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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to ___________
Commission file number 0-14772
JW CHARLES FINANCIAL SERVICES, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Florida 58-1545984
------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
980 North Federal Highway - Suite 210
Boca Raton, Florida 33432
--------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (407) 338-2600
--------------
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the last 90
days. Yes /x/ No
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at August 14, 1995
--------------------------------------- ------------------------------
Common stock, $.001 par value per share 3,908,898
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JW CHARLES FINANCIAL SERVICES, INC.
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INDEX
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Page
Part I. Financial Information
Item 1. Financial Statements.
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Consolidated Condensed Balance Sheets at June 30, 1995
and December 31, 1994 3
Consolidated Condensed Statements of Income for the Three
Months Ended June 30, 1995 and 1994 4
Consolidated Condensed Statements of Income for the Six
Months Ended June 30, 1995 and 1994 5
Consolidated Condensed Statements of Cash Flows for the
Six Months Ended June 30, 1995 and 1994 6
Notes to Consolidated Condensed Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 2. Changes in Securities 12
Item 3. Defaults Upon Senior Securities 12
Item 4. Submission of Matters to Vote of Security Holders 12
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
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2<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
------------------------------
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JW CHARLES FINANCIAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
-------------------------------------
June 30, December 31,
ASSETS 1995 1994(*)
-------- ------------
(Unaudited)
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Cash $4,893,000 $5,401,000
Cash and securities segregated under federal regulations 119,000
Commissions and other receivables from clearing broker and organizations 5,499,000 2,900,000
Receivables from customers, net 58,812,000 49,844,000
Receivables from brokers and dealers 7,142,000 5,984,000
Securities owned, at market value 13,169,000 11,338,000
Note receivable from affiliate 161,000 161,000
Furniture, equipment and leasehold improvements, net of
accumulated depreciation of $849,000 and $726,000 1,118,000 994,000
Deferred income taxes 466,000 360,000
Income taxes receivable 79,000
Other assets 3,668,000 5,157,000
----------- -----------
$95,047,000 $82,218,000
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY:
-------------------------------------
Liabilities:
Short-term borrowings from banks $17,443,000 $7,303,000
Accounts payable and accrued expenses 9,148,000 5,604,000
Payable to customers 23,478,000 30,288,000
Payables to brokers and dealers 19,667,000 16,155,000
Securities sold, not yet purchased, at market value 7,339,000 4,948,000
Notes payable 4,161,000 5,161,000
------------ -----------
81,236,000 69,459,000
------------ -----------
Contingencies
Redeemable preferred stock 5,746,000
Shareholders' equity:
Preferred stock 1,000
Common Stock - $.001 par value per share; 9,056,000 authorized,
3,907,898, and 3,907,398 issued and outstanding 4,000 4,000
Additional paid-in capital 761,000 1,078,000
Retained earnings 7,300,000 11,676,000
---------- -----------
Total shareholders' equity 8,065,000 12,759,000
---------- ----------
95,047,000 82,218,000
========== ==========
* - Derived from audited financial statements contained in registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1994.
(The accompanying notes are an integral part of
these consolidated financial statements.)
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3
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JW CHARLES FINANCIAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
-------------------------------------------
Three Months Ended June 30,
---------------------------
1995 1994
---- ----
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REVENUES:
Commission and fee income $10,232,000 $4,035,000
Market making and principal transactions, net 4,707,000 5,270,000
Interest 1,423,000 1,168,000
Clearing fees 1,289,000 1,208,000
Other 1,318,000 712,000
----------- ----------
18,696,000 12,393,000
----------- ----------
EXPENSES:
Commissions and clearing costs 10,736,000 6,096,000
Employee compensation and benefits 3,218,000 2,442,000
General and administrative 3,346,000 2,539,000
Interest 618,000 380,000
---------- ----------
17,918,000 11,457,000
---------- ----------
Income before income taxes 1,051,000 936,000
Provision for income taxes 399,000 333,000
---------- ----------
Net income $ 652,000 $ 603,000
========== ==========
PER COMMON SHARE:
Net income available to common shareholders $ .16 $ .15
========== ==========
Weighted average number of common shares outstanding during the period 3,952,005 3,933,648
========== ==========
(The accompanying notes are an integral part of
these consolidated financial statements.)
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4
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JW CHARLES FINANCIAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
-------------------------------------------
Six Months Ended June 30,
---------------------------
1995 1994
---- ----
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REVENUES:
Commission and fee income $17,976,000 $9,590,000
Market making and principal transactions, net 9,413,000 10,276,000
Interest 2,793,000 2,178,000
Clearing fees 2,753,000 2,467,000
Other 2,144,000 1,324,000
----------- ----------
35,079,000 25,835,000
----------- ----------
EXPENSES:
Commissions and clearing costs 19,038,000 12,728,000
Employee compensation and benefits 6,677,000 5,052,000
General and administrative 6,479,000 5,487,000
Interest 1,106,000 686,000
---------- ----------
33,300,000 23,953,000
---------- ----------
Income before income taxes 1,779,000 1,882,000
Provision for income taxes 697,000 671,000
---------- ----------
Net income $1,082,000 $1,211,000
========== ==========
PER COMMON SHARE:
Net income available to common shareholders $ .27 $ .30
========== ==========
Weighted average number of common shares outstanding during the period 3,952,005 3,933,648
========== ==========
(The accompanying notes are an integral part of
these consolidated financial statements.)
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5
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JW CHARLES FINANCIAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
-----------------------------------------------
Six Months Ended June 30,
---------------------------
1995 1994
---- ----
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $1,082,000 $1,211,000
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Depreciation and amortization 123,000 68,000
Changes in operating assets and liabilities:
Cash and securities segregated under federal regulations (119,000)
Commissions and other receivables from clearing broker and organizations (2,599,000) 597,000
Receivables from customers, net (8,968,000) 3,849,000
Receivables from brokers and dealers (1,158,000) (5,397,000)
Securities owned (1,831,000) 2,982,000
Deferred income taxes (106,000) (186,000)
Income taxes receivable 79,000
Other assets 1,489,000 (417,000)
Accounts payable and accrued expenses 3,544,000 2,710,000
Payables to customers (6,810,000) (1,250,000)
Payable to brokers and dealers 3,512,000 4,922,000
Securities sold, not yet purchased 2,391,000 1,279,00
Income taxes payable 385,000
Preferred stock dividends payable (14,000)
---------- ----------
Net cash provided (used) by operating activities (9,371,000 10,739,000
INVESTING ACTIVITY
Purchases of property and equipment, net (247,000) (122,000)
---------- ----------
FINANCING ACTIVITIES
Short-term borrowings from banks 10,140,000 (9,435,000)
(Repayment) Proceeds from notes payable (1,000,000) 2,500,000
Cash flow distributions and redemptions of preferred stock (1,000) (560,000
Mandatory preferred stock dividends paid (29,000) (42,000)
Issuance of common stock 4,000
----------- -----------
Net cash provided (used) by financing 9,110,000 (7,533,000)
----------- -----------
Net increase (decrease) in cash (508,000) 3,084,000
Cash and cash equivalents at beginning of period 5,401,000 3,289,000
----------- -----------
Cash and cash equivalents at end of period $4,893,000 $6,373,000
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for income taxes $ 653,000 $ 616,000
========== ==========
Cash paid during the period for interest $1,106,000 $ 686,000
========== ==========
(The accompanying notes are an integral part of
these consolidated financial statements.)
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6
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JW CHARLES FINANCIAL SERVICES, INC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(Unaudited)
1. BASIS OF PRESENTATION
The interim financial information included herein is unaudited;
however, such information reflects all adjustments which are, in the
opinion of management, necessary for a fair presentation of the
periods indicated.
The accompanying consolidated condensed financial statements include
the accounts of the Company and its subsidiaries. Certain information
and footnote disclosures normally included in financial statements
prepared in conformity with generally accepted accounting principles
have been condensed or omitted pursuant to the rules and regulations
of the Securities and Exchange Commission. These consolidated
condensed financial statements should be read in conjunction with the
consolidated financial statements and related notes contained in the
Company's 1994 Annual Report on Form 10-K. Because of seasonal and
other factors, the results of operations for the three month and six
month periods ended June 30, 1995 are not necessarily indicative of
the results of operations to be expected for the fiscal year ending
December 31, 1995.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Consolidation - The accompanying consolidated financial
statements include the accounts JW Charles Financial Services, Inc.
and its subsidiaries which are, Corporate Securities Group, Inc. ("CSG"),
JW Charles Securities, Inc. ("JWC Securities"), JW Charles Clearing Corp.
("JWC Clearing"), JW Charles Capital Corp. ("JWC Capital"), JW Charles
Insurance Services, Inc. ("JWC Insurance"), and DMG Securities, Inc.
("DMG"). All significant intercompany transactions have been eliminated
in consolidation.
3. INCOME TAXES
At December 31, 1994 the Company had net operating loss carryforwards
of approximately $2 million for income tax purposes that expires in
2005. The net operating loss carryforward, which was acquired as part
of the Company's merger with a privately owned financial services
holding company then known as JW Charles Financial Services, Inc.
("Old JWC Financial") in 1990, is limited under the separate return
limitation year rules which allow each member of the Old JWC
Financial group to utilize its net operating loss carryforward only to
the extent of its taxable income For financial statement purposes, a
valuation allowance of $821,000 has been recognized to offset the
deferred tax assets related to this carryforwards.
The reconciliation of income taxes attributable to continuing
operations computed at the U.S. federal statutory tax rates to income
tax expense for the three month period ended June 30, 1995 is as
follows:
Tax at statutory rates 34.0%
Increase resulting from:
Effect of state income taxes 3.6%
Other 1.6%
-------
39.2%
=======
The income tax provision for the three months ended June 30, 1995
consists of the following:
June 30,
1995
----------
Current $ 803,000
Deferred (106,000)
----------
Total $ 697,000
==========
4. CONTINGENCIES
The Company is involved in various claims and possible actions arising
out of the normal course of its business. Although the ultimate
outcome of these claims cannot be ascertained at this time, it is the
opinion of the Company based on knowledge of facts and advice of
counsel, that the resolution of such actions will not have a material
adverse effect on the Company's financial condition.
7<PAGE>
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Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
---------------------------------------------
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1995 (THE "1995 PERIOD") VS. 1994
(THE "1994 PERIOD")
Commissions and fee income increased by $6,197,999 (or 154%) to
$10,232,000 in the 1995 Period compared to $4,035,000 in the 1994
Period. Market making and principal transactions - net, which
represents the net realized and unrealized gain or loss experienced on
securities transactions, decreased by $563,000 (or 11%) to $4,707,000
in the 1995 Period from $5,270,000 in the 1994 Period. The increase
in the combined total of these two line items reflects higher volume
due both to improved market conditions and the increase in the size of
the retail sales force. The relative changes in each of these line
items is attributable to an increasing percentage of the Company s
business being conducted on an agency basis as opposed to a principal
basis.
Interest income increased by $255,000 to $1,423,000 in the 1995
Period from $1,168,000 in the 1994 Period. Interest income consists
primarily of interest earned on receivables from customers, securities
owned and customer money market fund balances. The increase in
interest income is primarily due to the increase incustomer balances
in the 1995 Period as compared to the 1994 Period.
In addition to conducting its own securities business, the
Company, through JWCC, clears and executes securities transactions,
primarily on a fully-disclosed basis, for other broker-dealers and
financial institutions. The Company receives clearing fees for
providing this service. Such clearing fees increased slightly to
$1,289,000 in the 1995 Period from $1,208,000 in the 1994 Period. The
increase in clearing fees is primarily due increased clearing volume
as a result of improved market conditions in the 1995 Period as
compared to the 1994 Period.
Commissions and clearing costs, which represents the portion of
fee income payable by the Company to registered representatives or
other broker-dealers as a result of securities transactions (and the
related costs associated with the execution of such trades) increased
by $4,640,000 to $10,736,000 in the 1995 Period from $6,096,000 in the
1994 Period. Commissions and clearing costs as a percentage of
commission and fee income and market making and principal
transactions-net (the "Clearing Factor") increased to 72% in the 1995
Period as compared to 66% in the 1994 Period. The Company believes
that the increase in the Clearing Factor is attributable to several
factors including (i) the utilization of special first year payouts to
recruit registered representatives to work in the Company s new office
and (ii), an increase in the percentage of fee income generated by the
Company s independent affiliated branch offices.
The Company believes that its Clearing Factor is representative
of the prevailing experience in the industry, although sufficient
industry data is not available to make a precise comparison. The
major component, however, is commission rates, and the Company's
commission rates for its independent affiliated branch office
registered representatives and its in-house employee registered
representatives are comparable with that paid by other firms in the
securities brokerage industry (ranging from 80% to 90% for registered
representatives in affiliated branch offices and 30% to 50% for its
in-house employee registered representatives, depending upon
production levels). Affiliated branch office registered
representatives receive higher commissions from the Company than
registered representatives who are Company employees, which reflects
that each affiliated branch office is responsible for its own
overhead. Accordingly, the Company's overhead attributable to branch
registered representatives is less than the overhead attributable to
the Company's in-house registered representatives. As a result, the
Company's margin is not adversely affected by engaging additional af-
filiated branch office registered representatives (and paying them
higher commissions) as opposed to hiring in-house employee registered
representatives.
Employee compensation and benefits increased by $776,000 to
$3,218,000 in the 1995 Period from $2,442,000 in the 1994 Period
primarily reflecting compensation and employee benefit costs
associated with an increase in professional and support staff which
resulted from the opening of new offices and a general increase in
transaction volume experienced due to improved market conditions.
General and administrative expenses increased by $807,000 to
$3,346,000 in 1995 Period from $2,539,000 in the 1994 Period. General
8
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and administrative expenses, as a percentage of total revenues
declined to 18% in the 1995 Period from 20% in 1994 Period. The
increase in general and administrative expenses in absolute terms is
primarily attributable to a the opening of new offices and a general
increase in expenditures as a result of increased transaction volume.
Interest expense, which consists primarily of interest incurred
on short-term borrowings to finance JWC Clearing receivables from
customers and securities owned, increased to $618,000 in the 1995
Period from $380,000 in the 1994 Period. The increase is primarily a
result of an increase in the average outstanding balance of securities
owned in the 1995 Period and an increase in interest rates during the
1995 Period.
Net income increased to $652,000 (or 3% of total revenues) in the
1995 Period from $603,000 (or 5% of total revenues) in the 1994
Period. The increase in income before income taxes in absolute terms
is directly related to an increase in revenues. As a percentage of
total revenues, net income decreased primarily due to (i) start-up
costs related to the Company s new offices and (ii), an increase in
the percentage of fee income generated by the Company s independent
affiliated branch offices.
SIX MONTHS ENDED JUNE 30, 1995 (THE "1995 PERIOD") VS. 1994 (THE
"1994 PERIOD")
Commissions and fee income increased by $9,244,000 or 36% to
$35,079,000 in the 1995 Period compared to $25,835,000 in the 1994
Period. Market making and principal transactions - net decreased by
$863,000 or 8% to $9,413,000 in the 1995 Period from $10,276,000 in
the 1994 Period. The increase in the total of these two line items is
directly related to the Company's expanded market making and trading
activities experienced in the 1995 Period as compared to the 1994
Period. The relative changes in each of these line items is
attributable to an increasing percentage of the Company s business
being conducted on an agency basis as opposed to a principal basis.
Interest income increased by $615,000 to $2,793,000 in the 1995
Period from $2,178,000 in the 1994 Period. The increase in interest
income is primarily due to the increase in interest rates in the 1995
Period as compared to the 1994 Period.
Clearing fees amounted to $2,753,000 and $2,467,000 in the 1995
and 1994 Periods, respectively. The increase in clearing fees is
primarily due increased clearing volume as a result of improved market
conditions in the 1995 Period as compared to the 1994 Period.
Commissions and clearing costs increased by $6,310,000 to
$19,038,000 in the 1995 Period from $12,728,000 in the 1994 Period.
The Clearing Factor increased to 70% in the 1995 Period as compared to
64% in the 1994 Period for the same reasons discussed in the
comparison of the three month period above.
Employee compensation and benefits increased by $1,625,000 to
$6,677,000 in the 1995 Period from $5,052,000 in the 1994 Period
primarily for the same reasons discussed in the comparison of the
three month period.
General and administrative expenses increased by $992,000 to
$6,479,000 in 1995 Period from $5,487,000 in the 1994 Period. General
and administrative expenses represented approximately 18% of total
revenues in the 1995 Period as compared to 21% in the 1994 Period.
The increase in general and administrative expenses in absolute terms
is primarily attributable the same reasons discussed in the comparison
of the three month period.
Net income decreased to $1,082,000 (or 3% of total revenues) in
the 1995 Period from $1,211,000 (or 5% of total revenues) in the 1994
Period. The decrease in income before income taxes in both absolute
and percentage terms is directly related to start-up costs related to
the Company s new offices and (ii), an increase in the percentage of
fee income generated by the Company s independent affiliated branch
offices.
LIQUIDITY AND CAPITAL RESOURCES
The Company maintains a highly liquid balance sheet with the
majority of the Company's assets consisting of securities owned, which
9
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are marked to market daily and receivables from customers arising from
customer related securities transactions. Receivables from customers
consist primarily of collateralized customer margin loans and
securities borrowed which are typically secured with marketable
corporate debt and equity securities. The nature of the Company's
business as a market maker and securities dealer requires it to carry
significant levels of securities inventories in order to meet its
customer and internal trading needs. Additionally, the Company's role
as a financial intermediary for customer activities, which it conducts
on a principal basis, results in significant levels of customer
related balances. Accordingly, the Company's total assets and
financial leverage can fluctuate significantly depending largely upon
general economic and market conditions, volume of activity, customer
demand and underwriting commitments. The Company's ability to support
increases in its total assets is a function of its ability to generate
funds internally and obtain short-term borrowings from banks.
The Company has borrowed over the past few years an aggregate of
$5,000,000 from Gilman CMG, Inc. ( GCMG ) or an affiliate thereof,
which owns approximately 49% of the Company s outstanding shares of
Common Stock. On May 15, 1995, the Company and GCMG entered into a
new Loan Agreement for a refinancing of that debt, pursuant to which
the debt was converted to a term loan, bearing interest at a rate of
10% per annum, with $1,000,000 of principal paid on May 16, 1995, and
the remaining $4,000,000 of principal payable in equal quarterly
installments of $250,000 on July 15, October 15, January 15, and April
15, of each year until paid in full. Interest accrues on the
principal outstanding from time to time and is payable quarterly on
the same dates that principal payments are required. The Company has
the option to prepay principal, in whole or in part at any time,
without premium or penalty.
On May 15, 1995, the Company and GCMG also entered into a Stock
Repurchase Agreement, pursuant to which the Company agreed to
repurchase the shares of Common Stock of the Company owned by GCMG.
Under the Stock Repurchase Agreement, the Company is required to use
its Modified Net Income, as defined, to repurchase annually (on or
before each April 15, commencing on April 15, 1996) shares of Common
Stock at a price of $3.00 per share, subject to possible upward
adjustment based on certain increases to the Company s net tangible
book value occurring after March 31, 1995. Modified Net Income for
each year means 50% of the Company s audited net income for the
immediately preceding fiscal year reduced by the aggregate amount of
principal payments made to GCMG on the above debt during such fiscal
year. The Company is obligated, however, to repurchase all shares of
Common Stock owned by GCMG on or before April 15, 2003, or it will
incur a $672,000 repurchase delay penalty that will be due and payable
in two equal installments on April 16, 2003 and April 16, 2004. The
Stock Repurchase Agreement also caused GCMG to sell and surrender to
the Company for retirement all shares of Series A Special Distribution
Stock owned by GCMG, for a an aggregate purchase price of $700.
As a result of the Company entering into this Stock Repurchase
Agreement, $5,746,000 was reclassified from the shareholder s equity
section of condensed balance sheet to redeemable preferred stock.
Such amount represents the Company s minimum purchase obligation to
GCMG.
The Company believes that its current borrowing arrangements
combined with anticipated levels of internally generated funds will be
sufficient to fund its financial requirements for the foreseeable
future. This estimate is based on the Company's current level of
operations and certain assumptions relating to the Company's business
and planned growth. Should the Company significantly expand either
its market making activities or its underwriting of securities on a
firm-commitment basis, however, the Company may need to obtain
additional capital to support such activities and to comply with
regulatory requirements. Management expects that the Company will
seek to expand its market making activities and corporate finance
activities during the 1995 fiscal year, and as a result the Company
will need to seek additional capital. The Company is not dependent
upon raising additional capital, however, in order to maintain its
current levels of operations, and therefore does not propose to raise
additional capital unless it is available on acceptable terms. In the
event that the Company should find that its ability to generate funds
internally is insufficient to satisfy its future capital needs, the
Company will require additional financing from outside sources.
10
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At June 30, 1995, the Company had shareholders' equity of
$8,065,000, representing a decrease of $4,694,000 from December 31,
1995. The decrease in shareholders' equity is primarily due to the
reclassification of $5,746,000 from shareholder s equity to redeemable
preferred stock as discussed above net of reported net income.
CSG , DMG, JWC Securities and JWC Clearing are subject to the
Securities and Exchange Commission's Uniform Net Capital Rule (Rule
15c3-1 under the Securities Exchange Act of 1934), which requires the
maintenance of minimum net capital and requires that CSG's, DMG s and
JWC Securities ratio of aggregate indebtedness to net capital (excess
net capital), as defined by the Rule, not exceed 15 to 1. JWC
Clearing has elected to comply with the alternative net capital
requirement of Rule 15c3-1, which requires net capital equal to or
greater than 2% of aggregate debit items computed in applying the
formula for determination of reserve requirements. Additionally, JWC
Clearing and JWC Securities are subject to the minimum net capital
requirements of the NYSE, which provide that equity capital may not be
withdrawn or cash dividends paid if the resulting net capital would be
less than 5% of aggregate debits. As of June 30, 1995, CSG, JWC
Securities and DMG had net capital of $2,337,000, $1,780,000 and
$429,000, respectively and excess net capital of $1,980,000,
$1,472,000 and $401,000, respectively. At June 30, 1995, JWC
Clearing s net capital was 10.0% of aggregate debit items as compared
with the minimum of 2%, and its Rule 15c3-1 net capital was $6,263,000
as compared with the minimum of $1,272,000.
In its capacity as a general partner in three affiliated real
estate limited partnerships, the Company has guaranteed certain
partnership indebtedness. Additionally, under applicable partnership
law, the Company is contingently liable for any obligations of such
limited partnerships that remain unpaid after any dissolution of the
partnerships. The Company has not made any provision in its financial
statements for the possible effect on the Company's financial
condition of the above guarantees and the Company's contingent
liability as a general partner of its affiliated partnerships. The
Company does not expect to incur any significant losses or obligations
that may materially affect the Company's liquidity as a result of
these matters.
11
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II - OTHER INFORMATION
Item 1. Legal Proceedings
---------------------------
In July 1994, a third amended complaint was filed in the matter
of Marilyn Norwood, as guardian for Samuel Laten v. JW Charles
Securities, Inc., et al., Case No. 93-19727, in the Circuit Court for
the Seventeenth Judicial Circuit In and For Broward County, Florida
(the "Norwood Matter") which raised claims against JW Charles
Securities, Inc. and certain of its registered representatives. The
Plaintiff alleges that JW Charles Securities, Inc. and certain of its
registered representatives acted as accomplices in a scheme to defraud
Samuel Laten out of $2,700,000 which was deposited by Laten into a
joint account at JW Charles. The Plaintiff further alleges that
Robert Ballard (the other joint account owner) defrauded Laten by
withdrawing almost all of the $2,700,000 deposited to the joint
account and that JW Charles was negligent in allowing this type of
activity to occur. In October , 1994, a hearing was held to rule on
JW Charles motion to compel arbitration. The Court granted the
Company s motion and the case was dismissed as to JW Charles and its
registered representatives. The Plaintiff has since filed an
arbitration claim alleging the same acts. JW Charles has filed a
motion to stay the arbitration pending disposition of the Plaintiffs
court proceeding against Ballard and as such an answer has not yet
been filed in the arbitration. No hearing date has been set on the
arbitration. The Company expects that the ultimate disposition of
this case will not have a material adverse impact upon its financial
position.
There are no material legal proceedings pending or threatened in
which the Company is party or of which the Company's property is the
subject. The Company has been named in various arbitration and legal
proceedings arising in the ordinary course of its securities brokerage
business. Although arbitration and litigation involves contingencies
that cannot be definitively predicted, including the unpredictability
of actions that might be taken by an arbitration panel or jury on
matters that are submitted to them, the Company expects that the
ultimate disposition of arbitration and litigation arising from the
ordinary course of business will not have a material adverse impact
upon its financial position.
Item 2. Changes in Securities.
------------------------------
None
Item 3. Defaults Upon Senior Securities.
----------------------------------------
None.
Item 4. Submission of Matters to Vote of Security Holders.
------------------------------------------------------------
On June 21, 1995 at the Annual Meeting of Shareholders of JW
CHARLES FINANCIAL SERVICES, INC. Messrs. Marshall T. Leeds, Joel E.
Marks, Wm. Dennis Ferguson, Gregg S. Glaser, Stephen W. Cropper, John
R. Faiella, Joseph P. Robilotto and Michael B. Weinberg each were
elected as a director to serve a term that continues until the next
annual meeting and until their successor, if there is to be one, is
duly elected and qualified. The number of shares voted for, or
withheld from, each candidate is forth in the table below.
<TABLE>
<CAPTION>
Number of Number of Number of
Votes Votes Votes
Nominee For Election Withheld Not Voted
------- ------------ -------- ---------
<C> <S> <C> <C> <C>
Marshall T. Leeds 3,443,902 15,300 448,196
Joel E. Marks 3,443,902 15,300 448,196
Wm. Dennis Ferguson 3,443,902 15,300 448,196
Gregg S. Glaser 3,443,902 15,300 448,196
Stephen W. Cropper 3,438,902 20,300 448,196
John R. Faiella 3,438,902 20,300 448,196
Joseph P. Robilotto 3,438,902 20,300 448,196
Michael B. Weinberg 3,443,902 15,300 448,196
</TABLE>
12<PAGE>
<PAGE>
Item 5. Other Information
-------------------------
None.
Item 6. Exhibits and Reports on Form 8-K
------------------------------------------
(a) Exhibits:
The following exhibits are included herein:
10(a) Stock Repurchase Agreement
10(b) Loan Agreement Between Gilman CMG, Inc. and JW Charles
Financial Services, Inc.
(b) Reports on From 8-K:
From 8-K reporting date - June 21, 1995
Item Reported - Item 4, Changes in Registrant's Certifying Accountant.
13
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
JW CHARLES FINANCIAL SERVICES, INC.
Date: August 14, 1995 /s/ Joel E. Marks
-------------- ------------------------------------
(Joel E. Marks, Senior Vice President)
(Duly Authorized Officer)
Date: August 14, 1995 /s/ Joel E. Marks
---------------- --------------------------------------
(Joel E. Marks, Vice President, Principal
Financial and Accounting Officer)
14<PAGE>
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
---------- -----------------
10(a) Stock Repurchase Agreement
10(b) Loan Agreement Between Gilman CMG, Inc. and JW Charles
Financial Services, Inc.
<PAGE>
STOCK REPURCHASE AGREEMENT
THIS STOCK REPURCHASE AGREEMENT (the "Agreement") is made and
entered into as of this 15th day of May, 1995, by and among JW CHARLES
FINANCIAL SERVICES, INC., a Florida corporation ("Purchaser"), and
GILMAN CMG, INC., a Delaware corporation ("Seller"); and, solely for
purposes of Section 4 of this Agreement, MARSHALL T. LEEDS ("Leeds")
and JOEL E. MARKS ("Marks").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Seller is the record and beneficial owner of 1,915,849
shares (the "Common Shares") of the $.001 par value per share common
stock of Purchaser ("Common Stock"), constituting approximately 49% of
the issued and outstanding Common Stock;
WHEREAS, Seller is the record and beneficial owner of 700,000
shares of the $.001 par value per share Series A Special Distribution
Stock of Purchaser ("Series A Stock"), which constitutes all of the
outstanding shares of Series A Stock (the "Series A Shares";
collectively with the Common Shares, the "Shares");
WHEREAS, Purchaser and Seller are entering into that certain Loan
Agreement pursuant to which Seller has converted two outstanding loans
into a single $5,000,000 term loan (the "Loan"); and
WHEREAS, in order to induce Seller to agree to the Loan and to
sell the Series A Shares, Purchaser has agreed to repurchase from
Seller all of the Common Shares, all upon the terms and conditions
contained herein.
NOW, THEREFORE, in consideration of the premises and mutual
covenants contained herein, and other good and valuable consideration,
the receipt and adequacy of which are hereby acknowledged, the parties
hereby agree as follows:
1. Sale and Repurchase of Shares; Escrow of Common Shares.
(a) Sale of Series A Shares. Seller agrees to sell and
surrender immediately to Purchaser for retirement, upon Purchaser's
request, the Series A Shares and all certificates evidencing such
shares, for a total cash purchase price of SEVEN HUNDRED DOLLARS
($700), payable to Seller in full upon such surrender.
(b) Repurchase and Escrow of Common Shares. Subject in all
respects to the terms and provisions of this Agreement, Purchaser
agrees to repurchase, and Seller agrees to sell and transfer to
Purchaser, the Common Shares over a period of time not later than
April 15, 2003. In order to facilitate the repurchase when and as
payments for the Common Shares are delivered by Purchaser under
Section 2 hereof, Seller shall deliver to and deposit with North
American Transfer Co. ("Escrow Agent") certificates representing all
<PAGE>
of the Common Shares, which shall be free and clear of any and all
liens, charges, rights, pledges, hypothecations and encumbrances of
any nature whatsoever (other than those set forth in this Agreement),
and duly executed blank stock powers. The Common Shares and related
stock powers shall be held and administered in accordance with the
terms and provisions of an escrow agreement in substantially the form
attached hereto as Exhibit A (the "Escrow Agreement").
2. Repurchase Schedule and Payment Terms for Common Shares.
(a) On or before each April 15, commencing on April 15, 1996,
until Purchaser has acquired all the Common Shares, which date shall
be no later than April 15, 2003, Purchaser shall repurchase and pay
for a number of Common Shares, rounded to the nearest whole number,
equal to the applicable Defined Net Income divided by the applicable
Price Per Share (each as defined below) or such lesser number of
Common Shares then remaining unrepurchased. Purchaser, with Seller's
consent, which shall not be unreasonably withheld, shall have the
right to repurchase a larger number of the Common Shares on any such
April 15, or to repurchase additional Common Shares from time to time
on any other dates, which dates shall be determined by Purchaser in
its sole discretion (but with at least ten business days' written
notice to Seller), by delivering to Seller the applicable Price Per
Share for all such additional Common Shares; provided, however,
Purchaser may, without the consent of Seller, repurchase additional
Common Shares in accordance with the terms hereof from time to time as
determined by Purchaser in its sole discretion during the period
between April 16, 2002 and April 15, 2003. Payment for any Common
Shares being repurchased shall be in cash by wire transfer or other
delivery of certified funds. Contemporaneously with Seller's receipt
of each such payment, Seller shall join with Purchaser in issuing a
joint written instruction to the Escrow Agent (the "Notice of
Release") which shall instruct the Escrow Agent to take all actions
necessary to cause the delivery to Purchaser of the number of Common
Shares repurchased by such payment. Notwithstanding anything to the
contrary contained herein, Purchaser's rights and obligations to
repurchase Common Shares pursuant to the foregoing sentences shall be
suspended during any time that Purchaser is in arrears on required
payments of principal or interest under the Loan.
(b) The defined terms used above in this Section 2 have the
respective meanings set forth below. The price or amount, as the case
may be, that is "applicable" at any particular time means the price or
amount determined with respect to the most recent fiscal year ended of
Purchaser for which its financial statements, prepared in accordance
with generally accepted accounting principles as applied in the United
States of America ("GAAP"), have been audited and included as part of
its Annual Report on Form 10-K filed with the Securities and Exchange
Commission for such fiscal year (the "Audited Financial Statements").
"Price Per Share" means an amount equal to the greater of (i) $3.00
per share or (ii) the product of $3.00 multiplied by a fraction whose
numerator is Purchaser's applicable Net Tangible Book Value and whose
denominator is $10,847,000 (Purchaser's Net Tangible Book Value at
December 31, 1994 as calculated on Exhibit B). "Net Tangible Book
Value," which means tangible assets less total liabilities, shall be
determined in accordance with GAAP, consistently applied, and shall be
- 2 -
<PAGE>
calculated annually by Purchaser's independent public accounting firm
based on Purchaser's Audited Financial Statements; provided, however,
that such calculation shall exclude any cash payments received by
Purchaser in consideration for its issuance of any shares of capital
stock after the date hereof. "Defined Net Income" means an amount
equal to fifty percent (50%) of (i) Purchaser's total net income
reported in its Audited Financial Statements minus (ii) the aggregate
amount of principal paid to Seller by Purchaser under the Loan for the
previous year.
(c) If Purchaser, at any time after the date hereof, issues any
shares of Common Stock in subdivision of outstanding shares of Common
Stock, or combines outstanding shares of Common Stock into a lesser
number, then (i) the Price Per Share, otherwise determined as provided
in Section 2(b), shall be adjusted by multiplying the same (as so
otherwise determined) by a fraction, the numerator of which shall be
the number of shares of Common Stock actually outstanding immediately
prior to such subdivision or combination and the denominator of which
shall be the number of shares of Common Stock actually outstanding
immediately after such subdivision or combination, and (ii) the total
number of Common Shares subject to repurchase under Section 2(a)
hereof shall be adjusted to reflect the impact of such subdivision or
combination on the Common Shares that were outstanding on the date
thereof and thereafter such adjusted number of Common Shares shall
constitute the Common Shares.
(d) If Purchaser has not repurchased all of the Common Shares by
the close of business on April 15, 2003, Purchaser shall pay to Gilman
a repurchase delay penalty equal to $672,000, which amount shall be
payable in two (2) equal installments on April 16, 2003 and April 16,
2004, and any such installment not paid when due shall bear interest
until paid at the rate equal to the greater of ten percent (10%) per
annum or three percent (3%) over the prime rate of a national bank
selected by Gilman. The obligations of Purchaser under the foregoing
sentence shall not constitute a release of Purchaser's obligation to
repurchase the Common Shares.
3. Seller's Rights as a Shareholder. At all times that Common
Shares are held in escrow by the Escrow Agent as contemplated hereby
and have not been repurchased by Purchaser's delivery of payment
therefor as provided in Section 2, Seller shall retain (and be
entitled to exercise) all rights of ownership incident thereto,
including, without limitation, the right to vote and to receive cash
or other distributions in respect of such Common Shares, except that
any distribution of shares of Common Stock shall be required to be
delivered to the Escrow Agent in accordance with the Escrow Agreement
and such shares be deemed added to the Common Shares and subject to
repurchase hereunder.
4. Election of Board of Directors.
(a) Until all the Common Shares have been purchased, and all
amounts due pursuant to the Loan have been paid to the Seller in full,
Leeds, Marks, Purchaser, and Seller shall use their respective best
efforts to cause the Board of Directors of Purchaser (the "Board") to
be comprised of an even number of directors, and at no time less than
four (4), with Seller entitled to designate persons as nominees for
one-half (1/2) of that number of positions and Leeds entitled to
- 3 -
<PAGE>
designate the remaining nominees. Each nominee designated by Seller
or Leeds, as the case may be, shall be reasonably acceptable to the
other. In the event of any vacancy on the Board arising for any
reason, the party who designated the director whose position has
become vacant shall be entitled to designate the person to become the
successor director. If either Seller or Leeds notifies the other in
writing that it wishes to remove a director whom it has designated,
the parties hereto shall cooperate in taking all action necessary to
effect the removal of such director as promptly as practicable.
(b) The parties agree to instruct their respective designees to
act in good faith and use their best efforts in discharging their
duties as a director of Purchaser.
5. Representations and Warranties of Seller. Seller represents
and warrants to, and agrees with, Purchaser as follows:
(a) Freedom from Encumbrances. Seller is the record and lawful
owner of the Shares. The Shares are free and clear of all liens,
charges, rights, pledges, hypothecations, and encumbrances of any kind
whatsoever in favor of any person.
(b) Organization, Power, Etc. Seller is a corporation duly
organized, validly existing, and in good standing under the laws of
the State of Delaware. Seller is duly qualified to conduct business
in all other states or jurisdictions in which the failure to be so
qualified would adversely affect Seller's ability to perform its
obligations hereunder. Seller has all requisite corporate power and
authority to carry on its business as now being conducted, and to
execute and deliver this Agreement and to perform its obligations
hereunder.
(c) Authorization of Agreement. The execution, delivery, and
performance of this Agreement by Seller and the consummation by it of
the transactions contemplated hereby have been duly and effectively
authorized by all requisite corporate action. This Agreement
constitutes the legal, valid, and binding obligation of Seller,
enforceable in accordance with its terms, subject to bankruptcy,
insolvency, and other laws of general applicability relating to or
affecting creditors' rights and to general equity principles.
(d) Effect of Agreement. Neither the execution and delivery by
Seller of this Agreement nor the consummation by it of the
transactions contemplated hereby will violate any provision of law,
the Certificate of Incorporation or By-laws of Seller, any judgment,
award, or decree, or any indenture, agreement, or other instrument to
which Seller is a party, or by which Seller or any of its properties
or assets is bound, or conflict with, result in a breach of, or
constitute (with due notice or lapse of time or both) a default under
any such indenture, agreement, or other instrument.
(e) No Brokers. No broker, agent, finder, consultant, or other
person has been retained by or has acted on behalf of Seller (other
than legal and accounting advisors), or is entitled to be paid based
upon any agreement or understanding made by Seller in connection with
- 4 -<PAGE>
the transactions contemplated by this Agreement. Purchaser shall have
no liability for any broker's fee, finder's fee, consultant's fee, or
similar third party remuneration by reason of any action of Seller.
6. Representations and Warranties of Purchaser. Purchaser
represents and warrants to, and agrees with, Seller as follows:
(a) Organization, Power, Etc. Purchaser has all requisite power
and authority to execute and deliver this Agreement and to perform its
obligations hereunder. Purchaser represents and warrants that it is
duly organized, validly existing, and in good standing under the laws
of the State of Florida and is duly qualified to conduct business in
all other states and jurisdictions in which the failure to be so
qualified would adversely affect its ability to perform its
obligations hereunder.
(b) Authorization of Agreement. The execution, delivery, and
performance of this Agreement by Purchaser and the consummation by it
of the transactions contemplated hereby have been duly and effectively
authorized by all requisite corporate action. This Agreement
constitutes the legal, valid, and binding obligation of Purchaser,
enforceable in accordance with its terms, subject to bankruptcy,
insolvency, and other laws of general applicability relating to or
affecting creditors' rights and to general equity principles.
(c) Effect of Agreement. Neither the execution and delivery by
Purchaser of this Agreement nor the consummation by it of the
transactions contemplated hereby will violate any provision of law, or
any organizational documents of Purchaser, any judgment, award, or
decree, or any indenture, agreement, or other instrument to which
Purchaser is a party, or by which Purchaser or any of its properties
or assets are bound, or conflict with, result in a breach of, or
constitute (with due notice or lapse of time or both) a default under
any such indenture, agreement, or other instrument.
(d) No Brokers. No broker, agent, finder, consultant, or other
person has been retained by or has acted on behalf of Purchaser (other
than legal and accounting advisors), or is entitled to be paid based
upon any agreement or understanding made by Purchaser in connection
with the transactions contemplated by this Agreement. Seller shall
have no liability for any broker's fee, finder's fee, consultant's
fee, or similar third party remuneration by reason of any action of
Purchaser.
7. General Provisions.
(a) Expenses, Etc. Whether or not the transactions contemplated
by this Agreement are consummated, neither of the parties hereto shall
have any obligation to pay any of the fees and expenses of the other
party incident to the negotiation of this Agreement or any expenses of
counsel, accountants, and other experts for the other party.
- 5 -
<PAGE>
(b) Notices. Any notice, consent, request, or other
communication to a party required or permitted hereunder shall be
deemed to have been duly given or made (a) on the date delivered in
person, (b) on the date indicated on the return receipt if mailed
postage prepaid, by certified or registered U.S. Mail, with return
receipt requested, (c) on the date transmitted by facsimile, if sent
by 5:00 P.M., Eastern Time, and confirmation of receipt thereof is
reflected or obtained, or (d) if sent by Federal Express or other
nationally recognized overnight courier service or overnight express
U.S. Mail, with service charges or postage prepaid, then on the next
business day after delivery to the courier service or U.S. Mail (in
time for and specifying next day delivery). In each case (except for
personal delivery) such notices, requests, demands, and other
communications shall be sent to a party at its address or facsimile
number as follows, or as otherwise designated by the party by notice
in accordance herewith:
If to Seller: Gilman CMG, Inc.
111 West 50th Street
New York, New York
Attn: John Faiella, President
Telecopy No.: (212) 582-7610
with a copy to: Stephen Cropper, Esq.
Gilman Investment Company
111 West 50th Street
New York, New York
Telecopy No.: (212) 582-7610
If to Purchaser: JW Charles Financial Services,
Inc.
1117 Perimeter Center West
Suite 500E
Atlanta, Georgia 30338
Attn: Joel E. Marks, Chief
Financial Officer
Telecopy No.: (404) 353-5873
If to Leeds: Marshall T. Leeds
c/o JW Charles Financial Services,
Inc.
980 North Federal Highway
Suite 310
Boca Raton, Florida 33432
Telecopy No.: (407) 338-2827
- 6 -
<PAGE>
If to Marks: Joel E. Marks
c/o JW Charles Financial Services,
Inc.
1117 Perimeter Center West
Suite 500E
Atlanta, Georgia 30338
Telecopy No.: (404) 353-5873
with a copy (in the case
of any of Purchaser, Leeds,
or Marks) to: W. Randy Eaddy, Esq.
Kilpatrick & Cody
1100 Peachtree Street
Suite 2800
Atlanta, Georgia 30309
Telecopy No.: (404) 815-6555
or such other address or facsimile number as any party hereto shall
have designated by notice in writing to the other party hereto.
(c) Applicable Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Florida.
(d) Binding Effect, Benefits. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors and assigns. Notwithstanding anything contained in this
Agreement to the contrary, nothing in this Agreement, expressed or
implied, is intended to confer on any person other than the parties
hereto or their respective successors and assigns, any rights,
remedies, obligations or liabilities under or by reason of this
Agreement.
(e) Severability. Each section of this Agreement, and any and
every provision therein, shall be severable from every other section
of this Agreement, and any and every provision thereof, and the
invalidity or unenforceability of any section herein or provision
thereof shall not affect the validity or enforceability of any other
section or provision or this Agreement.
(f) Counterparts and Headings. For the convenience of the
parties, this Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, but all of which together
shall constitute one and the same instrument, and it shall not be
necessary for the same counterpart of this Agreement to be signed by
all of the undersigned in order for the agreements set forth herein to
be binding upon all of the undersigned in accordance with the terms
hereof. The headings set out herein are for convenience of reference
only and shall not be deemed a part of this Agreement.
- 7 -
<PAGE>
(g) Further Documents and Actions. The parties hereby agree to
take such further actions and execute and deliver each to the other
such further documents, as may be necessary or convenient from time to
time to more effectively convey and transfer the Shares, carry out the
intent and purposes of this Agreement, and to establish and protect
the rights and remedies created or intended to be created hereunder.
(h) Entire Agreement. This Agreement constitutes the entire
agreement of the parties hereto with respect to the subject matter
hereof and supersedes all prior agreements and understandings, oral
and written, between the parties hereto with respect to the subject
matter hereof. This Agreement may not be modified or amended except
in writing signed by both parties.
IN WITNESS WHEREOF, this Stock Repurchase Agreement has been duly
executed and delivered by the parties hereto or their duly authorized
representatives as of the date first above written.
"Seller"
GILMAN CMG, INC.
By: /s/ John Faiella
---------------------------------
John Faiella, President
"Purchaser"
JW CHARLES FINANCIAL SERVICES,
INC.
By: /s/ Joel E. Marks
---------------------------------
Joel E. Marks, Vice Chairman and
Chief Financial Officer
Solely for purposes of Section 4, this Stock Repurchase Agreement
has been duly executed and delivered by the undersigned as of the date
first above written.
/s/ Marshall T. Leeds
----------------------------------------
MARSHALL T. LEEDS
/s/ Joel E. Marks
----------------------------------------
JOEL E. MARKS
<PAGE>
EXHIBIT A
ESCROW AGREEMENT
THIS ESCROW AGREEMENT is made and entered into as of this 15th
day of May, 1995, by and among JW CHARLES FINANCIAL SERVICES, INC., a
Florida corporation (the "Purchaser"), GILMAN CMG, INC., a Delaware
corporation ("Seller"), and NORTH AMERICAN TRANSFER CO. ("Escrow
Agent").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Seller and Purchaser have entered into that certain
Stock Repurchase Agreement, dated as of May 15, 1995 (the "Repurchase
Agreement"), pursuant to which Seller will sell and transfer to
Purchaser, and Purchaser will acquire from Seller, subject to the
terms and conditions set forth in such Repurchase Agreement, the
Shares (as defined below) (other capitalized terms used but not
otherwise defined herein shall have the respective meanings given in
the Repurchase Agreement);
WHEREAS, pursuant to the Repurchase Agreement, Seller is
delivering simultaneously herewith stock certificates representing an
aggregate of 1,915,849 shares (the "Shares") of common stock of
Purchaser, par value $.001 per share (the "Common Stock") to Escrow
Agent, accompanied by instruments of transfer duly executed by the
Seller in blank, (the "Escrow Shares"), and until Purchaser has made
certain payments to Seller causing the delivery of the Shares to
Purchaser, as provided thereunder, they shall be held in escrow to
facilitate such purchase and sale under the Repurchase Agreement;
WHEREAS, Purchaser will make certain payments to Seller to
repurchase the Shares pursuant to the Repurchase Agreement after the
date hereof, at which time certificates representing the Shares so
purchased are to be delivered to Purchaser;
WHEREAS, Purchaser and Seller have entered into this Agreement to
acknowledge the creation of the Escrow Shares hereunder and to make
certain agreements with respect to the Shares; and
WHEREAS, Escrow Agent is willing to accept the Escrow Shares and
to hold and distribute the Escrow Shares in accordance with the terms
and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises of this
Agreement and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree
as follows:
1. Appointment of Escrow Agent. Purchaser and Seller hereby
designate and appoint Escrow Agent to serve as escrow agent, and
Escrow Agent hereby confirms its agreement to act as escrow agent upon
the terms, conditions, and provisions of this Agreement.
2. Term. The term of this Escrow Agreement shall commence on
the date hereof and shall terminate upon the final delivery by Escrow<PAGE>
Agent to Purchaser, or other final disposition in accordance herewith,
of all the Escrow Shares held by the Escrow Agent pursuant to the
terms and conditions hereof.
3. Creation of Escrow.
(a) Contemporaneously herewith, Seller has delivered to Escrow
Agent the Escrow Shares. Escrow Agent hereby acknowledges receipt of
the Shares and agrees to hold, administer, and distribute the Escrow
Shares in accordance with the terms of this Agreement and not permit
any withdrawal thereof except pursuant to the terms hereof.
(b) Seller shall deliver, or caused to be delivered, to Escrow
Agent (i) any shares of Common Stock received by it in a distribution
with respect to the Shares through a stock split, stock dividend,
reclassification, or other transaction, and the same shall thereupon
become and constitute a part of the Escrow Shares, and (ii) any
instruments necessary for Escrow Agent to transfer from time to time
any of the Escrow Shares as payment therefor is made by Purchaser,
including, but not by way of limitation, additional blank stock powers
duly executed by Seller. The Escrow Shares are to be held,
administered, and distributed by the Escrow Agent as provided herein.
4. Rights of Seller. At all times that Escrow Shares are held
in escrow by the Escrow Agent as contemplated hereby and have not been
acquired by Purchaser's delivery of payment therefor as provided in
Section 2 of the Repurchase Agreement, Seller shall retain (and be
entitled to exercise) all rights of ownership incident thereto,
including, without limitation, the right to vote and to receive cash
or other distributions in respect of such Escrow Shares, except that
any distribution of shares of Common Stock shall be required to be
delivered to Escrow Agent in accordance with the terms herein and such
shares shall be deemed added to the Escrow Shares and subject to
repurchase in accordance with the Repurchase Agreement.
5. Disposition of Escrow Shares. Escrow Agent shall deliver to
Purchaser certificates representing the Escrow Shares in such amount
as is specified in any Notice of Release received by Escrow Agent.
For purposes of this Agreement, "Notice of Release" means a joint
written instruction from Purchaser and Seller, specifying the
disposition to be made of the Escrow Shares or any portion thereof.
Escrow Agent shall take all lawful actions that may be necessary to
effect such delivery as promptly as practicable, including providing
instructions to transfer agents or registrars respecting the
cancellation or reissuance of stock certificates so that the
appropriate numbers of Shares may be delivered to Purchaser and the
residual Shares returned to escrow hereunder.
6. Escrow Agent.
(a) The duties and responsibilities of Escrow Agent hereunder
shall be limited to those expressly set forth in this Escrow
Agreement, and Escrow Agent shall not be bound in any way by any other
contract or agreement between Seller and Purchaser, except to refer to
- 2 -
<PAGE>
the Repurchase Agreement for definitional purposes only, whether or
not Escrow Agent has knowledge of any such contract or agreement or of
the terms or conditions thereof.
(b) Escrow Agent shall not be liable to anyone for any damages,
losses, or expenses incurred as a result of any act or omission of
Escrow Agent, unless such damages, losses, or expenses are caused by
Escrow Agent's willful misconduct or gross negligence. Accordingly,
Escrow Agent shall not incur any such liability with respect to (i)
any action taken or omitted in good faith upon the advice of counsel
for Escrow Agent given with respect to any question relating to the
duties and responsibilities of Escrow Agent under this Escrow
Agreement or (ii) any action taken or omitted in reliance upon any
instrument, including any written notice or instruction provided for
herein, not only as to its due execution by an authorized person and
as to the validity and effectiveness of such instrument, but also as
to the truth and accuracy of any information contained therein that
Escrow Agent shall in good faith believe to be genuine, to have been
signed by a proper person or persons and to conform to the provisions
of this Escrow Agreement.
(c) In the event of a dispute between any of the parties hereto
sufficient in the discretion of Escrow Agent to justify its doing so,
Escrow Agent shall be entitled to tender the Escrow Shares into the
registry or custody of any court of competent jurisdiction, to
initiate such legal proceedings as it deems appropriate, and thereupon
to be discharged from all further duties and liabilities under this
Escrow Agreement. Any such legal action may be brought in any such
court as Escrow Agent shall determine to have jurisdiction over the
Escrow Shares. The filing of any such legal proceedings shall not
deprive Escrow Agent of its compensation hereunder earned prior to
such filing.
(d) In the event all or any part of the Escrow Shares shall be
attached, garnished or levied upon pursuant to any court order, or the
delivery thereof shall be stayed or enjoined by a court order, or any
other order, judgment, or decree shall be made or entered by any court
affecting the Escrow Shares, or any part thereof, or any act of Escrow
Agent, Escrow Agent is hereby expressly authorized to obey and comply
with all final writs, orders, judgments, or decrees so entered or
issued by any court, without the necessity of inquiring whether such
court has jurisdiction; and, if Escrow Agent obeys or complies with
any such writ, order, judgment, or decree, it shall not be liable to
any of the parties hereto or to any other person by reason of such
compliance.
(e) Escrow Agent shall be under no duty to take any legal action
in connection with this Escrow Agreement or towards its enforcement,
or to appear in, prosecute or defend any action or legal proceeding
that would result in or might require it to incur any costs, expenses,
losses, or liability, unless and until it shall be indemnified with
respect thereto in accordance with subparagraph (f) of this Section.
(f) Seller and Purchaser, jointly and severally, hereby agree to
indemnify and hold harmless Escrow Agent against any and all costs,
losses, claims, damages, disbursements, liabilities, and expenses,
including reasonable costs of investigation, court costs, and
attorney's
- 3 -
<PAGE>
fees, which may be imposed upon or incurred by Escrow Agent in
connection with its acceptance of, or appointment as, Escrow Agent
hereunder, or in connection with the performance of its duties
hereunder, including any litigation arising out of this Escrow Agree-
ment or involving the subject matter hereof; provided, however, that
said indemnity shall not cover costs, losses, claims, damages,
disbursements, liabilities, and expenses arising out of Escrow Agent's
willful misconduct or gross negligence.
(g) If at any time any attempt should be made to modify this
Escrow Agreement in a manner that would increase the duties and
responsibilities of Escrow Agent, or in any manner that Escrow Agent
shall reasonably deem undesirable, or at any other time, Escrow Agent
may resign by notifying the other parties hereto by certified mail in
accordance with Section 9 below. From the date upon which such notice
is received by both Seller and Purchaser until the earlier of (i) the
acceptance by a successor escrow agent as shall be appointed in
accordance with Section 8 below; or (ii) sixty (60) days following the
date upon which notice was mailed, Escrow Agent's sole obligation
hereunder shall be to perform its duties hereunder in accordance with
the terms of this Escrow Agreement prior to any attempted modification
hereof.
7. Escrow Agent's Fees and Expenses. The reasonable
compensation of the Escrow Agent as set forth in Schedule A hereto and
all expenses, disbursements, and advances (including reasonable
attorneys' fees) incurred in carrying out Escrow Agent's duties
hereunder (the "Escrow Agent's Fees") shall be paid equally by
Purchaser and Seller.
8. Resignation by or Termination of the Escrow Agent. The
Escrow Agent may resign as such by delivering written notice to such
effect at least 30 days prior to the effective date of such
resignation to Seller and Purchaser. Seller and Purchaser, acting
jointly, may terminate the Escrow Agent from its position as such by
delivering written notice to the Escrow Agent to such effect, executed
by Seller and Purchaser, at least 30 days prior to the effective date
of such termination (unless such termination is as a result of the
Escrow Agent's breach of its obligations hereunder, in which case the
effective date of such termination shall be any date specified in such
notice). In the event of such resignation by or termination of the
Escrow Agent, a successor Escrow Agent shall be appointed by mutual
agreement among Seller and Purchaser, and the Escrow Agent which has
been so terminated or has so resigned shall promptly deliver to the
successor Escrow Agent the entire Escrow Shares (together with copies
of all records pertaining thereto) upon presentation of evidence
reasonably satisfactory to it of the appointment and authorization of
such successor Escrow Agent by Seller and Purchaser. From and after
the appointment of a successor Escrow Agent pursuant to this section,
all references herein to the Escrow Agent shall be deemed to be to
such successor Escrow Agent. Should Seller and Purchaser fail to
appoint a successor Escrow Agent within 30 days of the effective date
of any resignation or termination pursuant to this section, then
Escrow Agent may institute suit in a court of competent jurisdiction
to have a successor Escrow Agent appointed.
- 4 -
<PAGE>
9. General Provisions.
(a) Assignment. The rights and obligations of Purchaser under
this Agreement shall inure to the benefit of and shall be binding upon
the successors and assigns of Purchaser. Neither this Agreement nor
any right or benefit hereunder may be assigned or transferred by
Seller without the prior written consent of Purchaser.
(b) Severability. Each section of this Agreement, and any and
every provision therein, shall be severable from every other section
of this Agreement, and any and every provision thereof, and the
invalidity or unenforceability of any section herein or provision
thereof shall not affect the validity or enforceability of any other
section or provision or this Agreement.
(c) Construction. This Agreement shall be governed by and
construed in accordance with the laws of the State of Florida.
(d) Notice. Any notice, consent, request, or other
communication to a party required or permitted hereunder shall be
deemed to have been duly given or made (a) on the date delivered in
person, (b) on the date indicated on the return receipt if mailed
postage prepaid, by certified or registered U.S. Mail, with return
receipt requested, (c) on the date transmitted by facsimile, if sent
by 5:00 P.M., Eastern Time, and confirmation of receipt thereof is
reflected or obtained, or (d) if sent by Federal Express or other
nationally recognized overnight courier service or overnight express
U.S. Mail, with service charges or postage prepaid, then on the next
business day after delivery to the courier service or U.S. Mail (in
time for and specifying next day delivery). In each case (except for
personal delivery) such notices, requests, demands, and other
communications shall be sent to a party at its address or facsimile
number as follows, or as otherwise designated by the party by notice
in accordance herewith:
If to Seller: Gilman CMG, Inc.
111 West 50th Street
New York, New York
Attn: John Faiella
Telecopy No.: (212) 582-7610
with a copy to: Stephen Cropper, Esq.
Gilman Investment Company
111 West 50th Street
New York, New York
Telecopy No.: (212) 582-7610
- 5 -
<PAGE>
If to Purchaser: JW Charles Financial Services, Inc.
1117 Perimeter Center West
Suite 500E
Atlanta, Georgia 30338
Attn: Joel E. Marks, Chief
Financial Officer
Telecopy No.: (404) 394-2919
with a copy to: W. Randy Eaddy, Esq.
Kilpatrick & Cody
1100 Peachtree Street
Suite 2800
Atlanta, Georgia 30309
Telecopy No.: (404) 815-6555
If to the Escrow Agent: North American Transfer Company
147 West Merrick Road
Freeport, New York 11520
Attn: Mildred Rostolder
Telecopy: (516) 379-8525
or such other address or addresses as any party hereto shall have
designated by notice in writing to the other party hereto.
(e) Multiple Counterparts. This Agreement may be executed
in one or more counterparts, each of which shall be deemed to be an
original, but all of which together shall constitute one and the same
instrument, and it shall not be necessary for the same counterpart of
this Agreement to be signed by all of the undersigned in order for the
agreements set forth herein to be binding upon all of the undersigned
in accordance with the terms hereof.
(f) Captions. Captions and Section headings used herein
are for convenience only and are not a part of this Agreement and
shall not be used in construing it.
(g) Further Assurances. Each of the parties hereto shall
cooperate with the Escrow Agent and deliver to the Escrow Agent such
additional information and documents as the Escrow Agent shall
reasonably request in the performance of its obligations under this
Escrow Agreement, including such documents as it shall reasonably
request to evidence termination of this Escrow Agreement and to
evidence the consent of the parties hereto to the final distribution
of the Escrow Shares in accordance with the terms of this Escrow
Agreement.
(h) Entire Agreement. This Agreement embodies the entire
agreement of the parties hereto relating to the subject matter hereof,
and all prior agreements, understandings, and negotiations are merged
therein and superseded hereby.
- 6 -
<PAGE>
IN WITNESS WHEREOF, the parties have each executed and
delivered this Agreement as of the date first above written.
"Seller"
GILMAN CMG, INC.
By: /s/ John Faiella
-------------------------------
John Faiella, President
"Purchaser"
JW CHARLES FINANCIAL SERVICES, INC.
By: /s/ Joel E. Marks
-----------------------------------
Joel E. Marks, Vice Chairman and
Chief Financial Officer
"Escrow Agent"
NORTH AMERICAN TRANSFER COMPANY
By:__/s/________________________________
Name:______________________________
Title:_____________________________
- 7 -<PAGE>
SCHEDULE A
ESCROW AGENT'S FEES
The Escrow Agent's fee shall be $1,500 for the first
calendar year commencing on the date hereof and $1,000 for each
subsequent calendar year or part thereof, plus all expenses,
disbursements, and advances (including reasonable attorneys' fees)
incurred by Escrow Agent in carrying out Escrow Agent's duties under
the Escrow Agreement.<PAGE>
<PAGE>
LOAN AGREEMENT
Between
GILMAN CMG, INC.
and
JW CHARLES FINANCIAL SERVICES, INC.
Dated: May 15, 1995
6960WRE.4<PAGE>
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I - DEFINITIONS . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II - TERM OF LOAN; CLOSING . . . . . . . . . . . . . . . 3
Section 2.1 Conversion of Existing Notes . . . . . . . . 3
Section 2.2 Interest Rate and Interest and Principal
Payment Schedule . . . . . . . . . . . . . . 3
Section 2.3 Late Charge; Default Interest Rate . . . . . 3
Section 2.4 Intent Not to Commit Usury . . . . . . . . . 3
Section 2.5 Closing . . . . . . . . . . . . . . . . . . . 3
ARTICLE III - BORROWER'S REPRESENTATIONS AND WARRANTIES . . . . . 4
Section 3.1 Organization and Standing . . . . . . . . . . 4
Section 3.2 Corporate Power and Authority . . . . . . . . 4
Section 3.3 Valid and Binding Obligation . . . . . . . . 4
Section 3.4 No Legal Bar . . . . . . . . . . . . . . . . 5
Section 3.5 Litigation . . . . . . . . . . . . . . . . . 5
Section 3.6 Consent or Filing . . . . . . . . . . . . . . 5
Section 3.7 Disclosure . . . . . . . . . . . . . . . . . . 5
ARTICLE IV - CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . 5
Section 4.1 Correctness of Warranties . . . . . . . . . . . 6
Section 4.2 Corporate Documents . . . . . . . . . . . . . . 6
Section 4.3 Certificate of Resolutions and Incumbency . . . 6
ARTICLE V - BORROWER'S COVENANTS . . . . . . . . . . . . . . . . . 6
Section 5.1 Corporate Existence and Qualification . . . . . 6
Section 5.2 Financial Statements; SEC Reports . . . . . . . 7
Section 5.3 Taxes and Claims . . . . . . . . . . . . . . . 7
Section 5.4 Books and Records . . . . . . . . . . . . . . . 7
Section 5.5 Inspection by Lender; Audits . . . . . . . . . 7
Section 5.6 Pay Indebtedness to Lender and Perform Other
Covenants . . . . . . . . . . . . . . . . . . . 8
Section 5.7 Litigation . . . . . . . . . . . . . . . . . . 8
Section 5.8 Defaults or Assessments . . . . . . . . . . . . 8
Section 5.9 Change of Name, Principal Place of Business,
Etc. . . . . . . . . . . . . . . . . . . . . . 8
Section 5.10 Indebtedness . . . . . . . . . . . . . . . . . 8
6960WRE.4 -i-
<PAGE>
ARTICLE VI - EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . 9
Section 6.1 Immediate Acceleration . . . . . . . . . . . . 9
Section 6.2 Discretionary Acceleration . . . . . . . . . 10
Section 6.3 Waiver of Default . . . . . . . . . . . . . . 11
ARTICLE VII - REMEDIES FOR DEFAULT . . . . . . . . . . . . . . . 12
Section 7.1 Action for Enforcement . . . . . . . . . . . 12
Section 7.2 Rights and Remedies Cumulative . . . . . . . 12
Section 7.3 Rights and Remedies Not Waived . . . . . . . 12
ARTICLE VIII - MISCELLANEOUS . . . . . . . . . . . . . . . . . . 12
Section 8.1 Notices . . . . . . . . . . . . . . . . . . . 12
Section 8.2 Further Assurances . . . . . . . . . . . . . 13
Section 8.3 Severability . . . . . . . . . . . . . . . . 13
Section 8.4 Counterparts . . . . . . . . . . . . . . . . 14
Section 8.5 Interpretation . . . . . . . . . . . . . . . 14
Section 8.6 Conflict . . . . . . . . . . . . . . . . . . 14
Section 8.7 Headings . . . . . . . . . . . . . . . . . . 14
Section 8.8 Jurisdiction and Venue . . . . . . . . . . . 14
Section 8.9 Written Amendments, Etc. Only . . . . . . . . 15
Section 8.10 Governing Law; Benefit . . . . . . . . . . . 15
Section 8.11 Enforcement Costs . . . . . . . . . . . . . . 15
Section 8.12 WAIVER OF JURY TRIAL . . . . . . . . . . . . 15
Section 8.13 Authorized Representatives of Lender . . . . 16
6960WRE.4 -ii-
<PAGE>
<PAGE>
LOAN AGREEMENT
THIS LOAN AGREEMENT is made and effective this 15th day of May
1995, by and between GILMAN CMG, INC., a Delaware corporation
(hereinafter "Lender"), and JW CHARLES FINANCIAL SERVICES, INC., a
Florida corporation (hereinafter "Borrower").
WITNESSETH:
WHEREAS, Borrower has two outstanding loans from Lender, each in
the principal amount of $2,500,000 and each evidenced by a promissory
note of Borrower that is now otherwise due and payable (the "Existing
Notes"), and Borrower desires that Lender convert such loans to a
single $5,000,000 term loan (the "Loan") and provide for repayment of
the Loan in installments over a five-year term beginning with the
first business day after the date hereof; and
WHEREAS, Lender is willing to make the Loan on the terms and
conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual promises,
conditions, representations and warranties hereinafter set forth and
for other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
As used in this Loan Agreement, the Exhibits and Schedules
attached hereto, if any, and any Loan Document executed incidental
thereto, the following terms shall have the following meanings unless
the context otherwise requires:
"Affiliate" means, with respect to any person, any other person
who controls, is controlled by, or is under common control with, the
subject person, whether a result of stock or other security ownership,
contract rights, or one or more positions held. Without limiting the
foregoing, any person who is a director, general partner, executive
officer (as defined for purposes of Regulation S-K under the
Securities Exchange Act of 1934, as amended), or beneficial owner of
securities representing 25% or more of the outstanding voting power
(with respect to the election of directors or persons who constitute
the governing body) of an entity is deemed to be an Affiliate of the
entity, and the entity is deemed to be an Affiliate of such person.
"Agreement" means this Loan Agreement, as the same may be
amended, supplemented, or otherwise modified from time to time in
writing in accordance with the provisions hereof.
6960WRE.4 -1-
<PAGE>
"Default" means any of the events specified in Sections 6.1 and
6.2 herein, whether or not any requirement for the giving of notice,
the lapse of time, or both has been satisfied.
"Event of Default" means any of the events specified in Sections
6.1 and 6.2 hereof, provided that any requirement for the giving of
notice, the lapse of time, or both, or any other condition, has been
satisfied.
"GAAP" means generally accepted accounting principles as
applicable from time to time in the United States; each requirement
herein of compliance with GAAP means compliance on a consistent
application basis from period to period and with respect to the same
or similar items for which GAAP might otherwise permit alternative
treatments.
"Loan" means the aggregate $5,000,000 principal amount, upon
conversion of the Existing Notes as described in Section 2.1, deemed
advanced by Lender to Borrower pursuant to this Agreement and
evidenced by the Term Note.
"Loan Documents" means this Agreement, the Term Note, and all
other documents, agreements, instruments, or certificates delivered to
Lender in connection with the Loan (whether at, prior to, or after the
Closing).
"Principal Subsidiaries" means the three Subsidiaries of
Borrower, and any successors thereto, identified in Section 5.1.
"Requirement of Law" means the Restated Articles of Incorporation
and Bylaws or other organizational or governing documents of a given
entity, and any law, treaty, rule or regulation, or determination of
any arbitrator or court or other governmental authority, in each case
applicable to or binding upon such entity or any of its property or to
which such entity or any of its property is subject.
"Subsidiary", as to one corporation or entity, means a second
corporation or other entity of which shares of stock or other
ownership interests having voting power (other than stock or other
ownership interests having such power only by reason of the happening
of a contingency) to elect a majority of the directors of such
corporation, or other persons performing similar functions for such
entity, are owned, directly or indirectly, by the first corporation or
entity.
"Term Note" means the instrument, in substantially the form of
Exhibit A hereto, from Borrower evidencing the Loan.
6960WRE.4 -2-
<PAGE>
ARTICLE II
TERMS OF LOAN; CLOSING
Section 2.1 Conversion of Existing Notes
At the Closing, (a) Lender shall cancel the Existing Notes and
the theretofore outstanding aggregate principal amount of $5,000,000
under the Existing Notes shall be deemed converted into and shall
constitute the Loan, and (b) Borrower shall execute and deliver to
Lender the Term Note in substantially the form of Exhibit A hereto.
Section 2.2 Interest Rate and Interest and Principal Payment
Schedule
The Loan shall bear interest on the principal amount outstanding
from time to time at the rate of ten percent (10%) per annum,
calculated on the basis of a 365 or 366-day year, as applicable, for
the actual number of days elapsed. Interest shall be paid quarterly,
in arrears, on the unpaid principal balance from time to time
outstanding, on the 15th day of each January, April, July, and
October, commencing July 15, 1995. The principal of the Loan shall be
paid $1,000,000 on the first business day after the date hereof, and
thereafter in installments of $250,000 on the 15th day of each July,
October, January and April until paid in full. The Loan may be
prepaid from time to time, in whole or in part, without penalty or
premium.
Section 2.3 Late Charge; Default Interest Rate
A late charge equal to three percent (3%) of any installment of
interest or principal that is not paid within fifteen (15) days of the
date when the same becomes due must be included with any such late
payment. At any time or times during which an Event of Default shall
then exist, Lender shall be entitled to declare that the interest rate
under the Term Note shall be equal to the maximum rate of interest
permitted by applicable law.
Section 2.4 Intent Not to Commit Usury
Borrower does not intend or expect to pay, nor does Lender intend
or expect to charge or collect, any interest under the Term Note, this
Agreement, or any other instrument executed in connection herewith,
greater than the maximum legal rate of interest that may be charged
under applicable law. Should any event result in the computation or
earning of interest in excess of such maximum legal rate, any and all
such excess shall be refunded to Borrower. Notwithstanding anything
to the contrary contained in this Agreement, the Term Note, or any
other instrument delivered in connection herewith, the amount of
interest due under the terms thereof shall in no event exceed the
maximum amount of interest permitted to be charged by law.
6960WRE.4 -3-
<PAGE>
Section 2.5 Closing
Subject to Borrower's satisfaction of (or Lender's waiver of) the
conditions set forth in Article IV, the Loan shall be made by Lender,
and the Term Note shall be delivered by Borrower, all as contemplated
by Section 2.1 (the "Closing") as promptly as practicable following
the execution and delivery of this Agreement by the parties, and may
occur simultaneously therewith (whenever so occurring, the "Closing
Date"). The Closing shall take place at 11:00 A.M., Eastern Time, at
the executive officers of Borrower at Suite 320, 980 North Federal
Highway, Boca Raton, Florida 33432, or at such other time and place
(and in such logistical manner) as Borrower and Lender shall mutually
agree, including via teleconference with initial deliveries of
documentation by telecopy transmissions to be followed mail or courier
deliveries of corresponding original versions of such documentation.
On the Closing Date, (a) Lender shall mark the Existing Notes
"CANCELLED" and deliver the same to Borrower or its authorized
representative; and (b) Borrower shall execute and deliver the Term
Note to Lender or its authorized representative.
ARTICLE III
BORROWER'S REPRESENTATIONS AND WARRANTIES
To induce Lender to enter into this Agreement, Borrower makes the
following representations and warranties, which shall be deemed to be
continuing representations and warranties so long as the Term Note
remains unpaid:
Section 3.1 Organization and Standing
Each of Borrower and its Subsidiaries is a corporation duly
organized, validly existing, and in good standing under the laws of
its state of incorporation and is duly qualified to do business in
each jurisdiction in which the conduct of its business requires such
qualification and would be materially and adversely affected in the
absence thereof. Borrower and each of its Subsidiaries is in
compliance with all applicable law and regulations governing the
conduct of their respective businesses and governing consummation of
the transactions contemplated herein, except for any such failures to
so comply that will or do not, singly or in the aggregate, have a
material adverse effect on the business, assets, financial conditions,
operations, or prospects of Borrower and the Subsidiaries taken as a
whole.
Section 3.2 Corporate Power and Authority
The execution, delivery, and performance hereof by Borrower are
within its corporate powers, have been duly authorized by all
necessary corporate action, and are not in contravention of law or the
terms of its Restated Articles of Incorporation or Bylaws or any
amendment thereto, or any indenture, agreement, or undertaking to
which Borrower is a party or by which it is bound.
6960WRE.4 -4-
<PAGE>
Section 3.3 Valid and Binding Obligation
This Agreement and the Term Note, constitute (or will constitute
when executed) the legal, valid, and binding obligations of Borrower,
enforceable in accordance with their respective terms, subject to
applicable bankruptcy and insolvency laws and laws affecting
creditors' rights and the enforcement thereof generally.
Section 3.4 No Legal Bar
The execution, delivery, and performance of this Agreement, the
other Loan Documents, and the borrowing contemplated by this Agreement
do not and will not violate any Requirement of Law or any contractual
obligation of Borrower and will not result in, or require, the
creation or imposition of any lien on any of its properties or
revenues pursuant to any Requirement of Law or any contractual
obligation, which violation or lien would have a material adverse
effect on the business, assets, financial condition, operations, or
prospects of Borrower.
Section 3.5 Litigation
There is not now pending against Borrower or any of its
Subsidiaries, nor to the knowledge of the officers of Borrower or any
of its Subsidiaries is there threatened, any litigation,
investigation, or proceeding the outcome of which would, in any case
or in the aggregate, materially and adversely affect the assets or
financial condition of Borrower and any of its Subsidiaries, taken as
a whole, or seriously affect their continued material operations,
except as disclosed in public filings of Borrower pursuant to Section
13 of the Securities Exchange Act of 1934, as amended, or as otherwise
specifically disclosed to Lender in writing.
Section 3.6 Consent or Filing
No consent, approval, or authorization of, or registration,
declaration, or filing with, any court, any governmental body or
authority, or any other person or entity is required in connection
with the valid execution, delivery, or performance of this Agreement
or any document required by this Agreement or in connection with any
of the transactions contemplated thereby, except for the possible
consent of holders of a majority of Borrower's outstanding shares of
Series A Special Distribution Stock.
Section 3.7 Disclosure
No representation or warranty made by Borrower in this Agreement,
in any of the other Loan Documents, or in any other document furnished
in connection herewith or therewith contains any misrepresentation of
a material fact or omits to state any material fact necessary to make
the statements herein or therein not misleading with respect to any
material fact. There is no fact known to the Borrower (and not known
to Lender) that materially and adversely affects, or that in the
future could reasonably be expected to materially and adversely
affect, the business, assets, financial condition, operations, or
prospects of Borrower.
6960WRE.4 -5-
<PAGE>
ARTICLE IV
CONDITIONS PRECEDENT
The obligation of Lender to consummate the transactions
contemplated hereby shall be subject to the satisfaction of the
following conditions precedent.
Section 4.1 Correctness of Warranties
All representations and warranties contained herein or otherwise
made to Lender in connection herewith shall be true and correct in all
material respects on the Closing Date.
Section 4.2 Corporate Documents
Lender shall have received true and correct copies, certified as
to authenticity by an officer of Borrower, of the Restated Articles of
Incorporation and the Bylaws of Borrower and any amendments thereto, a
current Certificate of Good Standing from Borrower's state of
incorporation and from any state in which the Borrower is qualified to
do business, and such other certificates, documents, or instruments as
may be reasonably requested by Lender. Lender hereby acknowledges
that it has received sufficiently recent copies of all of the above.
Section 4.3 Certificate of Resolutions and Incumbency
The Board of Directors of Borrower shall have adopted resolutions
authorizing the execution and delivery of all Loan Documents and the
taking of all actions called for by this Agreement, and Borrower shall
have furnished to Lender copies of such resolutions, certified by the
Secretary or an Assistant Secretary.
ARTICLE V
BORROWER'S COVENANTS
Borrower covenants and agrees that, until the Term Note, together
with interest and all other indebtedness to Lender under the terms of
this Agreement, are paid in full, unless specifically waived by Lender
in writing:
Section 5.1 Corporate Existence and Qualification
Borrower shall do, or cause to be done, all things necessary to
preserve, renew, and keep in full force and effect its corporate
existence and the corporate existence of its wholly-owned Subsidiaries
Corporate Securities Group, Inc., JW Charles Securities, Inc., and JW
Charles Clearing Corp. (collectively, the "Principal Subsidiaries")
and their respective rights, licenses, and permits; shall comply, and
cause the Principal Subsidiaries to comply, with all material laws
applicable to it, operate it and the Principal Subsidiaries' business
in a proper manner and substantially as presently operated or proposed
6960WRE.4 -6-
<PAGE>
to be operated; and at all times shall maintain, preserve, and protect
its franchises and trade names and preserve its property used or
useful in the conduct of its or the Principal Subsidiaries' business,
and keep the same in good repair, working order, and condition, and
from time to time make, or cause to be made, all needful and proper
repairs, renewals, replacements, betterments, and improvements
thereto, so that the business carried on in connection therewith may
be properly and advantageously conducted at all times.
Section 5.2 Financial Statements; SEC Reports
Borrower shall keep its books of account in accordance with GAAP
and shall furnish to Lender within 120 days after the close of its
fiscal year a balance sheet as of the close of such year, and
statements of income and retained earnings and statements of cash
flows for such year. Such statements shall be consolidated statements
of Borrower and its Subsidiaries and shall be audited and certified by
Borrower's independent public accountants. Within 60 days after each
fiscal quarter, Borrower shall furnish to Lender a balance sheet and
income statement certified by the chief financial officer of Borrower.
Borrower, with reasonable promptness, shall furnish to Lender such
other data as Lender may reasonably request and will at all times and
from time to time permit Lender by or through any of its officers,
authorized agents, employees, attorneys, or accountants to inspect and
make extracts from Borrower's books and records.
Borrower shall also furnish Lender, within five (5) days of the
filing or delivery described below, a copy of all reports on Forms 10-
K, 10-Q, and 8-K, and of all proxy statements and annual or quarterly
reports to shareholders, that Borrower files with (or is required to
deliver to) the Securities and Exchange Commission pursuant to
applicable provisions of the Securities Exchange Act of 1934, as
amended, or regulations promulgated thereunder.
Section 5.3 Taxes and Claims
Borrower shall promptly pay and discharge and shall cause its
Subsidiaries to promptly pay and discharge: (a) all taxes,
assessments, and governmental charges upon or against Borrower, its
Subsidiaries, or their assets, including payroll taxes, prior to the
date on which penalties attach thereto, unless and to the extent that
such taxes are being diligently contested in good faith and by
appropriate proceedings and appropriate reserves therefor have been
established; and (b) all lawful claims, whether for labor, materials,
supplies, services, or anything else that reasonably might or could,
if unpaid, become a lien or charge upon the properties or assets of
Borrower or its Subsidiaries unless and to the extent only that the
same are transferred to bond, being diligently contested in good faith
and by appropriate proceedings, and appropriate reserves therefor have
been established.
Section 5.4 Books and Records
Borrower shall: (a) maintain at all times true and complete
books, records, and accounts in which true and correct entries shall
be made of its transactions in accordance with GAAP; and (b) by means
of appropriate quarterly entries reflected in its accounts and in all
financial statements furnished pursuant to Section 5.2, establish
6960WRE.4 -7-
<PAGE>
proper liabilities and reserves for all taxes and proper reserves for
depreciation, renewal and replacement, obsolescence, and amortization
of its properties and bad debts, all in accordance with GAAP.
Section 5.5 Inspection by Lender; Audits
Borrower shall allow any authorized representative of Lender to
visit and inspect any of the properties of Borrower and its
Subsidiaries, to examine the books of account and other records and
files of Borrower or any of its Subsidiaries, to make copies thereof
and to discuss the affairs, business, finances, and accounts of
Borrower or any of its Subsidiaries with its officers and employees,
all at such reasonable times and as often as Lender may reasonably
request.
Section 5.6 Pay Indebtedness to Lender and Perform Other
Covenants
Borrower shall make full and timely payments of the principal of
and interest on the Term Note and all other indebtedness of Borrower
to Lender hereunder, whether now existing or hereafter arising, and
duly comply with all the terms and covenants contained in each of the
instruments and documents given to Lender pursuant to this Agreement
at the times and places and in the manner set forth herein.
Section 5.7 Litigation
Borrower will promptly notify Lender upon the commencement of any
action, suit, claim, counterclaim, or proceeding against or
investigation of Borrower or any of its Subsidiaries where the damage
claim is in excess of $500,000 or where the litigation may materially
and adversely affect the Borrower's or any of its Subsidiaries'
business (except when the alleged liability is fully covered by
insurance, excluding application of any standard deductible). If any
such action, suit, claim, counterclaim, or proceeding (where the
alleged liability is not so covered by insurance) involves an amount
in excess of $1,000,000 or where the litigation may materially and
adversely affect Borrower's or any of its Subsidiaries' business,
Borrower shall also provide Lender, upon request, with an opinion of
counsel concerning the litigation or investigation and the probable
outcome thereof.
Section 5.8 Defaults or Assessments
Borrower shall promptly notify Lender in writing of: (a) any
material assessment by any taxing authority for unpaid taxes as soon
as Borrower has knowledge thereof and shall supply Lender with copies
of all notices from the Internal Revenue Service or any other taxing
authority with respect to any such matter; and (b) any alleged default
by Borrower or any of its Subsidiaries in the performance of (or any
material modification of) any of the terms or conditions contained in
any agreement, mortgage, indenture, or instrument to which Borrower or
any of its Subsidiaries is a party or which is binding upon Borrower,
and of any default by Borrower in the payment of any of its
indebtedness which default may, singly or in the aggregate, have a
6960WRE.4 -8-
<PAGE>
material adverse effect on the business, assets, financial condition,
operations, or prospects of Borrower and its Subsidiaries taken as a
whole.
Section 5.9 Change of Name, Principal Place of Business, Etc.
Borrower shall notify Lender immediately of any change in the
name of Borrower, the principal place of business of Borrower, the
office where the books and records of Borrower are kept, or any change
in the registered agent of Borrower for the purpose of service of
process.
Section 5.10 Indebtedness
Neither Borrower nor any of its Subsidiaries, without prior
written consent of Lender, will create, incur, assume, or suffer to
exist liability for, contingently or otherwise (including, without
limitation, any guaranty of the indebtedness of another person), any
indebtedness for borrowed money if Borrower's consolidated debt to
equity ratio, determined in accordance with GAAP but after giving
effect to such indebtedness and (whether or not in accordance with
GAAP) treating any guaranty of the indebtedness of another person as
an indebtedness of Borrower in the amount covered by such guaranty,
shall be greater than 3 to 1, except that the following shall be
permitted in any event and shall not be included in the calculation of
the above debt to equity ratio:
(a) indebtedness of Borrower to Lender;
(b) unsecured current liabilities incurred with trade creditors
in the ordinary course of business other than those which are for
money borrowed or are evidenced by bonds, debentures, notes or other
similar instruments;
(c) Money borrowed from banks or other financial institutions
in the ordinary course of business and solely for the purpose of
purchasing securities for the account of (i) any Subsidiary of
Borrower that is registered as a broker/dealer under the Securities
Exchange Act of 1934, as amended, or (ii) customer margin accounts of
any such Subsidiary;
(d) notes or similar written instruments executed in the
ordinary course of business and solely for the purpose of providing
fidelity bond insurance and insurance of customer accounts in excess
of the coverage provided by the Securities Investor Protection
Corporation (SIPC); and
(e) purchase money mortgage obligations incurred in the ordinary
course of business that do not exceed $1,000,000 in the aggregate of
Borrower and its Subsidiaries, on a consolidated basis, at any time.
6960WRE.4 -9-
<PAGE>
ARTICLE VI
EVENTS OF DEFAULT
The occurrence of any one of more of the following events is a
Default hereunder and the continuance of any such Default beyond the
period (if any) provided below within which such Defaults may be cured
shall be an Event of Default hereunder:
Section 6.1 Immediate Acceleration
If:
(a) Borrower or any Principal Subsidiary: (i) shall file a
voluntary petition under Title 11 of the United States Code (the
"Bankruptcy Act") for adjudication as a bankrupt; (ii) shall file
an answer seeking reorganization or an arrangement under any
bankruptcy or similar statute of the United States of America or
any subdivision thereof or of any foreign jurisdiction in
response to an involuntary petition; (iii) shall consent to the
filing of a petition in any such bankruptcy or reorganization
proceeding; (iv) shall consent to the appointment of a receiver
or trustee or officer performing similar functions with respect
to any substantial part of its property; (v) shall make a general
assignment for the benefit of its creditors; or (vi) shall
execute a consent to any other type of insolvency proceedings
(under the Bankruptcy Act or otherwise) or any informal
proceeding for the dissolution or liquidation (whether or not
related to any bankruptcy or similar proceeding) of, or
settlement of, claims against or winding up of affairs of,
Borrower or any Principal Subsidiary; or
(b) The appointment of a receiver or trustee or officer
performing similar functions for Borrower or any Principal
Subsidiary or for any of their respective assets, or the filing
against Borrower or any Principal Subsidiary of a petition for
adjudication as a bankrupt or insolvent or for reorganization
under any bankruptcy or similar laws of the United States of
America or of any state thereof or of any foreign jurisdiction,
or the institution against Borrower or any Principal Subsidiary
of any other type of insolvency proceeding (under the Bankruptcy
Act or otherwise) or of any formal or informal proceeding for the
dissolution or liquidation, settlement of claims against or
winding up of affairs, of Borrower or any Principal Subsidiary,
and the failure to have such appointment vacated or such petition
or proceeding dismissed within sixty (60) days after such
appointment, filing or institution;
THEN, immediately and without requirement of any notice, all principal
and interest and any other charges then owing under the Term Note or
otherwise hereunder shall forthwith mature and become due and payable
without presentment, demand, protest, or further notice of any kind,
all of which are hereby expressly waived.
6960WRE.4 -10-
<PAGE>
Section 6.2 Discretionary Acceleration
In the case of:
(a) Default by Borrower in the payment of any principal,
interest, or other amount hereunder within five (5) business days
after the same becomes due to Lender hereunder or under the Term
Note and continuance thereof for five (5) business days after
written notice to Borrower from Lender;
(b) Default in the payment or performance of any other
liability, obligation, or covenant of Borrower to Lender
hereunder, and continuance thereof for fifteen (15) days after
written notice to Borrower from Lender;
(c) If, on or after the Closing Date, (i) for any reason
(other than any act on the part of Lender) any Loan Document
ceases to be in full force and effect in any material respect, or
(ii) any party to any Loan Document (other than Lender) shall
assert in writing that any such document or agreement has ceased
to be in full force and effect and Lender shall have determined
that such assertion constitutes an Event of Default;
(d) Any representation, warranty, statement, certificate,
or report made or furnished by Borrower to Lender proves to have
been false or erroneous in any material respect at the time of
the making thereof, or to have omitted any substantial liability
or claim against Borrower, or if on the date of execution of this
Agreement there shall have been any materially adverse change in
any of the facts disclosed therein, which change shall not have
been disclosed to Lender at or prior to the time of such
execution;
(e) The rendition by any court of a final judgment against
Borrower or any of its Subsidiaries in excess of $1,000,000
(exclusive of amounts covered by insurance for which coverage is
not disputed) which shall not be satisfactorily stayed,
discharged, vacated, or set aside within thirty (30) days of the
making thereof, or the attachment of any property of Borrower in
connection therewith and such property has not been released or
provided for to the satisfaction of Lender within thirty (30)
days after the making thereof;
(f) The termination, for whatever reason, of Marshall T.
Leeds as the Chief Executive Officer of Borrower; or
(g) Marshall T. Leeds and Joel E. Marks, considered
together, (i) not owning beneficially the single largest block of
the Borrower's outstanding voting securities (excluding such
securities owned beneficially Gilman CMG, Inc. or its Affiliates)
and (ii) not having the legal right to cause the election of at
least one-half (1/2) of the members of the Board of Directors of
Borrower;
6960WRE.4 -11-
<PAGE>
THEN, upon the occurrence of any such Default, Lender, at its option,
(i) may terminate the Loan hereby granted by written notice to that
effect to Borrower and may declare all principal and interest and any
other charges then owing under the Term Note or otherwise hereunder to
mature and be forthwith due and payable without presentment, demand,
protest, or further notice of any kind, all of which are hereby
expressly waived, or (ii) may elect not to accelerate the Loan but
instead to increase the interest rate under the Term Note up to the
default rate of interest as provided in Section 2.3.
Section 6.3 Waiver of Default
Lender at any time may waive any Default or any Event of Default
that shall have occurred and any of its consequences, in which case
the parties hereto shall be restored to their former positions and
rights and obligations hereunder, respectively; but no such waiver
shall extend to any subsequent or other Default or impair any right
consequent thereon, and no such waiver shall be effective unless it is
in a written document executed by a duly authorized officer of Lender.
ARTICLE VII
REMEDIES FOR DEFAULT
Upon the occurrence of an Event of Default, Lender shall have the
following remedies:
Section 7.1 Action for Enforcement
In case any one or more Events of Default shall occur and be
continuing, Lender may proceed to protect and enforce its rights or
remedies either by suit in equity or by action at law, or both,
whether for the specific performance of any covenant, agreement, or
other provision contained herein, in the Term Note, or in any document
or instrument delivered in connection with or pursuant to this
Agreement, or to enforce the payment of the Term Note or any other
legal or equitable right or remedy.
Section 7.2 Rights and Remedies Cumulative
No right or remedy herein conferred upon Lender is intended to be
exclusive of any other right or remedy contained herein, in the Term
Note, or in any instrument or document delivered in connection with or
pursuant to this Agreement, and every such right or remedy shall be
cumulative and shall be in addition to every other such right or
remedy contained herein and therein or now or hereafter existing at
law or in equity or by statute or otherwise.
Section 7.3 Rights and Remedies Not Waived
No course of dealing between Borrower and Lender or any failure
or delay on the part of Lender in exercising any rights or remedies
hereunder shall operate as a waiver of any rights or remedies of
6960WRE.4 -12-
<PAGE>
Lender, and no single or partial exercise of any rights or remedies
hereunder shall operate as a waiver or preclude the exercise of any
other rights or remedies hereunder.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Notices
All notices, consents, requests, and demands to or upon the
respective parties hereto to be effective shall be in writing and,
unless otherwise expressly provided herein, shall be deemed to have
been duly given or made (a) on the date delivered in person, (b) on
the date indicated on the return receipt if mailed postage prepaid, by
certified or registered U.S. Mail, with return receipt requested, (c)
on the date transmitted by telecopy, if sent by 5:00 P.M., Eastern
Time, and confirmation of receipt thereof is reflected or obtained, or
(d) if sent by Federal Express or other nationally recognized
overnight courier service or overnight express U.S. Mail, with service
charges or postage prepaid, then on the next business day after
delivery to the courier service or U.S. Mail (in time for and
specifying next day delivery). In each case (except for personal
delivery) such notices, requests, demands, and other communications
shall be sent to a party at its address or telecopy number as follows,
or as otherwise designated by the party by notice in accordance
herewith:
To Borrower: JW Charles Financial Services, Inc.
1117 Perimeter Center West
Suite 500E
Atlanta, Georgia 30338
Attn: Joel E. Marks, Chief Financial Officer
Telecopy No.: (404) 394-2919
with a copy to: W. Randy Eaddy, Esq.
Kilpatrick & Cody
1100 Peachtree Street
Suite 2800
Atlanta, Georgia 30309-4530
Telecopy No.: (404) 815-6555
To Lender: Gilman CMG, Inc.
111 West 50th Street
New York, New York
Attn: John Faiella
Telecopy No.: (212) 582-7610
6960WRE.4 -13-
<PAGE>
with a copy to: Stephen Cropper, Esq.
Gilman Investment Company
111 West 50th Street
New York, New York
Telecopy No.: (212) 582-7610
Section 8.2 Further Assurances
At any time and from time to time, upon Lender's reasonable
request and at the expense of Borrower, Borrower will promptly (and in
any event within 15 days) execute and deliver any and all further
instruments and documents and take such further action as Lender may
deem reasonable to effect the purposes of this Agreement or any of the
other Loan Documents.
Section 8.3 Severability
Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability
without invalidating the remaining provisions hereof, and any such
prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other
jurisdiction.
Section 8.4 Counterparts
This Agreement may be executed by one or more of the parties to
this Agreement on any number of separate counterparts and all of said
counterparts taken together shall be deemed to constitute one and the
same instrument. Confirmation of execution by telecopied facsimile
signature page shall be binding upon any party so confirming or
telecopying.
Section 8.5 Interpretation
Each of the parties acknowledges that it has been represented by
its own counsel in connection with the negotiation and execution of
this Agreement and all of the other Loan Documents, and therefore no
party shall, while this Agreement is effective or after its
termination, claim or assert that any provisions of this Agreement or
any of the other Loan Documents should be construed against the
drafter of this Agreement or any of the other Loan Documents.
Section 8.6 Conflict
If the terms and provisions of any of the other Loan Documents
should conflict with any of the terms and provisions of this
Agreement, the terms and provisions of this Agreement shall be
interpreted as being paramount, superior, and controlling.
6960WRE.4 -14-
<PAGE>
Section 8.7 Headings
The headings of Articles, Sections, and Subsections of this
Agreement are for convenience of reference only, and are not to be
considered a part hereof, and do not limit or otherwise affect any of
the terms hereof.
Section 8.8 Jurisdiction and Venue
Each of the parties irrevocably and unconditionally: (a) agrees
that any suit, action, or other legal proceeding arising out of or
relating to this Agreement may, and to the extent permitted by that
court shall, be brought in the District Court of the United States,
Southern District of Florida; (b) consents to the jurisdiction of each
such court in any such suit, action, or proceeding; (c) waives any
objection that it may have to the laying of venue of any such suit,
action, or proceeding in any such court; and (d) agrees that service
of any court paper may be effected on such party by mail, as provided
in this Agreement, or in such other manner as may be provided under
applicable laws or court rules in the State of Florida.
Section 8.9 Written Amendments, Etc. Only
The provisions of this Agreement may be amended, supplemented,
waived, or otherwise modified only by a writing signed by the party as
to whom enforcement of any such amendment, supplement, waiver, or
modification is sought and making specific reference to this
Agreement.
Section 8.10 Governing Law; Benefit
This Agreement and all rights hereunder shall be governed by, and
construed and enforced in accordance with, the laws of the State of
New York and the Federal law of the United States. In the event of a
conflict between New York and Federal laws, the Federal law of the
United States shall supersede and control. This Agreement shall bind
and inure to the benefit of, and the terms "Borrower" and "Lender",
respectively, as used in this Agreement shall include, the respective
parties and their respective heirs, personal representatives,
participants, successors, and assigns. However, Borrower may not
assign its rights or delegate its obligations under this Agreement
without the prior written consent of Lender. Lender may assign, in
whole or in part, and issue participating interests in and to this
Agreement, the Note, the Term Note, and the Loan Documents upon not
less than 30 days' written notice to Borrower and upon delivery to
Borrower of satisfactory assurances that any such action complies with
applicable federal and state securities laws. No consent of Borrower
to such assignment or participation shall be required (other than
Borrower's satisfaction as to compliance with applicable securities
laws), provided that Lender shall remain liable for the duties of
Lender hereunder in the event any such assignee fails to perform as
may be required hereunder. In such event, Borrower agrees to attorn
to such assignee and to execute such estoppel certificates and
consents thereto and other documentation as may be reasonably required
to facilitate such assignment, provided such consents and
documentation do not add to the obligations of Borrower and the costs
of providing the same are paid by Lender.
6960WRE.4 -15-
<PAGE>
Section 8.11 Enforcement Costs
If any legal action or other proceeding is brought for the
enforcement of this Agreement, or because of an alleged dispute,
breach, default, or misrepresentation in connection with any provision
of this Agreement, the successful or prevailing party or parties shall
be entitled to recover reasonable attorneys' fees, sale and use taxes,
court costs, and all expenses even if not taxable as court costs
(including, without limitation, all such fees, taxes, costs, and
expenses incident to arbitration, appellate, bankruptcy, and
post-judgment proceedings), incurred in that action or proceeding
(collectively, "Expenses"), in addition to any other relief to which
such party or parties may be entitled. Attorneys' fees shall include,
without limitation, paralegal fees, investigative fees, administrative
costs, sales and use taxes, and all other charges properly billed by
the attorney, subject to the "reasonable" condition provided above.
Section 8.12 WAIVER OF JURY TRIAL
THE PARTIES HERETO DO HEREBY MUTUALLY AND WILLINGLY WAIVE THE
RIGHT TO A TRIAL BY JURY OF ANY AND ALL CLAIMS MADE BY OR BETWEEN
THEM, INCLUDING, WITHOUT LIMITATION, ANY AND ALL CLAIMS, DEFENSES,
COUNTERCLAIMS, CROSSCLAIMS, THIRD PARTY CLAIMS, AND INTERVENOR'S
CLAIMS, WHETHER ARISING FROM OR RELATED TO THE NEGOTIATION, EXECUTION,
AND PERFORMANCE OF THE TRANSACTION TO WHICH THIS AGREEMENT RELATES.
Section 8.13 Authorized Representatives of Lender
Lender hereby confirms to Borrower that each of Stephen Cropper
and John Faiella is duly authorized by Lender to act on its behalf in
connection with the Loan and this Agreement, and Borrower shall be
entitled to rely on actions taken by such persons acting on behalf of
Lender, unless and until Lender shall provide Borrower written
notification that one or more such persons is no longer so authorized.
6960WRE.4 -16-
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Loan Agreement
to be executed by their respective duly authorized officers.
"Borrower"
JW CHARLES FINANCIAL SERVICES,
INC.
Attest:
By: /s/ Marshall T. Leeds
----------------------------
Secretary or Assistant Marshall T. Leeds, President and
Chief Executive Officer
"Lender"
GILMAN CMG, INC.
Attest:
-------------------------------- By: /s/ John Jaiella
--------------------------
Secretary or Assistant Name: John Faiella
Title: President
6960WRE.4<PAGE>
Exhibit A
TERM NOTE
U.S. $5,000,000 May 15, 1995
Palm Beach County, Florida
FOR VALUE RECEIVED, JW Charles Financial Services, Inc., a
Florida corporation ("Maker"), hereby promises to pay to the order of
Gilman CMG, Inc., a Delaware corporation ("Lender"), at its offices at
111 West 50th Street, New York, New York 10020 (or at such other place
or places as Lender may designate in writing, from time to time), the
principal sum of FIVE MILLION DOLLARS (U.S. $5,000,000), in lawful
money of the United States of America, together with interest accruing
thereon at the rate and times hereinafter provided, calculated on the
daily principal balances from time to time outstanding. The loan
represented by this Note is made pursuant and is subject to the terms
and conditions of the Loan Agreement dated May 15, 1995 between Maker
and Lender (the "Loan Agreement"). All capitalized terms not defined
herein shall have the respective meanings ascribed to them in the Loan
Agreement.
Maker promises to pay interest, calculated on the basis of a 365
or 366-day year, as applicable, for the actual number of days elapsed,
on the daily principal balances from time to time outstanding at the
rate of ten percent (10%) per annum. Accrued interest and $1,000,000
of the principal of this Note shall be due and payable on the first
business day after the date hereof, and thereafter accrued interest
and installments of the remaining principal (each in the amount of
$250,000) shall be due and payable on the 15th day of each July,
October, January, and April beginning July 15, 1995, and continuing
thereafter until April 15, 1999, at which time all accrued and unpaid
interest, together with the entire principal amount then outstanding
hereunder, shall be due and payable in full.
A late charge equal to three percent (3%) of any installment of
interest or principal that is not paid within fifteen (15) days of the
date when the same becomes due and payable must be included with any
such late payment. At any time or times during which an Event of
Default shall then exist or upon the maturity of this Note, Lender
shall be entitled to declare that the interest rate under this Note
shall be equal to the maximum rate of interest permitted by applicable
law (the "Default Rate of Interest").
Nothing herein contained, nor any transaction related thereto,
shall be construed or so operate as to require Maker to pay interest
at a greater rate than is now lawful to contract for in such case, or
to make any payment, or to do any act, contrary to applicable law.
Should any interest or other charges paid by Maker result in the
computation or earning of interest in excess of the maximum rate of
interest that is legally permitted under applicable law, then any and
6960WRE.4
<PAGE>
all such excess shall be and the same is hereby waived by Lender, and
any and all such excess shall be automatically credited against and in
reduction of the principal balance due under this indebtedness (and
treated as a prepayment of principal), and any portion of said excess
that exceeds the principal balance due under this indebtedness shall
be repaid by Lender to Maker.
In the event of the continuation of any default in the payment of
any interest or principal under this Note for a period of five (5)
business days after such payment becomes due, which default shall
continue for a period of five (5) business days after written notice
thereof from Lender, Lender may elect to declare and may declare the
entire unpaid principal amount outstanding hereunder, together with
interest accrued thereon, immediately due and payable or may increase
the interest rate under this Note up to the Default Rate of Interest.
Maker hereby waives demand, presentment, notice of non-payment,
dishonor, and protest.
Maker may prepay the principal amount of this Note in whole or in
part at any time, and from time to time, without penalty or premium,
and, from and after any such prepayment in part, interest shall be
calculated on the resulting reduced principal balance. In the event
of a partial prepayment of principal, the amount so paid shall be
applied to reduce on a dollar-for-dollar basis the amount of the next
succeeding installment or installments of principal otherwise due
hereunder, unless another application is otherwise specified by
Borrower; provided, however, that accrued interest calculated on the
reduced principal balance shall continue to be due and payable, until
the entire principal of this Note is paid in full, on the dates
provided above whether or not any installment of principal is required
to be paid on such date as a result the application of a partial
prepayment of principal.
In case this Note is collected by or through an attorney-at-law,
all costs of collection, including reasonable attorney's fees, shall
be paid by Maker.
Time is of the essence.
Lender shall not be deemed to waive any of its rights, unless
such waiver be in writing and signed by Lender. No delay or omission
by Lender in exercising any of its rights shall operate as a waiver of
such rights, and a waiver in writing on one occasion shall not be
construed as a consent to or a waiver of any right or remedy on any
future occasion.
The provisions of this Note and the Loan Documents shall be
governed by, and construed and enforced in accordance with, the laws
of the State of New York and the Federal law of the United States. In
the event of conflict between New York and Federal laws, the Federal
law shall supersede and control. Wherever possible, each provision of
this Note shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Note shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity,
without invalidating the remainder of such provision or the remaining
provisions of this Note.
6960WRE.4
<PAGE>
This Note may not be amended or modified, nor shall any waiver of
any provisions hereof be effective, except by an instrument in writing
executed by the holder of this Note. Maker has executed this Note as
principal and not as surety or accommodation party.
The word "Lender" as used herein shall include transferees,
successors, and assigns of Lender, and all rights of Lender hereunder
shall inure to the benefit of its transferees, successors, and
assigns. All obligations of Maker shall bind its legal
representatives, successors, and assigns.
MAKER, BY EXECUTION HEREOF, AND LENDER, BY ACCEPTANCE HEREOF,
MUTUALLY AND WILLINGLY WAIVE THE RIGHT TO A TRIAL BY JURY OF ANY AND
ALL CLAIMS MADE BY OR BETWEEN THEM, INCLUDING, WITHOUT LIMITATION, ANY
AND ALL CLAIMS, DEFENSES, COUNTERCLAIMS, CROSSCLAIMS, THIRD PARTY
CLAIMS, AND INTERVENOR'S CLAIMS, WHETHER ARISING FROM OR RELATED TO
THE NEGOTIATION, EXECUTION, AND PERFORMANCE OF THE TRANSACTIONS TO
WHICH THIS NOTE RELATES.
"Maker"
JW CHARLES FINANCIAL SERVICES, INC.
(Corporate Seal)
By: /s/ Marshall T. Leeds
---------------------------------
Marshall T. Leeds
President and Chief Executive
Officer
STATE OF FLORIDA
COUNTY OF PALM BEACH
SWORN TO AND SUBSCRIBED before me this 15th day of May, 1995, by
Marshall T. Leeds, as President and Chief Executive Officer of JW
Charles Financial Services, Inc., a Florida corporation, on behalf of
the corporation.
__________________________________
Notary Public
My Commission Expires:
6960WRE.4<PAGE>
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<CIK> 0000741557
<NAME> JW CHARLES FINANCIAL SERVICES, INC.
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<EXCHANGE-RATE> 1
<CASH> 5,012,000
<SECURITIES> 13,169,000
<RECEIVABLES> 71,614,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 93,929,000
<PP&E> 1,118,000
<DEPRECIATION> 849,000
<TOTAL-ASSETS> 95,047,000
<CURRENT-LIABILITIES> 78,075,000
<BONDS> 3,161,000
<COMMON> 765,000
5,746,00
0
<OTHER-SE> 7,300,000
<TOTAL-LIABILITY-AND-EQUITY> 95,047,000
<SALES> 0
<TOTAL-REVENUES> 18,969,000
<CGS> 0
<TOTAL-COSTS> 13,300,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 618,000
<INCOME-PRETAX> 1,051,000
<INCOME-TAX> 399,000
<INCOME-CONTINUING> 652,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 652,000
<EPS-PRIMARY> .16
<EPS-DILUTED> 0
</TABLE>
