the final disposition of a
proceeding, payment shall be made only if such person undertakes to repay FAS if
it is ultimately determined that he or she was not entitled to indemnification.
Directors and officers would not be indemnified for loss, liability or expenses
incurred in connection with proceedings brought against such persons otherwise
than in the capacities in which they serve FAS. Under the General Corporation
Law of Delaware FAS may, although it has no present intention to do so, by
action of the New Board of Directors, provide the same indemnification to its
employees, agents, attorneys and representatives as it provides to its directors
and officers. The Delaware Certificate provides that such practices are not
exclusive of any other rights to which persons seeking indemnification may
otherwise be entitled under any agreement or otherwise.
The Delaware Certificate specifies that the right to indemnification is a
contract right. The Delaware Certificate also provides that a person seeking
indemnification from FAS may bring suit against FAS to recover any and all
amounts entitled to such person provided that such person has filed a written
claim with FAS and FAS has failed to pay such claim within thirty days of
receipt thereof. In addition, FAS authorize FAS to purchase and maintain
indemnity insurance, if it so chooses to guard against future expense.
The Delaware Certificate provides for payment of all expenses incurred,
including those incurred to defend against a threatened proceeding.
Additionally, the Delaware Certificate provides that indemnification shall
continue as to a person who has ceased to be a director or officer and shall
inure to the benefit of the heirs, executors and administrators of such a
person. The General Corporation Law of Delaware also provides that to the
extent any director or officer who is, by reason of such a position, a witness
in any proceeding, he or she shall be indemnified for all reasonable expenses
incurred in connection therewith.
Under Delaware law, as with Florida law, rights to indemnification and
expenses need not be limited to those provided by statute. As a result, under
Delaware law and the Delaware Certificate, FAS will be permitted to indemnity
its directors and officers, within the limits established by law and public
policy, pursuant to an express contract, a by-law provision, a stockholder vote
or otherwise, any or all of which could provide indemnification rights broader
than those currently available under the Florida Articles or expressly provided
for under Florida or Delaware law.
Insofar as the Delaware Certificate provides indemnification to directors
or officers for liabilities arising under the Securities Act of 1933, it is the
position of the Securities and Exchange Commission that such indemnification
would be against public policy as expressed in such statute and, therefore,
unenforceable.
The Board of Directors recognizes that FAS may in the future be obligated
to incur substantial expense as a result of the indemnification rights conferred
under the Delaware Certificate, which are intended to be as broad as possible
under applicable law. Because directors of FAS may personally benefit from the
indemnification provisions of FAS , the members of the Board of Directors may be
deemed to have a personal interest in the effectuation of the Merger.
DEFENSES AGAINST HOSTILE TAKEOVERSDefenses Against Hostile Takeovers
Introduction. Introduction While the following discussion summarizes the
reasons for, and the operation and effects of, certain provisions of FAS's
Certificate of Incorporation which management has identified as potentially
having an anti-takeover effect, it is not intended to be a complete description
of all potential anti-takeover effects, and it is qualified in its entirety by
reference to FAS's Certificate of Incorporation and By Laws. A copy of the
Certificate of Incorporation is included as an exhibit to this Information
Statement/Prospectus which should be reviewed for more detailed information and
the By Laws are available upon request.
In general, the anti-takeover provisions in Delaware law and FAS's
Certificate of Incorporation are designed to minimize FAS's susceptibility to
sudden acquisitions of control which have not been negotiated with and approved
by FAS's Board of Directors. As a result, these provisions may tend to make it
more difficult to remove the incumbent members of the Board of Directors. The
provisions would not prohibit an acquisition of control of FAS or a tender offer
for all of FAS's capital stock. The provisions are designed to discourage any
tender offer or other attempt to gain control of FAS in a transaction that is
not approved by the Board of Directors, by making it more difficult for a person
or group to obtain control of FAS in a short time and then impose its will on
the remaining stockholders. However, to the extent these provisions
successfully discourage the acquisition of control of FAS or tender offers for
all or part of FAS's capital stock without approval of the Board of Directors,
they may have the effect of preventing an acquisition or tender offer which
might be viewed by stockholders to be in their best interests.
Tender offers or other non-open market acquisitions of stock are usually
made at prices above the prevailing market price of a company's stock. In
addition, acquisitions of stock by persons attempting to acquire control through
market purchases may cause the market price of the stock to reach levels which
are higher than would otherwise be the case. Anti-takeover provisions may
discourage such purchases, particularly those of less than all of FAS's stock,
and may thereby deprive stockholders of an opportunity to sell their stock at a
temporarily higher price. These provisions may therefore decrease the
likelihood that a tender offer will be made, and, if made, will be successful.
As a result, the provisions may adversely affect those stockholders who would
desire to participate in a tender offer. These provisions may also serve to
insulate incumbent management from change and to discourage not only sudden or
hostile takeover attempts, but any attempts to acquire control which are not
approved by the Board of Directors, whether or not stockholders deem such
transactions to be in their best interests.
Authorized Shares of Capital Stock. Authorized Shares of Capital Stock
FAS's Certificate of Incorporation authorizes the issuance of up to 10,000,000
shares of serial preferred stock. Shares of FAS's serial preferred stock with
voting rights could be issued and would then represent an additional class of
stock required to approve any proposed acquisition. This preferred stock,
together with authorized but unissued shares of Common Stock (the Certificate of
Incorporation authorizes the issuance of up to 25,000,000 shares), could
represent additional capital stock required to be purchased by an acquiror.
Issuance of such additional shares may dilute the voting interest of FAS's
stockholders. If the Board of Directors of FAS determined to issue an
additional class of voting preferred stock to a person opposed to a proposed
acquisition, such person might be able to prevent the acquisition
single-handedly.
Stockholder Meetings. Stockholder Meetings Delaware law provides that the
annual stockholder meeting may be called by a corporation's board of directors
or by such person or persons as may be authorized by a corporation's certificate
of incorporation or By Laws. FAS's Certificate of Incorporation provides that
annual stockholder meetings may be called only by FAS's Board of Directors or a
duly designated committee of the Board. Although FAS believes that this
provision will discourage stockholder attempts to disrupt the business of FAS
between annual meetings, its effect may be to deter hostile takeovers by making
it more difficult for a person or entity to obtain immediate control of FAS
between one annual meeting as a forum to address certain other matters and
discourage takeovers which are desired by the stockholders. FAS's Certificate
of Incorporation also provides that stockholder action may be taken only at a
special or annual stockholder meeting and not by written consent.
Classified Board of Directors and Removal of Directors.Classified Board of
Directors and Removal of Directors. FAS's Certificate of Incorporation provides
that FAS's Board of Directors is to be divided into three classes which shall be
as nearly equal in number as possible. The directors in each class serve for
terms of three years, with the terms of one class expiring each year. Each
class currently consists of approximately one-third of the number of directors.
Each director will serve until his successor is elected and qualified.
A classified Board of Directors could make it more difficult for
stockholders, including those holding a majority of FAS's outstanding stock, to
force an immediate change in the composition of a majority of the Board of
Directors. Since the terms of only one-third of the incumbent directors expire
each year, it requires at least two annual elections for the stockholders to
change a majority, whereas a majority of a non-classified Board may be changed
in one year. In the absence of the provisions of FAS's Certificate of
Incorporation classifying the Board, all of the directors would be elected each
year. The provision for a staggered Board of Directors affects every election
of directors and is not triggered by the occurrence of a particular event such
as a hostile takeover. Thus a staggered Board of Directors makes it more
difficult for stockholders to change the majority of directors even when the
reason for the change would be unrelated to a takeover.
FAS's Certificate of Incorporation provides that a director may not be
removed except for cause by the affirmative vote of the holders of 75% of the
outstanding shares of capital stock entitled to vote at an election of
directors. This provision may, under certain circumstances, impede the removal
of a director and thus preclude the acquisition of control of FAS through the
removal of existing directors and the election of nominees to fill in the newly
created vacancies. The supermajority vote requirement would make it difficult
for the stockholders of FAS to remove directors, even if the stockholders
believe such removal would be beneficial.
Restriction of Maximum Number of Directors and Filling Vacancies on the
Board of Directors. Restriction of Maximum Number of Directors and Filling
Vacancies on the Board of DirectorsDelaware law requires that the board of
directors of a corporation consist of one or more members and that the number of
directors shall be set by the corporation's By Laws, unless it is set by the
corporation's certificate of incorporation. FAS's Certificate of Incorporation
provides that the number of directors (exclusive of directors, if any, to be
elected by the holders of preferred stock) shall not be less than one or more
than 15, as shall be provided from time to time in accordance with FAS By Laws.
The power to determine the number of directors within these numerical
limitations and the power to fill vacancies, whether occurring by reason of an
increase in the number of directors or by resignation, is vested in FAS's Board
of Directors. The overall effect of such provisions may be to prevent a person
or entity from quickly acquiring control of FAS through an increase in the
number of FAS's directors and election of nominees to fill the newly created
vacancies and thus allow existing management to continue in office.
Stockholder Vote Required to Approve Business Combinations with Related
Persons. Stockholder Vote Required to Approve Business Combinations with
Related PersonsFAS's Certificate of Incorporation generally requires the
approval of the holders of 75% of FAS's outstanding voting stock (and any class
or series entitled to vote separately), and a majority of the outstanding stock
not beneficially owned by a related person (as defined) (up to a maximum
requirement of 85% of the outstanding voting stock), to approve business
combinations (as defined) involving the related person, except in cases where
the business combination has been approved in advance by two-thirds of those
members of FAS's Board of Directors who were directors prior to the time when
the related person became a related person. Under Delaware law, absent these
provisions, business combinations generally, including mergers, consolidations
and sales of substantially all of the assets of FAS must, subject to certain
exceptions, be approved by the vote of the holders of a majority of FAS's
outstanding voting stock. One exception under Delaware law to the majority
approval requirement applies to business combinations (as defined) involving
stockholders owning 15% of the outstanding voting stock of a corporation for
less than three years. In order to obtain stockholder approval of a business
combination with such a related person, the holders of two-thirds of the
outstanding voting stock, excluding the stock owned by the 15% stockholder, must
approve the transaction. Alternatively, the 15% stockholder must satisfy other
requirements under Delaware law relating to (i) the percentage of stock acquired
by such person in the transaction which resulted in such person's ownership
becoming subject to the law, or (ii) approval of the board of directors of such
person's acquisition of the stock of the Delaware corporation. Delaware law
does not contain price criteria. The supermajority stockholder vote
requirements under the Certificate of Incorporation and Delaware law may have
the effect of foreclosing mergers and other business combinations which the
holders of a majority of FAS's stock deem desirable and place the power to
prevent such a transaction in the hands of a minority of FAS's stockholders
Under Delaware law, there is no cumulative voting by stockholders for the
election of FAS's directors. The absence of cumulative voting rights
effectively means that the holders of a majority of the stock voted at a
stockholder meeting may, if they so choose, elect all directors of FAS, thus
precluding a small group of stockholders from controlling the election of one or
more representatives to FAS's Board of Directors.
Advance Notice Requirements for Nomination of Directors and Proposal of New
Business at Annual Stockholder Meetings. Advance Notice Requirements for
Nomination of Directors and Proposal of New Business at Annual Stockholder
MeetingsFAS's Certificate of Incorporation generally provides that any
stockholder desiring to make a nomination for the election of directors or a
proposal for new business at a stockholder meeting must submit written notice
not less than 30 or more than 60 days in advance of the meeting. This advance
notice requirement may give management time to solicit its own proxies in an
attempt to defeat any dissident slate of nominations, should management
determine that doing so is in the best interests of stockholders generally.
Similarly, adequate advance notice of stockholder proposals will give management
time to study such proposals and to determine whether to recommend to the
stockholders that such proposals be adopted. In certain instances, such
provisions could make it more difficult to oppose management's nominees or
proposals, even if the stockholders believe such nominees or proposals are in
their interests. Making the period for nomination of directors and introducing
new business a period not less than 30 days prior to notice of a stockholder
meeting may tend to discourage persons from bringing up matters disclosed in the
proxy materials furnished by FAS and could inhibit the ability of stockholders
to bring up new business in response to recent developments.
Supermajority Voting Requirement for Amendment of Certain Provisions of the
Certificate of Incorporation. Supermajority Voting Requirement for Amendment of
Certain Provisions of the Certificate of IncorporationFAS's Certificate of
Incorporation provides that specified provisions contained in the Certificate of
Incorporation may not be repealed or amended except upon the affirmative vote of
the holders of not less than seventy-five percent of the outstanding stock
entitled to vote. This requirement exceeds the majority vote that would
otherwise be required by Delaware law for the repeal or amendment of the
Certificate of Incorporation. Specific provisions subject to the supermajority
vote requirement are (i) Article X, governing the calling of stockholder
meetings and the requirement that stockholder action be taken only at annual or
special meetings, (ii) Article IX, requiring written notice to FAS of
nominations for the election of directors and new business proposals, (iii)
Article X, governing the number and terms of FAS's directors, (iv) Article XI,
governing the removal of directors, (v) Article XIII, governing approval of
business combinations involving related persons, (vi) Article XIII, relating to
the consideration of various factors in the evaluation of business combinations,
(vii) Article XIV, providing for indemnification of directors, officers,
employees and agents, (ix) Article XVIII, limiting directors' liability, and (x)
Articles XVI and XVII, governing the required stockholder vote for amending the
By Laws and Certificate of Incorporation, respectively. Article XVII is
intended to prevent the holders of less than 75% of FAS's outstanding voting
stock from circumventing any of the foregoing provisions by amending the
Certificate of Incorporation to delete or modify one of such provisions. This
provision would enable the holders of more than 25% of FAS's voting stock to
prevent amendments to the Certificate of Incorporation or By Laws even if they
were favored by the holders of a majority of the voting stock.
CERTAIN SIGNIFICANT DIFFERENCES BETWEEN THE CORPORATION LAWS OF FLORIDA AND
DELAWARE Certain Significant Differences Between the Corporation Laws of Florida
and Delaware
Although it is impractical to compare all of the differences between the
corporation laws of Florida and Delaware the following is a summary of certain
significant differences between the provisions of Florida law applicable to
Executive and those of Delaware law which will be applicable to FAS.
Dividends. Dividends A Florida corporation may not make distributions to
shareholders if, after giving it effect, in the judgment of the board of
directors: (a) The corporation would not be able to pay its debts as they become
due in the usual course of business; and (b) The corporation's total assets
would be less than the sum of its total liabilities plus (unless the articles of
incorporation permit otherwise) the amount that would be needed, if the
corporation were to be dissolved at the time of the distribution, to satisfy the
preferential rights upon dissolution of shareholders whose preferential rights
are superior to those receiving the distribution. In contrast, a Delaware
corporation may pay dividends either out of surplus or, if there is no surplus,
and except in very limited circumstances, out of net profits for the fiscal year
in which the dividend is declared or out of net profits for the preceding fiscal
year. In any event, FAS does not anticipate paying dividends in the foreseeable
future.
Right to Inspect Books and Records. Right to Inspect Books and Records
Under Florida law, any shareholder upon written demand at least five business
days before the date on which the shareholder wishes to inspect and copy, made
"in good faith and for a proper purpose," may examine the corporation's books
and records, including minutes of meetings, accounting records and the record of
shareholders that are directly connected with the shareholder's purpose. Under
Delaware law, any stockholder of a corporation, regardless of his percentage of
ownership, has the right to inspect the corporation's stock ledger, list of
stockholders and its other books and records, upon a written demand under oath
in which the stockholder states a "proper purpose" for such inspection.
Interested Director Transactions. Interested Director Transactions Under
both Florida and Delaware law, certain contracts or transactions in which one or
more of a corporation's directors have an interest are not void or voidable
because of such interest if the contract or transaction is fair to the
corporation when authorized or if it is approved in good faith by the
shareholders or by the directors who are not interested therein after the
material facts as to the contract or transaction and the interest of any
interested directors are disclosed. With certain exceptions, Florida and
Delaware law are the same in this area. Under Florida law, if approval of the
Board of Directors is to be relied upon for this purpose, the contract or
transaction may be approved by a majority vote of a quorum of the directors
without counting the vote of the interested director or directors (except for
purposes of establishing quorum). Under Delaware law, the approval of the board
of directors can be obtained for the contract or transaction by the vote of a
majority of the disinterested directors, even though less than a majority of a
quorum. Accordingly, it is possible that certain transactions that the Board of
Directors of Executive currently might not be able to approve itself because of
the number of interested directors could be approved by a majority of the
disinterested directors of FAS, although less than a majority of a quorum.
Executive is not aware of any plans to propose any transaction involving
directors of Executive which could not be approved by the Board of Directors
under Florida law but could be approved by the New Board of Directors under
Delaware law.
Special Meetings of Shareholders. Special Meetings of ShareholdersUnder
Florida law, a special meeting of shareholders may be called by the Board of
Directors or by the holders of at least 10% of the shares entitled to vote at
the meeting or by such other persons or groups as may be authorized in the
articles of incorporation or the by-laws. Under Delaware law, a special meeting
may be called by the board of directors and only such other persons as are
authorized by the certificate of incorporation or the by-laws. The Certificate
of Incorporation of FAS, unlike Executive's By-Laws, provides that a special
meeting of stockholders may be called only by the board of directors or by a
committee of the board of directors which has been duly delegated such authority
by the board of directors and by no other person.
Sequestration of Shares. Sequestration of Shares Delaware law provides
that the shares of any person in a Delaware corporation may be attached or
"sequestered" for debts or other demands. Such provision could be used to
assert jurisdiction against a non-resident holder of the Delaware corporation's
shares, thereby compelling the non-resident holder to appear in an action
brought in a Delaware court. Florida law has no comparable provision.
Certain Actions. Certain Actions Delaware law provides that stockholders
have six years in which to bring an action against directors responsible for the
payment of an unlawful dividend. Under Florida law, all directors voting for or
assenting to an unlawful distribution are jointly and severally liable to the
corporation for the excess of the amount of dividend over what could have been
distributed lawfully. Florida law requires that any action be commenced within
two (2) years after the date of the distribution. Florida law and Delaware law
require that the plaintiff held stock at the time when the transaction
complained of occurred. Under Florida law a successful shareholder has a
statutory right to expenses, including attorney's fee, if the court so directs.
Under Delaware law recovery of fees and expenses by a successful shareholder is
governed by case law.
Tender Offer and Business Combination Statutes. Tender Offer and Business
Combination Statutes Florida law regulates tender offers and business
combinations involving Florida corporations as well as certain corporations
incorporated outside Florida that conduct business in Florida. The Florida law
provides that any acquisition by a person, either directly or indirectly, of
ownership of, or the power to direct the voting of, 20% or more ("Control
Shares") of the outstanding voting securities of a corporation is a "Control
Share Acquisition." A Control Share Acquisition must be approved by a majority
of each class of outstanding voting securities of such corporation excluding the
shares held or controlled by the person seeking approval before the Control
Shares may be voted. A special meeting of shareholders must be held by the
corporation to approve a Control Share Acquisition within 50 days after a
request for such meeting is submitted by the person seeking to acquire control.
If the Control Shares are accorded full voting rights and the acquiring person
has acquired Control Shares with a majority or more of the voting power of the
Corporation, all shareholders shall have dissenter's rights as provided by
applicable Florida law.
Florida law regulates mergers and other business combinations between a
corporation and a shareholder who owns more than 10% of the outstanding voting
shares of such corporation ("Interested Shareholder"). Specifically, any such
merger between a corporation and an Interested Shareholder must be approved by
the vote of the holders of two-thirds of the voting shares of such corporation
excluding the shares beneficially owned by such shareholder. The approval by
shareholders is not required, however, if (i) such merger or business
combination is approved by a majority of disinterested directors, (ii) such
Interested Shareholder is the beneficial owner of at least 90% of the
outstanding voting shares excluding the shares acquired directly from the
subject corporation in a transaction not approved by a majority of disinterested
directors, or (iii) the price paid to shareholders in connection with a merger
or a similar business combination meets the statutory test of "fairness."
Delaware law regulates hostile takeovers by providing that an "interested
stockholder," defined as a stockholder owning 15% or more of the corporation's
voting stock or an affiliate or associate thereof, may not engage in a "business
combination" transaction, defined to include a merger, consolidation or a
variety of self-dealing transactions with the corporation for a period of three
years from the date on which such stockholder became an "interested stockholder"
unless (a) prior to such date the corporation's board of directors approved
either the "business combination" transaction or the transaction in which the
stockholder became an "interested stockholder', (b) the stockholder, in a single
transaction in which he became an "interested stockholder," acquires at least
85% of the voting stock outstanding at the time the transaction commenced
(excluding shares owned by certain employee stock plans and persons who are
directors and also officers of the corporation) or (c) on or subsequent to such
date, the "business combination" transaction is approved by the corporation's
board of directors and authorized at an annual or special meeting of the
corporation's stockholders, by the affirmative vote of at least two-thirds of
the outstanding voting stock not owned by the "interested stockholder."
Thus, the effect of such provision of Delaware law is to prevent any
attempted hostile takeover of a Delaware corporation from being completed for
three years unless (a) at least 85% of the voting shares of the target are
acquired in a single transaction; (b) at least two-thirds of the voting shares
of the target, excluding the shares held by the bidder, vote in favor of the
acquisition; or (c) the corporation opts out of the statutory protection.
Dissenters' Rights. Dissenters' RightsUnder Florida laws shareholders may
dissent from, and demand cash payment of the fair value of their shares in
respect of, (i) a merger or consolidation of the corporation, and (ii) a sale or
exchange of all or substantially all of a corporation's assets, including a sale
in dissolution.
Under Delaware law, dissenters' rights are not available with respect to a
sale, lease, exchange or other disposition of all or substantially all of a
corporation's assets or any amendment of its charter, unless such corporation's
charter expressly provides for dissenters' rights in such instances. The
Delaware Certificate contains no such provision. Stockholders of a Florida
corporation have no dissenters' rights in the case of a merger or consolidation
if their shares are either listed on a national securities exchange or quoted on
the NASDAQ National Market System. Stockholders of a Delaware corporation have
no dissenters' rights in the case of a merger or consolidation if their shares
are either listed on a national securities exchange or held of record by more
than 2,000 stockholders or the corporation is the survivor of a merger that did
not require the stockholders to vote for its approval; provided, however, that
dissenters' rights will be available in such instances, if stockholders are
required under the merger or consolidation to accept for their shares anything
other than shares of stock of the surviving corporation, shares of stock of a
corporation either listed on a national securities exchange or held of record by
more than 2,000 stockholders, cash, in lieu of fractional shares, or any
combination of the foregoing.
LEGAL MATTERSLEGAL MATTERS
The validity of the FAS Common Stock will be passed on for FAS by Sonfield
& Sonfield, Houston, Texas. Certain legal matters related to the Merger will be
passed on for Executive by James D. Cullen, Esq., Naples, Florida.
EXPERTSEXPERTS
The financial statements of FAS at June 25, 1998 appearing in this
Information Statement/Prospectus have been audited by Harper & Pearson Company,
independent auditors, as set forth in their report thereon appearing elsewhere
herein and are included in reliance upon such report given upon the authority of
such firm as experts in accounting and auditing. The financial statements of
Executive included elsewhere in this Information Statement/Prospectus have been
included herein in reliance upon the report of Bobbitt, Pittenger & Company,
P.A., independent accountants, given on the authority of that firm as experts in
giving said report. No other information contained in this Information
Statement/Prospectus has been audited or reviewed by Harper & Pearson Company or
Bobbitt, Pittenger & Company, P.A. Consequently, the independent auditors are
not providing any opinions or any other form of assurances on the information
contained herein. Each of the individual reports by the independent auditors
should be read in conjunction with this Information Statement/Prospectus.
N
F - 1
[Enlarge/Download Table]
INDEX TO FINANCIAL STATEMENTSINDEX TO FINANCIAL STATEMENTS
EXECUTIVE WEALTH MANAGEMENT SERVICES, INC.
Report of Independent Auditors F- 2
Statements of Financial Condition as of December 31, 1997 F - 3
Statement of Income as of December 31, 1997 F - 4
Statement of Changes in Stockholders' Equity as of December 31, 1997 F - 5
Statement of Cash Flows as of December 31, 1997 F - 6
Notes to Financial Statements as of December 31, 1997 F - 7-11
Balance Sheet as of March 31, 1998 (Unaudited) **
Statements of Operation for the six months ended June 30, 1998 (Unaudited) **
Statement of Changes in Stockholders' Equity for the six months ended June 30, 1998 (Unaudited) **
Statement of Cash Flows for the six months ended June 30, 1998 (Unaudited) **
Notes to Financial Statements for the six months ended June 30, 1998 (Unaudited) **
FAS GROUP, INC.
Report of Independent Auditors F - 12
Balance Sheet F - 13
Statement of Income F - 14
Statement of Changes in Stockholders' Equity F - 15
Statement of Cash Flows F - 16
Notes to Financial Statements F - 17-22
December 31, 1997 Compiled Pro Forma Combing Financial Statements
Pro Forma Combing Balance Sheet F - 23
Pro Forma Combing Statement of Operations F - 24
Pro Forma Combing Statement of Cash Flows F - 25
_____________________
**TO BE FILED BY AMENDMENT
F - 2
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
Companys 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.
Certified Public Accountants
F - 7
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EXECUTIVE WEALTH MANAGEMENT SERVICES, INC.
STATEMENTS OF FINANCIAL CONDITION
December 31,
-------------------------------------------------
1997 1996
----------- ----------
ASSETS
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
=========== ==========
The accompanying notes are an integral part of these financial statements.
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EXECUTIVE WEALTH MANAGEMENT SERVICES, INC.
STATEMENTS OF INCOME
Year Ended December 31,
--------------------------------------
1997 1996
----------- -----------
REVENUE
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)
=========== ===========
The accompanying notes are an integral part of these financial statements.
[Enlarge/Download Table]
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,
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
=========== ========== ============= ========== ======= ========
The accompanying notes are an integral part of these financial statements.
[Download Table]
EXECUTIVE WEALTH MANAGEMENT SERVICES, INC.
STATEMENTS OF CASH FLOWS
Year Ended December 31,
---------------------------------------------
1997 1996
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES
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 $ - $ -
========== ==========
The accompanying notes are an integral part of these financial statements.
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
OMNIs 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.
F - 13
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 Companys 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:
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1997 1996
--------- ---------
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
========= =========
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:
[Download Table]
1998 $103,452
1999 36,000
2000 36,000
2001 36,000
2002 18,000
--------
229,452
========
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 Companys
stockholders. The Company operates pursuant to the (K)(2)(ii) exemptive
provisions of the Securities and Exchange Commissions 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 Companys 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
[Download Table]
The following sets forth the computation of basic and diluted earnings per
share.
Numerator 1997 1996
----------- -----------
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)
=========== ===========
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 Companys financial position or results of operations for
1997. Proforma 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
Companys 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 Companys 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 Companys 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 Companys common stock. The plan provides for the
granting of options to purchase a maximum of 500,000 shares of the Companys
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 Companys 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.
[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
[Download Table]
FAS GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
JUNE 25, 1998
ASSETS
---------------------------------------------------
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
==========
See accompanying notes.
F - 15
[Download Table]
FAS GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF INCOME
FOR THE PERIOD ENDED JUNE 25, 1998
CONSULTING FEE $1,200,000
FEDERAL INCOME TAX EXPENSE 408,000
----------
NET INCOME $ 792,000
==========
See accompanying notes.
[Download Table]
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
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
============ =========== ========== ==========
See accompanying notes.
F - 17
[Download Table]
FAS GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
FOR THE PERIOD ENDED JUNE 25, 1998
CASH FLOWS FROM OPERATING ACTIVITIES
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-
============
See accompanying notes.
F-26
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 puts
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.
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 EVENT
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.
[Enlarge/Download Table]
FAS GROUP, INC.
PRO FORMA COMBINING BALANCE SHEETS
December 31, 1997
-------------------
ASSETS DEC. 31 HISTORICAL PRO FORMA PRO FORMA
1996 EWMS FAS Combined
---------- ------------ ---------- -----------
Cash $ - $ 127,771 $ - $ 127,791
Organization Costs - - 2,544 2,544
Receivables
Broker dealers 40,306 45,406 - 45,406
Correspondent brokers 122,201 68,766 - 68,766
Customers 13,000 13,105 - 13,105
Affiliates and employees 3,650 18,363 - 18,363
Other 14,847 - 14,847
Furniture, fixtures and
Equipment at cost, net of
Accumulated depreciation 37,192 27,343 - 27,343
Deposits with clearing organizations 43,742 45,157 - 45,157
Other deposits 1,934 1,934 - 1,934
Syndication costs - 15,000 - 15,000
Equity Securities - -0- 5,200,000 5,200,000
---------- ------------ ---------- -----------
$ 262,025 $ 377,692 $5,202,544 $5,580,236
========== ============ ========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Accounts payable $ 36,483 $ 107,465 - $ 107,465
Commissions payable 143,566 101,291 - 101,291
Federal Income Tax Payable - - 408,000 408,000
180,049 208,756 408,000 616,756
---------- ------------ ---------- -----------
STOCKHOLDERS' EQUITY
Preferred Stock -0- -0- -0- -0-
Common Stock 4,983 5,231 2,544 7,775
Stock warrants 4,410 4,410 -0- 4,410
Additional paid-in-capital 913,688 1,105,639 4,000,000 5,105,639
----------
Accumulated deficit (841,105) (946,344) 792,544 (154,344)
---------- ------------ ---------- -----------
TOTAL STOCKHOLDERS' EQUITY 81,976 168,936 4,794,544 4,963,480
---------- ------------ ---------- -----------
$ 262,025 $ 377,692 $5,202,544 $5,580,236
========== ============ ========== ===========
<FN>
NOTE TO READER: FAS GROUP, INC. DOES NOT OWN $4,000,000 OF THE EQUITY SECURITIES; ARE
REFLECTED ABOVE TO SHOW THE PRO FORMA EFFECTS ON THE PRO FORMA COMBINED BALANCE SHEET AS IF
THE SECURITIES WERE OWNED BY FAS GROUP, INC.
[Enlarge/Download Table]
FAS GROUP, INC.
PRO FORMA COMBINED STATEMENT OF OPERATIONS
December 31, 1997
-------------------
DECEMBER HISTORICAL PRO FORMA PRO FORMA
1996 EXECUTIVE FAS COMBINED
----------- ------------ ---------- -----------
REVENUE
Commissions $2,909,749 $ 3,723,815 $ - $3,723,815
Underwriting Fees 32,500 304,002 - 304,002
Other 57,795 144,899 - 144,899
Consulting Fee - - 1,200,000 1,200,000
----------- ------------ ---------- -----------
3,000,044 4,172,716 1,200,000 5,372,716
----------- ------------ ---------- -----------
EXPENSES
Employer compensation and benefits 345,561 406,052 - 406,052
Commissions 2,275,456 3,131,258 - 3,131,258
Clearing charges and regulatory fees 262,542 346,223 - 346,223
Occupancy and equipment rental 125,968 130,494 - 130,494
Depreciation 11,844 10,811 - 10,811
Other Operating Expenses 214,687 280,670 - 280,670
----------- ------------ ---------- -----------
3,236,058 4,305,508 - 4,305,508
----------- ------------ ---------- -----------
OPERATING INCOME (LOSS) (236,014) (132,792) 1,200,000 1,067,208
OTHER INCOME
Rent 23,969 27,553 - 27,553
FEDERAL INCOME TAX - - 408,000 (408,000)
----------- ------------ ---------- -----------
NET INCOME (LOSS) $ (212,045) $ (105,239) $ 792,000 $ 686,761
=========== ============ ========== ===========
[Enlarge/Download Table]
FAS GROUP, INC.
PRO FORMA COMBINED STATEMENTS OF CASH FLOWS
December 31, 1997
-------------------
December 31 HISTORICAL PRO FORMA PRO FORMA
1996 EWMS FAS COMBINED
------------- ------------ ----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss $ (212,045) $ (105,239) $ -0- $ (105,239)
------------- ------------ ----------- -----------
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation 11,844 10,811 10,811
(Increase) decrease in operating assets:
Receivables:
Broker dealers (963) (5,100) (5,100)
Correspondent brokers 20,772 53,435 53,435
Customers (13,000) (105) (105)
Affiliates and employees (3,650) (14,847) (14,847)
Deposits (1,318) (1,415) (1,415)
Syndication costs (15,000) (15,000)
(Decrease) increase in operating liabilities:
Accounts payable (21,570) 70,982 70,982
Commissions payable (977) (42,275) _________ (42,275)
------------- ------------ -----------
(8,862) 41,773 -0- 41,773
------------- ------------ ----------- -----------
NET CASH USED IN OPERATING ACTIVITIES (220,907) (63,466) -0- (63,466)
------------- ------------ ----------- -----------
CASH FLOWS USED BY INVESTING ACTIVITIES
Purchase of furniture, fixtures and equipment (6,685) (962) -0- (962)
------------- ------------ ----------- -----------
NET CASH USED BY INVESTING ACTIVITIES (6,685) (962) -0- (962)
------------- ------------ ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds form Sale of Preferred Stock -0- -0- -0- -0-
Proceeds from sale of common stock 222,992 214,000 120 214,120
Syndication costs (15,803) (21,801) -0- (21,801)
------------- ------------ ----------- -----------
NET CASH PROVIDED BY FINANCING
ACTIVITIES 207,189 192,199 120 192,319
------------- ------------ ----------- -----------
NET INCREASE IN CASH (20,403) 127,771 120 127,891
CASH, at beginning of year 20,403 -0- -0- -0-
------------- ------------ ----------- -----------
CASH, at end of year $ -0- $ 127,771 $ 120 $ 127,891
============= ============ =========== ===========
Annex A Page 1
ANNEX 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
Annex A Page 5
[Enlarge/Download Table]
TABLE OF CONTENTS
RECITALS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE I NAME OF SURVIVING CORPORATION, CERTIFICATE OF INCORPORATION AND BY-
LAWS, BOARD OF DIRECTORS AND OFFICERS.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.01 Name of Surviving Corporation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.02 Certificate of Incorporation and By-Laws . . . . . . . . . . . . . . . . . . . . . . . . 1
1.03 Board of Directors and Officers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II STATUS AND CONVERSION OF SECURITIES. . . . . . . . . . . . . . . . . . . . . . . . 1
2.01 Stock of EWMS and FAS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(a) EWMS Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(b) Dissenters Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(c) Surrender and Exchange of EWMS Common Stock . . . . . . . . . . . . . . . . . . . . . . . 1
(d) Transfer Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(e) EWMS Stock Transferees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.02 Assumption of Employment Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.03 Capital Stock of FAS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.04 Capital Stock of MergerSub . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE III STOCKHOLDER APPROVAL, BOARD OF DIRECTORS' RECOMMENDATIONS,
FILINGS, EFFECTIVE TIME.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
3.01 Stockholder Approvals, Board of Director's Recommendations . . . . . . . . . . . . . . . 1
3.02 Filing, Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE IV CERTAIN EFFECTS OF MERGER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE V REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . 1
5.01 Representations and Warranties of EWMS . . . . . . . . . . . . . . . . . . . . . . . . . 1
(a) Security Holders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(b) Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(c) Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(d) Absence of Changes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(e) Litigation and Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(f) NASD Membership, Compliance, Governmental Authorizations. . . . . . . . . . . . . . . . . 1
(g) Due Organization and Qualification. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(h) Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(i) Material Agreements and Employment Contracts. . . . . . . . . . . . . . . . . . . . . . . 1
(j) Title to Property and Related Matters . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(k) Corporate Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(l) Licenses, Trademarks and Trade Names. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(m) Corporate Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(n) Binding Obligation of EWMS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(o) Capitalization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(p) Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(q) Registration Statement, Prospectus/Information Statement. . . . . . . . . . . . . . . . . 1
(r) Finders or Brokers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(s) SEC Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(t) Employment Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(u) Share Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(v) Approvals Required. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
5.02 Representations and Warranties of Stockholder. . . . . . . . . . . . . . . . . . . . . . 1
(a) Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(b) Binding Obligation of Stockholder . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(c) Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(d) Registration Statement, Prospectus/Information Statement. . . . . . . . . . . . . . . . . 1
(e) Finders or Brokers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(f) Stockholder Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
5.03 Representations and Warranties of FAS and MergerSub. . . . . . . . . . . . . . . . . . . 1
(a) Shares of FAS Common Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(b) Due Authorization and Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(c) Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(d) Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(e) Absence of Changes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(f) Litigation and Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(g) Due Organization and Qualification. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(h) Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(i) Breach of Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(j) Capitalization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(k) Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(l) Title to Property and Related Matters . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(m) Compliance, Governmental Authorization. . . . . . . . . . . . . . . . . . . . . . . . . . 1
(n) Brokerage Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(o) Public Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(p) Regulatory Filings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(q) Material Agreements and Employment Contracts. . . . . . . . . . . . . . . . . . . . . . . 1
(r) Corporate Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(s) Corporate Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(t) Binding Obligation of FAS and MergerSub . . . . . . . . . . . . . . . . . . . . . . . . . 1
(u) Registration Statement, Prospectus/Information Statement. . . . . . . . . . . . . . . . . 1
5.04 Representations and Warranties of FAS Founder. . . . . . . . . . . . . . . . . . . . . . 1
(a) Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(b) Binding Obligation of FAS Founder . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(c) Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(d) Registration Statement, Prospectus/Information Statement. . . . . . . . . . . . . . . . . 1
(e) Finders or Brokers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(f) FAS Founder Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE VI COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
6.01 Covenants of EWMS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(a) Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(b) No Solicitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(c) EWMS and Subsidiary Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
6.02 Covenants of Stockholder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(a) No Solicitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(b) Agreement to Vote . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
6.03 Covenants of FAS and MergerSub . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(a) Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(b) No Solicitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(c) FAS and Subsidiary Actions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(d) Agreement to Vote . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
6.04 Covenants of FAS Founder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(a) No Solicitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(b) Agreement to Vote . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
6.05 Covenants of EWMS, Stockholder, FAS, MergerSub and FAS Founder . . . . . . . . . . . . . 1
(a) Access to Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(b) Registration Statement and Information Statement. . . . . . . . . . . . . . . . . . . . . 1
(c) Commercially Reasonable Efforts; Other Efforts. . . . . . . . . . . . . . . . . . . . . . 1
(d) Public Announcements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(e) Notification of Certain Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(f) Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(g) Directors' and Officers' Liability Insurance. . . . . . . . . . . . . . . . . . . . . . . 1
(g) Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(h) Stock Exchange Listing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(i) Actions Regarding Office and Car Lease Obligations. . . . . . . . . . . . . . . . . . . . 1
(k) Retroactive Insurance Coverage. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(l) Failure to Take Action. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(m) Exhibits, Closing Statements and Schedules. . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE VII CONDITIONS PRECEDENT TO OBLIGATIONS OF THE PARTIES. . . . . . . . . . . . . . . . 1
7.01 Conditions Precedent to Obligations of EWMS and Stockholder. . . . . . . . . . . . . . . 1
(a) Accuracy of Representations and Warranties. . . . . . . . . . . . . . . . . . . . . . . . 1
(b) Compliance with Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(c) Form of New Certificates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(d) Audited Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(e) Approval by Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(f) Opinion of Counsel. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(g) Officer's Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(h) Closing Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(i) Lock-up Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(j) Additional Registered Representatives . . . . . . . . . . . . . . . . . . . . . . . . . . 1
7.02 Conditions Precedent to Obligations of FAS and MergerSub . . . . . . . . . . . . . . . . 1
(a) Accuracy of Representations and Warranties. . . . . . . . . . . . . . . . . . . . . . . . 1
(b) Compliance with Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(c) Lock Up Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(d) Approval by Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(e) Opinion of Counsel. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(f) Officers' Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(g) Closing Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
7.03 Conditions Precedent to Obligations of EWMS, Stockholder, FAS, MergerSub and FAS Founder 1
(a) Registration Statement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(b) EWMS Stockholder Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(c) Listing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(d) Certain Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(e) Opinions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(f) Stockholder Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
7.04 Post Merger Incentive Stock Options. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE VIII CLOSING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
8.01 Time and Place . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
8.04 Documents at Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(a) Documents by EWMS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(b) Documents by FAS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
8.05 Filings at the Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE IX TERMINATION AND ABANDONMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
9.01 Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(a) Mutual Consent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(b) Failure to Consummate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(c) Order of Judicial or Regulatory Authority . . . . . . . . . . . . . . . . . . . . . . . . 1
(d) Exercise of Dissenter's Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
9.02 Termination by EWMS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
9.03 Termination by FAS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
9.04 Procedure for Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
9.05 Effect of Termination and Abandonment. . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE X DISPUTE RESOLUTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
10.1 Agreement Disputes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
10.2 Arbitration in Accordance with American Arbitration Association Rules. . . . . . . . . . 1
10.3 Final and Binding Awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
10.4 Costs of Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
10.5 Settlement by Mutual Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE XI OTHER MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
11.01 The Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
11.02 Survivability and Investigations. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
11.03 Nature of Representations and Warranties. . . . . . . . . . . . . . . . . . . . . . . . 1
11.05 Further Assurances. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
11.06 Waiver of Compliance and Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
11.07 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
11.08 Interpretation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
11.09 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
11.10 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
11.11 Binding Effect. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
11.12 Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
11.13 Time. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
11.14 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
11.15 Default Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Registration Statement18.doc 12 May 7, 1998
Annex A Page 6
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
Annex A Page 37
Annex A Page 7
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 Vote. 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 Vote. 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:
[Enlarge/Download Table]
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.
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/Bonnie 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
Annex A Page 55
Schedule 1
Liabilities of EWMS Not Disclosed in Financial Statements
Pursuant to Section 5.01(c)
Other than what is discussed in Schedule 3, to the best knowledge of EWMS, there
are no other actual or contingent liabilities.
Annex A Page 39
Schedule 2
Adverse Changes since the date of the Financial Statements
Pursuant to Section 5.01(d)
To the best knowledge of EWMS, None.
Annex A Page 40
Schedule 3
Litigation
Pursuant to Section 5.01(e)
There have been a number of public and private offerings of securities through
EWMS as Placement Agent. One of these public offerings, which occurred in 1991
and 1992 was for a limited partnership called Federal Mortgage Investors, Ltd.
("FMIL"). FMIL has experienced financial difficulties as a result of
misrepresentations made to it by certain third parties in connection with the
purchase of certain mortgages. FMIL and Guy S. Della Penna, as General
Partner, filed a lawsuit against said third parties, which suit was subsequently
settled at mediation for $977,000. To date, however, no portion of that sum has
been paid. One investor has threatened suit and an arbitration claim with the
NASD against Mr. Della Penna only and not EWMS. Counsel believes that in the
event any securities-related claims are asserted against EWMS, which are not
necessarily anticipated, they would possibly be beyond the statute of
limitations period. Federal Mortgage Management, Inc, an affiliate public
offering, although not in financial default, is in the process of developing a
workout program with its independent auditors, legal counsel and Trustee for the
noteholders of this program to extend the maturity date of the final series of
notes due December 1998, for up to a period of 36 months. All interest and
principal payments are and have been paid to date and non of the program
investors have threatened claims or filed suit against EWMS or Mr. Della Penna.
In no instances and to the best knowledge of EWMS, have any legal proceedings
been threatened or commenced against EWMS whatsoever for these or other
offerings sold by EWMS.
[LETTERHEAD OF THE CLAYTON LAW FIRM, P.A.]
VIA FACSIMILE (941) 954-7508
Ms. Christine Cox, P.A.
Bobbitt, Pittenger & Company, P.A.
1605 Main Street, Suite 1010
Sarasota, Florida 34236-9851
Re: Executive Wealth Management Services, Inc.
Ladies and Gentlemen:
During the calendar year 1997, this law firm was retained to render legal
services in connection with the following matters:
(1) to represent Guy Della Penna individually and in his capacity as an
officer of Securities Trading Group, Inc. in a lawsuit styled, "J Brian Murphy
and Gail Murphy, Plaintiffs, v Gaeton S. Della Penna a/k/a Guy S. Della Penna
and Securities Trading Group, Inc., a Florida corporation," Circuit Court,
Sarasota County, Florida, Case No. 97-3959-CA-01. This lawsuit does not name
Executive Wealth Management Services, Inc. ("EWMS") as a party, and is not
believed likely at this time that EWMS will be named as a party;
(2) to represent Guy Della Penna individually and in his capacity as a
general partner of Federal Mortgage Investors, Ltd. in a lawsuit styled, "Joy
and Moran n/k/a Law Office of Michael Moran, Plaintiff, v. Guy S. Della Penna,
individually and as co-general partner of Federal Mortgage Investors, Limited, a
Florida limited partnership," Circuit Court, Sarasota County, Florida, Case No.
97-6313-CA-01. This lawsuit dies not name Executive Wealth Management Services,
Inc. ("EWMS") as party, and it is not believed likely at this time that EWMS
will be named as a party; and
(3) to consult with Mr. Della Penna individually and in conjunction with
other legal counsel for various business ventures he has engaged in, and which
were sold by EWMS representatives, for the purpose of understanding what legal
position Mr. Della Penna and EWMS may be in with respect to those ventures.
Based upon the scope of our representation as generally described above,
and information we have been provided by Mr. Della Penna and other employees and
representatives of EWMS, it is our understanding that there are at present no
material pending or threatened litigation, claims and assessments, nor are we
aware of any material unasserted claims and assessments against EWMS.
Please let me know if you have any questions.
Very truly yours,
W. Andrew Clayton, Jr.
-------------------------
W. Andrew Clayton, Jr.
WAC/dc
cc: Ms. Bonnie Gilmore, Chief Financial Officer, Executive Wealth Management
Services, Inc.
Annex A Page 42
Schedule 4
Exceptions to Compliance with Laws and Regulations
Pursuant to Section 5.01(f)
To the best knowledge of EWMS, None.
Annex A Page 43
Schedule 5
Exceptions with Respect to Tax Matters
Pursuant to Section 5.01(h)
To the best knowledge of EWMS, None.
Annex A Page 44
Schedule 6
Material Agreements, Employment Contracts and Employee Benefit Plans
Pursuant to Section 5.01(i)
And Section 5.01(r)
Attach Employment Agreements with the following persons:
Guy S. Della Penna
Jack A. Alexander
Robert H. DeVore
Georgeanne Detweiler
Bonnie S. Gilmore
Andrea Smeltzer
Attach Investment Banking Agreement with FMC Capital Markets and reflect
obligation for FAS to pay $37,500 and EWMS to pay $37,500 at the Closing.
SERVICE
AND
NON-CIRCUMVENTION AGREEMENT
This Service and Non-Circumvention Agreement is among Financial Marketing
Consultants, Inc. ("FMC") having its office at 2150 Goodlette Road, Suite 200,
Naples, Florida 34102; and Executive Wealth Management Services, Inc.
("Executive") having it principal office at 1800 Second Street, Suite 780,
Sarasota, Florida 34236.
WHEREAS, FMC has the ability to introduce possible sources of financing and
or underwriters of securities offerings to Executive, and
WHEREAS, Executive, a public held broker/dealer, is interested in being assisted
in identifying possible sources of financing and/or underwriters of an offering
of securities of Executive and is willing to compensate FMC for its efforts on
its behalf; and
WHEREAS, FMC does not want Executive to circumvent it by attempting to deal
directly with an underwriter or financing source, thereby depriving FMC of its
opportunity to receive compensation for services rendered to Executive.
NOW, THEREFORE, in consideration of the mutual covenants herein contained and
other good and valuable consideration, the sufficiency and receipt of which is
hereby acknowledged, the parties agree as follows:
1. Obligations of FMC:
A. FMC shall, as the case may be, make introductions to and presentations
with and/or on behalf of Executive to underwriters, broker/dealers,
corporations, partnerships or individuals that may invest in and/or assist
Executive with a secondary public and/or private offering of securities issued
by Executive.
B. FMC shall inform Executive of all contacts made to parties that have
expressed an interest in acquiring additional information about and/or to
conduct due diligence with respect to Executive.
C. FMC shall in its sole discretion have the right to advertise the
acceptance of offers of interest from prospective investors in Executive. Any
expenses associated with said advertisements shall be the sole responsibility of
FMC.
2. Obligations of Executive:
A. Executive shall provide to FMC on Exhibit "A" hereto, a list of all
broker/dealers, corporations, partnerships or individuals (collectively
hereinafter "Previous Contacts") that have been contacted during the twelve (12)
month period immediately preceding the date of this Agreement with respect to
underwriting an offering of securities to be issued by Executive and all such
Previous Contacts so identified shall, unless otherwise agreed by Executive, be
excluded as parties for which FMC shall receive compensation hereunder should
one or more Previous Contact participate in a financial transaction with
Executive.
B. A qualified representative of Executive shall attend all presentations
made to prospective investors and/or underwriters as may be deemed reasonably
necessary by FMC.
C. Executive shall at all times during the term of this Agreement provide
FMC and its agents will full access to Executive books, records, tax returns,
documents, directors, officers, employees, representatives, agents for any and
all matters deemed by FMC to be relevant to the operation of Executive.
D. Executive shall pay all expenses incurred by FMC with respect to this
engagement, provided however, any expense in excess of One Hundred Dollars
($100) requires the prior approval of a designated representative of Executive.
3. Term:
This is an exclusive non-cancelable Agreement for three (3) months from the
above first written date and shall thereafter for a period of three (3) months
become a non-exclusive Agreement. Subsequent to the initial period, this
Agreement may be terminated by either party upon thirty (30) days prior written
notice. Provided, however, in the event FMC has obtained bone fide interest by
or letter of intent from an underwriter, broker/dealer, corporation, partnership
or individual that may invest in and/or assist Executive with an offering of
securities issued by Executive, this Agreement shall automatically renew for
consecutive three (3) month periods until said bone fide interest or letter of
intent shall expire. The expiration of this Agreement shall not relieve either
party of any obligations incurred prior thereto.
4. Independent Contractor:
The parties expressly acknowledge that FMC shall operate as an independent
contractor for all purposes, including but not limited to, payment of taxes,
licenses, etc., with respect to any local, state, federal or any other
governmental agency or authority, when performing any functions under this
Agreement.
5. Compensation:
a) Executive shall pay to FMC, at the closing of any financial
transaction accepted by Executive, a cash fee in the amount of One and one half
percent (1.5%) of the value of amounts obtained or to be obtained by Executive,
from any entity or through any intermediary introduced to Executive by FMC, and
the obligation to pay of said fee shall extend to any subsequent funding and/or
investment by any entity or through any intermediary introduced to Executive by
FMC through a twelve (12) month period after termination of this Agreement.
b) Executive shall issue to FMC or its assigns, at the closing of any
financial transaction accepted by Executive, warrants equal to One and one half
percent (1.5%) of the securities and warrants placed (amount raised divided by
the share price plus the warrants) exercisable at the offering price for a five
year term. Warrants shall have piggyback registration rights.
c) Executive shall reimburse all pre-approved expenses incurred by FMC
in respect to the services rendered by FMC pursuant to this Agreement.
6. Exclusive Relationship:
Executive acknowledges and agrees that during the term of this Agreement
that it shall not retain or employ the services of any entity to conduct a
financial transaction acceptable to Executive without the prior written consent
of FMC, except as set forth in Exhibit A.
7. Indemnification:
Executive and FMC mutually agree to indemnify and hold the other party, its
shareholders, directors, officers, employees, agents and assignees harmless
against liability for any and all claims arising out of this Agreement.
8. Continuing Obligations:
All obligations of Executive or FMC which expressly or by their nature
survive the expiration or termination of this Agreement shall continue in full
force and effect subsequent to and notwithstanding its expiration or termination
and until they are satisfied in full or by their nature expire.
9. Complete Agreement:
This Agreement contains the entire agreement of the parties and no
representations, inducements, promises or agreements, oral or otherwise, between
the parties not imposed herein shall be of any force or effect.
10. Severance and Substitution of Valid Provisions:
Except as expressly provided to the contrary herein, each section,
paragraph, term and provision of this Agreement and any portion thereof shall be
considered favorable and if for any reason any such provision of the Agreement
is held to be invalid, contrary to, or in conflict with any applicable present
or future law or regulation in a final ruling issued in a proceeding to which
Executive and FMC are parties, that ruling shall not impair the operation of or
have any other effect upon such other portions of this Agreement as may remain
otherwise intelligible, which shall continue to be given full force and effect
and bind the parties hereto.
11. Captions:
The captions or headings of the paragraphs are inserted only as a matter of
reference, and in no way define, limit, or describe the scope of this Agreement
or the intent of any provision thereof.
12. Venue:
This Agreement shall be governed by and construed in accordance with the
laws of the State of Florida. Any claim or controversy that arises out of or
relates to this Agreement shall be settled by arbitration in the City of Naples,
Florida in accordance with the rules then obtaining of the American Arbitration
Association. Judgment upon any award rendered pursuant to such arbitration may
be entered in any court possessing jurisdiction of arbitration awards.
WITNESS WHEREOF, the undersigned have executed this Agreement on this __ day of
March, 1997.
Financial Marketing Consultants, Inc. Executive Wealth Management
Services, Inc.
By: /s/Dennis B. Schroeder___________ By: _/s/Guy S. Della
----------------------------------- ----------------
Penna___________
--------------
Dennis B. Schroeder Guy S. Della Penna
Chief Executive Officer President
EXHIBIT "A"
This is a list of all broker/dealers, corporations, partnerships or individuals
that have been contacted by Executive during the twelve (12) month period
immediately preceding the date of this Agreement with respect to a possible
investment in Executive.
Annex A Page 49
Schedule 7
Exceptions to Title to Properties and List of Real Property
Pursuant to Section 5.01(j)
EWMS holds title to its properties free and clear of any and all liens or
encumbrances with the exception of leased equipment. Please see Form 10K and
the related audited financial statements as of December 31, 1997.
Annex A Page 50
Schedule 8
Licenses, Trademarks and Trade Names.
Pursuant to Section 5.01(l)
To the best knowledge of EWMS, there are none with the exception of a proposed
name registration of "Prostar" jointly with two EWMS brokers on a 51% and 49%
basis, respectively, for its role, as Registered Investment Advisor.
Schedule 9
EWMS's Capitalization
Pursuant to Section 5.01(o)
See attached audited financial statements for fiscal year ending December 31,
1998. See all Exhibit "A" attached hereto concerning a private placement by
EWMS.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
ANNUAL AUDITED REPORT
FORM X-17A-5
PART III
FACING PAGE
Information Required of Brokers and Dealers Pursuant to Section 17 of the
Securiteis Exchange Act of 1934 and Rule 17a-5 Thereunder
FOR THE PERIOD BEGINNING 01-01-97 AND ENDING 12-31-97
A. REGISTRANT IDENTIFICATION
NAME OF BROKER-DEALER: Executive Wealth Managemetn Services, Inc.
EI # 59-2087068
ADDRESS OF PRINCIPAL PLACE OF BUSINESS: (Do not use P.O. Box No.): 2323
Stickney Point Road
Sarasota, Fl 34231
NAME AND TELEPHONE NUMBER OF PERSON TO CONTACT IN REGARD TO THIS REPORT:
Guy S. Della Penna 060-48-3246 (941) 965-4200
B. ACCOUNTANT IDENTIFICATION
Indendpendnt Public Accoutnant whose opinion is contained in this Report*
Bobbitt, Pittenger & Co, P.A.
16050 Main Street
Sarasota, FL 34236
CHECK ONE:
_x_ Certified Public Accountant
-
___ Public Accuntant
___ Accountant not resident in United States or any of its possessions.
FOR OFFICICIAL USE ONLY
_
_________
*Claims for exemption from the requirement that the annual report be covered by
the opinion of an independent public accountant must be supported by a statement
of facts and circumstances relied on as the basis for the exemption. See
section 240.17a-5(e)(2).
SEC 1410 (3-91) POTENTIAL PERSONS WHO ARE TO RESPOND TO THE COLLECTION OF
INFORMATION CONTAINED IN THIS FORM ARE NOT REQURED TO RESPOND UNLESS THE FORM
DISPLAYS A CURRENTLY VALIED OMB CONTROL NUMB4ER.
EXECUTIVE WEALTH MANAGEMENT SERVICES, INC.
REPORT ON AUDITS OF
FINANCIAL STATEMENTS
AND ADDITIONAL INFORMATION
FOR THE YEARS ENDED
DECEMBER 31, 1997 AND 1996
BOBBITT, PITTENGER & COMPANY, P. A.
EXECUTIVE WEALTH MANAGEMENT SERVICES, INC.
<B>
CONTENTS
--------
PAGE
----
FINANCIAL STATEMENTS
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS 1
STATEMENTS OF FINANCIAL CONDITION 2
STATEMENTS OF INCOME 3
STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY 4
STATEMENTS OF CHANGES IN LIABILITIES
SUBORDINATED TO CLAIMS OF GENERAL CREDITORS 5
STATEMENTS OF CASH FLOWS 6
NOTES TO FINANCIAL STATEMENTS 7
ADDITIONAL INFORMATION
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON ADDITIONAL INFORMATION 13
COMPUTATIONS OF NET CAPITAL AND NET CAPITAL
REQUIREMENTS UNDER RULE 15c3-1 OF THE
SECURITIES AND EXCHANGE COMMISSION 14
COMPUTATION FOR DETERMINATION OF RESERVE
REQUIREMENTS UNDER RULE 15c3-3 OF THE
SECURITIES AND EXCHANGE COMMISSION 15
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON INTERNAL ACCOUNTING CONTROL REQUIRED
BY SEC RULE 17a-5 16
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
Companys 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.
Certified Public Accountants
Annex A Page 65
EXECUTIVE WEALTH MANAGEMENT SERVICES, INC.
STATEMENTS OF FINANCIAL CONDITION
December 31,
-------------------------------------------------
1997 1996
----------- ----------
ASSETS
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
=========== ==========
The accompanying notes are an integral part of these financial statements.
[Download Table]
EXECUTIVE WEALTH MANAGEMENT SERVICES, INC.
STATEMENTS OF INCOME
Year Ended December 31,
--------------------------------------
1997 1996
----------- -----------
REVENUE
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)
=========== ===========
The accompanying notes are an integral part of these financial statements.
[Enlarge/Download Table]
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,
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
=========== ========== ============= ========== ======= ========
The accompanying notes are an integral part of these financial statements.
EXECUTIVE WEALTH MANAGEMENT SERVICES, INC.
STATEMENT OF CHANGES IN LIABILITIES
SUBORDINATED TO CLAIMS OF GENERAL CREDITORS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
The Company has no subordinated claims as of December 31, 1997 and 1996.
The accompanying notes are an integral part of these financial statements.
[Download Table]
EXECUTIVE WEALTH MANAGEMENT SERVICES, INC.
STATEMENTS OF CASH FLOWS
Year Ended December 31,
---------------------------------------------
1997 1996
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES
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 $ - $ -
========== ==========
The accompanying notes are an integral part of these financial statements.
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
OMNIs 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.
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 Companys 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:
[Download Table]
1997 1996
--------- ---------
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
========= =========
EXECUTIVE WEALTH MANAGEMENT SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
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:
[Download Table]
1998 $103,452
1999 36,000
2000 36,000
2001 36,000
2002 18,000
--------
229,452
========
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 Companys
stockholders. The Company operates pursuant to the (K)(2)(ii) exemptive
provisions of the Securities and Exchange Commissions 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 Companys 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
[Download Table]
The following sets forth the computation of basic and diluted earnings per
share.
Numerator 1997 1996
----------- -----------
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)
=========== ===========
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 Companys financial position or results of operations for
1997. Proforma 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
Companys 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 Companys 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 Corporations financial instruments consist of all of its assets and
liabilities. The Corporations 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
Companys 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 Companys 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 Companys common stock. The plan provides for the
granting of options to purchase a maximum of 500,000 shares of the Companys
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 Companys 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.
Annex A Page 66
ADDITIONAL INFORMATION
Annex A Page 67
February 6, 1998
BOARD OF DIRECTORS
Executive Wealth Management Services, Inc.
Sarasota, Florida
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
--------------------------------------------
ON ADDITIONAL INFORMATION
---------------------------
We have audited the accompanying financial statements of Executive Wealth
Management Services, Inc. as of December 31, 1997 and 1996. Our audits were
made for the purpose of forming an opinion on the basic financial statements
taken as a whole. The supplementary schedules of Computations of Net Capital
and Net Capital Requirements Under Rule 15c3-1 of the Securities and Exchange
Commission and Computation for Determination of Reserve Requirements under Rule
15c3-3 of the Securities and Exchange Commission are presented for the purposes
of additional analysis and are not a required part of the basic financial
statements. The accompanying schedules are required by Rule 17a-5 of the
Securities and Exchange Commission. Such information has been subjected to the
testing procedures applied in the audit of the basic financial statements and,
in our opinion, is fairly stated in all material respects in relation to the
basic financial statements taken as a whole.
The Company is exempt from the determination of reserve requirements in
compliance with provisions under SEC Rule 15c3-3. We found no material
differences in the computation of net capital under SEC Rule 15c3-1.
Certified Public Accountants
Annex A Page 69
[Download Table]
EXECUTIVE WEALTH MANAGEMENT SERVICES, INC.
COMPUTATIONS OF NET CAPITAL AND NET CAPITAL REQUIREMENTS
UNDER RULE 15c3-1 OF THE SECURITIES AND EXCHANGE COMMISSION
Year Ended December 31,
--------------------------
1997 1996
----------- -----------
NET CAPITAL
Stockholders' equity. . . . . . . . . . . . . $ 168,936 $ 81,976
Deductions - non-allowable assets
Furniture, fixtures and equipment . . . . . . (27,343) (37,192)
Deposits. . . . . . . . . . . . . . . . . . . (1,934) (1,934)
Petty cash. . . . . . . . . . . . . . . . . . (100) (100)
Accounts receivable . . . . . . . . . . . . . (19,751) (19,257)
Syndication costs . . . . . . . . . . . . . . (15,000)
Mutual funds. . . . . . . . . . . . . . . . . (2,290)
-----------
Net capital before haircuts on securities . . 102,518 23,493
Haircuts on securities. . . . . . . . . . . . (903) (875)
----------- -----------
NET CAPITAL . . . . . . . . . . . . . . . . . $ 101,615 $ 22,618
=========== ===========
AGGREGATE INDEBTEDNESS
Items included in balance sheet
Accounts payable. . . . . . . . . . . . . . . $ 107,465 $ 34,050
Commissions payable . . . . . . . . . . . . . 101,291 143,566
----------- -----------
Total Aggregate Indebtedness. . . . . . . . . $ 208,756 $ 177,616
=========== ===========
Ratio: Aggregate Indebtedness to Net Capital. 2.05 to 1 7.85 to 1
=========== ===========
CAPITAL REQUIREMENTS
MINIMUM NET CAPITAL REQUIREMENT PER
SEC RULE 15c3-1 . . . . . . . . . . . . . . . $ 5,000 $ 5,000
=========== ===========
NET CAPITAL REQUIREMENT PER NATIONAL
ASSOCIATION OF SECURITIES DEALERS (130%
OF MINIMUM NET CAPITAL REQUIREMENT
OR 6 2/3% AGGREGATE INDEBTEDNESS) . . . . . . $ 13,924 $ 11,842
=========== ===========
EXECUTIVE WEALTH MANAGEMENT SERVICES, INC.
COMPUTATION FOR DETERMINATION OF RESERVE REQUIREMENTS
UNDER RULE 15c3-3 OF THE SECURITIES AND EXCHANGE COMMISSION
DECEMBER 31, 1997 AND 1996
The Company is exempt from the determination of reserve requirements under
provisions of SEC Rule 15c3-3 exemption (K)(2)(ii).
Annex A Page 70
February 6, 1998
BOARD OF DIRECTORS
Executive Wealth Management Services, Inc.
Sarasota, Florida
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
--------------------------------------------
ON INTERNAL ACCOUNTING CONTROL REQUIRED BY SEC RULE 17a-5
-----------------------------------------------------------------
In planning and performing our audit of the financial statements of Executive
Wealth Management Services, Inc. for the years ended December 31, 1997 and 1996,
we considered its internal control structure in order to determine our auditing
procedures for the purposes of expressing our opinion on the financial
statements and not to provide assurance on the internal control structure.
We also made a study of the practices and procedures followed by the Company, in
making the periodic computations of aggregate indebtedness and net capital under
Rule 17a-3(a)(11) and the procedures for determining compliance with the
exemption provisions of Rule 15c3-3. We did not review the practices and
procedures followed by the Company in making the quarterly securities
examinations, counts, verifications and the recordation of differences required
by Rule 17a-13 or in complying with the requirements for prompt payment for
securities under Section 8 of Regulation T of the Board of Governors of the
Federal Reserve System because the Company did not carry security accounts for
customers or perform custodial functions relating to customer securities.
The management of the Company is responsible for establishing and maintaining a
system of internal accounting control and the practices and procedures referred
to in the preceding paragraph. In fulfilling this responsibility, estimates and
judgements by management are required to assess the expected benefits and
related costs of control procedures and of the practices and procedures referred
to in the preceding paragraph and to assess whether those practices and
procedures can be expected to achieve the Commission's above-mentioned
objectives. The objectives of a system of internal accounting control and the
practices and procedures are to provide management with reasonable, but not
absolute, assurance that assets for which the Company has responsibility are
safeguarded against loss from unauthorized use or disposition, and that
transactions are executed in accordance with management's authorization and
recorded properly to permit the preparation of financial statements in
accordance with generally accepted accounting principles. Rule 17a-5(g) lists
additional objectives of the practices and procedures listed in the preceding
paragraph.
Because of inherent limitations in any internal accounting control procedures or
the practices and procedures referred to above, errors or irregularities may
nevertheless occur and not be detected. Also, projection of any evaluation of
control procedures to future periods is subject to the risk that they may become
inadequate because of changes in conditions or that the degree of compliance
with them may deteriorate.
Annex A Page 71
BOARD OF DIRECTORS
Page Two
February 6, 1998
Our consideration of the internal control structure would not necessarily
disclose all matters in the internal control structure that might be material
weaknesses under standards established by the American Institute of Certified
Public Accountants. A material weakness is a condition in which the design or
operation of the specific internal control structure elements does not reduce to
a relatively low level the risk that errors or irregularities in amounts that
would be material in relation to the financial statements being audited may
occur and not be detected within a timely period by employees in the normal
course of performing their assigned functions. We noted the following matter
involving the control environment and its operation that we consider to be a
material weakness as defined above. This condition was considered in
determining the nature, timing and extent of the procedures to be performed in
our audits of the financial statements of Executive Wealth Management Services,
Inc. for the years ended December 31, 1997 and 1996, and this report does not
affect our report thereon dated February 6, 1998.
Segregation of Duties
-----------------------
Because of a limited number of personnel, it is not always possible to
adequately segregate certain incompatible duties so that no one employee has
access to both physical assets and the related accounting records, or to all
phases of a transaction. Consequently, the possibility exists that
unintentional or intentional errors or irregularities could exist and not be
promptly detected.
Our audit did not reveal any significant errors or irregularities resulting from
this lack of segregation of employee duties and responsibilities.
We understand that practices and procedures that accomplish the objectives
referred to in the second paragraph of this report are considered by the
Commission to be adequate for its purpose in accordance with the Securities
Exchange Act of 1934 and related regulations, and that practices and procedures
that do not accomplish such objectives in all material respects indicate a
material inadequacy for such purposes. Based on this understanding and on our
study, we believe that the Companys practices and procedures were adequate at
December 31, 1997 and 1996, to meet the Commissions objectives.
* * * * *
This report is intended solely for the use of management of Executive Wealth
Management Services, Inc. and the Securities and Exchange Commission and other
regulatory agencies which rely on Rule 17a-5(g) under the Securities Exchange
Act of 1934 and should not be used for any other purpose.
Certified Public Accountants
Annex A Page 72
Schedule 10
Liabilities of FAS and MergerSub Not Disclosed in Financial Statements
Pursuant to Section 5.03(d)
Annex A Page 73
Schedule 11
Adverse Changes Since the Date of the Financial Statements
Pursuant to Section 5.03(e)
Annex A Page 74
Schedule 12
Litigation
Pursuant to Section 5.03(f)
Annex A Page 75
Schedule 13
Exceptions to Title to Properties
Pursuant to Section 5.03(l)
Annex A Page 76
Schedule 14
Exceptions to Compliance with Laws and Regulations
Pursuant to Section 5.03(m)
Annex A Page 77
Schedule 15
Commitments to Issue FAS's Securities
Pursuant to Section 5.03(j)
Include description of all series of common stock and preferred stock including
number of shares outstanding if not fully described in Financial Statements of
FAS.
Annex A Page 78
Schedule 16
Material Agreements, Employment Contracts and Employee Benefit Plans
Pursuant to Section 5.03(q)
Include engagement agreement with Sonfield & Sonfield describing agreement to
pay $100,000 as legal fees at the Closing.
A-80 FDraft10/18/93
Annex A Page 79
Schedule 17
Capitalization of FAS and MergerSub
Pursuant to Section 5.03(j)
[PAGE INTENTIONALLY OMITTED]
Annex A Page 80
EXHIBIT A
EWMS COMMON STOCK OWNED BY STOCKHOLDER
PURSUANT TO SECTION 5.01(A)
[Download Table]
NAME NUMBER OF SHARES
----------------
1,455,835*
Guy S. Della Penna
[Download Table]
FAS Common Stock to be Issued
Pursuant to Section 2.01(a)
NAME NUMBER OF SHARES PERCENT OF TOTAL
------------------
Class A Class B Class A Class B
------------------ ---------------- ---------------- ----------
Guy S. Della Penna __________ __________ __________ __________
________________ __________ __________ __________ __________
* Under a Regulation "D" best efforts private placement dated March 1, 1998, a
shareholder is selling up to 100,000 shares of common stock and the Company is
selling up to 500,000 shares of common stock.
B-1 FDraft10/18/93
Annex A Page 81
EXHIBIT B
Form of Certificate of FAS Common Stock
Pursuant to Section 11.04(b)(i)
C- 1 Draft 10/18/93
Annex A Page 82
EXHIBIT C
Members of the Board of Directors of FAS at the Effective Time
Pursuant to Section 1.03
[Download Table]
NAME NUMBER OF YEARS OF INITIAL TERM
---- -------------------------------
Jack A. Alexander 3
Dennis B. Schroeder 2
Robert E. Windom, M.D. 2
Guy S. Della Penna 3
_____________________ 1
_____________________ 1
_____________________ 3
Annex A Page 83
EXHIBIT D
Senior Officers of FAS at the Effective Time
Pursuant to Section 1.03
[Enlarge/Download Table]
NAME OFFICE
------------------------------------------- ----------------------------------------------------------------------
Jack A. Alexander Chairman and CEO
Guy S. Della Penna President, Chief Operating Officer, CEO of Affinity Marketing Division
Robert H. DeVore Senior Vice President, General Counsel and Treasurer
Barbara J. Knox Vice President and Chief Compliance Officer
Bonnie S. Gilmore Senior Vice President, Chief Financial Officer and Secretary
Georgeanne Detweiler Vice President General Operations
and Senior Registered Options Principal
_____________________ ________________________________
SONFIELD & SONFIELD
Executive Wealth Management Services, Inc.
May 7, 1998
Page 85 of 3
Annex A Page 85
Annex A Page 84
EXHIBIT E
Form of Opinion of FAS's Counsel
Pursuant to Section 7.01(f)
[LETTERHEAD OF SONFIELD & SONFIELD]
May 7, 1998
Executive Wealth Management Services, Inc.
2323 Stickney Point Road
Sarasota, Florida 34231
Ladies and Gentlemen:
We are acting as counsel to FAS Group, Inc., a Delaware corporation
("FAS") and FAS Wealth Management Services, Inc., a Florida corporation,
("MergerSub") in connection with the transactions contemplated by the Agreement
and Plan of Merger dated as of May 7, 1998 (the "Agreement") among FAS,
MergerSub, Executive Wealth Management Services, Inc., a Florida corporation
("EWMS") and the stockholders of EWMS (the "Stockholder").
In our examination we have assumed the genuineness of all signatures,
the legal capacity of natural persons, the authenticity of all documents
submitted to us as originals, the conformity to original documents of all
documents submitted to us as certified or photostatic copies, and the
authenticity of the originals of such copies. As to any facts material to this
opinion which we did not independently establish or verify, we have relied upon
statements and representations of MergerSub and FAS, their respective officers
and other representatives and of public officials.
In rendering the opinions set forth herein, we have examined and
relied on originals or copies, certified or otherwise identified to our
satisfaction, of the following:
(i) the Agreement;
(ii) the certificate of the officers of MergerSub and FAS, dated
the date hereof (the "Officers' Certificate");
(iii) certified copies of the Certificate of Incorporation and
By-Laws, each as amended, of MergerSub and the Restated Certificate of
Incorporation and By-Laws, each as amended, of FAS;
(iv) a certified copy of certain resolutions of the Board of
Directors of MergerSub and FAS, each adopted on May 7, 1998;
(v) such other documents as we have deemed necessary or
appropriate as a basis for the opinion set forth below.
Members of this Firm are admitted to practice in the State of Texas.
We express no opinion as to the laws of any jurisdiction other than (i) the
laws of the State of Texas; (ii) the General Corporation Law of the State of
Delaware; and (iii) the federal laws of the United States of America to the
extent specifically referred to herein.
As to factual matters, we have relied without investigation on the
Officers' Certificate provided by MergerSub and FAS and the representations and
warranties contained in the Agreement.
(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) The 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 the Agreement;
(v) The execution and delivery by FAS of the 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 Articles of Incorporation or By-Laws or,
to the best of 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 respective 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; and
(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) of
the Agreement, 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 the Agreement.
This opinion is being furnished only to you and is solely for your
benefit and is not to be used, circulated, quoted, relied upon or otherwise
referred to for any purpose without prior written consent except that the
Stockholder, individually or collectively, may rely on this opinion as if it
were addressed to each Stockholder.
Yours very truly,
/s/Sonfield & Sonfield
------------------------
SONFIELD & SONFIELD
F- 1 Draft 10/18/93
Annex A Page 86
EXHIBIT F
Opinion of EWMS's Counsel
Pursuant to Section 7.02(e)
[Letterhead of Michael Hric, P.A.]
May 7, 1998
FAS Group, Inc.
14358 Golden Sunset Lane
Poway, California 92064
May 7, 1998
Page 87
Annex A Page 87
FAS Group, Inc.
14358 Golden Sunset Lane
Poway, California 92064
Ladies and Gentlemen:
We are acting as counsel to Executive Wealth Management Services, Inc, a
Florida corporation, ("EWMS") and certain stockholders of EWMS (the
"Stockholder"), in connection with the transaction contemplated by the Agreement
and Plan of Merger dated as of May 7, 1998 (the "Agreement") between FAS Group,
Inc., a Delaware corporation ("FAS"), FAS Wealth Management Services, Inc., a
Delaware corporation ("MergerSub"), EWMS and Stockholder.
In our examination we have assumed the genuineness of all signatures, the
legal capacity of natural persons, the authenticity of all documents submitted
to me as originals, the conformity to original documents of all documents
submitted to me as certified or photostatic copies, and the authenticity of the
originals of such copies. As to any facts material to this opinion which we did
not independently establish or verify, we have relied upon statements and
representations of EWMS and its officers and Stockholder and their
representatives and of public officials.
In rendering the opinions set forth herein, we have examined and
relied on originals or copies, certified or otherwise identified to our
satisfaction, of the following:
(i) the Agreement;
(ii) the certificate of the officers of EWMS, dated the date
hereof (the "Officers' Certificate");
(iii) certified copies of the Certificate of Incorporation and
By-Laws, each as amended, of EWMS;
(iv) certified copy of certain resolutions of the Board of
Directors of EWMS adopted on May _____, 1998, and;
(v) such other documents as we have deemed necessary or
appropriate as a basis for the opinion set forth below.
Members of this firm are admitted to practice in the State of Florida.
We express no opinion as to the laws of any jurisdiction other than (i) the laws
of the State of Florida; and (ii) the federal laws of the United States of
America to the extent specifically referred to herein.
As to factual matters, we have relied without investigation on the
Officers' Certificate provided by EWMS and the Stockholder and the
representations and warranties contained in the Agreement.
(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) The 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 the 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 its 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) of the Agreement, 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 the
Agreement. When duly transferred to FAS as provided therein, to the best of
counsel's knowledge after inquiry, FAS will own all of the issued and
outstanding common stock of EWMS.
This opinion is being furnished only to you and is solely for your
benefit and is not to be used, circulated, quoted, relied upon or otherwise
referred to for any purpose without prior written consent.
Yours very truly,
/s/Michael Hric, P.A.
-----------------------
Michael Hric, P.A.
G- 1 Draft 10/18/93
Annex A Page 88
EXHIBIT G-1
Lock Up Agreement
Pursuant to Sections 7.02(c) and 7.01(j)
To induce FAS Group, Inc., a Delaware corporation ("FAS") and FAS Wealth
Management Services, Inc., a Delaware corporation (collectively the "FAS
Companies"), to consummate the transactions contemplated by an agreement (the
"Agreement") dated May 7, 1998, among FAS Companies, Executive Wealth Management
Services, Inc., a Florida corporation ("EWMS"), and certain of the stockholders
of EWMS ("Stockholder"), the undersigned shareholder of EWMS agrees:
(a) For a period of 12 months after the date of the Closing (as defined
in the Agreement), he or she will not sell, transfer, dispose of pledge, or
alienate all or any part of the FAS Common Stock owned by the undersigned; or
(b) Not to agree to any of the foregoing.
Dated: May 7, 1998
Name:__________________________
G- 1 Draft 10/18/93
Annex A Page 89
EXHIBIT G-2
Lock Up Agreement
Pursuant to Section 7.02(c)
To induce FAS Group, Inc., a Delaware corporation ("FAS") and FAS Wealth
Management Services, Inc., a Delaware corporation (collectively the "FAS
Companies"), to consummate the transactions contemplated by an agreement (the
"Agreement") dated May 7, 1998, among FAS Companies, Executive Wealth Management
Services, Inc., a Florida corporation ("EWMS"), and certain of the stockholders
of EWMS ("Stockholder"), the undersigned shareholder of EWMS agrees:
(a) For a period of 6 months after the date of the Closing (as defined
in the Agreement), he will not sell, transfer, dispose of pledge, or alienate
all or any part of the FAS Common Stock owned by the undersigned; or
(b) Not to agree to any of the foregoing.
Dated: May 7, 1998
/s/Robert E. Windom, M.D.
----------------------------
Robert E. Windom, M.D.
H-1 Draft 10/18/93
Annex A Page 90
EXHIBIT H-1
Override Agreement
Pursuant to Section 7.04(b)
H-1 Draft 10/18/93
Annex A Page 91
EXHIBIT H-2
Stockholder Agreement
Pursuant to Section 7.03(f)
I-1 Draft 10/18/93
Annex A Page 92
EXHIBIT I-1
Form of Officers' Certificate of FAS Concerning Accuracy
Pursuant to Section 7.01(g)
THE UNDERSIGNED HEREBY CERTIFY, on behalf of FAS Group, Inc., Inc., a
Delaware corporation ("FAS"), and pursuant to Section 7.01(g) of an agreement
(the "Agreement"), dated __________, 1998, among FAS Group, Inc., a Delaware
corporation, FAS Wealth Management Services, Inc., a Delaware corporation,
certain of the stockholders ("Stockholder") of EWMS, and EWMS, that we are the
duly elected and qualified president and chief executive officer, and the duly
elected and qualified secretary, and that all representations and warranties of
FAS or MergerSub contained in the Agreement were accurate when made and, in
addition, are accurate as of the Closing (as defined in the Agreement) as though
such representations and warranties were made as of the Closing in exactly the
same language by FAS or MergerSub and regardless of knowledge or lack thereof on
the part of FAS or any Stockholder or changes beyond its or his control, and as
of the Closing, FAS and MergerSub have performed and complied with all covenants
and agreements and satisfied all conditions required to be performed and
complied with by any of them at or before such time by the Agreement.
IN WITNESS WHEREOF, we have hereunto set our hands and the seal of FAS this
_____ day of May, 1998.
/s/Jack A. Alexander
----------------------
Jack A. Alexander, President
/s/Jack A. Alexander
----------------------
Jack A. Alexander, Secretary
[corporate seal]
I-1 Draft 10/18/93
Annex A Page 93
EXHIBIT I-2
Form of Officers' Certificate of EWMS Concerning Accuracy
Pursuant to Section 7.02(f)
THE UNDERSIGNED HEREBY CERTIFY, on behalf of Executive Wealth Management
Services, Inc., a Florida corporation ("EWMS"), and pursuant to Section 7.02(h)
of an agreement (the "Agreement"), dated __________, 1998, among FAS Group,
Inc., a Delaware corporation, Jack A. Alexander ("FAS Founder"), FAS Wealth
Management Services, Inc., a Delaware corporation, the majority stockholder
("Stockholder") of EWMS, and EWMS, that we are the duly elected and qualified
president and chief executive officer, and the duly elected and qualified
secretary, and that all representations and warranties of EWMS contained in the
Agreement were accurate when made and, in addition, are accurate as of the
Closing (as defined in the Agreement) as though such representations and
warranties were made as of the Closing in exactly the same language by EWMS and
regardless of knowledge or lack thereof on the part of EWMS or any Stockholder
or changes beyond its or his control, and as of the Closing, EWMS has performed
and complied with all covenants and agreements and satisfied all conditions
required to be performed and complied with by any of them at or before such time
by the Agreement.
IN WITNESS WHEREOF, we have hereunto set our hands and the seal of EWMS
this _____ day of May, 1998.
/s/Guy S. Della Penna
------------------------
Guy S. Della Penna, President
/s/Bonnie S. Gilmore
----------------------
Bonnie S. Gilmore, Secretary
[corporate seal]
Annex A Page 3
[Download Table]
EXHIBIT J
List of Definitions and Meaning of Terms
Agreement 7
Broker-Dealer Transaction 24
Class A Common Stock 8
Class B Common Stock 8
Closing 36
Closing Financial Statements 31
Closing Statements 29
Code 7
Constituent Corporations 7
Effective Time 10
EWMS 7
EWMS Acquisition Transaction 21, 22
EWMS Common Stock 8
EWMS SEC Reports 13
Exchange Act 13
FAS 7
FAS Acquisition Transaction 24, 25
FAS Common Stock 8
FAS Founder 7
Merger 7
MergerSub 7
NASD 11
New Certificates 9
Old Certificates 9
Person 37
Preferred Stock 8
Registration Statement 13, 15, 18, 19
SEC 11
Securities Act 13
Statements 15
Stockholder 7
Subsidiary 38
Surviving Corporation 7
AMENDMENT
TO
AGREEMENT AND PLAN OF MERGER
AMENDMENT TO 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"
R E C I T A L SRECITALS
-----------------------
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 desire to amend
the Agreement desire to waive certain conditions precedent to obligations of
EWMS and Stockholder.
NOW, THEREFORE, the parties hereto hereby adopt the above recitals and
agree as follows:
1. AUDITED FINANCIAL STATEMENTS. The provision contained in
subparagraph (d) of Section 7.01 of the Agreement with respect to equity of not
less than $5 million including not less than $500,000 cash is waived.
2. ADDITIONAL REGISTERED REPRESENTATIVES. The provisions of
subparagraph (i) of subparagraph (j) of Section 7.1 with respect to receipt of
executed documents covering not less than 25 registered representatives is
waived.
IN WITNESS WHEREOF, the parties have executed this Amendment to the
Agreement and Plan of Merger this 31st day of July, 1998.
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/Bonnie 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
AMENDMENT TO AGREEMENT AND PLAN OF MERGER
The Agreement and Plan of Merger dated May 7, 1998 (the "Merger Agreement")
among Executive Wealth Management Services, Inc. ("EWMS"), certain shareholders
of EWMS, Jack A. Alexander ("Founder"), on behalf of FAS Group, Inc. ("FAS") and
its wholly-owned subsidiary to be formed ("MergerSub") is hereby amended as
follows:
All references in the Merger Agreement to consummation on or before June
30, 1998 is hereby changed to read August 31, 1998.
All of the remaining terms and conditions of the Merger Agreement shall
remain in full force as originally written.
Executed by the parties and effective as of this 31st day of July, 1998.
EXECUTIVE WEALTH MANAGEMENT
SERVICES, INC.
By:/s/Guy S. Della Penna /s/Guy S. Della Penna
------------------------ ------------------------
Guy S. Della Penna, President Guy S. Della Penna, Majority
Shareholder
of EWMS
FAS GROUP, INC. FAS WEALTH MANAGEMENT
SERVICES, INC.
By:/s/Jack A. Alexander By: /s/Jack A. Alexander
---------------------- ----------------------
Jack A. Alexander, Chairman & CEO Jack A. Alexander,
Chairman & CEO
/s/Jack A. Alexander
----------------------
Jack A. Alexander, Founder
Annex B Page 14
ANNEX B
CERTIFICATE OF INCORPORATION
OF
FAS GROUP, INC.
ARTICLE I
NAME
The name of the Corporation is FAS Group, Inc.
ARTICLE II
DURATION
The Corporation is to have perpetual existence.
ARTICLE III
REGISTERED OFFICE AND AGENT
The address of its registered office in the State of Delaware is the
Corporation Trust Center at 1209 Orange Street, in the City of Wilmington,
County of New Castle, State of Delaware. The name of its registered agent at
such address is The Corporation Trust Company.
ARTICLE IV
PURPOSES
The purpose for which the Corporation is organized is to transact all
lawful business for which corporations may be incorporated pursuant to the laws
of the State of Delaware. The Corporation shall have all the powers of a
corporation organized under the General Corporation Law of the State of
Delaware.
ARTICLE V
CAPITAL STOCK
A. Number and Designation. The Corporation shall have authority to issue
-----------------------
27 million shares of capital stock, of which 25 million shall be shares of Class
A common stock, par value $0.001 per share ("Class A Common Stock"), 1 million
shall be shares of Class B common stock, par value $0.001 per share ("Class B
Common Stock" and, together with the Class A Common Stock, "Common Stock"), and
1 million shall be shares of preferred stock, par value $0.001 per share
("Preferred Stock"). The shares may be issued by the Corporation from time to
time as approved by the board of directors of the Corporation without the
approval of the stockholders except as otherwise provided in this Article V or
the rules of a national securities exchange if applicable. The consideration
for the issuance of the shares shall be paid to or received by the Corporation
in full before their issuance and shall not be less than the par value per
share. The consideration for the issuance of the shares shall be cash, services
rendered, personal property (tangible or intangible), real property, leases of
real property or any combination of the foregoing. In the absence of actual
fraud in the transaction, the judgment of the board of directors as to the value
of such consideration shall be conclusive. Upon payment of such consideration
such shares shall be deemed to be fully paid and nonassessable. In the case of
a stock dividend, the part of the surplus of the Corporation which is
transferred to stated capital upon the issuance of shares as a stock dividend
shall be deemed to be the consideration for their issuance.
A description of the different classes and series (if any) of the
Corporation's capital stock, and a statement of the relative powers,
designations, preferences and rights of the shares of each class and series (if
any) of capital stock, and the qualifications, limitations or restrictions
thereof, are as follows:
B. 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
in this Article V.
(1) 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 in this Article V 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.
(2) 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 ten 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.
(3) 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.
(4) 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.
(5) 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.
(5) Conversion of Shares of Class B Common Stock Into Shares of Class A
----------------------------------------------------------------------
Common Stock.
-----------
(a) For the purposes of this Article V, 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 this 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 pursuant to this Article V 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 this 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 pursuant to
this Article V 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 pursuant to this Article V
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 pursuant to this Article V 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.
C. 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.
ARTICLE VI
PREEMPTIVE RIGHTS
No holder of any of the shares of any class or series of stock or of
options, warrants or other rights to purchase shares of any class or series of
stock or of other securities of the Corporation shall have any preemptive right
to purchase or subscribe for any unissued stock of any class or series, or any
unissued bonds, certificates of indebtedness, debentures or other securities
convertible into or exchangeable for stock or carrying any right to purchase
stock which may be issued pursuant to resolution of the board of directors of
the Corporation to such persons, firms, corporations or associations, whether or
not holders thereof, and upon such terms as may be deemed advisable by the board
of directors in the exercise of its sole discretion.
ARTICLE VII
REPURCHASE OF SHARES
The Corporation may from time to time, pursuant to authorization by the
board of directors of the Corporation and without action by the stockholders,
purchase or otherwise acquire shares of any class, bonds, debentures, notes,
scrip, warrants, obligations, evidences or indebtedness, or other securities of
the Corporation in such manner, upon such terms, and in such amounts as the
board of directors shall determine; subject, however, to such limitations or
restrictions, if any, as are contained in the express terms of any class of
shares of the Corporation outstanding at the time of the purchase or acquisition
in question or as are imposed by law.
ARTICLE VIII
MEETINGS OF STOCKHOLDERS; CUMULATIVE VOTING
A. Action by Written Consent. No action that is required or permitted to
--------------------------
be taken by the stockholders of the Corporation at any annual or special meeting
of stockholders may be effected by written consent of stockholders in lieu of a
meeting of stockholders, unless the action to be effected by written consent of
stockholders and the taking of such action by such written consent have
expressly been approved in advance by the board of directors of the Corporation.
B. Special Meetings. Special meeting of the stockholders of the
-----------------
Corporation for any purpose or purposes may be called at any time by the board
of directors of the Corporation, or by a committee of the board of directors
which has been duly designated by the board of directors and whose powers and
authorities, as provided in a resolution of the board of directors or in the
bylaws of the Corporation, include the power and authority to call such meetings
but such special meetings may not be called by another person or persons.
C. Cumulative Voting. There shall be no cumulative voting by stockholders
-----------------
of any class or series in the election of directors of the Corporation.
D. Place of Meetings. Meetings of stockholders may be held at such place
------------------
as the bylaws may provide.
ARTICLE IX
NOTICE FOR NOMINATIONS AND PROPOSALS
A. Nominations and Proposals. Nominations for the election of directors
---------------------------
and proposals for any new business to be taken up at any annual or special
meeting of stockholders may be made by the board of directors of the Corporation
or by any stockholder of the Corporation entitled to vote generally in the
election of directors. In order for a stockholder of the Corporation to make
any such nominations and/or proposals at an annual meeting or such proposals at
a special meeting, he or she shall give notice thereof in writing, delivered or
mailed by first class United States mail, postage prepaid, to the Secretary of
the Corporation of less than thirty days nor more than sixty days prior to any
such meeting; provided, however, that if less than forty days' notice of the
meeting is given to stockholders, such written notice shall be delivered or
mailed, as prescribed, to the Secretary of the Corporation not later than the
close of the tenth day following the day on which notice of the meeting was
mailed to stockholders. Each such notice given by a stockholder with respect to
nominations for the election of directors shall set forth (1) the name, age,
business address and, if known, residence address of each nominee proposed in
such notice, (2) the principal occupation or employment of each such nominee,
and (3) the number of shares of stock of the Corporation which are beneficially
owned by each such nominee. In addition, the stockholder making such nomination
shall promptly provide any other information reasonably requested by the
Corporation.
B. Form of Notice. Each such notice given by a stockholder to the
----------------
Secretary with respect to business proposals to bring before a meeting shall set
forth in writing as to each matter: (1) a brief description of the business
desired to be brought before the meeting and the reasons for conducting such
business at the meeting; (2) the name and address, as they appear on the
Corporation's books, of the stockholder proposing such business; (3) the class
and number of shares of the Corporation which are beneficially owned by the
stockholder; and (4) any material interest of the stockholder in such business.
Notwithstanding anything in this Certificate to the contrary, no business shall
be conducted at the meeting except in accordance with the procedures set forth
in this Article.
C. Determination of Adequacy of Notice. The Chairman of the annual or
---------------------------------------
special meeting of stockholders may, if the facts warrant, determine and declare
to such meeting that a nomination or proposal was not made in accordance with
the foregoing procedure, and, if he should so determine, he shall so declare to
the meeting and the defective nomination or proposal shall be disregarded and
laid over for action at the next succeeding adjourned, special or annual meeting
of the stockholders taking place thirty days or more thereafter. This provision
shall not require the holding of any adjourned or special meeting of
stockholders for the purpose of considering such defective nomination or
proposal.
ARTICLE X
DIRECTORS
A. Number and Vacancies. The number of directors of the Corporation shall
--------------------
be such number, not less than one nor more than 15 (exclusive of directors, if
any, to be elected by holders of preferred stock of the Corporation), as shall
be provided from time to time in a resolution adopted by the board of directors,
provided that no decrease in the number of directors shall have the effect of
shortening the term of any incumbent director, and provided further that no
action shall be taken to decrease or increase the number of directors from time
to time unless at least two-thirds of the directors then in office shall concur
in said action. Exclusive of directors, if any, elected by holders of preferred
stock, vacancies in the board of directors of the Corporation, however caused,
and newly created directorships shall be filled by a vote of two-thirds of the
directors then in office, whether or not a quorum, and any director so chosen
shall hold office for a term expiring at the annual meeting of stockholders at
which the term of the class to which the director has been chosen expires and
when the director's successor is elected and qualified. The board of directors
shall be classified in accordance with the provisions of Section B of this
Article X.
B. Classified Board. The board of directors of the Corporation (other
-----------------
than directors which may be elected by the holders of preferred stock), shall be
divided into three classes of directors which shall be designated Class I, Class
II and Class III. The members of each class shall be elected for a term of
three years and until their successors are elected and qualified. Such classes
shall be as nearly equal in number as the then total number of directors
constituting the entire board of directors shall permit, exclusive of directors,
if any, elected by holders of preferred stock, with the terms of office of all
members of one class expiring each year. Should the number of directors not be
equally divisible by three, the excess director or directors shall be assigned
to Classes I or II as follows: (1) if there shall be an excess of one
directorship over the number equally divisible by three, such extra directorship
shall be classified in Class I; and (2) if there be an excess of two
directorships over a number equally divisible by three, one shall be classified
in Class I and the other in Class II. At the organizational meeting of the
Corporation, directors of Class I shall be elected to hold office for a term
expiring at the first annual meeting of stockholders, directors of Class II
shall be elected to hold office for a term expiring at the second succeeding
annual meeting of stockholders and directors of Class III shall be elected to
hold office for a term expiring at the third succeeding annual meeting
thereafter. Thereafter, at each succeeding annual meeting, directors of each
class shall be elected for three year terms. Notwithstanding the foregoing, the
director whose term shall expire at any annual meeting shall continue to serve
until such time as his successor shall have been duly elected and shall have
qualified unless his position on the board of directors shall have been
abolished by action taken to reduce the size of the board of directors prior to
said meeting.
Should the number of directors of the Corporation be reduced, the
directorship(s) eliminated shall be allocated among classes as appropriate so
that the number of directors in each class is as specified in the position(s) to
be abolished. Notwithstanding the foregoing, no decrease in the number of
directors shall have the effect of shortening the term of any incumbent
director. Should the number of directors of the Corporation be increased, other
than directors which may be elected by the holders of preferred stock, the
additional directorships shall be allocated among classes as appropriate so that
the number of directors in each class is as specified in the immediately
preceding paragraph.
Whenever the holders of any one or more series of preferred stock of the
Corporation shall have the right, voting separately as a class, to elect one or
more directors of the Corporation, the board of directors shall include said
directors so elected and not be in addition to the number of directors fixed as
provided in this Article X. Notwithstanding the foregoing, and except as
otherwise may be required by law, whenever the holders of any one or more series
of preferred stock of the Corporation elect one or more directors of the
Corporation, the terms of the director or directors elected by such holders
shall expire at the next succeeding annual meeting of stockholders.
ARTICLE XI
REMOVAL OF DIRECTORS
Notwithstanding any other provision of this Certificate or the bylaws of
the Corporation, any director or all the directors of a single class (but not
the entire board of directors) of the Corporation may be removed, at any time,
but only for cause and only by the affirmative vote of the holders of at least
75% of the voting power of the outstanding shares of capital stock of the
Corporation entitled to vote generally in the election of directors (considered
for this purpose as one class) cast at a meeting of the stockholders called for
that purpose. Notwithstanding the foregoing, whenever the holders of any one or
more series of preferred stock of the Corporation shall have the right, voting
separately as a class, to elect one or more directors of the Corporation, the
preceding provisions of this Article XI shall not apply with respect to the
director or directors elected by such holders of preferred stock.
ARTICLE XII
ACQUISITION OF CAPITAL STOCK
A. Definitions. For the purpose of this Article:
-----------
(1) The term "Act" shall mean the Securities Exchange Act of 1934, as
amended, and any successor statute.
(2) The term "acting in concert" shall mean (i) knowing participation
in a joint activity or conscious parallel action towards a common goal whether
or not pursuant to an express agreement, and (ii) a combination or pooling of
voting or other interest in the Corporation's outstanding shares of capitol
stock for a common purpose, pursuant to any contract, understanding,
relationship, agreement or other arrangement, whether written or otherwise.
(3) The term "acquire," "acquisition" or "acquiring" with respect to
the acquisition of any security of the Corporation shall refer to the
acquisition of such security by any means whatsoever, including without
limitation, an acquisition of such security by gift, by operation of law, by
will or by intestacy, whether voluntarily or involuntarily.
(4) The term "Code" means the Internal Revenue Code of 1986, as
amended, and any successor statute.
(5) The term "Common Stock" means all Common Stock of the Corporation
and any other securities issued by the Corporation (other than the Warrants)
which are treated as stock for purposes of Section 382 of the Code.
(6) The term "Fair Market Value" of the Common Stock shall mean the
average of the daily closing prices of the Common Stock for 15 consecutive
trading days commencing 20 trading days before the date of such computation The
closing price is the last reported sale price on the principal securities
exchange on which the Common Stock is listed or, if the Common Stock is not
listed on any national securities exchange, the NASDAQ National Marked System,
or, if the Common Stock is not designated for trading on the NASDAQ National
Market System, the average of the closing bid and asked prices as reported on
NASDAQ or, if not so reported, as furnished by the National Quotation Bureau
Incorporated. In the absence of such a quotation, the Corporation shall
determine the current market rice on a reasonable and appropriate basis of the
average of the daily closing prices for 15 consecutive trading days commencing
20 trading days before the date of such computation.
(7) The term "own," "owing," "ownership" or "owning" refer to the
ownership of securities within the meaning of Section 382 of the Code after
taking into account the attribution rules of Section 382(l)(3) of the Code and
the regulations promulgated hereunder (except insofar as such attribution would
be inconsistent with provisions of this Article XII relating to Warrants).
(8) The term "Person" shall mean any individual, firm, corporation,
partnership, joint venture or other entity and shall include any group composed
of such person and any other person with whom such person or any Affiliate or
Associate (as those terms are defined in Rule 12b-2 of the General Rules and
Regulations under the Act) of such person has any agreement, arrangement or
understanding, directly or indirectly, for the purposes of acquiring, holding,
voting or disposing of Common Stock or Warrants, and any other person who is a
member of such group.
(9) The term "Transfer Agent" shall mean the transfer agent with
respect to the Common Stock nominated and appointed by the Board of Directors
from time to time.
(10) The term "Warrant" shall mean any securities issued or assumed
by the Corporation, or any securities issuable by the Corporation in respect to
issued securities which are convertible into, or which include the right to
acquire, shares of Common Stock, whether or not the right to make such
conversion or acquisition is subject to any contingencies, including, without
limitation, warrants, options, calls, contracts to acquire securities,
convertible debt instruments or any other interests treated as an option
pursuant to Section 382(l)(3) of the Code.
(11) The term "Warrant Agent" shall mean any warrant agent for any
Warrants nominated and appointed by the Board of Directors from time to time.
B. Acquisition of Control Shares.
--------------------------------
(1) If, at any time during the ten years from the effective date of this
Certificate, any Person shall acquire the beneficial ownership (as determined
pursuant to Rules 13d-3 and 13d-5 under the Act) of more than 20% of any class
of Common Stock, then the record holders of Common stock beneficially owned by
such acquiring Person shall have only the voting rights set forth in this
paragraph B on any matter requiring their vote or consent. With respect to each
vote in excess of 20% of the voting power of the outstanding shares of Common
Stock which such record holders would otherwise be entitled to cast without
giving effect to this paragraph B, the record holders in the aggregate shall be
entitled to cast only one-hundredth of a vote. A Person who is a record owner
of shares of Common Stock that are beneficially owned simultaneously by more
than one person shall have, with respect to such shares, the right to cast the
least number of votes that such person would be entitled to cast under this
paragraph B by virtue of such shares being so beneficially owned by any of such
acquiring Persons. The effect of the reduction in voting power required by this
paragraph B shall be given effect in determination the presence of a quorum for
purposes of convening a meeting of the stockholders of the Corporation
(2) The limitation on voting rights prescribed by this paragraph B
shall terminate and be of no force and effect as of the earliest to occur of:
(i) the date that any person becomes the beneficial owner of
shares of stock representing at least 75% of the total number of votes entitled
to be cast in respect of all outstanding shares of stock, before giving effect
to the reduction in votes prescribed by this paragraph B; or
(ii) the date (the "Reference Date") one day prior to the date on
which, as a result of such limitation of voting rights, the Common Stock will be
delisted from (including by ceasing to be temporarily or provisionally
authorized for listing with) the New York Stock Exchange (the "NYSE") or the
American Stock Exchange (the "AMEX"), or be no longer authorized for inclusion
(including by ceasing to be provisionally or temporarily authorized for
inclusion) on the National Association of Securities Dealers, Inc. Automated
Quotation System/National Market System ("NASDAQ/NMS"); provided, however, that
(a) such termination shall not occur until the earlier of (x) the 90th day after
the Reference Date or (y) the first day on or after a Reference Date that there
is not pending a proceeding under the rules of the NYSE, the AMEX or the
NASDAQ/NMS or any other administrative or judicial proceeding challenging such
delisting or removal of authorization of the Common Stock, an application for
listing of the Common stock with the NYSE or the AMEX or for authorization for
the Common Stock to be including on the NASDAQ/NMS, or an appeal with respect to
any such application, and (b) such termination shall not occur by virtue of such
delisting or lack of authorization if on or prior to the earlier of the 90th day
after the Reference Date or the day on which no proceeding, application or
appeal of the type described in (y) above is pending, the Common Stock is
approved for listing or continued listing on the NYSE or the AMEX or authorized
for inclusion or continued inclusion on the NASDAQ/NMS (including any such
approval or authorization which is temporary or provisional). Nothing contained
herein shall be construed so as to prevent the Common Stock from continuing to
be listed with the NYSE or AMEX or continuing to be authorized for inclusion on
the NASDAQ/NMS in the event that the NYSE, AMEX or NASDAQ/NMS, as the case may
be, adopts a rule or is governed by an order, decree, ruling or regulation of
the Securities and Exchange Commission which provides in whole or in part that
companies having Common Stock with differential voting rights listed on the NYSE
or the Amex or authorized for inclusion on the NASDAQ/NMS may continue to be so
listed or included.
C. Exceptions. The restrictions contained in this Article XII shall not
----------
apply to (1) any underwriter or member of an underwriting or selling group
involving a public sale or resale of securities of the Corporation or a
subsidiary thereof; provided, however, that upon completion of the sale or
resale of such securities, no such underwriter or member of such selling group
is a beneficial owner of more than 4.9% of any class of equity security of the
Corporation, (2) any revocable proxy granted pursuant to a proxy solicitation in
compliance with section 14 of the Act by a stockholder of the Corporation or (3)
any employee benefit plans of the Corporation. In addition, the Continuing
Directors of the Corporation, the officers and employees of the Corporation and
its subsidiaries, the directors of subsidiaries of the Corporation, the employee
benefit plans of the Corporation and its subsidiaries, entities organized or
established by the Corporation or any subsidiary thereof pursuant to the terms
of such plans and trustees and fiduciaries with respect to such plans acting in
such capacity shall not be deemed to be a group with respect to their beneficial
ownership of voting stock of the Corporation solely by virtue of their being
directors, officers or employees of the Corporation or a subsidiary thereof or
by virtue of the Continuing Directors of the Corporation, the officers and
employees of the Corporation and its subsidiaries and the directors of
subsidiaries of the Corporation being fiduciaries or beneficiaries of an
employee benefit plan of the Corporation or a subsidiary of the Corporation.
Notwithstanding the foregoing, no director, officer or employee of the
Corporation or any of its subsidiaries or group of any of them shall be exempt
from the provisions of this Article XII should any such person or group become a
beneficial owner of more than 20% of any class of equity security of the
Corporation.
D. Construction. A majority of the Continuing Directors, as defined in
------------
Article XIII, shall have the power to construe and apply the provisions of
paragraphs B, C and D of this Article XII and to make all determinations
necessary or desirable to implement such provisions, including but not limited
to matters with respect to (1) the number of shares beneficially owned by any
person, (2) whether a person has an agreement, arrangement or understanding with
another as to the matters referred to in the definition of beneficial ownership,
(3) the application of any other definition or operative provision of this
Article XII to the given facts or (4) any other matter relating to the
applicability or effect of paragraphs B, C and D of this Article XII. Any
constructions, applications, or determinations made by the Continuing Directors
pursuant to paragraphs B, C and D of this Article XII in good faith and on the
basis of such information and assistance as was then reasonably available for
such purpose shall be conclusive and binding upon the Corporation and its
stockholders.
E. Legend on Certificates. All certificates evidencing ownership of
------------------------
Common Stock or ownership of Warrants of the Corporation shall bear a
conspicuous legend in compliance with the General Corporation Law of Delaware
describing the restrictions on transfers set forth in this Article XII.
F. Partial Invalidity. If any provision of this Article XII or any
-------------------
application of any such provision is determined to be invalid by any federal or
state court having jurisdiction over the issues, the validity of the remaining
provisions shall not be affected and other applications of such provision shall
be affected only to the extent necessary to comply with the determination of
such court.
ARTICLE XIII
APPROVAL OF CERTAIN BUSINESS COMBINATIONS
The stockholder vote required to approve Business Combinations (as
hereinafter defined) shall be as set forth in this section.
A. Required Affirmative Vote.
---------------------------
(1) Except as otherwise expressly provided in this Article XIII, and in
addition to any other vote required by law, the affirmative vote required by
law, the affirmative vote of the holders of (i) at least 75% of the voting power
of the outstanding shares entitled to vote thereon (and, if any class or series
of shares is entitled to vote thereon separately the affirmative vote of the
holders of at least 75% of the outstanding shares of each such class or series),
and (ii) at least a majority of the outstanding shares entitled to vote thereon,
not including shares deemed beneficially owned by a Related Person (as
hereinafter defined), shall be required in order to authorize any of the
following:
(a) any merger or consolidation of the Corporation or a
subsidiary of the Corporation with or into a Related person (as hereinafter
defined);
(b) any sale, lease, exchange, transfer or other disposition,
including without limitation, a mortgage or pledge, of all or any Substantial
Part (as hereinafter defined) of the assets of the Corporation (including
without limitation any voting securities of a subsidiary) or of a subsidiary, to
a Related Person;
(c) any merger or consolidation of a Related Person with or into
the Corporation or a subsidiary of the Corporation;
(d) any sale, lease, exchange, transfer or other disposition of
all or any Substantial Part of the assets of a Related Person to the Corporation
or a subsidiary of the Corporation;
(e) the issuance of any securities of the Corporation or a
subsidiary of the Corporation to a Related Person other than on a pro rata basis
to all holders of capital stock of the Corporation of the same class or classes
held by the Related person, pursuant to a stock split, stock dividend or
distribution or warrants or rights, and other than in connection with the
exercise or conversion of securities exercisable for or convertible into
securities of the Corporation or any of its subsidiaries which securities have
been distributed pro rata to all holders of capital stock of the Corporation;
(f) the acquisition by the Corporation or a subsidiary of the
Corporation of any securities of a Related Person;
(g) any reclassification of the Common Stock of the Corporation,
or any recapitalization involving the Common Stock of the Corporation or any
similar transaction (whether or not with or into or otherwise involving a
Related Person) that has the effect directly or indirectly, of increasing by
more than 1% the proportionate share of the outstanding shares of any class of
equity or convertible securities of the Corporation or any subsidiary that are
directly or indirectly owned by any Related Person; and
(h) any agreement, contract or other arrangement providing for
any of the transactions described in this Article XIII.
(2) Such affirmative vote shall be required notwithstanding any other
provision of this Certificate, any provision of law, or any agreement with any
regulatory agency or national securities exchange which might otherwise permit a
lesser vote or no vote; provided, however, that in no instance shall the
provisions of this Article XIII require the vote of greater than 85% of the
voting power of the outstanding shares entitled to vote thereon for the approval
of a Business Combination.
(3) The term "Business Combination" as used in this Article XIII
shall mean any transaction which is referred to in any one or more of
subparagraphs A(1)(a) through (h) above.
B. Exceptions. The provisions of paragraph A shall not be applicable to
----------
any particular Business Combination, and such Business Combination shall require
only such affirmative vote as is required by any other provision of this
Certificate, any provision of law, or any agreement with any regulatory agency
or national securities exchange, if the Business Combination shall have been
approved in advance by a two-thirds vote of the Continuing Directors (as
hereinafter defined; provided, however, that such approval shall only be
effective if obtained at a meeting at which a continuing Director Quorum (as
hereinafter defined) is present.
C. Definitions. For the purposes of this Article XIII the following
-----------
definitions apply:
(1) The term "Related Person" shall mean and include (i) any
individual, corporation, partnership or other person or entity which together
with its "affiliates" or "associates" (as those terms are defined in the Act)
"beneficially owns" (as that there is defined in the Act) in the aggregate 10%
or more of the outstanding shares of the Common Stock of the Corporation; and
(ii) any "affiliate" or "associate" (as those terms are defined in the Act) of
any such individual, Corporation, partnership or other person or entity;
provided, however, that the term "Related Person" shall not include the
Corporation, any subsidiary of the Corporation, any employee benefit plan,
employee stock plan of the Corporation or of any subsidiary of the Corporation,
or any trust established by the Corporation in connection with the foregoing, or
any person or entity organized, appointed, established or holding shares of
capital stock of the Corporation for or pursuant to the terms of any such plan,
nor shall such term encompass shares of capital stock of the Corporation held by
any of the foregoing (whether or not held in a fiduciary capacity or otherwise).
Without limitation, any shares of the Common Stock of the Corporation which any
Related Person has the right to acquire pursuant to any agreement, or upon
exercise or conversion rights, warrants or options, or otherwise, shall be
deemed "beneficially owned" by such Related Person.
(2) The term "Substantial Part" shall mean more than 25% of the total
assets of the entity at issue, as of the end of its most recent fiscal year
ending prior to the time the determination is made.
(3) The term "Continuing Director" shall mean any member of the board
of directors of the Corporation who is unaffiliated with and who is not the
Related Person and was a member of the board prior to the time that the Related
Person became a Related Person, and any successor of a Continuing Director who
is unaffiliated with and who is not the Related Person and is recommended to
succeed a Continuing Director by a majority of Continuing Directors then on the
board.
(4) The term "Continuing Director Quorum" shall mean two-thirds of the
Continuing Directors capable of exercising the powers conferred on them.
ARTICLE XIV
EVALUATION OF BUSINESS COMBINATIONS
In connection with the exercise of its judgment in determining what is in
the best interests of the Corporation and of the stockholders, when evaluating a
Business Combination (as defined in Article XIII) or a tender or exchange offer,
the board of directors of the Corporation shall, in addition to considering the
adequacy of the amount to be paid in connection with any such transaction,
consider all of the following factors and any other factors which it deems
relevant; (A) the social and economic effects of the transaction on the
Corporation and its subsidiaries, employees and customers, creditors and other
elements of the communities in which the Corporation and its subsidiaries
operate or are located; (B) the business and financial condition and earnings
prospects of the acquiring person or entity, including, but not limited to, debt
service and other existing financial obligations, financial obligations to be
incurred in connection with the acquisition and other likely financial
obligations of the acquiring person or entity and the possible effect of such
conditions upon the Corporation and its subsidiaries and the other elements of
the communities in which the Corporation and its subsidiaries operate or are
located; and (C) the competence, experience, and integrity of the acquiring
person or entity and its or their management.
ARTICLE XV
INDEMNIFICATION
Any person who was or is a party or is threatened to be made a party to any
threatened, pending, or completed action, suit, or proceeding, whether civil,
criminal, administrative, or investigative (whether or not by or in the right of
the corporation) by reason of the fact that he is or was a director, officer,
incorporator, employee, or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, incorporator, employee,
partner, trustee, or agent of another corporation, partnership, joint venture,
trust, or other enterprise (including an employee benefit plan), shall be
entitled to be indemnified by the corporation to the full extent then permitted
by law against expenses (including counsel fees and disbursements), judgments,
fines (including excise taxes assessed on a person with respect to an employee
benefit plan), and amounts paid in settlement incurred by him in connection with
such action, suit, or proceeding. Such right of indemnification shall inure
whether or not the claim asserted is based on matters which antedate the
adoption of this Article XV. Such right of indemnification shall continue as to
a person who has ceased to be a director, officer, incorporator, employee,
partner, trustee, or agent and shall inure to the benefit of the heirs and
personal representatives of such a person. The indemnification provided by this
Article XV shall not be deemed exclusive of any other rights which may be
provided now or in the future under any provision currently in effect or
hereafter adopted of the bylaws, by any agreement, by vote of stockholders, by
resolution of disinterested directors, by provisions of law, or otherwise.
ARTICLE XVI
LIMITATIONS ON DIRECTORS' LIABILITY
A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except: (A) for any breach of the director's duty of loyalty
to the Corporation or its stockholders, (B) for acts or omissions that are not
in good faith or that involve intentional misconduct or a knowing violation of
law, (C) under Section 174 of the General Corporation Law of the State of
Delaware, or (D) for any transaction from which the director derived any
improper personal benefit. If the General Corporation law of the State of
Delaware is amended after the date of filing of this Certificate to further
eliminate or limit the personal liability of directors, then the liability of a
director of the Corporation shall be eliminated or limited to the fullest extent
permitted by the General Corporation Law of the State of Delaware, as so
amended.
Any repeal or modification of the foregoing paragraph by the stockholders
of the Corporation shall not adversely affect any right or protection of a
director of the Corporation existing at the time of such repeal or modification.
ARTICLE XVII
AMENDMENT OF BYLAWS
In furtherance and not in limitation of the powers conferred by statute,
the board of directors of the Corporation is expressly authorized to adopt,
repeal, alter, amend and rescind the bylaws of the Corporation by a vote of
two-thirds of the board of directors. Notwithstanding any other provision of
this Certificate or the bylaws of the Corporation, and in addition to any
affirmative vote required by law (and notwithstanding the fact that some lesser
percentage may be specified by law), the bylaws shall be adopted, repealed,
altered, amended or rescinded by the stockholders of the Corporation only by the
vote of the holders of not less than 75% of the voting power of the outstanding
shares of capital stock of the Corporation entitled to vote generally in the
election of directors (considered for this purpose as one class) cast at a
meeting of the stockholders called for that purpose (provided that notice of
such proposed adoption, repeal, alteration, amendment or rescission is included
in the notice of such meeting), or, as set forth above, by the board of
directors.
ARTICLE XVIII
AMENDMENT OF CERTIFICATE OF INCORPORATION
Subject to the provisions hereof, the Corporation reserves the right to
repeal, alter, amend or rescind any provision contained in this Certificate in
the manner now or hereafter prescribed by law, and all rights conferred on
stockholders herein are granted subject to this reservation. Notwithstanding
the foregoing at any time and from time to time, the provisions set forth in
Articles VIII, IX, X, XI, XII, XIII, XIV, XV, XVI, XVII and this Article XVIII
may be repealed, altered, amended or rescinded in any respect only if the same
is approved by the affirmative vote of the holders of not less than 75% of the
voting power of the outstanding shares of capital stock of the Corporation
entitled to vote generally in the election of directors (considered for this
purpose as a single class) cast at a meeting of the stockholders called for that
purpose (provided that notice of such proposed adoption, repeal, alteration,
amendment or rescission is included in the notice of such meeting).
ARTICLE XIX
The name and address of the incorporator is:
Danyel Owens
770 South Post Oak Lane
Suite 435
Houston, Texas 77056-1913
I, THE UNDERSIGNED, being the incorporator, for the purpose of forming a
corporation pursuant to the General Corporation Law of Delaware, does make and
file this Certificate of Incorporation, hereby declaring and certifying that the
facts herein stated are true, and accordingly have hereunto set my hand this
22nd day of June, 1998.
/s/Danyel Owens
----------------
Danyel Owens
Registration Statement18.doc Page
Registration Statement18.doc 15
Annex C Page 8
ANNEX C
FAS GROUP, INC.
STOCK INCENTIVE PLAN
1.
PURPOSE
The purpose of this Stock Incentive Plan (the "Plan") is to advance the
interests of FAS Group, Inc. (the "Company") and its stockholders by providing
deferred stock incentives in addition to current compensation to certain key
executives, certain directors and key employees of the Company and of its
subsidiaries who contribute significantly to the long-term performance and
growth of the Company and such subsidiaries. As used in this Plan, subsidiary
includes parent of the Company and any subsidiary of the Company within the
meaning of Sections 425(e) and (f) of the Internal Revenue Code of 1986, as
amended ("Code"), respectively.
2.
ADMINISTRATION
The Plan shall be administered by the Board of Directors of the Company
(the "Board of Directors") or a committee of the Board of Directors duly
authorized and given authority by the Board of Directors to administer the Plan
(the Board of Directors or such duly authorized committee hereinafter referred
to as the "Board"), as such is from time to time constituted.
The Board shall have all the powers vested in it by the terms of the Plan,
such powers to include exclusive authority (within the limitation described
herein) to select the employees to be granted Awards under the Plan, to
determine the type, size and terms of the Awards to be made to each employee
selected, to determine the time when Awards will be granted, and to prescribe
the form of the instruments evidencing Awards made under the Plan. The Board
shall be authorized to interpret the Plan and the Awards granted under the Plan,
to establish, amend and rescind any rules and regulations relating to the Plan,
and to make any other determinations which it believes necessary or advisable
for the administration of the Plan. The Board may correct any defect or supply
any omission or reconcile any inconsistency in the Plan or in any Award in the
Manner and to the extent the Board deems desirable to carry it into effect. Any
decision of the Board in the administration of the Plan, as described herein,
shall be final and conclusive. The Board may act only by a majority of its
members in office, except that the members thereof may authorize any one or more
of their number of any officer of the Company to execute and deliver documents
on behalf of the Board. No member of the Board shall be liable for anything done
or omitted to be done by him or by any other member of the Board in connection
with the Plan, except for his own willful misconduct or as expressly provided by
statute.
3.
PARTICIPATION
Subject to the provisions of the Plan, the Board shall have exclusive power
to select the directors and officers and other key employees of the Company and
its subsidiaries participating in the Plan to be granted Awards under the Plan.
4.
AWARDS UNDER THE PLAN
(a) Type of Awards. Awards under the Plan may be of three types: (i)
-----------------
"Nonqualified Stock Options" or "Incentive Stock Options," (ii) "Stock
Appreciation Rights" attached to Stock Options, or (iii) "Restricted Stock."
Stock Options are rights to purchase shares of Common Stock of the Company
having a par value of $.001 per share (the "Common Stock"). Stock Appreciation
Rights are rights to receive, without payment to the Company, cash and/or shares
of Common Stock in lieu of the purchase of shares of Common Stock under the
Stock Option to which the Stock Appreciation Rights are subject to the terms,
conditions and restrictions specified in Paragraph 5. Restricted Stock is a
share of Common Stock which is subject to the repurchase option and the other
terms, conditions and restrictions described in Paragraph 6.
(b) Maximum Number of Shares That May Be Issued. There may be issued
---------------------------------------------
under the Plan (as Restricted Stock or pursuant to the exercise of Stock Options
or Stock Appreciation Rights) an aggregate of 655,000 shares of Common Stock,
subject to adjustment as provided in Paragraph 7. In addition to Common Stock
actually so issued, there shall be deemed to have been issued pursuant to the
Plan (and therefore no longer available in connection with Awards) a number of
shares equal to the aggregate of the number of shares of Common Stock under
option in respect of which Stock Appreciation Rights granted pursuant to
subparagraph 5(f) shall have been exercised minus the number of shares of Common
Stock, if any, issued upon exercise of such Stock Appreciation Rights. Common
Stock issued pursuant to the Plan may be either authorized but unissued shares
or reacquired shares, or both. If any Common Stock issued as Restricted Stock
shall be repurchased pursuant to the option described in Paragraph 6 below, or
if any Common Stock issued under the Plan shall be reacquired pursuant to
restrictions imposed at the time of issuance, such shares may again be issued
under the Plan.
(c) Rights with Respect to Common Stock.
----------------------------------------
(i) An employee to whom an Award of Restricted Stock has been made
shall have, after issuance to him of a certificate for the number of shares of
Common Stock awarded and prior to the expiration of the Restricted Period or the
earlier repurchase of such shares of Common Stock as herein provided, ownership
of such shares of Common Stock, including the right to vote the same and to
receive dividends thereon, subject however, to the options, restrictions and
limitations imposed thereon pursuant to the Plan.
(ii) An employee to whom an Award of Stock Option or Stock
Appreciation Rights is made (and any person succeeding to such an employee's
rights pursuant to the Plan) shall have no rights as a stockholder with respect
to any shares of Common Stock issuable pursuant to any such Stock Option or
Stock Appreciation Rights until the date of the issuance of a stock certificate
to him for such shares. Except as provided in Paragraph 8, no adjustment shall
be made for dividends, distributions or other rights (whether ordinary or
extraordinary, and whether in cash, securities or other property) for which the
record date is prior to the date such stock certificate is issued.
(d) Exercise of Options and Stock Appreciation Rights: Expiration of
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Restrictions Applicable to Restricted Stock. Options and Stock Appreciation
---------------------------------------------
Rights shall be subject to such terms and conditions upon exercisability as the
-
Board may determine consistent with the provisions of this Plan. Repurchase and
other restrictions applicable to Restricted Stock shall be such as are
determined in the discretion of the Board consistent with the provisions of the
Plan. The Board may determine to permit any Option granted hereunder to be
exercisable immediately upon the date of grant or any time thereafter. The Board
may determine to permit any Stock Appreciation Right granted hereunder to be
exercisable not less than six months after the initial award of the Option
containing, or the amendment or supplementation of any existing Option Agreement
adding the Stock Appreciation Right; provided, however, that this limitation
shall not apply in the event of death or disability. The Board may determine
that there shall be no restrictions applicable to Restricted Stock awarded under
the Plan.
5.
STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
The Board may grant Stock Options (to which may but need not be attached
Stock Appreciation Rights as specified in subparagraph 5(f). Each Stock Option
(referred to herein as an "Option") granted under the Plan shall be evidenced by
an instrument in such form as the Board shall prescribe from time to time in
accordance with the Plan and shall comply with the following terms and
conditions (and with such other terms and conditions, including but not limited
to restrictions upon the Option or the shares of Common Stock issuable upon
exercise thereof, as the Board, in its discretion, shall establish):
(a) The Option price shall be determined by the Board at the time
the Option is granted and shall not be less than the par value of such shares of
Common stock.
(b) The Board will determine the number of shares of Common Stock
to be subject to each Option. The number of shares of Common Stock subject to an
outstanding Option will be reduced on a share for share basis to the extent that
shares of Common Stock under such Option are used to calculate the cash and/or
shares of Common Stock received pursuant to exercise of a Stock Appreciation
Right attached to such Option.
(c) The Option shall not be transferable by the optionee other
than by will or the laws of descent and distribution, and shall be exercisable
during his lifetime only to him.
(d) The Board will determine the conditions and terms governing
the exercise of granted Options; provided, however that no Option shall be
exercisable:
(i) after the expiration of ten years from the date it is
granted and may be exercised during the period prior to its expiration only at
such time or times as the Board may establish;
(ii) unless payment in United States dollars by cash or check
is made for the shares being acquired thereby in full at the time of exercise,
or at the option of the holder of such Option, in Common Stock theretofore owned
by such holder (or any combination of cash and Common Stock).
For purposes of determining the amount, if any, of the purchase price
satisfied by payment of Common Stock under clause (ii) above, such Common Stock
shall be valued at its fair market value on the date of exercise. Fair market
value means the fair market value of one share of Common Stock on the date in
question, which is deemed to be the mean between the highest and lowest sales
prices per share of Common Stock on any national stock exchange upon which
Common Stock is listed, or if Common Stock is not listed on any national stock
exchange, the mean between the highest closing bid and lowest closing asked
prices for Common Stock as reported by the National Association of Securities
Dealers NASDAQ System, or if not reported by such system, the mean between the
closing bid and asked prices as quoted by such quotation source as shall be
designated by the Board on that date. If there shall have been no sale on the
date in question, fair market value shall be determined by reference the last
preceding date on which such a sale or sales were so reported. If the Common
Stock is not listed or admitted to trading on the New York Stock Exchange, any
National Securities Exchange quoted on the NASDAQ National Markets Systems or in
the over-the-counter market, then, the fair market value shall be as set by, or
in a manner established by, the Board of Directors of the Corporation in good
faith. Any Common Stock delivered in satisfaction of all or a portion of the
purchase price shall be appropriately endorsed for transfer and assigned to the
Company. The Board may, in its discretion and to the extent permitted by the
laws of the State of Delaware determine to permit the holder of an Option to
satisfy the purchase price of the shares as to which an Option is exercised by
delivery of the Option holder's promissory note, such note to be subject to such
terms and conditions as the Board may determine. The Board may, in its
discretion and to the extent permitted by the laws of the State of Delaware,
determine to cause the Company to lend to the holder of an Option, funds on such
terms and conditions as the Board may determine to be appropriate, sufficient
for the holder of an Option to pay the purchase price of the shares as to which
an Option is to be exercised.
(e) If any person to whom an Option has been granted shall die
holding an Option which has not been fully exercised, his executors,
administrators, heirs or distributees, as the case may be, may, at any time
within one year after the date of such death (but in no event after the Option
has expired under the provisions of subparagraph 5(d)(i) hereon, exercise the
Option with respect to any shares as to which the decedent could have exercised
the Option at the time of his death.
(f) If the Board, in its discretion, so determines, there may be
attached to the Option a Stock Appreciation Right which shall be subject to such
terms and conditions, not inconsistent with the Plan, as the Board shall impose,
including the following:
(i) A Stock Appreciation Right may be exercised only to the
extent that the option to which it is attached is at the time exercisable.
However, if the option to which the Stock Appreciation Right is attached is
exercisable and if the optionee is at the relevant time an officer or director
of the Company who is required to file reports pursuant to Section 16(a) of the
Securities Exchange Act of 1934, as amended ("Exchange Act") ("Covered
Participant") - the Stock Appreciation Right may, subject to the approval of the
Board, be exercised, under such terms and conditions as may be specified by the
Board;
(ii) A Stock Appreciation Right shall entitle the optionee
(or any person entitled to act under the provisions of subparagraph 5(e)
hereunder to surrender unexercised the Option to which the Stock Appreciation
Right is attached (or any portion of such Option) to the Company and to receive
from the Company in exchange therefor that number of shares of Common Stock
having an aggregate value equal to (or, in the discretion of the Board, less
than) the excess of the value of one share over the option price per share times
the number of shares subject to the option, or portion thereof, which is so
surrendered. The Company shall be entitled to elect to settle its obligation
arising out of the exercise of a Stock Appreciation Right, by the payment of
cash equal to the aggregate value of the shares it would otherwise be obligated
to deliver or partly by the payment of cash and partly by the delivery of shares
of Common Stock. Any such election shall be made within 15 business days after
the receipt by the Board of written notice of the exercise of the Stock
Appreciation Right. The value of a share of Common Stock for this purpose shall
be the fair market value thereon on the last business day next preceding the
date of the election to exercise the Stock Appreciation Right;
(iii) No fractional shares shall be delivered under this
subparagraph 5(f) but in lieu thereof a cash adjustment shall be made.
(g) The Option agreement evidencing any incentive stock option
granted under this Plan shall provide that if the optionee makes a disposition,
within the meaning of Section 425(c) of the code and the regulations promulgated
thereunder, of any share or shares of Common Stock issued to him pursuant to his
exercise of an Option granted under this Plan within the two-year period
commencing on the day after the date of the granting of such Option or within a
one-year period commencing on the day after the date of transfer of the share or
shares to him pursuant to the exercise of such Option, he shall, within ten days
of such disposition, notify the Company thereof and immediately deliver to the
Company any amount of federal income tax withholding required by law.
6.
RESTRICTED STOCK
Each Award of Restricted Stock under the Plan shall be evidenced by an
instrument in such form as the Board shall prescribe from time to time in
accordance with the Plan and shall comply with the following terms and
conditions (and with such other terms and conditions as the Board, in its
discretion, shall establish):
(a) The Board shall determine the number of shares of Common Stock
to be issued to a participant pursuant to the Award.
(b) Shares of Common Stock issued to a participant in accordance
with the Award may not be sold, assigned, transferred, pledged, hypothecated or
otherwise disposed of, except by will or the laws of descent and distribution,
for such period as the Board shall determine, from the date on which the Award
is granted (the "Restricted Period"). The Company will have the option to
repurchase the shares subject to the Award at such price as the Board shall have
fixed, in its sole discretion, when the Award was made, which option will be
exercisable at such times and upon the occurrence of such events as the Board
shall establish when the Award is granted or if, on or prior to the expiration
of the Restricted Period or the earlier lapse of the Option, the participant has
not paid to the Company an amount equal to any Federal, State or local income or
other taxes which the Company determines is required to be withheld in respect
of such shares. Such option shall be exercisable on such terms, in such manner
and during such period as shall be determined by the Board when the Award is
made. Certificates for shares of Common Stock issued pursuant to Restricted
Stock Awards shall bear an appropriate legend referring to the foregoing Option
and other restrictions and to the fact that the shares are partly paid. Any
attempt to dispose of any such shares of Common Stock in contravention of the
foregoing Option and other restrictions shall be null and void and without
effect. If shares of Common Stock issued pursuant to a Restricted Stock Award
shall be repurchased pursuant to the Option described above, the participant, or
in the event of his death, his personal representative, shall forthwith deliver
to the Secretary of the Company the certificates for the shares of Common Stock
awarded to the participant, accompanied by such instruments of transfer, if any,
as may reasonably be required by the Secretary of the Company. If the Option
described above is not exercised by the company during such period as is
specified by the Board when the Award is made, such Option and the restrictions
imposed pursuant to the first sentence of this subparagraph 6(b) shall terminate
and be of no further force and effect.
7.
STOCK DIVIDENDS, STOCK SPLITS, REORGANIZATIONS AND
CERTAIN OTHER CORPORATION TRANSACTIONS
(a) Exercise of Corporate Powers. The existence of outstanding awards
-----------------------------
of Options, Stock Appreciation Rights or Restricted Stock shall not affect in
any way the right or power of the Company or its stockholders to make or
authorize any or all adjustments, recapitalization, reorganization or other
changes in the Company's capital structure or its business or any merger or
consolidation of the Company, or any issue of bonds, debentures, preferred or
prior preference stocks ahead of or affecting the Company's shares of Common
Stock or the rights thereof, or the dissolution or liquidation of the Company,
or any sale or transfer of all or any part of its assets or business, or any
other corporate act or proceeding whether of a similar character or otherwise.
(b) Recapitalization of the Company. If, while there are Options,
----------------------------------
Stock Appreciation Rights or Restricted Stock outstanding, the Company shall
effect any subdivision or consolidation of shares of Common Stock or other
capital readjustment, the payment of a stock dividend, stock split, combination
of shares or recapitalization or other increase or reduction in the number of
shares of Common Stock outstanding, without receiving compensation therefor in
money, services or property, then the number of shares of Common Stock available
under the Plan and the number of Options, Stock Appreciation Rights or
Restricted Stock which may thereafter be exercised shall (i) in the event of an
increase in the number of shares outstanding, be proportionately increased and
the fair market value of the Options, Stock Appreciation Rights or Restricted
Stock awarded as of the date of the award shall be proportionately reduced; and
(ii) in the event of a reduction in the number of shares outstanding, be
proportionately reduced, and the fair market value of the Options, Stock
Appreciation Rights or Restricted Stock awarded as of the date of the Award
shall be proportionately increased.
(c) Reorganization of the Company. If the Company is reorganized, or
-------------------------------
merged or consolidated or a party to a plan of exchange with another corporation
pursuant to which reorganization, merger, consolidation or plan of exchange
stockholders of the Company receive any shares of Common Stock or other
securities, or if the Company shall distribute securities of another corporation
to its stockholders, each Participant shall be entitled to receive in lieu of
the number of unexercised Options, Stock Appreciation Rights or Restricted Stock
at the date of award, to which such holder would have been entitled pursuant to
the terms of the agreement of merger of consolidation, if immediately prior to
such merger or consolidation such holder had been the holder of record of a
number of shares of Common Stock equal to the number of the unexercised Options
or Stock Appreciation Rights previously awarded to him, and Restricted Stock
shall be treated the same as unrestricted outstanding shares of Common Stock;
provided, that, anything herein contained to the contrary notwithstanding, upon
the dissolution or liquidation of the Company or upon any merger or
consolidation of the Company where it is not the surviving corporation, each
Participant shall be entitled to a benefit as though he had become fully vested
in all Options, Stock Appreciation Rights and Restricted Stock previously
awarded to him and then outstanding under this Plan, and had terminated
employment with the Company immediately prior to or concurrently with such
dissolution or liquidation or merger or consolidation.
(d) Issue of Common Stock by the Company. Except as hereinabove
------------------------------------------
expressly provided, the issue by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, for cash or property,
or for labor or services, either upon direct sale or upon the exercise of rights
or warrants to subscribe therefor, or upon any conversion of shares or
obligations of the Company convertible into such shares or other securities,
shall not affect, and no adjustment by reason thereof shall be made with respect
to, the number of, or fair market value of, any Options or Stock Appreciation
Rights then outstanding under previous awards but holders of Restricted Stock
shall be treated the same as the holders of outstanding unrestricted shares of
Common Stock
(e) Change In Control. The Board may, in its sole discretion, provide
------------------
that an Option or Stock Appreciation Right shall become fully exercisable or
that a share of Restricted Stock shall be free of any restrictions upon a Change
in Control of the Company (as defined in the next sentence). "Change in Control"
of the Company shall be conclusively deemed to have occurred if (and only if)
any of the following shall have taken place: (i) a change in control is reported
by the Company in response to either Item 6(e) of Schedule 14(a) of Regulation
14(a) promulgated under the Exchange Act or Item 1 of Form 8-K promulgated under
the Exchange Act; (ii) any "person" (as such term is used in Sections 13(d) and
14(d)(2) of the Exchange Act) is or becomes the "beneficial owner" (as defined
in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of
the Company representing forty percent or more of the combined voting power of
the company's then outstanding securities; or (iii) following the election or
removal of directors, a majority of the Board of Directors consists of
individuals who were not members of the Board of Directors two years before such
election or removal, unless the election of each director who was not a director
at the beginning of such two-year period has been approved in advance by
directors representing at least a majority of the directors then in office who
were directors at the beginning of the two-year period.
(f) Change in Authorized Common Stock. In the event that the number of
----------------------------------
shares of Common Stock which the corporation is authorized to issue pursuant to
its Certificate of Incorporation is increased or decreased, the aggregate
maximum number of shares of Common Stock which may be issued under the Plan
specified in paragraph 4(b) shall be increased or decreased proportionately.
8.
DESIGNATIONS OF BENEFICIARY BY PARTICIPANT
A participant may name a beneficiary to receive any payment to which he may
be entitled in respect of Awards under the Plan in the event of his death, on a
form to be provided by the Board. A participant may change his beneficiary from
time to time in the same manner. If no designated beneficiary is living on the
date on which any amount becomes payable to a participant's beneficiary, such
payment will be made to the participant's executors or administrators, and the
term "beneficiary" as used in the Plan shall include such person or persons.
9.
TAXES
(a) The Company may make such provisions as it deems appropriate for
the withholding of any taxes which it determines is required in connection with
any Options or Stock Appreciation Rights or Restricted Stock granted under this
Plan.
(b) Notwithstanding the terms of subparagraph 9(a), any participant may
pay all or any portion of the taxes required or allowed to be withheld by the
Company if paid to him in connection with the exercise of an Option, Stock
Appreciation Right or vesting of any Award of Restricted Stock by electing to
have the Company withhold shares of Common Stock, or by delivering previously
owned shares of Common Stock, having a fair market value, determined in
accordance with subparagraph 5(d), equal to the amount required to be withheld
or paid. A Participant must take the foregoing election on or before the date
that the amount of tax to be withheld is determined ("Tax Date"). Such elections
are irrevocable and subject to disapproval by the Board. Elections by Covered
Participants are subject to the following additional restrictions: (i) such
election may not be made within six months of the grant of the Award, provided
that this limitation shall not apply in the event of death or disability, and
(ii) such election must be made either six months or more prior to the Tax Date
or in a Window Period (as defined herein). Where the Tax Date in respect of an
Award is deferred until after exercise or expiration of restrictions and the
Covered Participant elects share withholding, the full amount of shares of
Common Stock will be issued or transferred to him upon exercise of the Option or
exercise of the Stock Appreciation Right or expiration of restrictions of the
Restricted Stock, as the case may be, but the Covered Participant shall be
unconditionally obligated to tender back to the Company the number of shares
necessary to discharge the Company's withholding obligation or his estimated tax
obligation on the Tax Date. As used herein, Window Period means the period
commencing on the third business day following the Company's release of a
quarterly or annual summary statement of sales and earnings and ending on the
twelfth business day following such release.
10.
MISCELLANEOUS PROVISIONS
(a) No employee or other person shall have any claim or right to be
granted an Award under the Plan. Neither the Plan nor any action taken hereunder
shall be construed as giving any employee any right to be retained in the employ
of the Company or any subsidiary.
(b) A participant's rights and interest under the Plan may not be
assigned or transferred in whole or in part either directly or by operation of
law or otherwise (except in the event of a participant's death), including but
not by way of limitation, execution, levy, garnishment, attachment, pledge,
bankruptcy or in any other manner and no such right or interest of any
participant in the Plan shall be subject to any obligation or liability of such
participant.
(c) No shares of Common Stock shall be issued hereunder unless counsel
for the Company shall be satisfied that such issuance will be in compliance with
applicable federal and state securities laws.
(d) The expenses of the Plan shall be borne by the Company.
(e) The Plan shall be unfunded. The Company shall not be required to
establish any special or separate fund or make any other segregation of assets
to assure the payment of any Award under the Plan and payment of Awards shall be
subordinate to the claims of the Company's general creditors.
By accepting any Award or other benefit under the Plan, each participant
and each person claiming under or through him shall be conclusively deemed to
have indicated his acceptance and ratification of, and consent to, any action
taken under the Plan by the Company or the Board.
11.
AMENDMENT OR DISCONTINUANCE
The Plan may be amended at any time and from time to time by the Board of
Directors but no amendment which increases the aggregate number of shares of
Common Stock which may be issued pursuant to the Plan shall be effective unless
and until the same is approved by the stockholders of the Company. No amendment
of the Plan shall adversely affect any right of any participant with respect to
any Award theretofore granted without such participant's written consent.
12.
TERMINATION
This Plan shall terminate upon the earlier of the following dates or events
to occur:
(a) upon the adoption of a resolution of the Board of Directors
terminating the Plan; or
(b) ten years from the date hereof
No termination of the Plan shall alter or impair any of the rights or
obligations of any person, without his consent, under any Award theretofore
granted under the Plan.
13.
STOCKHOLDER ADOPTION
The Plan is approved and adopted by the stockholders of the Company by
written consent in the manner required by the laws of the State of Delaware as
of June 23, 1998.
FAS GROUP, INC.
Annex D Page 5
ANNEX D
FLORIDA DISSENTERS' RIGHTS STATUTES
607.1301. DISSENTERS' RIGHTS; DEFINITIONS
The following definitions apply to ss. 607.1302 and 607.1320:
(1) "Corporation" means the issuer of the shares held by a
dissenting shareholder before the corporate action or the surviving or acquiring
corporation by merger or share exchange of that issuer.
(2) "Fair value" with respect to a dissenter's shares, means the
value of the shares as of the close of business on the day prior to the
shareholders' authorization date, excluding any appreciation or depreciation in
anticipation of the corporate action unless exclusion would be inequitable.
(3) "Shareholders' authorization date" means the date on which the
shareholders' vote authorizing the proposed action was taken, the date on which
the corporation received written consents without a meeting from the requisite
number of shareholders in order to authorize the action, or, in the case of a
merger pursuant to s. 607.1104, the day prior to the date on which a copy of the
plan of merger was mailed to each shareholder of record of the subsidiary
corporation.
607.1302. RIGHT OF SHAREHOLDERS TO DISSENT
(1) Any shareholder of a corporation has the right to dissent from, and
obtain payment of the fair value of his shares in the event of, any of the
corporate actions:
(a) Consummation of a plan of merger to which the corporation is a
party:
1. If the shareholder is entitled to vote on the merger, or
2. If the corporation is a subsidiary that is merged with its
parent under s. 507.1104, and the shareholders would have been entitled to vote
on action taken, except for the applicability of s. 607.1104;
(b) Consummation of a sale or exchange of all, or substantially
all, of the property of the corporation, other than in the usual and regular
course of business, if the shareholder is entitled to vote on the sale or
exchange pursuant to s. 607.1202, including a sale in dissolution but not
including a sale pursuant to court order or a sale for cash pursuant to a plan
by which all or substantially all of the net proceeds of the sale will be
distributed to the shareholders within 1 year after the date of sale;
(c) As provided in s. 607.0902(11), the approval of a
control-share acquisition;
(d) Consummation of a plan of share exchange to which the
corporation is a party as the corporation the shares of which will be acquired,
if the shareholder is entitled to vote on the plan;
(e) Any amendment of the articles of incorporation if the
shareholder is entitled to vote on the amendment and if such amendment would
adversely affect such shareholder by:
1. Altering or abolishing any preemptive rights attached to
any of his shares;
2. Altering or abolishing the voting rights pertaining to any
of his shares, except as such rights may be affected by the voting rights of new
shares then being authorized of any existing or new class or series of shares;
3. Effecting an exchange, cancellation, or reclassification
of any of his shares, when such exchange, cancellation, or reclassification
would alter or abolish his voting rights or alter his percentage of equity in
the corporation, or effecting a reduction or cancellation of accrued dividends
or other arrearages in respect to such shares;
4. Reducing the stated redemption price of any of his
redeemable shares, altering or abolishing any provision relating to any sinking
fund for the redemption or purchase of any of his shares, or making any of his
shares subject to redemption when they are not otherwise redeemable;
5. Making noncumulative, in whole or in part, dividends of
any of his preferred shares which had theretofore been cumulative;
6. Reducing the stated dividend preference of any of his
preferred shares; or
7. Reducing any stated preferential amount payable on any of
his preferred shares upon voluntary or involuntary liquidation; or
(f) Any corporate action taken, to the extent the articles of
incorporation provide that a voting or nonvoting shareholder is entitled to
dissent and obtain payment for his shares.
(2) A shareholder dissenting from any amendment specified in paragraph
(1)(e) has the right to dissent only as to those of his shares which are
adversely affected by the amendment.
(3) A shareholder may dissent as to less than all the shares registered
in his name. In that event, his rights shall be determined as if the shares as
to which he has dissented and his other shares were registered in the names of
different shareholders.
(4) Unless the articles of incorporation otherwise provide, this
section does not apply with respect to a plan of merger or share exchange or a
proposed sale or exchange of property, to the holders of shares of any class or
series which, on the record date fixed to determine the shareholders entitled to
vote at the meeting of shareholders at which such action is to be acted upon or
to consent to any such action without a meeting, were either registered on a
national securities exchange or held of record by not fewer than 2,000
shareholders.
(5) A shareholder entitled to dissent and obtain payment for his shares
under this section may not challenge the corporate action creating his
entitlement unless the action is unlawful or fraudulent with respect to the
shareholder or the corporation.
6407.1320. PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
(1)(a) If a proposed corporate action creating dissenters' rights under s.
607.1302 is submitted to a vote at a shareholders' meeting, the meeting notice
shall state that shareholders are or may be entitled to assert dissenters'
rights and be accompanied by a copy of ss. 607.1301, 607.1302, and 607.1320. A
shareholder who wishes to assert dissenters' rights shall:
1. Deliver to the corporation before the vote is taken written
notice of his intent to demand payment for his shares if the proposed action is
effectuated, and
2. Not vote his shares in favor of the proposed action. A proxy
or vote against the proposed action does not constitute such a notice of intent
to demand payment.
(b) If proposed corporate action creating dissenters' rights under s.
607.1302 is effectuated by written consent without a meeting, the corporation
shall deliver a copy of ss. 607.1301, 607.1302, and 607.1320 to each shareholder
simultaneously with any request for his written consent or, if such a request is
not made, within 10 days after the date the corporation received written
consents without a meeting from the requisite number of shareholders necessary
to authorize the action.
(2) Within 10 days after the shareholders' authorization date, the
corporation shall give written notice of such authorization or consent or
adoption of the plan of merger, as the case may be, to each shareholder who
filed a notice of intent to demand payment for his shares pursuant to paragraph
(1)(a) or, in the case of action authorized by written consent, to each
shareholder, excepting any who voted for, or consented in Writing to, the
proposed action.
(3) Within 20 days after the giving of notice to him, any shareholder
who elects to dissent shall file with the corporation a notice of such election,
stating his name and address, the number, classes, and series of shares as to
which he dissents, and a demand for payment of the fair value of his shares.
Any shareholder failing to file such election to dissent within the period set
forth shall be bound by the terms of the proposed corporate action. Any
shareholder filing an election to dissent shall deposit his certificates for
certificated shares with the corporation simultaneously with the filing of the
election to dissent. The corporation may restrict the transfer of
uncertificated shares from the date the shareholder's election to dissent is
filed with the corporation.
(4) Upon filing a notice of election to dissent, the shareholder shall
thereafter be entitled only to payment as provided in this section and shall not
be entitled to vote or to exercise any other rights of a shareholder. A notice
of election may be withdrawn in writing by the shareholder at any time before an
offer is made by the corporation, as provided in subsection (5), to pay for his
shares. After such offer, no such notice of election may be withdrawn unless
the corporation consents thereto. However, the right of such shareholder to be
paid the fair value of his shares shall cease, and he shall be reinstated to
have all his rights as a shareholder as of the filing of his notice of election,
including any intervening preemptive rights and the right to payment of any
intervening dividend or other distribution or, if any such rights have expired
or any such dividend or distribution other than in cash has been completed, in
lieu thereof, at the election of the corporation, the fair value thereof in cash
as determined by the board as of the time of such expiration or completion, but
without prejudice otherwise to any corporate proceedings that may have been
taken in the interim, if:
(a) Such demand is withdrawn as provided in this section;
(b) The proposed corporate action is abandoned or rescinded or the
shareholders revoke the authority to effect such action;
(c) No demand or petition for the determination of fair value by a
court has been made or filed within the time provided in this section; or
(d) A court of competent jurisdiction determines that such
shareholder is not entitled to the relief provided by this section.
(5) Within 10 days after the expiration of the period in which
shareholders may file their notices of election to dissent, or within 10 days
after such corporate action is effected, whichever is later (but in no case
later than 90 days from the shareholders' authorization date), the corporation
shall make a written offer to each dissenting shareholder who has made demand as
provided in this section to pay an amount the corporation estimates to be the
fair value for such shares. If the corporate action has not been consummated
before the expiration of the 90-day period after the shareholders' authorization
date, the offer may be made conditional upon the consummation of such action.
Such notice and offer shall be accompanied by:
(a) A balance sheet of the corporation, the shares of which the
dissenting shareholder holds, as of the latest available date and not more than
12 months prior to the making of such offer; and
(b) A profit and loss statement of such corporation for the
12-month period ended on the date of such balance sheet or, if the corporation
was not in existence throughout such 12-month period. for the portion thereof
during which it was in existence.
(6) If within 30 days after the making of such offer any shareholder
accepts the same, payment for his shares shall be made within 90 days after the
making of such offer or the consummation of the proposed action, whichever is
later. Upon payment of the agreed value, the dissenting shareholder shall cease
to have any interest in such shares.
(7) If the corporation fails to make such offer within the period
specified therefor in subsection (5) or if it makes the offer and any dissenting
shareholder or shareholders fail to accept the same within the period of 30 days
thereafter, then the corporation, within 30 days after receipt of written demand
from any dissenting shareholder given within 60 days after the date on which
such corporate action was effected, shall, or at its election at any time within
such period of 60 days may, file an action in any court of competent
jurisdiction in the county in this state where the registered office of the
corporation is located requesting that the fair value of such shares be
determined. The court shall also determine whether each dissenting shareholder,
as to whom the corporation requests the court to make such determination, is
entitled to receive payment for his shares. If the corporation fails to
institute the proceeding as herein provided, any dissenting shareholder may do
so in the name of the corporation. All dissenting shareholders (whether or not
residents of this state), other than shareholders who have agreed with the
corporation as to the value of their shares, shall be made parties to the
proceeding as an action against their shares. The corporation shall serve a
copy of the initial pleading in such proceeding upon each dissenting shareholder
who is a resident of this state in the manner provided by law for the service of
a summons and complaint and upon each nonresident dissenting shareholder either
by registered or certified mail and publication or in such other manner as is
permitted by law. The jurisdiction of the court is plenary and exclusive. All
shareholders who are proper parties to the proceeding are entitled to judgment
against the corporation for the amount of the fair value of their shares. The
court may, if it so elects, appoint one or more persons as appraisers to receive
evidence and recommend a decision on the question of fair value. The appraisers
shall have such power and authority as is specified in the order of their
appointment or an amendment thereof. The corporation shall pay each dissenting
shareholder the amount found to be due him within 10 days after final
determination of the proceedings. Upon payment of the judgment, the dissenting
shareholder shall cease to have any interest in such shares.
(8) The judgment may, at the discretion of the court, include a fair
rate of interest, to be determined by the court.
(9) The costs and expenses of any such proceeding shall be determined
by the court and shall be assessed against the corporation, but all or any part
of such costs and expenses may be apportioned and assessed as the court deems
equitable against any or all of the dissenting shareholders who are parties to
the proceeding, to whom the corporation has made an offer to pay for the shares,
if the court finds that the action of such shareholders in failing to accept
such offer was arbitrary, vexatious, or not in good faith. Such expenses shall
include reasonable compensation for, and reasonable expenses of, the appraisers,
but shall exclude the fees and expenses of counsel for, and experts employed by,
any party. If the fair value of the shares, as determined, materially exceeds
the amount which the corporation offered to pay therefor or if no offer was
made, the court in its discretion may award to any shareholder who is a party to
the proceeding such sum as the court determines to be reasonable compensation to
any attorney or expert employed by the shareholder in the proceeding.
(10) Shares acquired by a corporation pursuant to payment of the agreed
value thereof or pursuant to payment of the judgment entered therefor, as
provided in this section, may be held and disposed of by such corporation as in
the case of other treasury shares, except that, in the case of a merger, they
may be held and disposed of as the plan of merger otherwise provides. The
shares of the surviving corporation into which the shares of such dissenting
shareholders would have been converted had they assented to the merger shall
have the status of authorized but unissued shares of the surviving corporation.
------
Annex E Page 2
ANNEX E
LETTER OF TRANSMITTAL
---------------------
TO ACCOMPANY CERTIFICATES REPRESENTING
SHARES OF COMMON STOCK OF
EXECUTIVE WEALTH MANAGEMENT SERVICES, INC.
(A FLORIDA CORPORATION)
CUSIP: ____________
CONVERTED INTO A RIGHT TO RECEIVE SHARES OF COMMON STOCK OF
FAS GROUP, INC.
(A DELAWARE CORPORATION)
CUSIP: _____________
PURSUANT TO THE MERGER OF EXECUTIVE WEALTH MANAGEMENT SERVICES, INC.
SURRENDER CERTIFICATES FOR SHARES OF COMMON STOCK
OF EXECUTIVE WEALTH MANAGEMENT SERVICES, INC. TO:
ATLAS STOCK TRANSFER CORPORATION
By Mail: By Hand:
ATLAS STOCK TRANSFER CORPORATION
5899 South State Street 5899 South State Street
Salt Lake City, UT 84107-8103 Salt Lake City, UT 84107-8103
Attention: Pamela Gray Attention: Pamela Gray
For information call:
(801) 266-2271
The instructions accompanying this Letter of Transmittal should be read
carefully before this Letter of Transmittal is completed. If Company
Certificates are registered in different names, a separate Letter of Transmittal
must be submitted for each different registered owner.
DESCRIPTION OF COMPANY CERTIFICATES SURRENDERED
-----------------------------------------------
Name(s) and Address(es) of Company Certificate(s) Enclosed
Registered Owner(s) (Attach additional
(Please fill in, if blank) list if necessary)
------------------------------
Total Number
of Shares
Company Certificate Represented by
Number(s) Company Certificate(s)
Total Shares:
SIGNATURES MUST BE PROVIDED AND GUARANTEED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The undersigned hereby surrenders the certificate(s) listed above (the
"Company Certificates") representing shares of common stock, par value $.002 per
share of Executive Wealth Management Services, Inc. (the "Company Common
Stock"), for cancellation in exchange for shares of common stock, par value
$.001 ("FAS Common Stock"), of FAS GROUP, INC. ("FAS") at the exchange ratio of
one share of FAS Common Stock for each ___ shares of Company Common Stock
surrendered hereby, as well as a cash payment, if applicable, in lieu of any
fractional shares of FAS Common Stock to which the undersigned would otherwise
be entitled upon conversion of his Company Common Stock, determined by
multiplying the number of shares of Company Common Stock surrendered hereby that
are not convertible into a whole share of FAS Common Stock by $.____ without
interest (the "Cancellation Price"), pursuant to a merger of the Company into
FAS (the "Merger") effective _________, 1998 (the "Effective Date"). The terms
and conditions of the Merger are set forth in a Agreement and Plan of Merger
dated March 7, 1998 by and between the Company, certain stockholders of the
Company, FAS and FAS Wealth Management Services, Inc., a newly formed wholly
owned subsidiary of FAS (the "Plan of Merger"), which Plan of Merger has been
approved by persons holding approximately _____% of the Company Common Stock.
The undersigned understands that the exchange of Company Common Stock is subject
to the terms and conditions set forth in the accompanying Instruction. The
undersigned hereby waives any right to demand appraisal of the fair value of the
Company Common Stock surrendered hereby.
The undersigned understands that a certificate representing FAS Common
Stock and, if applicable, a check for any amount payable to the undersigned for
canceled fractional share interests (less any amount required to be withheld
pursuant to federal income tax law) will be sent by mail as soon as practicable
following the receipt of the Company Common Stock and this Letter of Transmittal
or delivered by other reasonable procedure requested by the undersigned and
agreed to by FAS.
Please issue and deliver the certificate representing the number of shares
of FAS Common Stock to which the undersigned is entitled in exchange for the
Company Common Stock surrendered pursuant to this Letter of Transmittal and, if
applicable, the check in payment of any canceled fractional interests to the
undersigned at the address specified under "Description of Company Certificates
Surrendered" above unless otherwise indicated under "Special Registration and
Payment Instructions" or "Special Delivery Instructions" below.
F- EXHIBIT F
SPECIAL REGISTRATION AND PAYMENT
INSTRUCTIONS (See Instruction 2 below)
COMPLETE ONLY if the FAS Certificates are to be registered in the name of, and
any check for cash payment is to be made payable to, and both are to be sent to,
a person OTHER than the name(s) of the registered holder(s) appearing under
"DESCRIPTION OF COMPANY CERTIFICATES SUBMITTED."
Issue and mail certificate and check to:
Name ______________________________
(Please Print)
Address ___________________________
___________________________________
(Include Zip Code)
___________________________________
(Signature)
___________________________________
(Tax Identification or Social
Security Number)
(See Substitute Form W-9)
SPECIAL DELIVERY INSTRUCTIONS
(See Instruction 2 below)
COMPLETE ONLY if the FAS Certificates are to be issued in the name of , and any
check is to be made payable to, the undersigned, but are to be sent OTHER than
to the address of the registered holder(s) appearing under "DESCRIPTION OF
COMPANY CERTIFICATES SUBMITTED" or, if the box immediately to the left is filled
in, OTHER THAN to the address appearing therein.
Mail or deliver to:
Name _____________________________
(Please Print)
Address __________________________
__________________________________
(Include Zip Code)
__________________________________
(Tax Identification or Social
Security Number)
(See Substitute Form W-9)
Annex E Page 3
The undersigned hereby warrants to FAS that the undersigned has full power
and authority to submit, sell, assign and transfer the Company Certificates
described above, free and clear of all liens, charges and encumbrances and not
subject to any adverse claim. The undersigned will, upon request, execute any
additional documents necessary or desirable to complete the transfer of the
Company Certificates.
All authority herein conferred or agreed to be conferred shall survive the
death or incapacity of the undersigned, and all obligations of the undersigned
hereunder shall be binding upon the heirs, personal representatives, successors
and assigns of the undersigned.
SIGN HERE AND, IF REQUIRED, HAVE SIGNATURES GUARANTEED (If Special
Registration and Payment Instructions are given, or if signature is by other
than the registered holder, signature(s) must be guaranteed. See Instruction
2.)
(Signature(s) of Shareholder(s)
Dated: ,1998
(Must be signed by the registered holder(s) exactly as name(s) appear(s) on the
Company Certificates or on a security position listing or by person(s)
authorized to become registered holder(s) by certificates and documents
transmitted herewith. If signature is by trustees, executors, administrators,
guardians, attorneys-in-fact, officers of corporations or others acting in a
fiduciary or representative capacity, please set forth full title and see
Instructions 2 and 3)
Name(s):
(Please Type or Print)
Capacity (Full Title)
Address
(include Zip Code)
Area Code and Tel. No.
Tax Identification or
Social Security No.
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTION 2)
Authorized Signature
Name
(Please Type or Print)
Name of Firm
Address
(Include Zip Code)
Area Code and Tel. No.
Dated: , 1998
IMPORTANT: Failure to complete the Substitute Form W-9 on the back page of this
Letter of Transmittal may result in backup withholding of 31% of any cash
payments made pursuant to the Merger. Please review the Instructions and the
information provided under "Important Tax Information" in this Letter of
Transmittal.
Annex E Page 4
INSTRUCTIONS
1. DELIVERY OF LETTER OF TRANSMITTAL AND COMPANY CERTIFICATES. Company
Certificates, together with a signed and completed Letter of Transmittal and any
required supporting documents, should be sent or delivered to Atlas Stock
Transfer Corporation at the address shown on the face of this Letter of
Transmittal. If any of the Company Certificates are registered in different
names, it will be necessary to complete, sign and submit as many separate
Letters of Transmittal as there are different registrations of Company
Certificates. The method of delivery of this Letter of Transmittal, the Company
Certificates and all other required documents is at the option and risk of the
shareholder(s) and the delivery will be deemed made only when actually received
by Atlas Stock Transfer Corporation. A Letter of Transmittal, the Company
Certificates and any other required documents must be properly received by Atlas
Stock Transfer Corporation, in form satisfactory to it, in order for the
delivery and surrender to be effective and the risk of loss of the Company
Certificates to pass to FAS. If delivery is by mail, registered or certified
mail with return receipt requested, properly insured, is recommended.
2. GUARANTEE OF SIGNATURES. Signatures on this Letter of Transmittal must
be guaranteed by a member firm of a registered national securities exchange or
of the National Association of Securities Dealers, Inc. or by a commercial bank
or trust company having an office or correspondent in the United States (an
"Eligible Institution"), unless the Company Certificate(s) are surrendered (i)
by the registered holder of Company Common Stock who has not completed the box
entitled "Special Payment Instructions" or the box entitled "Special Delivery
Instructions" on this Letter of Transmittal or (ii) for the account of an
Eligible Institution.
3. SIGNATURES. If this Letter of Transmittal is signed by the registered
holder(s) of the Company Certificates, the signature(s) must correspond exactly
with the name(s) as written on the face of the Company Certificates without
alteration, enlargement or any change whatsoever.
If any Company Certificate is held of record by two or more joint owners,
all such owners must sign this Letter of Transmittal.
If this Letter of Transmittal or any Company Certificates or stock powers
are signed by a trustee, executor, administrator, guardian, attorney-in-fact,
officer of a corporation or other person acting in a fiduciary or representative
capacity, such person should so indicate when signing, and submit evidence
satisfactory to FAS of such person's authority so to act.
4. VALIDITY OF SURRENDER; IRREGULARITIES. All questions as to validity,
form and eligibility of any surrender of Company Certificates hereunder will be
determined by FAS as the successor to the Company. FAS reserves the right to
waive any irregularities or defects in the surrender of any Company
Certificates, and its interpretations of the terms and conditions of the
reclassification and of this Letter of Transmittal (including these
Instructions) with respect to such irregularities or defects shall be final and
binding on all parties. A surrender will not be deemed to have been made until
all irregularities have been cured or waived.
5. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. Indicate the name and
address of the person(s) to which FAS Certificates are to be issued or to which
any applicable payment for the Company Common Stock is to be made or sent if
different from the name and address of the person(s) signing this Letter of
Transmittal.
6. ADDITIONAL COPIES. Additional copies of this Letter of Transmittal and
of the Information Statement may be obtained from Pamela Gray at Atlas Stock
Transfer Corporation located at: 5899 South State Street, Salt Lake City, Utah
84107-8103.
7. INADEQUATE SPACE. If the space provided on this Letter of Transmittal
is inadequate, the Company Certificate numbers and numbers of Company Common
Stock should be listed on a separate signed schedule affixed hereto.
8. LETTER OF TRANSMITTAL REQUIRED; SURRENDER OF COMPANY CERTIFICATES; LOST
COMPANY CERTIFICATES. A shareholder will not receive any FAS Common Stock or
cash for Company Common Stock unless and until this Letter of Transmittal or a
facsimile hereof, duly completed and signed, is delivered to Continent Stock
Transfer & Trust Company, together with the Company Certificates representing
such Company Common Stock and any required accompanying evidences of authority
in form satisfactory to Continent Stock Transfer & Trust Company. If the
Company Certificates have been lost or destroyed, such should be indicated on
the face of this Letter of Transmittal. In such event, FAS will forward
additional documentation necessary to be completed in order to effectively
surrender such lost or destroyed Company Certificates. No interest will be paid
on any amount due for Company Certificates.
9. SUBSTITUTE FORM W-9. Each shareholder is required to provide FAS with
a correct Taxpayer Identification Number ("TIN") on Substitute Form W-9, which
is provided under "Important Tax Information" below, and to indicate that he is
not subject to backup withholding by checking the box in Part 2 of the
Substitute Form W-9. Failure to provide the information on the Substitute Form
W-9 may subject the shareholder to 31% federal income tax withholding on the
payment. The box in Part 3 of the Substitute Form W-9 may be checked if the
shareholder has not been issued a TIN and has applied for a number or intends to
apply for a number in the near future. If the box in Part 3 is checked and FAS
is not provided with a TIN within 60 days, FAS will, withhold 31% of all
payments of such cash thereafter until a TIN is provided to FAS.
Annex F Page 1
IMPORTANT TAX INFORMATION
Under federal income tax law, a shareholder is required to provide FAS with
his correct TIN on Substitute Form W-9 below. If such shareholder is an
individual, the TIN is his Social Security number. If FAS is not provided with
the correct TIN, the shareholder may be subject to a $50 penalty imposed by the
Internal Revenue Service. In addition, payments that are made to such
shareholder may be subject to backup withholding.
Certain shareholders (including, among others, all corporations and certain
foreign individuals) are not subject to backup withholding and reporting
requirements and should indicate their exempt status on Substitute Form W-9.
If backup withholding applies, FAS is required to withhold 31% of any
payments made to the shareholder. Backup withholding is not an additional tax.
Rather, the tax liability of persons subject to backup withholding will be
reduced by the amount of tax withheld. If withholding results in an overpayment
of taxes, a refund may be obtained
PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL INSTRUCTIONS.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on payments that are made to a shareholder,
the shareholder is required to notify FAS of his correct TIN by completing the
form below certifying that the TIN provided on the Substitute Form W-9 is
correct (or that such shareholder is awaiting a TIN) and that (1) the
shareholder has not been notified by the Internal Revenue Service that he is
subject to backup withholding as a result of failure to report all interest or
dividends or (2) the Internal Revenue Service has notified the shareholder that
he is no longer subject to backup withholding.
WHAT NUMBER TO GIVE FAS
The shareholder is required to give FAS the Social Security number or
employer identification number of the record owner of the Company Certificates.
If the Company Certificates are in more than one name or are not in the name of
the actual owner, consult the enclosed Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9 for additional guidelines on which
number to report.
PAYER'S NAME: FAS GROUP, INC.
G- Exhibit G
SUBSTITUTE FORM W-9 PART 1 PLEASE PROVIDE YOUR TIN IN THE SPACE BELOW AND
CERTIFY BY SIGNING AND DATING PART 3.
Social Security Number
OR
Employer Identification Number
DEPARTMENT OF THE TREASURY INTERNAL REVENUE SERVICE PART 2 Check the box
if you are NOT subject to back up withholding under the provisions of Section
3406(a)(1)(C) of the Internal Revenue Code because (1) you have not been
notified that you are subject to backup withholding as a result of failure to
report all interest or dividends or (2) the Internal Revenue Service has
notified you that you are no longer subject to backup withholding
PAYERS REQUEST FOR TAXPAYER IDENTIFICATION NUMBER ("TIN") PART 3
CERTIFICATION - Under penalties of perjury, I certify that the information
provided on this form is true, correct and complete.
Signature:
Date:
Awaiting TIN?
NOTE: FAILURE TO COMPLETE THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31%
OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE AMENDMENT. PLEASE REVIEW ENCLOSED
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE
FORM W-9 FOR ADDITIONAL DETAILS.
Part II Page 6
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the DGCL applies to FAS and FAS Wealth, and the relevant
portion of the DGCL provides as follows:
145. Indemnification of Officers, Directors, Employees and Agents;
Insurance. (a) A corporation may indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
(b) A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
(c) To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections (a) and (b) of this
section, or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith.
(d) Any indemnification under subsections (a) and (b) of this section
(unless ordered by a court) shall be made by the corporation only as authorized
in the specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in subsections (a) and (b) of this
section. Such determination shall be made (1) by the board of directors by a
majority vote of a quorum consisting of directors who were not parties to such
action, suit or proceeding, or (2) if such a quorum is not obtainable, or, even
if obtainable a quorum of disinterested directors so directs, by independent
legal counsel in a written opinion, or (3) by the stockholders.
(e) Expenses (including attorneys' fees) incurred by an officer or
director in defending any civil, criminal, administrative or investigative
action, suit or proceeding may be paid by the corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such amount if
it shall ultimately be determined that he is not entitled to be indemnified by
the corporation as authorized in this section. Such expenses (including
attorneys' fees) incurred by other employees and agents may be so paid upon such
terms and conditions, if any, as the board of directors deems appropriate.
(f) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other subsections of this section shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office.
(g) A corporation shall have power to purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
whether or not the corporation would have the power to indemnify him against
such liability under this section.
(h) For purposes of this section, references to "the corporation" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers and employees or agents, so that
any person who is or was a director, officer, employee or agent of such
constituent corporation, or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, shall stand in the same
position under this section with respect to the resulting or surviving
corporation as he would have with respect to such constituent corporation if its
separate existence had continued.
(i) For purposes of this section, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include any
excise taxes assessed on a person with respect to any employee benefit plan; and
references to "serving at the request of the corporation" shall include any
service as a director, officer, employee or agent of the corporation which
imposes duties on, or involves services by, such director, officer, employee, or
agent with respect to an employee benefit plan, its participants or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the corporation" as referred to in this
section.
(j) The indemnification and advancement of expenses provided by, or
granted pursuant to, this section shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
(k) The Court of Chancery is hereby vested with exclusive jurisdiction
to hear and determine all actions for advancement of expenses or indemnification
brought under this section or under any bylaw, agreement, vote of stockholders
or disinterested directors, or otherwise. The Court of Chancery may summarily
determine a corporation's obligation to advance expenses (including attorneys'
fees).
The FAS Certificate of Incorporation limits the liability of directors (in
their capacity as directors, but not in their capacity as officers) to FAS or
its stockholders to the fullest extent permitted by the DGCL, as amended.
Specifically, no director of FAS will be personally liable to FAS or its
stockholders for monetary damages for breach of the director's fiduciary duty as
a director, except as provided in Section 102 of the DGCL for liability: (i) for
any breach of the director's duty of loyalty to FAS or its stockholders; (ii)
for acts or omissions not in good faith and which involve intentional misconduct
or knowing violation of law; (iii) under Section 174 of the DGCL, which relates
to unlawful payments of dividends or unlawful stock repurchases or redemptions;
or (iv) for any transaction from which the director derived an improper personal
benefit. The inclusion of this provision in the FAS Certificate of
Incorporation may have the effect of reducing the likelihood of derivative
litigation against directors, and may discourage or deter stockholders or
management from bringing a lawsuit against directors for breach of their duty of
care, even though such action, if successful, might otherwise have benefited FAS
and its stockholders.
Under the FAS Certificate of Incorporation and in accordance with Section
145 of the DGCL, FAS will indemnify any person who was or is a party, or is
threatened to be made a party, to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than a "derivative" action by or in the right of FAS) by reason of the
fact that such person was or is a director or officer of FAS, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred in connection with such action, suit or
proceeding if such person acted in good faith and in a manner such person
reasonably believed to be in or not opposed to the best interests of FAS, and,
with respect to any criminal action or proceeding, had no reasonable cause to
believe such acts were unlawful. A similar standard of care is applicable in
the case of derivative actions, except that indemnification only extends to
expenses (including attorneys' fees) actually and reasonably incurred in
connection with the defense or settlement of such an action and then, where the
person is adjudged to be liable to FAS, only if and to the extent that the Court
of Chancery of the State of Delaware or the court in which such action was
brought determines that such person is fairly and reasonably entitled to such
indemnity and then only for such expenses as the court deems proper. FAS will
indemnify, pursuant to the standard enumerated in Section 145 of the DGCL, any
past or present officer or director who was or is a party, or is threatened to
be made a party, to any threatened, pending or completed derivative action by or
in the right of FAS.
The Certificate of Incorporation of FAS provides that FAS may pay for the
expenses incurred by an indemnified director or officer in defending the
proceedings specified above in advance of their final disposition, provided
that, if the DGCL so requires, such indemnified person agrees to reimburse FAS
if it is ultimately determined that such person is not entitled to
indemnification. The FAS Certificate of Incorporation also allows FAS, in its
sole discretion, to indemnify any person who is or was one of its employees and
agents to the same degree as the foregoing indemnification of directors and
officers. To the extent that a director, officer, employee or agent of FAS has
been successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in subsections (a) and (b) of Section 145 of the DGCL, or
in defense of any claim, issue or matter therein, such person shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by such person in connection therewith. In addition FAS may purchase
and maintain insurance on behalf of any person who is or was a director,
officer, employee or agent of FAS or another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against and
incurred by such person in such capacity, or arising out of the person's status
as such whether or not FAS would have the power or obligation to indemnify such
person against such liability under the provisions of the DGCL. FAS maintains
insurance for the benefit of FAS's officers and directors insuring such persons
against certain liabilities, including civil liabilities under the securities
laws. Additionally, FAS has entered into indemnification agreements with each
of the Directors of FAS, which, among other things, provides that FAS will
indemnify such Directors to the fullest extent permitted by the FAS Certificate
of Incorporation and the DGCL and will advance expenses of defending claims
against such Directors.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Reference is made to the exhibit index immediately following the
signature page to the Registration Statement.
(b) The Schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are not
required under the related instructions or are inapplicable and, therefore, have
been omitted.
(c) The following opinions are included in the Information
Statement/Prospective as indicated:
NONE
ITEM 22. UNDERTAKINGS
The undersigned registrant hereby undertakes:
1. (a) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
Provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
registration statement is on Form S-3, Form S-8 or Form F-3, and the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed by the registrant pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934 that are incorporated by reference
in the registration statement.
(b) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(c) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
2. That, for purposes of determining any liability under the Securities
Act of 1933, each filing of the registrant's annual report pursuant to section
13(a) or section 15(d) of the Securities Exchange Act of 1934 that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
3. That prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this Information
Statement/Prospectus, by any person or party who is deemed to be an underwriter
within the meaning of Rule 145(c), the issuer undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items of
the applicable form.
4. That every prospectus (i) that is filed pursuant to the paragraph
immediately preceding, or (ii) that purports to meet the requirements of section
10(a)(3) of the Securities Act and is used in connection with an offering of
securities subject to Rule 415, will be filed as a part of an amendment to the
registration statement and will not be used until such amendment is effective,
and that, for purposes of determining any liability under the Securities Act of
1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
5. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or paid by a
director, officer or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
6. The undersigned registrant hereby undertakes to respond to requests
for information that is incorporated by reference into the prospectus pursuant
to Items 4, 10(b), 11, or 13 of this Form S-4, within one business day of
receipt of such request, and to send the incorporated documents by first class
mail or other equally prompt means. This includes information contained in
documents filed subsequent to the effective date of the registration statement
through the date of responding to the request.
7. The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became Effective.
Part II Page 7
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this Registration Statement on Form S-4 to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Poway, State of
California, on the ____ day of August, 1998.
FAS GROUP, INC.
By: /s/JACK A. ALEXANDER
----------------------
Jack A. Alexander, Chief Executive Officer,
Chief Financial Officer and Secretary
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed on the dates indicated by the
following persons in the capacities indicated.
By: /s/JACK A. ALEXANDER
----------------------
Jack A. Alexander, Chief Executive Officer,
Chief Financial Officer and Secretary
INDEX OF EXHIBITS
EXHIBIT NUMBER
------
DESCRIPTION
-----------
2.1 Agreement and Plan of Merger between by and among FAS Group, Inc., FAS
Wealth Management Services, Inc. and Executive Wealth Management Services, Inc.
and Certain Stockholders of Executive Wealth Management Services, Inc., dated
March 7, 1998 (incorporated by reference to Annex A to the Information
Statement/Prospectus).
3.1 Certificate of Incorporation of FAS Group, Inc. (incorporated by
reference to Annex B to the Information Statement/Prospectus).
3.2 Certificate of Incorporation of FAS Wealth Management Services, Inc.
3.3 By Laws of FAS Group, Inc.
3.4 By Laws of FAS Wealth Management Services, Inc.
4.1 Certificate of Designations of Class A Convertible Exchangeable
Preferred Stock**
4.2 Common Stock Warrant to FMC Capital Markets, Inc.
4.3 FAS Group, Inc. Stock Incentive Plan (incorporated by reference to Annex
C to the Information Statement/Prospectus)
5.1 Opinion of Sonfield & Sonfield Re: Legality of Securities
8.1 Opinion of Sonfield & Sonfield Re: Tax Matters
10.1 Letter of Intent dated July 4, 1998 with United States Refining &
Petrochemicals, Inc.
11.1 Statement Re: Computation of Per Share Earnings**
12.1 Statements Re: Computation of Ratios**
15.1 Letter Re: Unaudited Interim Financial Information**
23.1 Consent of Harper & Pearson Company
23.2 Consent of Bobbitt, Pittenger & Company, P.A.
23.2 Consent of Sonfield & Sonfield (included in Exhibit 5.1)
_________________________________
** To be filed by amendment.
Dates Referenced Herein and Documents Incorporated by Reference
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