AGREEMENT
CONCERNING THE EXCHANGE OF STOCK
BETWEEN
CAPITAL ADVISORS ACQUISITION CORP.
AND
SHAREHOLDERS OF
HARVARD FINANCIAL SERVICES, INC.
1 EXCHANGE OF SECURITIES .............................................1
1.1 Exchange of Shares ........................................1
1.2 Exemption from Registration ...............................1
1.3 Non-taxable Transaction ...................................1
2 REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS .................1
2.1 Organization ..............................................2
2.2 Capital Stock .............................................2
2.3 Subsidiaries ..............................................2
2.4 Directors and Officers ....................................2
2.5 Financial Statements ......................................2
2.6 Absence of Changes ........................................2
2.7 Absence of Undisclosed Liabilities ........................2
2.8 Tax Returns ...............................................2
2.9 Patents, Trade Names and Rights ...........................3
2.10 Compliance with Laws ......................................3
2.11 Litigation ................................................3
2.12 Authority .................................................3
2.13 Ability to Carry Out Obligations ..........................3
2.14 Full Disclosure ...........................................3
2.15 Assets ....................................................4
2.16 Material Contracts ........................................4
3 REPRESENTATIONS AND WARRANTIES OF CAPITAL ..........................4
3.1 Organization ..............................................4
3.2 Capital Stock .............................................4
3.3 Subsidiaries ..............................................4
3.4 Directors and Officers ....................................4
3.5 Patents, Trade Names and Rights ...........................4
3.6 Compliance with Laws ......................................4
3.7 Litigation ................................................5
3.8 Authority .................................................5
3.9 Ability to Carry Out Obligations ..........................5
3.10 Full Disclosure ...........................................5
3.11 Assets ....................................................5
4 COVENANTS ..........................................................6
4.1 Investigative Rights ......................................6
4.2 Conduct of Business .......................................6
5 CLOSING ............................................................6
5.1 Closing ...................................................6
5.2 Deliveries at Closing .....................................6
5.2.1 Shareholders' Deliveries at Closing .......................6
5.3 CAPITAL Deliveries at Closing .............................6
(i)
6 CONDITIONS TO OBLIGATIONS TO CLOSE .................................7
6.1 Conditions to Obligations of Shareholders to Close ........7
6.2 Conditions to Obligations of CAPITAL ......................7
7 INDEMNIFICATION ....................................................7
7.1 Indemnification ...........................................7
7.3 Notice and Opportunity to Defend ..........................7
8 MISCELLANEOUS ......................................................8
8.1 Costs .....................................................8
8.2 Additional Documentation ..................................8
8.3 Captions and Headings .....................................9
8.4 No Oral Change ............................................9
8.5 Non-Waiver ................................................9
8.6 Time of Essence ...........................................9
8.7 Choice of Law .............................................9
8.8 Counterparts and/or Facsimile Signature ...................9
8.9 Notices ...................................................9
8.10 Binding Effect ............................................10
8.11 Mutual Cooperation ........................................10
8.12 Brokers ...................................................10
8.13 Survival of Representations and Warranties ................10
SCHEDULE A LIST OF HARVARD SHAREHOLDERS ............................14
EXHIBIT 1.2 INVESTMENT LETTER
EXHIBIT 2.4 OFFICERS AND DIRECTORS
EXHIBIT 2.5 FINANCIAL STATEMENTS
EXHIBIT 2.18 MATERIAL CONTRACTS OF HARVARD
EXHIBIT 10.12 BROKERS
(ii)
AGREEMENT
THIS AGREEMENT made this 23rd day of July, 1997, by and between CAPITAL
ADVISORS ACQUISITION CORP., a Delaware Corporation ("CAPITAL"); and THE
UNDERSIGNED SHAREHOLDERS ("Shareholders@) owners of 100% of the stock of HARVARD
FINANCIAL SERVICES, INC., a New Jersey Corporation ("HARVARD").
WHEREAS, Shareholders hold all of the issued and outstanding common stock
of HARVARD; and
WHEREAS, CAPITAL, a public company, desires to exchange shares of its
common stock for all of the issued and outstanding common stock of HARVARD held
by the Shareholders, thereby making HARVARD a wholly owned subsidiary of
CAPITAL; and
WHEREAS, Shareholders desire to exchange all of the issued and outstanding
common stock of HARVARD for 10,250,000 shares of the common stock of CAPITAL,
all as more fully set forth herein below; and
WHEREAS, the Board of Directors of CAPITAL has authorized its proper
corporate officers to effect the transactions contemplated herein.
NOW THEREFORE, in consideration of the mutual covenants herein contained
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto hereby agree to the following terms
and conditions:
1 EXCHANGE OF SECURITIES
1.1 Exchange of Shares. Subject to all the terms and conditions of this
Agreement, CAPITAL will deliver to Shareholders 10,250,000 shares of previously
authorized but unissued unregistered shares of CAPITAL $0.0001 par value common
stock ("CAPITAL Shares"), in exchange for all of the issued and outstanding
shares of HARVARD owned by HARVARD Shareholders.
1.2 Exemption from Registration. The parties hereto intend that the CAPITAL
Shares to be exchanged shall be exempt from the registration requirements of the
Securities Act of 1933, as amended (the "Act"), pursuant to Section 4(2) of the
Act and the rules and regulations promulgated thereunder and exempt from the
registration requirements of the applicable states. In furtherance thereof,
Shareholders will execute and deliver to CAPITAL on the closing date, investment
letters suitable to CAPITAL counsel, in form substantially as per Exhibit 1.2
attached hereto.
Page 1
1.3 Non-taxable Transaction. The parties intend to effect this transaction
as a non-taxable reorganization pursuant to Section 368(a)(1)(B) of the Internal
Revenue Code of 1986, as amended.
2 REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
Shareholders hereby represent and warrant to CAPITAL that:
2.1 Organization. HARVARD is a corporation duly organized, validly existing
and in good standing under the laws of the State of New Jersey, has all
necessary corporate powers to own its properties and to carry on its business as
now owned and operated by it, and is duly qualified to do business and is in
good standing in each of the states where its business requires qualification.
2.2 Capital Stock. The authorized capital stock of HARVARD consists solely
of 20,000,000 shares of $.0001 par value common stock and 5,000,000 shares of
Preferred Stock variable par value, ** shares of common stock and 320,000 shares
of Preferred Stock are currently issued and outstanding all of which are owned
by Shareholders. HARVARD agrees that all of the Preferred Stock shall be
converted to Common Stock prior to Closing. All of the issued and outstanding
shares of HARVARD are duly and validly issued, fully paid and nonassessable.
There are no outstanding subscriptions, options, rights, warrants, debentures,
instruments, convertible securities or other agreements or commitments
obligating HARVARD to issue or to transfer from treasury any additional shares
of its capital stock of any class.
2.3 Subsidiaries. HARVARD does not have any subsidiaries or own any
interest in any other enterprise.
2.4 Directors and Officers. Exhibit 2.4 hereto contains the names and
titles of all directors and officers of HARVARD as of the date of this
Agreement.
2.5 Financial Statements. Exhibit 2.5 hereto consists of the financial
statements of HARVARD as of December 31, 1996 which have been certified by
Independent Public Accountants and Exhibit 12.5(a) consists of the unaudited
financial statements of HARVARD as of June 30, 1997 and for the periods then
ended. The financial statements have been prepared in accordance with generally
accepted accounting principles on an accrual basis and practices consistently
followed by HARVARD throughout the periods indicated, and fairly present the
financial position of HARVARD as of the dates of the balance sheets included in
the financial statements and the results of operations for the periods
indicated.
2.6 Absence of Changes. Since the date of HARVARD's financial statements
included in Exhibit 2.5(a), there has not been any change in the financial
condition or operations of HARVARD, except for changes in the ordinary course of
business, which changes have not, in the aggregate, been materially adverse.
-----------------------------------
** To be supplied prior to Closing.
Page 2
2.7 Absence of Undisclosed Liabilities. As of the date of HARVARD's most
recent balance sheet included in Exhibit 2.5(a), HARVARD did not have any
material debt, liability or obligation of any nature, whether accrued, absolute,
contingent or otherwise, and whether due or to become due, that is not reflected
in such balance sheet.
2.8 Tax Returns. Within the times and in the manner prescribed by law,
HARVARD has filed all federal, state and local tax returns required by law and
has paid all taxes, assessments and penalties due and payable. The provisions
for taxes, if any reflected in the Exhibits are adequate for the periods
indicated. There are no present disputes as to taxes of any nature payable by
HARVARD.
2.9 Patents, Trade Names and Rights. HARVARD owns and holds all necessary
patents, franchise rights, trademarks, service marks, trade names, inventions,
processes, know-how, trade secrets, copyrights, licenses and other rights
necessary to its business as now conducted or proposed to be conducted. HARVARD
is not infringing upon or otherwise acting adversely to the right or claimed
right of any person with respect to any of the foregoing.
2.10 Compliance with Laws. HARVARD has complied with, and is not in
violation of, applicable federal, state or local statutes, laws and regulations
(including, without limitation, any applicable building, zoning or other law,
ordinance or regulation) affecting its properties or the operation of its
business.
2.11 Litigation. HARVARD is not a defendant to any suit, action,
arbitration or legal, administrative or other proceeding, or governmental
investigation which is pending or, to the best knowledge of the Shareholders,
threatened against or affecting HARVARD or its business, assets or financial
condition. HARVARD is not in default with respect to any order, writ, injunction
or decree of any federal, state, local or foreign court, department, agency or
instrumentality applicable to it. HARVARD is not engaged in any material
lawsuits to recover monies due it.
2.12 Authority. The Board of Directors of HARVARD has authorized the
execution of this Agreement and the consummation of the transactions
contemplated herein, and HARVARD has full power and authority to execute,
deliver and perform this Agreement, and this Agreement is a legal, valid and
binding obligation of the Shareholders and is enforceable in accordance with its
terms and conditions.
2.13 Ability to Carry Out Obligations. The execution and delivery of this
Agreement by Shareholders and the performance by Shareholders of their
obligations hereunder in the time and manner contemplated will not cause,
constitute or conflict with or result in (a) any breach or violation of any of
the provisions of or constitute a default under any license, indenture,
mortgage, instrument, article of incorporation, bylaw, or other agreement or
instrument to which HARVARD is a party, or by which it may be bound, nor will
any consents or authorizations of any party to the Shareholders= performance of
their obligations hereunder be required; (b) an event that would permit any
party to any agreement or instrument to terminate it or to accelerate the
maturity of any indebtedness or other obligation of HARVARD; or (c) an event
that would result in the creation or imposition of any lien, charge or
encumbrance on any asset of HARVARD.
Page 3
2.14 Full Disclosure. None of the representations and warranties made by
HARVARD Shareholder herein or in any exhibit, certificate or memorandum
furnished or to be furnished by Shareholders, or on their behalf, contain or
will contain any untrue statement of material fact or omit any material fact the
omission of which would be misleading.
2.15 Assets.
2.15.1. HARVARD has good and marketable title to all of its property, free
and clear of all liens, claims and encumbrances, except as otherwise indicated
on Exhibit 2.5(a).
2.16 Material Contracts. Material contracts of HARVARD are set forth in
Exhibit 2.16.
3 REPRESENTATIONS AND WARRANTIES OF CAPITAL
CAPITAL represents and warrants to Shareholders that:
3.1 Organization. CAPITAL is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware, has all necessary
corporate powers to own its properties and to carry on its business as now owned
and operated by it, and is duly qualified to do business and is in good standing
in each of the states where its business requires qualification.
3.2 Capital Stock. The authorized capital stock of CAPITAL consists of
60,000,000 shares of common stock, par value $0.0001 of which 1,800,000 common
stock will be issued and outstanding prior to Closing. All of the issued and
outstanding shares are duly and validly issued, fully paid and nonassessable.
There are no outstanding subscriptions, options, rights, debentures,
instruments, convertible securities or other agreements or commitments
obligation CAPITAL to issue or to transfer from treasury any additional shares
of its capital stock of any class, other than those listed in CAPITAL's 1934 Act
filings with the Securities and Exchange Commission.
3.3 Subsidiaries. CAPITAL does not have any subsidiaries or own any
interest in any enterprise.
3.4 Directors and Officers. The names and titles of all directors and
officers of CAPITAL are as set forth in Form 10-A for the fiscal year ended
December 31, 1996 as on file with the Securities and Exchange Commission.
3.5 Patents, Trade Names and Rights. To the best of its knowledge CAPITAL
owns and holds all necessary patents, franchise rights, trademarks, service
marks, trade names, inventions, processes, know-how, trade secrets, copyrights,
licenses and other rights necessary to its business as now conducted or proposed
to be conducted. CAPITAL is not infringing upon or otherwise acting adversely to
the right or claimed right of any person with respect to any of the foregoing.
Page 4
3.6 Compliance with Laws. CAPITAL has complied with, and is not in
violation of, applicable federal, state or local statutes, laws and regulations
(including, without limitation, any applicable building, zoning or other law,
ordinance or regulation and all federal and state securities laws (including,
without limitation, the Securities Act of 1933 and the Securities Exchange Act
of 1934) and all material respects NASDAQ rules) affecting its properties or the
operation of its business.
3.7 Litigation. CAPITAL is not a party to any suit, action, arbitration or
legal, administrative or other proceeding, or governmental investigation which
is pending or, to the best knowledge of CAPITAL threatened against or affecting
CAPITAL or its business, assets or financial condition except for suits as
described in its 1934 Act filings. CAPITAL is not in default with respect to any
order, writ, injunction or decree of any federal, state, local or foreign court,
department, agency or instrumentality applicable to it.
3.8 Authority. The Board of Directors of CAPITAL has authorized the
execution of this Agreement and the consummation of the transactions
contemplated herein, and CAPITAL has full power and authority to execute,
deliver and perform this Agreement, and this Agreement is a legal, valid and
binding obligation of CAPITAL enforceable in accordance with its terms.
3.9 Ability to Carry Out Obligations. The execution and delivery of this
Agreement by CAPITAL and the performance by the CAPITAL of the obligations
hereunder in the time and manner contemplated will not cause, constitute or
conflict with or result in (a) any breach or violation of any of the provisions
of or constitute a default under any license, indenture, mortgage, instrument,
article of incorporation, bylaw, or other agreement or instrument to which
CAPITAL is a party, or by which it may be bound, nor will any consents or
authorizations of any party to CAPITAL's performance of its obligation
hereunder; (b) an event that would permit any party to any agreement or
instrument to terminate it or to accelerate the maturity of any indebtedness or
other obligation of CAPITAL; or (c) an event that would result in the creation
or imposition of any lien, charge or encumbrance on any asset of CAPITAL.
3.10 Full Disclosure. None of the representations and warranties made by
CAPITAL herein or in any exhibit, certificate or memorandum furnished or to be
furnished by CAPITAL or on its behalf, contains or will contain any untrue
statement of material fact or omit any material fact the omission of which would
be misleading.
3.11 Assets. CAPITAL has good and marketable title to all of its property,
free and clear of all liens, claims and encumbrances, except as otherwise
indicated in its 1934 Act filings.
Page 5
3.12 Filings with the SEC. CAPITAL has made all filings with the SEC that
it has been required to make under the Securities Act and the Securities
Exchange Act of 1934 (the "Exchange Act") (collectively, the "Public Reports").
Each of the Public Reports has complied with the Securities Act and the Exchange
Act in all material respects. None of the Public Reports, as of their respective
dates, contained no untrue statement of a material fact or omitted to state a
material fact necessary in order to make the statements made therein, in light
of the circumstances under which they were made, false or misleading. CAPITAL
has delivered to Shareholders a correct and complete copy of each Public Report
(together with all claims and schedules thereto and as amended to date).
4 COVENANTS RELATING TO THE PERIOD PRIOR TO CLOSING
4.1 Investigative Rights. From the date of this Agreement until the Closing
Date, each party shall provide to the other party, and such other party's
counsel, accountants, auditors and other authorized representatives, full access
during normal business hours and upon reasonable advance written notice to all
of each party's properties, books, contracts, commitments and records for the
purpose of examining the same. Each party shall furnish the other party with all
information concerning each party's affairs as the other party may reasonably
request.
4.2 Conduct of Business. Prior to Closing, Shareholders represent that
HARVARD shall conduct its business in the normal course. HARVARD shall not amend
its Articles of Incorporation or Bylaws (except as may be described in this
Agreement), declare dividends, redeem or sell stock or other securities, incur
additional or newly-funded liabilities, acquire or dispose of fixed assets,
change employment terms, enter into any material or long-term contract,
guarantee obligations of any third party, settle or discharge any balance sheet
receivable for less than its stated amount, pay more on any liability than its
stated amount, or enter into any other transaction without the prior approval of
CAPITAL, not to be unreasonably withheld.
5 CLOSING
5.1 Closing. The closing of this transaction shall be held at the offices
of HARVARD prior to or on August 20, 1997, at such other place and time as is
mutually agreeable to the parties, or by FAX and Federal Express.
5.2 Deliveries at Closing.
5.2.1. Shareholders' Deliveries at Closing. At the Closing, the
Shareholders shall deliver the following items:
5.2.1.1 certificates representing all of the shares of HARVARD stock held
by the Shareholders, along with a stock power or stock powers duly executed by
the Shareholders in blank;
Page 6
5.2.1.2 an investment letter in the form of Exhibit 1.2 hereof, duly
executed by the Shareholders;
5.2.2. CAPITAL Deliveries at Closing. At the Closing, CAPITAL shall deliver
the following items:
5.2.2.1 either (A) certificates representing the CAPITAL Shares, duly
issued to the Shareholders as listed on Schedule A attached hereto, or (B) a
copy of a letter from CAPITAL to its transfer agent instructing such transfer
agent to issue the certificates representing the CAPITAL Shares to the
Shareholders as listed on Schedule A.
5.2.2.2 resignations of CAPITAL Officers and Directors and a resolution
appointing HARVARD's designated Officers and Directors.
6 CONDITIONS TO OBLIGATIONS TO CLOSE
6.1 Conditions to Obligations of Shareholders to Close. The obligations of
the Shareholders to consummate the transactions contemplated by this Agreement
shall be subject to the satisfaction of the conditions that the representations
and warranties of CAPITAL shall be true in all material respects on and as of
the Closing Date with the same force and effect as though made on and as of the
Closing date, that CAPITAL shall have performed and complied in all material
respects with all covenants and agreements required by this Agreement to be
performed or complied with by it on or prior to the Closing Date.
6.2 Conditions to Obligations of CAPITAL. The obligations of CAPITAL to
consummate the transactions contemplated by this Agreement shall be subject to
the satisfaction of the conditions that the representations and warranties of
the Shareholders shall be true in all material respects on and as of the Closing
Date with the same force and effect as though made on and as of the Closing
Date, that the Shareholders shall have performed and complied in all material
respects with all covenants and agreements required by this Agreement to be
performed or complied with by it on or prior to the Closing Date. In addition,
HARVARD must be in receipt of a commitment for a warehouse or other line of
credit in the minimum amount of $15,000,000 obtained by or through Sands
Brothers & Co. Ltd.
7 INDEMNIFICATION
7.1 Indemnification. Shareholders agree to indemnify, defend and hold the
CAPITAL shareholders, CAPITAL, its officers and directors, harmless against and
in respect of any and all claims, demands, losses, costs, expenses, obligations,
liabilities, damages, recoveries and deficiencies, including interest, penalties
and reasonable attorney fees that it shall incur or suffer, which arise out of,
result or relate to any breach of, or failure by HARVARD Shareholder to perform
any of its material representations, warranties, covenants or agreements in this
Agreement or in any schedule, certificate, exhibit or other instrument furnished
or to be furnished by Shareholders under this Agreement.
Page 7
7.2 Indemnification. CAPITAL agrees to indemnify, defend and hold
Shareholders harmless against and in respect of any and all claims, demands,
losses, costs, expenses, obligations, liabilities, damages, recoveries and
deficiencies, including interest, penalties and reasonable attorney fees, that
it shall incur or suffer, which arise out of, result or relate to any breach of,
or failure by CAPITAL to perform any of its material representations,
warranties, covenants or agreements in this Agreement or in any schedule,
certificate, exhibit or other instrument furnished or to be furnished by CAPITAL
under this Agreement.
7.3 Notice and Opportunity to Defend. If there occurs an event which any
Party asserts is an indemnifiable event, the Party seeking indemnification shall
notify the Party obligated to provide indemnification (the "Indemnifying Party")
promptly. If such event involves (i) any claim or (ii) the commencement of any
action or proceeding by a third person, the Party seeking indemnification will
give such Indemnifying Party written notice of such claim or the commencement of
such action or proceeding. Such notice shall be a condition precedent to any
liability of the Indemnifying Party hereunder. Such Indemnifying Party shall
have a period of thirty (30) days within which to respond thereto. If such
Indemnifying Party does not respond within such thirty (30) days period, such
Indemnifying Party shall be obligated to compromise or defend, at its own
expense and by counsel chosen by the Indemnifying Party shall provide reasonably
satisfactory to the Party seeking indemnity, such matter and the Indemnifying
Party shall provide the Party seeking indemnification with such assurances as
may be reasonably required by the latter to assure that the Indemnifying Party
will assume, and be responsible for, the entire liability issue. If such
Indemnifying Party does not respond within such thirty (30) day period and
rejects responsibility for such matter in whole or in part, the Party seeking
indemnification shall be free to pursue, without prejudice to any of its rights
hereunder, such remedies as may be available to such Party under applicable law.
The Party seeking indemnification agrees to cooperate fully with the
Indemnifying Party and its counsel in the defense against any such asserted
liability. In any event, the Party seeking indemnification shall have the right
to participate at its own expense in the defense of such asserted liability. Any
compromise of such asserted liability by the Indemnifying Party shall require
the prior written consent of the Party seeking indemnification. If, however, the
Party seeking indemnification refuses its consent to a bona fide offer of
settlement which the Indemnifying Party wishes to accept, the Party seeking
indemnification may continue to pursue such matter, free of any participation by
the Indemnifying Party, at the sole expense of the Party seeking
indemnification. In such event, the obligation of the Indemnifying Party to the
Party seeking indemnification shall be equal to the lesser of (i) the amount of
the offer of settlement which the Party seeking indemnification refused to
accept plus the costs and expenses of such Party prior to the date the
Indemnifying Party notifies the Party seeking indemnification of the offer of
settlement and (ii) the actual out-of-pocket amount the Party seeking
indemnification is obligated to pay as a result of such Party's continuing to
pursue such an offer. An Indemnifying Party shall be entitled to recover from
the Party seeking indemnification any additional expenses incurred by such
Indemnifying Party as a result of the decision of the Party seeking
indemnification to pursue such matter.
Page 8
8 MISCELLANEOUS
8.1 Costs. Each party shall bear its own costs associated with this
Agreement, the closing of this Agreement, and all ancillary or related measures,
including without limitation, costs of attorneys fees, accountants fees, filing
fees, or other costs or expenses, without right or recourse from the other.
8.2 Additional Documentation. The parties acknowledge that further
agreements and documents, in addition to the Exhibits appended hereto, may be
required in order to effect the transactions contemplated hereunder. Each party
agrees to provide and execute such other and further agreements or documentation
as, in the opinions of respective counsel, are reasonably necessary to effect
the transactions contemplated hereunder and to maintain regulatory and legal
compliance.
8.3 Captions and Headings. The article and paragraph headings throughout
this Agreement are for convenience and reference only and shall not define,
limit or add to the meaning of any provision of this Agreement.
8.4 No Oral Change. This Agreement and any provision hereof may not be
waived, changed, modified or discharged orally, but only by an agreement in
writing signed by the party against whom enforcement of any such waiver, change,
modification or discharge is sought.
8.5 Non-Waiver. The failure of any party to insist in any one or more cases
upon the performance of any of the provisions, covenants or conditions of this
Agreement or to exercise any option herein contained shall not be construed as a
waiver or relinquishment for the future of any such provisions, covenants or
conditions. No waiver by any party of one breach by another party shall be
construed as a waiver with respect to any subsequent breach.
8.6 Time of Essence. Time is of the essence of this Agreement and of each
and every provision.
8.7 Choice of Law. This Agreement and its application shall be governed by
the laws of the State of New Jersey.
8.8 Counterparts and/or Facsimile Signature. This Agreement may be executed
in any number of counterparts, including counterparts transmitted by telecopier
or FAX, any one of which shall constitute an original of this Agreement. When
counterparts of facsimile copies have been executed by all parties, they shall
have the same effect as if the signatures to each counterpart or copy were upon
the same document and copies of such documents shall be deemed valid as
originals. The parties agree that all such signatures may be transferred to a
single document upon the request of any party.
Page 9
8.9 Notices. All notices, requests, demands and other communications under
this Agreement shall be in writing and shall be deemed to have been duly given
on the date of service if served personally on the party to whom notice is to be
given, or on the third day after mailing if mailed to the party to whom notice
is to be given, by first class mail, registered or certified, postage prepaid,
and properly addressed as follows:
If to CAPITAL, to it at:
------------------------
Xxxxxx X. Xxxxxxx, Esq.
Xxxxxx X. Xxxxxxx, P.C.
4180 La Xxxxx Xxxxxxx Xxxxx, Xxxxx 000
Xx Xxxxx, Xxxxxxxxxx 00000
If to Shareholders, to them at:
-------------------------------
Harvard Financial Services, Inc.
0000 Xxxxxxx Xxxxx
Xxxxx 70 & Hartford Road
Medford, New Jersey 08055
with a copy to:
--------------------
Xxxxxxx X. Xxxx, Esq.
Levy & Levy, P.A.
Plaza 1000, Suite 000, Xxxx Xxxxxx
Xxxxxxxx, XX 00000
8.10 Binding Effect. This Agreement shall inure to and be binding upon the
heirs, executors, personal representatives, successors and assigns of each of
the parties to this Agreement.
8.11 Mutual Cooperation. The parties hereto shall cooperate with each other
to achieve the purpose of this Agreement and shall execute such other and
further documents and take such other and further actions as may be necessary or
convenient to effect the transaction described herein.
8.12 Brokers. The parties hereto represent that no other broker has brought
about this Agreement, and no other finder's fee has been paid or is payable by
either party, except for the broker whose name is set forth on Exhibit 10.12,
and whose fee shall be paid by the Shareholders. Each party hereto shall
indemnify and hold the other harmless against any and all claims, losses,
liabilities or expenses which may be asserted against it as a result of its
dealings, arrangements or agreements with any other broker.
Page 10
8.13 Survival of Representations and Warranties. The representations,
warranties, covenants and agreements of the parties set forth in this Agreement
or in any instrument, certificate, opinion or other writing provided for herein
shall survive the Closing.
AGREED AND ACCEPTED as of the date first above written.
CAPITAL ADVISORS ACQUISITION CORP.
/S/ Xxxxxx X. Xxxxxxxxxx
----------------------------------
By: Xxxxxx X. Xxxxxxxxxx
Its: President and Chief Financial Officer
ATTEST:
/S/ Xxxxxx X. Xxxxxxx
--------------------------
By: Xxxxxx X. Xxxxxxx
Its: Secretary
SHAREHOLDERS OF HARVARD FINANCIAL SERVICES, INC. WHO WILL WARRANT THE
REPRESENTATIONS HEREIN:
First Jersey
/S/ Xxxxxxx X. Xxxxx /S/ Xxxxx Xxxxxx
--------------------------- ---------------------------------
By: Xxxxx Xxxxxx
Its: Secretary
/S/ Xxxxxx X. Xxxxxx /S/ Xxxxxxx X. Xxxx
--------------------------- ---------------------------------
/S/ Xxxxx Xx Xxxxxx
--------------------------- ---------------------------------
/S/ Xxxx Xxxxxx
--------------------------- ---------------------------------
/S/ Xxxx Xxxxx
---------------------------
Page 11
NON-WARRANTING HARVARD SHAREHOLDER SIGNATURE PAGE for Agreement Concerning the
Exchange of Stock between Capital Advisors Acquisition Corp. and the
Shareholders of Harvard Financial Services, Inc.
The undersigned shareholders of Harvard Financial Services, Inc. execute this
Agreement solely for the purpose of affirming the following and for no other
purpose.
Delivery of Harvard Stock
Each Harvard Shareholder signing hereto hereby agrees to sell, assign,
transfer and deliver and does hereby sell, assign, transfer and deliver to
CAPITAL, and CAPITAL agrees to acquire and accept from each Harvard Shareholder,
upon the terms and conditions set forth in this Agreement, complete, absolute
and unencumbered right, title and interest in and to the Harvard Shares held by
each Harvard Shareholder.
Consideration.
The entire consideration to be paid to Harvard Shareholders in exchange for
the transfer, assignment and deliver of the Harvard Shares is common shares of
the authorized but unissued capital stock of CAPITAL as allocated on Schedule A
to each shareholder.
Exchange of Shares
At the Closing Date as defined in this Agreement, CAPITAL shall deliver to
Harvard Shareholders, in accordance with Schedule A, 10,250,000 shares of the
authorized but unissued capital stock of CAPITAL (the "Capital Shares"). The
exchange of shares contemplated by this Agreement is intended to result in a
tax-free reorganization within the meaning of Section 368(a)(1)(B) of the Code.
The Harvard Shareholders agree to assist CAPITAL in adopting and filing any
documentation necessary to comply with the Code in order to preserve the
tax-free treatment of the within exchange of shares.
Investment Representation.
The Shares being acquired by Harvard Shareholders hereunder are being
acquired for investment purposes only and not with a view towards resale or
redistribution and no person or entity has any beneficial interest in such
shares except the Harvard Shareholders. The Shares being acquired have not been
registered under the Securities Act of 1933 as amended (the "Securities Act")
and Harvard Shareholders acknowledge and agree that they may not sell, offer,
transfer, hypothecate or convey such shares except pursuant to a registration
statement pursuant to the Securities Act or an exemption therefrom. Such shares
shall be issued with the following legend and shall be subject to a stock
transfer order delivered by the Company to the transfer agent, such legend to be
as follows:
Page 12
The shares represented by this certificate have not been registered with the
Securities and Exchange Commission under the Securities Act of 1933, as amended.
The shares have been acquired for investment and may not be sold, transferred,
assigned, pledged or hypothecated in the absence of an effective registration
for these shares under such Act or an opinion of the Company's counsel that such
registration is not required under said Act.
----------------------------------- ------------------------------------
----------------------------------- ------------------------------------
Page 13
SCHEDULE A
LIST OF HARVARD SHAREHOLDERS
Shareholder Name/Address Number of Harvard Shares Number of Capital Shares
------------------------ ------------------------ ------------------------
** To be supplied prior to Closing.
Page 14
EXHIBIT 1.2
INVESTMENT LETTER
CAPITAL ADVISORS ACQUISITION CORP.
x/x Xxxxxx X. Xxxxxxx, Xxx.
Xxxxxx X. Xxxxxxx, X.X.
0000 Xx Xxxxx Xxxxxxx Xxxxx, Xxxxx 000
Xx Xxxxx, Xxxxxxxxxx 00000
Page
Re: INVESTMENT LETTER
Gentlemen:
The undersigned having acquired by a stock-for-stock exchange a certain
amount of the total 10,250,000 restricted shares of common stock of CAPITAL
ADVISORS ACQUISITION CORP., a Delaware corporation (the "Company"), par value
$.0001 per share (the "Securities"), hereby represents to the Company that:
1. The Securities which are being acquired by the undersigned are being
acquired for the undersigned's own account and for investment and not with a
view to the public resale or distribution thereof.
2. The undersigned will not sell, transfer or otherwise dispose of the
Securities unless, in the opinion of the Company's counsel, such disposition
conforms with applicable securities laws requirements.
3. The undersigned is aware that the Securities are "restricted securities"
as that term is defined in Rule 144 (the "Rule") promulgated under the
Securities Act of 1933, as amended (the "Act").
The undersigned acknowledges that the undersigned has had an opportunity to
ask questions of and receive answers from duly designated representatives of the
Company concerning the finances of the Company and the proposed business plan of
the Company.
The undersigned acknowledges and understands that the Securities are
unregistered and must be held indefinitely unless they are subsequently
registered under the Act or an exemption from such registration is available.
CAPITAL ADVISORS ACQUISITION CORP.
Page 2
Investment Letter
------------------------------------------------------------------------------
The undersigned further acknowledges that the undersigned is fully aware of
the applicable limitations on the resale of the Securities. These restrictions
for the most part are set forth in Rule 144 (the "Rule"). The Rule permits sales
of "restricted securities" upon compliance with the requirements of such Rule.
If and when the Rule is available to the undersigned, the undersigned may make
only sales of the Securities in accordance with the terms and conditions of the
rule (which may limit the amount of Securities that may be sold).
By reason of the undersigned's knowledge and experience in financial and
business matters in general, and investments in particular, the undersigned is
capable of evaluating the merits and risks of an investment by the undersigned
in the Securities.
The undersigned is capable of bearing the economic risks of an investment
in the Securities. The undersigned fully understands the speculative nature of
the Securities and the possibility of loss.
The undersigned's present financial condition is such that the undersigned
is under no present or contemplated future need to dispose of any portion of the
Securities to satisfy any existing or contemplated undertaking, need, or
indebtedness.
Any and all certificates representing the Securities, and any and all
securities issued in replacement thereof or in exchange therefor, shall bear a
restrictive legend.
The undersigned further agrees that the Company shall have the right to
issue stop-transfer instructions to its transfer agent until such time as sale
is permitted under Security Laws and acknowledges that the Company has informed
the undersigned of its intention to issue such instructions.
Very truly yours,
---------------------------------
Undersigned
---------------------------------
Date:
---------------------------------
Address
---------------------------------
Social Security Number
EXHIBIT 2.4
OFFICERS AND DIRECTORS
President: .................. Xxxxx Xxxxxx
Secretary: .................. Xxxxxxx X. Xxxx
Vice President &
Chief Operating Officer: ........... Xxxxxx Xxxxxx
Directors: .................. Xxxxx Xxxxxx
.................. Xxxxxxx X. Xxxx, Esq.
.................. Xxxxxxx X. Xxxxx
EXHIBIT 2.5
FINANCIAL STATEMENTS
DECEMBER 31, 1996/95
XCEL FINANCIAL SERVICES, INC.
YEARS ENDED DECEMBER 31, 1996 AND 1995
CONTENTS
Page(s)
INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS
Balance Sheets 2 & 3
Statements of Operations 4
Statements of Deficit 5
Statements of Cash Flows 6
Notes to Financial Statements 7, 8 & 9
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
XCEL Financial Services, Inc.
0000 Xxxxxxx Xxxxx
Xxxxxxx, X.X. 00000
We have audited the accompanying balance sheets of XCEL Financial Services,
Inc. as of December 31, 1996 and 1995, and the related statements of operations,
deficit and cash flows for the years then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principle 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 present fairly,
in all material respects, the financial position of XCEL Financial Services,
Inc. as of December 31, 1996 and 1995, and the results of its operations and its
cash flow for the years then ended in conformity with generally accepted
accounting principles.
XXXXXX & ASSOCIATES, P.A.
April 24, 1997
Page 1
XCEL FINANCIAL SERVICES, INC.
BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
1995 1996
-----------------------------
Assets
------
Cash and cash equivalents $ 25,587 $ 140,742
Loans receivable, net of allowance
for loan losses of $15,000 for 1996
and $4,500 for 1995 (Note 1) 682,526 260,808
Due from related parry (Note 2) 95,592 47,221
Deferred income taxes (Note 1) 3,398
Security Deposit 400
------------------------------
Total Assets $ 807,702 $ 448,771
========== ===========
The accompanying notes are an integral part of these financial statements.
Page 2
XCEL FINANCIAL SERVICES, INC.
BALANCE SHEETS
DECEMBER 31, 1995 AND 1995
1995 1996
-----------------------------
Liabilities and Stockholders' Equity
------------------------------------
Liabilities
Accrued expenses (Note 2) $ 34,363 $ 9,025
Holdback to customers (Note 3) 413,775 88,761
Unearned discounts (Note 5) 72,730 50,175
Income taxes payable (Note 1) 7,735 3,800
-----------------------------
Total Liabilities 528,504 151,751
-----------------------------
Stockholders' Equity:
--------------------
Convertible preferred stock, $1.00 (Note 4)
par value Class a, non-voting,
5,000,000 Shares authorized ,
320,000 issued and outstanding 320,000 320,000
Common stock, $.000' par value, (Note 5)
20,000,000 shares authorized;
3,395,000 issued and outstanding 340 340
Deficit ( 41,242) ( 23,330)
------------------------------
Total Stockholders' Equity 279,098 297,010
------------------------------
Total Liabilities and Stockholders' Equity $807,702 $ 448,774
==============================
The accompanying notes are an integral part of these financial statements.
Page 3
XCEL FINANCIAL SERVICES, INC.
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1995 AND 1995
1995 1996
-----------------------------
Revenues
--------
Discount on loans (Note 1) $ 64,215 $ 6,412
Interest or loans (Note 1) 42,984 4,625
Loan fees 5,381 399
Other interest income 7,928 7,923
-----------------------------
Total Revenue 115,153 19,364
-----------------------------
Expenses
--------
Provision for credit losses 10,500 4,500
Selling 23,060 1,420
General and administrative (Note 2) 60,255 3,010
-----------------------------
Total Expenses 93,826 8,930
-----------------------------
Income Before Income Taxes 22,237 10,434
--------------------------
Income Taxes (Note 6) 4,333 3,800
------------ -----------------------------
Net Income $ 17,989 $ 5,534
---------- =============================
The accompanying notes are an integral part of these financial statements.
Page 4
XCEL FINANCIAL SERVICES, INC.
STATEMENTS OF DEFICIT
YEARS ENDED DECEMBER 31, 1995 AND 1995
Balance, January 1, 1995 $ 0
Add net income for the year 6,634
Less dividend distributions (29,964)
Balance, December 31, 1996 (23,330)
Add net income for the year 17,989
Less dividend distributions (35,901)
Balance, December 31, 1995 $ (41,242)
==========
The accompanying notes are an integral part of these financial statements.
Page 5
XCEL FINANCIAL SERVICES, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995 AND 1995
1995 1996
-----------------------------
Cash Flows From Operating Activities
------------------------------------
Net income $ 17,989 $ 6,634
Adjustments To Reconcile Net Income To Net
Cash Used In Operating Activities
-------------------------------------------
Provision for credit losses 10,500 4,500
Changes In Operating Assets And Liabilities
-------------------------------------------
Increase in accounts receivable (432,218) (255,398)
Increase in due from related party ( 48,470) ( 47,221)
Increase in deferred income taxes ( 3,398)
Increase in security deposit ( 400)
Increase in accrued expenses 25,338 9,025
Increase in holdback to customers 325,761 88,761
Increase in unearned discounts 22,555 50,175
Increase in income taxes payable 3,936 3,800
-----------------------------
Net Cash Used In Operating Activities ( 79,154) (149,534)
------------------------------------- -----------------------------
Net Cash Flows From Financing Activities
----------------------------------------
Proceeds from issuance of preferred stock 320,000
Proceeds from issuance of common stock 340
Dividend distributions ( 35,901) ( 29,964)
-----------------------------
Net Cash (Used In) Provided By Financing
Activities ( 35,901) 290,375
---------------------------------------- -----------------------------
Net (Decrease) Increase In Cash and
Cash Equivalents (115,055) 140,742
---------------------------------------- -----------------------------
Cash and Cash Equivalents, Beginning 140,742 0
---------------------------------------- -----------------------------
Cash and Cash Equivalents, Ending $ 25,687 $ 140,742
---------------------------------------- -----------------------------
Supplemental Cash Flow Information (Note 7)
The accompanying notes are an integral part of these financial statements.
Page 6
XCEL FINANCIAL SERVICES INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996 AND 1995
1. Summary of Significant Accounting Policies
Nature of Operations
XCEL financial Services, Inc. Purchases installment races through its
office in Bedford, NJ. The terms of the installment notes are based on
contracts with various educational institutions throughout the United
States.
Use of Estimates
The preparation of financial statements in conformity with general 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 statement
and the reported amounts of revenues and expenses during the period. The
ultimate outcome and actual results could differ from those estimates.
Cash and Cash Equivalents
For purposes of the statements of cash flows, cash equivalents include time
deposits and all highly liquid debt instruments with original maturities of
3 months or less.
Loan Receivables
Loan receivables that management has the intent and ability to hold for the
foreseeable future or until maturity or payoff are resorted at their
outstanding unpaid principal balances reduced by any chargeoffs.
Allowance for loan losses is increased by charges to income and decreased
by chargeoffs. Management's periodic evaluation of the adequacy of the
allowance is based on the Company's mast lean loss experience, known and
inherent risks in the portfolio, adverse situations that may affect the
borrower's ability to repay, and current economic conditions.
Revenue Recognition
The Company records interest income and loan discounts ratably over the
term of the loans which run for approximately twelve to eighty four months.
Receivables for consumer loans are recorded when the contract is purchased.
Unearned discount income represents revenue to be recognized over the term
of the loans.
Page 7
Income Taxes
The Company uses Statement of Financial Accounting Standards No. 109
"Accounting For Income Taxes" (SFAS No. 109) in reporting deferred income taxes.
SEAS No. 109 requires a company to recognize deferred tax liabilities and assets
for the excepted future income tax consequences of events that -are been
recognized in tile company's financial statement. Under this method, deferred
tax assets and liabilities are determined based on temporary differences between
the financial carrying amounts and the tax bases of assets and liabilities using
enacted tax rates in effect in the veers in which the temporary differences are
expected to reverse.
2. Related Party Transactions
The Company leases office space under a month to month operating lease from
a company that owns stock in XCEL Financial Services Inc. Rent expense for
the year ended December 31, 1995 was $8,64O. This amount is included in
accrued expenses at December 31, 1396. The Company Purchased severe' loans
receivable from a company that owns stock in XCEL Financial Services, Inc.
The amount due from the collections on those receivables at December 31,
1995 was $47,221 and it increased by $48,470 during 1996. At December- 31,
1995, the amount due from this company was $95,691.
3. Holdback to Customers
Based on contracts with educational institutions, the Company is entitled
to holdback a Percentage of the loans receivable until certain requirements
have been met. The amount held back is required to be deposited in separate
accounts on behalf of the educational institutions. At December 31, 1996,
the Company did not maintain separate accounts on behalf of the educational
institutions and did not have enough cash to fund these accounts.
4. Convertible Preferred Stock
During 1995, the Company issued through a private placement, 320,000 shares
of Class A 11.25% non-voting, cumulative convertible preferred stock at a par
value of $1.00 per share. Dividends are payable quarterly, in arrears, on March
31, June 30, September 30 and December 31.
5. Common Stock
During 1995, the Company issued 3,395,000 shares of its common stock: at a
par value or $.0001 per share.
6. Income Taxes
Income taxes for the year ended December 31, 1996 and 1995 are as follows:
1995 1996
-----------------------------
Current
--------
Federal $ 4,662 $ 2,375
State 3,074 1,425
-----------------------------
7,730 3,800
Deferred
---------
Federal (2,048)
State (1,350)
-----------------------------
(3,398)
-----------------------------
$ 4,338 $ 3,800
=============================
Page 8
The deferred income tax asset in the amount of $3,398 at December 31, 1996
is due to using different accounting methods for financial reporting and
income tax reporting for the allowance for loan losses.
7. Supplemental Cash Flow Information
Cash paid during the years ended December 31, 1996 and 1995 for taxes were
$3,800 (1996) and $0 (1995).
8. Subsequent Xxxxx
On March 5, 1997, the Board of Directors approved the issuance of six-month
notes, paying interest of 20% per annum, with a common stock kicker of l
share of common stock for every $2 loaned up to $250,000. The Company is
encumbered for $230,000 from this offering.
On March 21 and April 7, 1997, the Board of Directors approved the issuance
of an additional 392,500 shares of restricted common stock for Job
performance and commitment to four (4) individuals: Xxxxxxx Xxxx 300,000
shares; Xxxxxx Xxxxxx 50,000 shares; Xxxxxxx Xxxxxxxx 32,500 shares; and
Xxxx Xxxxxxxxx 10,000 shares.
On April 24, 1997, the Board of Directors approved a name chance for the
Company due to the numerous companies in the industry that have similar
names. The Company's new name is Harvard Financial Services, Inc.
Page 9
EXHIBIT 2.5(a)
FINANCIAL STATEMENTS
JUNE 30, 1997
HARVARD FINANCIAL SERVICES, INC.
BALANCE SHEET
AS OF JUNE 30, 1997
1997
--------------
Assets
--------
Cash and cash equivalents $ 11,048
Loans receivable, net of allowance for
loan losses of $15,000 1,343,975
Due from related party 14,057
Equipment, net of accumulated
depreciation of $904 14,772
Deferred income taxes 3,398
Security deposit 400
Other assets 115
-------------- ---
Total Assets $ 1,387,765
==============
Page 1
HARVARD FINANCIAL SERVICES, INC.
BALANCE SHEET
AS OF JUNE 30, 1997
1997
--------------
Liabilities and Stockholders' Equity
------------------------------------
Liabilities:
------------
Notes payable $ 230,000
Accrued expenses 30,653
Holdback to customers 684,093
Unearned discounts 124,694
Income taxes payable 3,936
--------------
Total Liabilities 1,073,376
--------------
Stockholders' Equity:
---------------------
Convertible preferred stock, $1.00
par value Class A, non-voting, 5,000,000
shares authorized, 320,000 issued
and outstanding $ 320,000
Common stock, $.0001 par value,
20,000,000 shares authorized; 4,550,000
issued and outstanding 455
Deficit (6,066)
--------------
Total Stock holders' Equity 314,389
--------------
Total Liability and Stockholders' Equity $ 1,387,765
---------------------------------------- ==============
Page 2
HARVARD FINANCIAL SERVICES, INC.
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1997
1997
--------------
Revenues
--------
Discount on loans $ 15,416
Interest on loans 87,439
Loan fees 6,467
-------------- -----
Total Revenue 109,322
Expenses
--------
Selling $ 27,135
General and administrative 46,335
-------------- ------
Total Expenses 73,470
--------------
Income Before Income Taxes $ 35,852
==============
Page 3
EXHIBIT 2.18
MATERIAL CONTRACTS OF HARVARD
** Previously supplied.
EXHIBIT 10.12
BROKERS
XXXXXXX X. XXXXXXXX, ESQUIRE
