SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Age of 1934
Filed by the Registrant
Filed by a Party other than the Registrant
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(6)(2)
/x/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
JWCHARLES FINANCIAL SERVICES, INC.
------------------------------------------------
(Name of Registrant as Specified in Its Charter)
------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-
6(i)(1)(4) and 0-11.
/ / (1) Title of each class of securities to which transaction
applies:
----------------------------------------------------------
(2) Aggregate number of class of securities to which
transaction applies:
----------------------------------------------------------
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth
the amount on which the filing fee is calculated and
state how it was determined):
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<PAGE>
JWCHARLES FINANCIAL SERVICES, INC.
980 NORTH FEDERAL HIGHWAY
SUITE 310
BOCA RATON, FLORIDA 33432
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 10, 1997
To the Stockholders of
JWCharles Financial Services, Inc.:
Notice is hereby given that the Annual Meeting of
Stockholders of JWCharles Financial Services, Inc. (the
"Company") will be held on Tuesday, June 10, 1997, at 10:00 a.m.
Eastern Time, at the Company's executive offices, 980 North
Federal Highway, Suite 310, Boca Raton, Florida, for the
following purposes:
1. To elect eight (8) directors to hold office until
the 1998 Annual Meeting of Stockholders and until their
respective successors, if there are to be any, have been
duly elected and have qualified;
2. To approve an amendment to the Company's 1990 Stock
Option Plan to increase the number of shares available for
issuance pursuant to such Plan, from 1,200,000 shares to
1,600,000 shares;
3. To approve the adoption of the Company's 1997
Employee Stock Purchase Plan; and
4. To transact such other business as may properly
come before the meeting or any postponement, adjournment or
adjournments thereof.
Only stockholders of record at the close of business on
April 25, 1997 are entitled to notice of and to vote at the
Annual Meeting of Stockholders or any postponement or adjournment
thereof.
BY ORDER OF THE BOARD OF
DIRECTORS
Joel E. Marks
Secretary
April 30, 1997
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE
FILL IN, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD, WHICH
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. THE PROXY
MAY BE REVOKED AT ANY TIME PRIOR TO EXERCISE, AND IF YOU ARE
PRESENT AT THE MEETING YOU MAY, IF YOU WISH, REVOKE YOUR PROXY AT
THAT TIME AND EXERCISE THE RIGHT TO VOTE YOUR SHARES PERSONALLY.
<PAGE>
JWCHARLES FINANCIAL SERVICES, INC.
PROXY STATEMENT
DATED APRIL 30, 1997 FOR THE
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 10, 1997
This proxy statement is furnished in connection with the
solicitation of proxies by the Board of Directors of JWCharles
Financial Services, Inc. (the "Company") for use at the Annual
Meeting of Stockholders to be held on Tuesday, June 10, 1997,
including any postponement, adjournment or adjournments thereof,
for the purposes set forth in the accompanying Notice of Meeting.
Management intends to mail this proxy statement and the
accompanying form of proxy to stockholders on or about April 30,
1997.
Only stockholders of record at the close of business on
April 25, 1997 (the "Record Date") are entitled to notice of and
to vote at the Annual Meeting. As of the Record Date, the
Company had 3,319,021 shares of Common Stock, par value $.001 per
share ("Common Stock"), outstanding and entitled to vote at the
Annual Meeting. The presence at the Annual Meeting, either in
person or by proxy, of holders of a majority of the shares of
Common Stock outstanding is necessary to constitute a quorum for
the transaction of all business before the Annual Meeting.
Proxies in the accompanying form, duly executed and returned
to the management of the Company, and not revoked, will be voted
at the meeting. Any proxy given pursuant to this solicitation
may be revoked by the stockholder at any time prior to the voting
of the proxy by delivery of a subsequently dated proxy, by
written notification to the Secretary of the Company, or by
personally withdrawing the proxy at the meeting and voting in
person.
A COPY OF THE COMPANY'S ANNUAL REPORT TO STOCKHOLDERS FOR
THE FISCAL YEAR ENDED DECEMBER 31, 1996 IS BEING FURNISHED
HEREWITH TO EACH STOCKHOLDER OF RECORD AS OF THE CLOSE OF
BUSINESS ON APRIL 25, 1997. ADDITIONAL COPIES OF THE ANNUAL
REPORT AND COPIES OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K
WILL BE PROVIDED FREE OF CHARGE UPON WRITTEN REQUEST TO:
JWCHARLES FINANCIAL SERVICES, INC.
980 NORTH FEDERAL HIGHWAY
SUITE 310
BOCA RATON, FLORIDA 33432
ATTN: INVESTORS RELATIONS DEPARTMENT
If the person requesting the Form 10-K was not a stockholder
of record on April 25, 1997, the request must include a
representation that the person was a beneficial owner of Common
Stock on that date. Copies of any exhibits to the Form 10-K will
also be furnished on request and upon payment of the Company's
expenses in furnishing the exhibits.
Proxies that are executed but which do not contain any
specific instructions will be voted for the election of all the
nominees for directors specified herein, for approval of the
amendment to the 1990 Stock Option Plan and the adoption of the
1997 Employee Stock Purchase Plan, and in the discretion of the
persons appointed as proxies on any other matter that may
properly come before the Annual Meeting or any postponement,
adjournment or adjournments thereof, including any vote to
postpone or adjourn the Annual Meeting.<PAGE>
3-FOR-2 STOCK SPLIT
Unless otherwise indicated, all information with respect to
numbers of shares of Common Stock and prices of Common Stock
appearing in this Proxy Statement have been adjusted to reflect
the Company's three-for-two stock split effected in the form of a
50% stock dividend on February 7, 1997.
VOTING SECURITIES AND PRINCIPAL STOCKHOLDERS
The following table sets forth the holdings of Common Stock,
which is the Company's only class of voting securities, by the
only stockholders who, as of April 25, 1997, were known by the
Company to own beneficially more than five percent of the
Company's outstanding Common Stock, by all directors, nominees
for director and disclosed highly compensated executive officers
and by all directors and executive officers of the Company as a
group, as of the same date. Unless otherwise indicated, the
person or entity has sole power to vote and dispose of the
shares. The address for each of Messrs. Leeds, Marks, Glaser and
Ferguson is c/o the Company at 980 North Federal Highway, Suite
310, Boca Raton, Florida 33432; the address for each of and
Messrs. Cropper, Faiella, Robilotto and Weinberg is 111 West 50th
Street, New York, New York 10020 and the address for each of
Robert D. Goldstein and Judy Goldstein is 919 Third Avenue, New
York, New York 10022.
<TABLE>
<CAPTION>
Number of Shares
Name of Beneficial Owner Beneficially Owned Percent of Class
------------------------ ------------------ ----------------
<S> <C> <C>
Marshall T. Leeds <F1><F2> 986,006 28.7
Gilman CMG, Inc. <F1> - -
Joel E. Marks <F1><F3> 301,433 9.1
Gregg S. Glaser 55,950 1.7
Wm. Dennis Ferguson <F4> 73,500 2.2
Robert D. Goldstein <F5> } )
Judy Goldstein <F5> } ) 184,050 5.6
Stephen W. Cropper - -
John R. Faiella - -
Joseph P. Robilotto - -
Michael B. Weinberg - -
All directors and executive
officers as a group (8 persons) <F2><F3><F4> 1,416,889 40.6
______________
<FN>
<F1> Gilman CMG, Inc. ("GCMG"), which until June 11, 1996 had
owned over 45% of the outstanding Common Stock, and Mr.
Leeds have had an agreement for several years to support an
equal number of persons identified by the other for election
as directors of the Company. On June 11, 1996, the Company
entered into an Amended and Restated Stock Repurchase
Agreement with GCMG for, and simultaneously consummated, the
repurchase of all of the Company' shares of Common Stock
owned by GCMG. In connection with that transaction, Messrs.
Leeds and Marks agreed with GCMG to vote for the election as
directors of the Company an equal number of nominees
identified by GCMG, on the one hand, and by Messrs. Leeds
and Marks, on the other hand, until such time that the
2
<PAGE>
promissory note given by the Company to pay a portion of the
repurchase price is paid in full. See "CERTAIN
TRANSACTIONS", below.
<F2> Includes 112,500 shares of Common Stock issuable upon
exercise of currently exercisable stock options.
<F3> Includes 107,500 shares of Common Stock owned by Mr.
Marks' wife and 120,000 shares of Common Stock owned by Mr.
Marks as custodian for his minor children.
<F4> Includes 60,000 shares of Common Stock issuable upon
exercise of currently exercisable stock options.
<F5> Excludes 79,027 shares of Common Stock owned in trust for
Robert and Judy Goldstein's adult daughter. Each of them
disclaims any beneficial ownership of such shares.
</FN>
</TABLE>
ELECTION OF DIRECTORS
(Item Number 1 on the Proxy Card)
The Company's Board of Directors presently consists of eight
members, each of whom serves for a one-year term until the next
annual meeting of stockholders and his successor, if there is to
be one, is duly elected and qualified. Each of the nominees is
presently a director of the Company and is listed below, along
with certain background information.
Directors are elected by a plurality of the votes cast by
the holders of shares of Common Stock entitled to vote for the
election of directors at a meeting at which a quorum is present.
A quorum will be present for the Annual Meeting when the holders
of a majority of the shares outstanding on the Record Date are
present in person or by proxy. An abstention and a broker non-
vote are included in determining whether a quorum is present, but
will not affect the outcome of the vote. Unless otherwise
indicated on a proxy, all duly executed proxies granted by the
holders of the Common Stock will be voted individually at the
Annual Meeting for the election of each nominee. Each nominee
has indicated that he will serve if elected, but if the situation
should arise that any nominee is no longer able or willing to
serve, the proxy may be voted for the election of such other
person as may be designated by the Board of Directors. Each
person elected as a director shall serve a term that continues
until the next annual meeting and until his successor, if there
is to be one, is duly elected and qualified.
<TABLE>
<CAPTION>
Name Age Director Since Position(s) with the Company
- ---- --- -------------- ----------------------------
<S> <C> <C> <C>
Marshall T. Leeds 41 1983 President, Chief Executive
Officer and Chairman of the
Board
Joel E. Marks 40 1983 Vice Chairman, Chief Financial
Officer and Secretary
Wm. Dennis Ferguson 53 1990 Executive Vice President and
Director
Gregg S. Glaser 37 1990 Executive Vice President,
Treasurer and Director
Stephen W. Cropper 49 1995 Director
John R. Faiella 55 1995 Director
Joseph P. Robilotto 53 1995 Director
Michael B. Weinberg 59 1995 Director
</TABLE>
3<PAGE>
MARSHALL T. LEEDS, a co-founder of the Company in 1983, also
serves as President and Chief Executive Officer of Corporate
Securities Group, Inc. ("CSG"), JW Charles Clearing Corp. ("JWC
Clearing"), JW Charles Securities, Inc. ("JWC Securities") and
DMG Securities, Inc., four of the Company's wholly-owned
subsidiaries. Mr. Leeds is past Chairman of Regional Investment
Association, Inc., ("RIBA"), the country's largest association of
independent broker-dealers involved in the underwriting of debt
and equity securities, and he currently serves on the Independent
Contractor Firm Committee of the Securities Industries
Association.
JOEL E. MARKS, the other co-founder of the Company, also
serves as the Senior Managing Director of Investment Banking and
as Executive Vice President of each of the Company's wholly-owned
subsidiaries. Mr. Marks is a Certified Public Accountant, and
prior to 1983, he was employed in various capacities in both the
audit and tax departments of the international accounting and
consulting firm of Deloitte & Touche LLP. From 1987 to 1994, he
served as Senior Vice President and Chief Financial Officer of
Automobile Protection Corporation - APCO, an unaffiliated public
corporation. Mr. Marks currently serves as the Chairman of the
RIBA.
WM. DENNIS FERGUSON serves as Executive Vice President of
each of the Company's wholly-owned subsidiaries. From July 21,
1990 to October 31, 1990, prior to its acquisition by the
Company, Mr. Ferguson served as acting President and Chief
Executive Officer of the predecessor company ("Old JWC
Financial") which was acquired by the Company on November 1,
1990. From 1981 to 1990, he held various executive positions at
Old JWC Financial. Mr. Ferguson received a Bachelor of Science
degree from Florida Southern College and attended Florida
Atlantic University Graduate School. From 1978 to 1980, Mr.
Ferguson was Area Vice President and Office Manager for the
investment banking firm of Dean Witter Reynolds.
GREGG S. GLASER serves as Executive Vice President and
Treasurer of each of the Company's wholly-owned subsidiaries.
Mr. Glaser is a Certified Public Accountant with a Bachelor of
Science degree from the University of Florida. From 1981 to
1986, when he joined Old JWC Financial, Mr. Glaser was a senior
auditor with the Fort Lauderdale office of the international
accounting and consulting firm of Price Waterhouse LLP.
STEPHEN W. CROPPER is a director and officer of Gilman
Securities Corporation and GCMG, subsidiaries of Gilman
Investment Company, a holding company which through its principal
subsidiary, Gilman Paper Company, is engaged in the manufacture
and sale of paper and lumber products. Mr. Cropper also serves
as Assistant General Counsel of Gilman Paper Company.
JOHN R. FAIELLA is a director and President of Gilman
Securities Corporation and GCMG, as well as Treasurer of Gilman
Investment Company and Gilman Paper Company.
JOSEPH P. ROBILOTTO is an officer of Gilman Securities
Corporation and is Vice President of Gilman Paper Company.
MICHAEL B. WEINBERG is both an attorney-at-law engaged in
the private practice of law and a Certified Public Accountant.
Mr. Weinberg currently serves as Tax Counsel to Gilman Paper
Company.
During the last fiscal year, the Board of Directors held
seven (7) meetings. All the nominees for reelection as directors
attended all the Board and committee meetings held during their
directorship with the exception of Mr. Weinberg, who attended six
of the seven meetings of the Board of Directors.
BOARD COMMITTEES
AUDIT COMMITTEE. The Audit Committee supervises independent
audits of the Company and its subsidiaries and oversees the
establishment of appropriate accounting policies and internal
accounting controls. Members are Mr. Weinberg, Chairman; Mr.
Marks and Mr. Glaser. The Audit Committee met two times during
1996.
The Audit Committee's principal functions include reviews of
audit plans, scope of examinations and findings of the Company's
independent public accountants; significant legal matters;
internal controls; and the adequacy of insurance coverage.
Further, it is the responsibility of this committee to recommend
to the Board the annual appointment of the independent public
accountants, to review the findings of external regulatory
agencies and to oversee the accounting policies used in preparing
the Company's financial statements.
4<PAGE>
COMPENSATION COMMITTEE. The Compensation Committee oversees
the Company's compensation policies and programs. Members are
Mr. Marks, Chairman; Mr. Faiella and Mr. Glaser. The
Compensation Committee met one time during 1996.
The Compensation Committee reviews and approves the
Company's general compensation policies and programs to maintain
an environment that attracts and retains people of high
capability, commitment and integrity, while also providing
incentives for executives and other personnel of the Company to
contribute to the success and profitability of the Company for
the benefit of its stockholders.
OTHER COMMITTEES. In addition to the committees described
above, the Board also has an Investment and Risk Committee whose
function is primarily to oversee the Company's investment
policies and procedures and toestablish guidelines to be used by
the Company's principal product managers. Members of the
Investment and Risk Committee are Mr. Ferguson, Chairman, Mr.
Cropper, Mr. Leeds and Mr. Robilotto.
The Company does not have a standing nominating committee of
the Board of Directors.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as
amended, requires the Company's officers and directors and
persons who beneficially own more than ten percent of the
Company's Common Stock ("ten-percent stockholders") to file
reports of ownership and changes in ownership with the Securities
and Exchange Commission (the "SEC") and with the National
Association of Securities Dealers, Inc. ("NASD"). Officers,
directors and ten-percent stockholders are required by SEC
regulations to furnish the Company with copies of all Section
16(a) forms they file.
Based solely on its review of the copies of such forms
received by it and information furnished to the Company by such
persons, the Company believes that during the Company's fiscal
year ended December 31, 1996, all its officers, directors and
ten-percent stockholders complied with the Section 16(a)
reporting requirements, except that Messrs. Leeds, Marks, Glaser
and Ferguson, all directors and officers of the Company, omitted
to file, on a timely basis, one report on Form 4 and on Form 5
describing the issuance to them on September 12, 1996 of options
to purchase 50,000, 17,500, 7,500 and 5,000 shares of Common
Stock of the Company, respectively, prior to adjustment for the
Company's 3-for-2 stock split effected on February 7, 1997.
ARRANGEMENTS FOR BOARD AND MANAGEMENT
Messrs. Leeds and Marks and GCMG have agreed to support an
equal number of persons identified by the other for election as
directors of the Company, and, consistent with that agreement,
they each identified four of the eight current nominees. They
have also agreed to certain restrictions on their respective
rights to dispose of their shares. These parties have agreed to
support all eight nominees for election at the Annual Meeting.
In connection with the series of transactions between the
Company and Wilmington Trust Company ("Wilmington") as more fully
described under "Certain Transactions" herein, the Company
granted Wilmington the right to appoint one person to serve on
its Board of Directors. Wilmington has not yet exercised such
right.
PROPOSED AMENDMENT TO 1990 STOCK OPTION PLAN
(Item Number 2 on the Proxy Card)
BACKGROUND AND SUMMARY
In 1990 the Company adopted its 1990 Stock Option Plan (the
"Plan") and at that time reserved 600,000 shares of the Company's
Common Stock to cover options to be granted under the Plan during
its ten-year term. In 1994, the Plan was amended to increase the
number of shares available for issuance from 600,000 to
1,200,000. As of March 31, 1997, there were no additional shares
available under the Plan. The Board of Directors now believes it
to be in the best interest of the Company and its stockholders to
increase the number of shares authorized and available for
issuance pursuant to the terms of the Plan. On March 25, 1997,
the Board of Directors approved, subject to stockholder approval,
an amendment to the Plan to increase the number of shares
available for issuance under the Plan by 400,000 shares, from
1,200,000 to 1,600,000 shares.
5<PAGE>
The following summary of information about the Plan is
qualified in its entirety by reference to the Plan itself, which
is available upon request by any stockholder from Joel E. Marks,
Secretary, JW Charles Financial Services, Inc., 1117 Perimeter
Center West, Suite 500E, Atlanta, Georgia 30338, telephone: (770)
399-8805.
The purpose of the Plan is to provide to those key persons
among the approximately 800 employees and other personnel of the
Company and its subsidiaries (including registered
representatives licensed with the Company or one of its
subsidiaries) an opportunity to acquire or increase their stock
ownership in the Company, and thereby to encourage their
continued service and to provide them an additional incentive to
achieve the Company's objectives. Under the Plan, if this
proposal to amend the Plan is approved by the stockholders of the
Company, options to purchase up to an aggregate of 1,600,000
shares of the Company's Common Stock, subject to antidilution and
similar adjustments, may be granted to employees and other key
persons of the Company or any subsidiary the Company may form
(including directors if they are employees).
The Plan is administered by the Board of Directors, which
has the authority to designate a committee of its members to
discharge some or all of its administrative functions (for
purposes of this discussion, the Board when so acting, or any
committee it may designate to act, is referred to as the
"committee"). The committee has the responsibility for
determining the individuals who will receive options, the option
prices, and the number of shares that will be available under
each option. The committee also may designate whether an option
constitutes an incentive stock option, which receives favorable
federal income tax treatment, or a non-qualified stock option.
If the Board grants an incentive stock option, the term of
the option cannot exceed ten years from the date of grant, and in
the case of an incentive stock option granted to a person owning
more than 10% of the Common Stock, the term cannot exceed five
years from the date of grant. The option exercise price for
incentive stock options may not be less than 100% of the fair
market value per share on the date of grant. The exercise term
of a non-qualified stock option may be unlimited, and the option
price may be as low as the par value per share. The option price
is payable in full upon exercise of any option, and payment may
be made in cash, by delivery of shares of the Company's Common
Stock, by delivery to the Company of a promissory note, or by a
combination of any of these methods, as prescribed by the Company
in its grant of the option. Each option not exercised expires as
provided in the option agreement. Options are non-transferable,
except in the event of death of the optionee.
The Board of Directors at any time may cause the committee
to cease granting options, may terminate the Plan, or may amend
or modify the Plan in any respect. The Board may not amend the
Plan, however, to increase the number of shares of stock subject
to the Plan, or to change or modify the class of employees and
other personnel that may participate in the Plan, unless the
Board's actions are approved or ratified by the stockholders of
the Company within twelve (12) months from the date the Board
adopts any such amendment. In addition, no termination,
amendment, or modification of the Plan can affect adversely the
rights of an optionee under any outstanding option without the
consent of the optionee or his or her legal representative.
At March 31, 1997, options to purchase 736,077 shares of
Common Stock, at prices ranging from $1.95 to $6.73 per share,
were outstanding under the Plan, and there were no shares
remaining for the grant of other options under the Plan. The
fair market value of the shares subject to outstanding options
under the Plan, as of March 31, 1997, was approximately
$6,625,000.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
There are no federal income tax consequences to an optionee
or to the Company on the granting of options. Federal income tax
consequences upon exercise will vary depending on whether the
option is an incentive stock option or a non-qualified option.
6<PAGE>
INCENTIVE STOCK OPTIONS
When an optionee exercises an incentive stock option, the
optionee will not realize any income at that time, and the
Company will not be entitled to a deduction. The optionee will
recognize capital gain or loss at the time of disposition of the
shares acquired through the exercise of an incentive stock option
if the shares have been held for at least two years after the
option was granted and one year after it was exercised. The
Company will not be entitled to a tax deduction if the optionee
satisfies these holding period requirements. The net federal
income tax effect to the holder of the incentive stock options is
to defer, until the acquired stock is sold, taxation of any
increase in the stock's value from time of grant of the option to
the time of its exercise, and to tax such gain, at the time of
sale, as capital gain rather than ordinary income. For the
purpose of calculating tax upon disposition where already-owned
stock is surrendered in payment of the option price, the capital
gains holding period and basis of the new shares, to the extent
of the old shares surrendered, is the same as for the old shares;
the holding period for the additional shares (that is, the shares
received on exercise in excess of the old shares surrendered)
begins on the date the option is exercised, and such additional
shares have a zero basis.
If the holding period requirements are not met, then upon
sale of the shares the optionee generally recognizes as ordinary
income the excess of the fair market value of the shares at the
date of exercise over the option price stated in the option
agreement; any increase in the value of the option stock
subsequent to exercise is long- or short-term capital gain to the
optionee depending on the optionee's holding period for the
stock. However, if the sale is for a price less than the value
of the shares on the date of exercise, the optionee might
recognize ordinary income only to the extent the sales price
exceeded the option price. In either case, the Company is
entitled to a deduction to the extent of ordinary income
recognized by the optionee.
NON-QUALIFIED STOCK OPTIONS
Generally, when an optionee exercises a non-qualified stock
option, the optionee recognizes income in the amount of the
aggregate fair market value of the shares received upon exercise,
less the aggregate amount paid for those shares, and the Company
may deduct as an expense the amount of income so recognized by
the optionee, provided that the Company satisfies certain tax
withholding requirements. The holding period of the acquired
shares begins upon the exercise of the option, and the optionee's
basis in the shares is equal to the fair market value of the
acquired shares on the date of exercise.
If the optionee pays all or part of the purchase price by
delivering to the Company already-owned shares of its Common
Stock, there are no federal income tax consequences to the
optionee or the Company to the extent of the number of shares so
delivered. As to any additional shares issued, the optionee
recognizes income equal to the aggregate fair market value of the
additional shares received, less any cash paid to the Company,
and the Company is allowed to deduct the amount of such income,
provided that the Company satisfies certain tax withholding
requirements. The holding period and basis of the new shares, to
the extent of the number of old shares delivered, is the same as
for the old shares. The holding period for the additional shares
begins on the date the option is exercised, and the basis in
those additional shares is equal to their fair market value on
the date of exercise.
VOTE REQUIRED AND RECOMMENDATION OF THE BOARD
The proposed amendment of the Plan has been adopted by the
Board of Directors. Pursuant to the terms of the Plan, the
proposed amendment of the Plan must be submitted for stockholder
approval. The proposed amendment to the Plan is also submitted
for stockholder approval in order to obtain certain benefits
provided by Section 422A of the Internal Revenue Code of 1986, as
amended (the "Code"), which are discussed under "Certain Federal
Income Tax Consequences Incentive Stock Options", above. The
affirmative vote of the holders of a majority of the shares of
Common Stock present at the Annual Meeting is required to approve
the proposed amendment of the Plan, assuming the presence of a
quorum.
The Board of Directors unanimously recommends a vote "FOR"
approval of the proposed amendment of the Plan.
7<PAGE>
PROPOSED 1997 EMPLOYEE STOCK PURCHASE PLAN
(Item Number 3 on the Proxy Card)
BACKGROUND AND SUMMARY
On March 25, 1997, the Board of Directors adopted, subject
to stockholder approval, the JW Charles Financial Services, Inc.
1997 Employee Stock Purchase Plan (the "Purchase Plan") to
provide eligible employees with an opportunity to purchase Common
Stock through payroll deductions and cash contributions pursuant
to a plan that is intended to qualify for favorable tax benefits
as an "employee stock purchase plan" under Section 423 of the
Code. By assisting eligible employees in acquiring stock
ownership in the Company, the Purchase Plan can help eligible
employees provide for their future security and encourage them to
remain in the employment of the Company or its qualified
subsidiaries.
The following summary of information about the Purchase Plan
is qualified in its entirety by reference to the Purchase Plan
itself, which is available upon request by any stockholder from
Joel E. Marks, Secretary, JW Charles Financial Services, Inc.,
1117 Perimeter Center West, Suite 500E, Atlanta, Georgia, 30338,
telephone: (770) 399-8805.
An aggregate of 400,000 shares of Common Stock may be issued
pursuant to purchases under the Purchase Plan, subject to
adjustment in the event of stock dividends, stock splits,
combination of shares, recapitalizations, or other changes in the
outstanding Common Stock. If approved by the stockholders of the
Company at the Annual Meeting, the Purchase Plan will be
effective as of its March 25, 1997 adoption date by the Board of
Directors. The Company anticipates that the internal
administrative steps necessary to implement will be completed by,
and that the first offering period and enrollment date (as
described below) will begin on, October 1, 1997.
The Purchase Plan shall be administered by the Board of
Directors or by a committee (the "Committee") of the Board
consisting of not less than two directors of the Company
appointed by the Board. The Board or the Committee is
authorized, subject to the provisions of the Purchase Plan, to
establish such rules and regulations as it deems necessary for
the proper administration of the Purchase Plan and to make such
determinations and interpretations and to take such action in
connection with the Purchase Plan and any Common Stock made
available thereunder as it deems necessary or advisable. The
Board or the Committee shall have the right to determine, prior
to any offering period for the purchase of shares pursuant to the
Purchase Plan, the maximum number of shares of Common Stock which
may be offered during that offering period and the manner of
allocating the Common Stock among eligible employees. All such
determinations and interpretations shall be binding and
conclusive on all participating employees and their legal
representatives.
The Board may at any time, or from time to time, alter or
amend the Purchase Plan in any respect, except that no such
amendment shall be effective unless approved within 12 months by
the stockholders of the Company, if such stockholder approval is
required for the Purchase Plan to continue to comply with Code
Section 423. The Board may suspend or discontinue the Purchase
Plan at any time. Upon termination of the Purchase Plan, all
payroll deductions and cash contributions shall cease, and all
amounts then credited to the participants' accounts shall be
equitably applied to the purchase of whole shares of Common Stock
then available for sale, and any remaining amounts shall be
promptly refunded to the participants.
All regular full and part-time employees of the Company and
each qualified subsidiary of the Company shall be eligible to
participate in the Purchase Plan, other than (a) employees whose
customary employment is 20 hours or less per week and (b) any
employee who, immediately after any purchase of shares would own
stock possessing 5% or more of the total combined voting power or
value of all classes of stock of the Company. A "qualified
subsidiary" means any subsidiary of which 50% or more of the
total combined voting power of all classes of its stock is owned
by the Company or another such qualified subsidiary. As of March
31, 1997, the Company had approximately 500 employees that would
have been eligible to participate in the Purchase Plan.
8
<PAGE>
An eligible employee may elect to participate in the
Purchase Plan prior to any enrollment date. Enrollment dates
shall occur on the first day of each offering period (which is a
consecutive three-month period beginning with each January,
April, July and October). A participating employee may authorize
automatic payroll deductions or make direct cash contributions
pursuant to the Purchase Plan, and all such amounts will be used
to purchase shares of Common Stock. The purchase price for
Common Stock purchased under the Purchase Plan shall be 85% of
the fair market value of such shares as of the share purchase
date, which shall be the last day of each offering period or such
other trading date as the Committee shall determine. The Company
shall not permit purchases under the Purchase Plan (a) by an
employee who, immediately after the purchase, would own shares
possessing 5% or more of the total combined voting power or value
of all classes of stock of the Company, or (b) which would permit
an employee's rights to purchase shares under the Purchase Plan,
or under any other qualified employee stock purchase plan
maintained by the Company, to accrue at a rate in excess of
$25,000 of the fair market value of such shares determined at the
time such rights are granted for each calendar year in which the
right is outstanding at any time.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The Purchase Plan is intended to qualify as an "employee
stock purchase plan" within the meaning of Section 423 of the
Code. Under the Code, an employee who elects to participate in
an offering under the Purchase Plan will not realize income at
the time the offering commences or when the shares purchased
under the Purchase Plan are transferred to him or her. If an
employee disposes of such shares after two years from the date
the offering of such shares commences, and after one year from
the date of the transfer of such shares to him or her, the
employee will be required to include in income, as compensation
for the year in which such disposition occurs, an amount equal to
the lesser of (i) the excess of the fair market value of such
shares at the time of disposition over the purchase price, or
(ii) 15% of the fair market value of such shares at the time the
offering commenced. The employee's basis in such shares will be
increased by the amount so includable as income, and any gain or
loss computed with reference to such adjusted basis will be a
capital gain or loss, either short-term or long-term, depending
on the holding period for such shares. In such event, the
Company will not be entitled to any tax deduction from income.
If any employee disposes of shares purchased under the
Purchase Plan within the above two-year or one-year period, the
employee will be required to include in income, as compensation
for the year in which such disposition occurs, an amount equal to
the excess of the fair market value of such shares on the date of
purchase over the purchase price. The employee's basis in such
shares will be increased by the amount includable as income, and
any gain or loss computed with reference to such adjusted basis
will be a capital gain or loss, either short-term or long-term,
depending on the holding period for such shares. In the event of
a disposition within such two-year or one-year period, the
Company will be entitled to an expense deduction equal to the
amount the employee is required to include in income.
An employee who is a nonresident of the United States will
generally not be subject to the federal income tax rules
described above with respect to shares of Common Stock purchased
under the Purchase Plan.
VOTE REQUIRED AND RECOMMENDATION OF THE BOARD
The Purchase Plan has been adopted by the Board, subject to
approval by the stockholders of the Company. Such approval is
required in order for the Purchase Plan to qualify as an
"employee stock purchase plan" under Section 423 of the Code.
The affirmative vote of the holders of a majority of the shares
of Common Stock present at the Annual Meeting is required to
approve the proposed Purchase Plan, assuming the presence of a
quorum.
The Board of Directors unanimously recommends a vote "FOR"
approval of the proposed 1997 Employee Stock Purchase Plan.
9<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth the annual and long-term
compensation for services rendered in all capacities to the
Company and its subsidiaries for the Company's Chief Executive
Officer and each of the other executive officers whose aggregate
cash compensation exceeded $100,000 ("Named Executive Officers")
during any of the Company's last three fiscal years:
<TABLE>
<CAPTION>
Summary Compensation Table
Long-Term Compensation
Annual Compensation Awards<F1>
---------------------------------- ----------------------
Restricted
Name Stock Options/ All Other
and Principal Position Year Salary Bonus Awards SARs <F2> Compensation
- ---------------------- ---- ---------- ----------- ----------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
Marshall T. Leeds 1996 $ 270,519 $ 1,246,612 - 75,000 $ 13,000
President and Chief 1995 $ 263,681 $ 1,050,672 - - $ 13,000
Executive Officer 1994 $ 256,750 $ 742,600 - - $ 14,620
Joel E. Marks 1996 $ 175,000 $ 431,616 - 26,250 $ 3,000
Chief Financial Officer 1995 $ 120,000 $ 267,407 - - $ 3,000
and Executive Vice 1994 $ 120,000 $ 285,562 - 60,000 $ 4,620
Wm. Dennis Ferguson 1996 $ 120,000 $ 262,563 - 7,500 $ 3,000
Executive Vice President 1995 $ 120,000 $ 180,199 - - $ 3,000
1994 $ 120,000 $ 126,695 - 60,000 $ 4,620
Gregg S. Glaser 1996 $ 124,000 $ 72,696 - 11,250 $ 3,000
Treasurer and Executive 1995 $ 122,592 $ 56,408 - - $ 3,000
Vice President 1994 $ 120,000 $ 42,075 - 60,000 $ 3,195
<FN>
<F1> There were no payouts of long-term compensation during the fiscal
year.
<F2> All are stock options and were issued pursuant to the Company's 1990
Stock Option Plan discussed elsewhere herein.
</FN>
</TABLE>
____________
Directors are not compensated for their attendance at Board of
Directors or Board Committee meetings. Each director is reimbursed for
travel expenses incurred in connection with attendance at meetings of the
Board of Directors and Board Committees.
The following tables show, as to the Company's Chief Executive
Officer and Named Executive Officers, certain information with respect to
options granted to them. No stock appreciation rights ("SARs") have been
granted.
10<PAGE>
<TABLE>
<CAPTION>
Aggregated Option Exercises In Last Fiscal Year
And Fiscal Year-End Option Values
Number of
Securities Value of
Underlying Unexercised In-
Unexercised the-Money
Options at Options at
December 31, 1996 December 31, 1996
(#) ($)
Shares Acquired
on Exercisable (E)/ Exercisable (E)/
Name Exercise (#) Value Realized($) Unexercisable (U) Unexercisable (U)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Marshall T. Leeds 80,000 $497,750 112,500 (E) $581,250 (E)
Joel E. Marks 40,000 $278,000 - (E) $- (E)
Wm. Dennis Ferguson 5,000 $ 39,375 60,000 (E) $343,000 (E)
Gregg S. Glaser 45,000 $349,935 - (E) $- (E)
</TABLE>
At December 31, 1996, the closing bid price of the Company's Common
Stock was $7.67, as adjusted for the Company's 3-for-2 stock split.
,, At December 31, 1996, options to purchase an aggregate of 649,850
shares of Common Stock, giving effect to adjustments for the Company's 3-
for-2 stock split, at prices ranging from $1.95 to $3.67 per share, as
adjusted for the stock split, were outstanding under the 1990 Stock
Option Plan. To date, options to purchase 394,838 shares of Common Stock
granted under the 1990 Stock Option Plan have been exercised, of which
22,500 shares of Common Stock were subsequently forfeited because of the
failure of the former optionee to fulfill the continuation conditions for
vesting in the shares of Common Stock.
SAVINGS AND INVESTMENT PLAN
The Company has an Incentive Savings and Investment Plan (the
"Savings Plan"), which offers its employees tax advantages pursuant to
Section 401(k) of the Internal Revenue Code. Under the terms of the
Savings Plan, a participant may elect to defer up to 10% of his or her
compensation. The Company will make a matching contribution to the
Savings Plan of 50% of the first 4% of compensation contributed by each
participant who is employed by the Company or a qualified subsidiary on
December 31st of such year. Participants' contributions to the Savings
Plan are fully vested at all times and are not subject to forfeiture.
The Company's matching contribution vests to each participant over a
five-year vesting schedule based upon the participant's years of service
with the Company. Contributions are made by participants by means of a
payroll deduction program. Within specified limits, participants have
the right to direct their savings into certain kinds of investments as
specified in the Savings Plan.
The Company's matching contribution during the year ended December
31, 1996 for each of the individuals named in the Summary Compensation
Table is included in such table as "All Other Compensation."
11<PAGE>
CERTAIN TRANSACTIONS
On January 19, 1996, the Company obtained an unsecured $2,500,000
revolving line of credit from Wilmington Trust Company ("Wilmington") for
general corporate purposes (the "Wilmington Facility"). The Wilmington
Facility matures on December 31, 2002, at which time all outstanding
borrowings plus all accrued and unpaid interest will become due and
immediately payable. Borrowings under the Wilmington Facility bear
interest at Wilmington's National Commercial Rate, with interest payments
due monthly in arrears. The Company is required to maintain certain debt
covenants, including (i) minimum stockholders' equity equal to at least
$7,000,000, plus 30% of net income for all future fiscal quarters, plus
75% of the net proceeds from any Common Stock issuances and (ii) net
income, as defined, in excess of $1,500,000 for any four quarters within
any consecutive nine-quarter period. At March 25, 1997, there was no
balance outstanding under the Wilmington Facility.
In connection with the Wilmington Facility, the Company granted
Wilmington the right to designate one person to serve on the Company's
Board of Directos, which right Wilmington has not yet exercised. In
addition, the Company entered into a Marketing Agreement with Wilmington
Trust FSB (the "Wilmington Marketing Agreement") and granted W T
Investments, Inc. a warrant to purchase, giving effect to adjustments for
the Company's 3-for-2 stock split, up to 600,000 shares of the Company's
Common Stock at any time prior to December 31, 2002 (the "Wilmington
Warrant"). The exercise price per share, as adjusted for the stock
split, is the greater of $3.67 or an amount equal to the sum of total (i)
gross revenues multiplied by .175 plus (ii) earnings before tax
multiplied by 2.5 and divided by the weighted average number of common
shares outstanding based upon the Company's audited financial statements.
At December 31, 1996, the Wilmington Warrant exercise price per share was
approximately $10.60. The Wilmington Marketing Agreement provides that
the Company will market certain products and services, initially personal
trust and asset management services, provided by Wilmington Trust FSB to
the Company's brokers, clients and prospects.
From December 1992 until June 11, 1996 (when the Company accelerated
its repurchase of the shares of Common Stock held by GCMG), Gilman CMG,
Inc. or its affiliates (collectively "GCMG") had owned up to 49% of the
Company's outstanding Common Stock, and the Company had borrowed an
aggregate of $5,000,000 from GCMG. On May 15, 1995, as part of a
transaction for the Company's repurchase over time all of its Common
Stock owned by GCMG, the Company and GCMG entered into a loan agreement
(the "Gilman Loan") that converted the Company's then outstanding
indebtedness to GCMG to a $5,000,000 term loan, bearing interest at a
rate of 10% per annum. At December 31, 1996, $2,500,000 was outstanding
under the Gilman Loan with principal payable in equal quarterly
installments of $250,000 due on January 15, April 15, July 15 and October
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 June 11, 1996, the Company entered into an Amended and Restated
Stock Repurchase Agreement (the "New Agreement") with GCMG for, and
simultaneously consummated, the accelerated repurchase of all of the
Company' shares of Common Stock owned by GCMG. The total consideration
paid by the Company consisted of a promissory note in the principal
amount of $6,125,000 (the "New Loan"), along with the $1,155,000 in cash.
The New Loan bears interest, which is payable quarterly, at a rate of 10%
per annum. Beginning April 15, 1997, the Company is obligated to make
principal payments each year in an amount equal to 50% of annual net
income, as defined, until the New Loan is repaid in full. The New Loan
contains a balloon payment feature requiring, without regard to the above
formula, that the entire outstanding principal balance be repaid in full
on April 15, 2000. The New Loan is prepayable, in whole or in part, at
any time by paying GCMG a prepayment penalty equal to 10% of the
prepayment amount.
12
<PAGE>
REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee has provided the following report:
The compensation policies of the Company have been developed to link
the compensation of the executive officers of the Company with enhanced
stockholder value. Through the establishment of both short-term and
long-term incentive plans and the use of base salary and performance
bonus combinations, the Company seeks to align the financial interests of
its executive officers with those of its stockholders.
PHILOSOPHY AND COMPONENTS
In designing its compensation programs, the Company follows its
belief that compensation should reflect both the Company's recent
performance and the value created for stockholders, while also supporting
the broader business strategies and long-range plans of the Company and
the relative compensation levels of other firms in the Company's market
segments. In doing so, the compensation programs reflect the following
general characteristics:
-- The Company's financial performance and in particular that of
the individual.
-- An annual incentive plan, which generates a portion of
compensation based on the achievement of specific performance
goals, with superior performance resulting in commensurate
total annual compensation.
The Company's executive compensation is based upon the components
listed below, each of which is intended to serve the overall compensation
philosophy:
BASE SALARY. Base salary is intended to be set at a level
slightly below the competitive amounts paid to executive
officers of similar businesses in structure, size, and market
orientation. Salaries for executive officers are reviewed by
the Board on an annual basis, or in the case of the Chief
Executive Officer, according to the specific terms of his
employment agreement as discussed below.
INCENTIVE COMPENSATION. In accordance with the Company's
philosophy of tying a substantial portion of the compensation
of its executive officers to the achievement of specific
performance goals, an incentive plan is developed for each of
its executive officers. The Company's incentive plans are
designed to reward superior performance with total compensation
above competitive levels. On the other hand, in the event
performance goals are not achieved and the Company suffers as a
result, compensation of affected executive officers may fall
below competitive levels.
STOCK OPTIONS. The Company periodically awards its executive
officers with stock options granted under the terms of its 1990
Stock Option Plan. Options are awarded to selected executive
officers and other persons in recognition of the outstanding
contribution they have made to the Company's financial
performance. The awarding of options is designed to encourage
ownership of the Company's Common Stock by its executive
officers thereby aligning their personal interests with those
of our stockholders.
The Compensation Committee also believes that the Company's Savings and
Investment Plan, which includes participants other than executive
officers, is an important part of the Company's overall compensation
program.
The Compensation Committee reviews and determines the compensation
of the executive officers of the Company with this philosophy on
compensation as its basis. While promoting initiative and providing
incentives for superior performance on behalf of the Company for the
benefit of its stockholders, the Compensation Committee also seeks to
assure that the Company is able to compete for and retain talented
personnel who will lead the Company in achieving levels of financial
performance that will enhance stockholder value over the long-term as
well as short-term.
13<PAGE>
CEO EMPLOYMENT AGREEMENT
Effective January 1, 1994, the Company entered into an employment
agreement with Mr. Leeds to provide for his continued service as
President and Chief Executive Officer for a three (3) year "evergreen"
period. In this context, the evergreen period means that the term of the
agreement on any given day, unless the agreement has previously been
terminated, extends for three (3) years from that day. Under the terms
of his employment agreement, Mr. Leeds receives a base annual salary of
$250,000, subject to an annual adjustment to reflect changes in the
consumer price index. Additionally, Mr. Leeds receives an annual bonus
equal to the sum of (i) 10% of the Company's consolidated net income
available to common stockholders up to $500,000 plus (ii) 10% of the
amount by which the Company's consolidated net income available to common
stockholders exceeds 25% of the arithmetic average of total stockholders'
equity calculated by adding together total stockholders' equity at
January 1, 1994 and December 31, 1994. Mr. Leeds is also eligible to
participate in the other employee benefit plans as generally made
available to senior management of the Company. Mr. Leeds' employment is
terminable by the Company without cause at any time by paying Mr. Leeds a
lump sum payment equal to the greater of $1,000,000 or the sum of (i) his
base salary payable for the remainder of the term, plus (ii) three times
the greater of (A) the amount of annual bonus that was payable to him
with respect to the immediately preceding fiscal year or (B) the
arithmetic average of the amounts of annual bonus that were payable to
him with respect to the immediately preceding three fiscal years, and by
immediately vesting him in any and all options he may possess which have
not yet vested.
The Compensation Committee believes that the compensation terms of
Mr. Leeds' employment agreement are consistent with and reflect the
Company's executive compensation philosophy. The base salary to Mr.
Leeds is somewhat less than what the Compensation Committee believes
exists in the Company's industry, and the opportunities for bonus
compensation are tied to the Company's performance in terms of value to
its stockholders.
Joel E. Marks -- John R. Faiella -- Gregg S. Glaser
14
<PAGE>
PERFORMANCE GRAPH
The following graph demonstrates the performance of the cumulative
total return to the stockholders of the Company's Common Stock during the
previous five years in comparison to the cumulative total return on the
NASDAQ Stock Market and the cumulative total return for the NASDAQ
Financial Stocks.
[graph appears here]
Indexed Returns (1991=100)
<TABLE>
<CAPTION>
Annual Return
----------------------------------------------------------------------------
1992 1993 1994 1995 1996
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
JWCharles Financial
Services, Inc. Common
Stock 160.000 160.000 145.000 167.500 460.000
- ------------------------------------------------------------------------------------------------------------------
NASDAQ Composite Index 217.864 250.093 244.462 345.715 425.258
- ------------------------------------------------------------------------------------------------------------------
NASDAQ Financial Index 213.880 248.584 249.174 362.816 465.167
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
Assumes $100 invested in JWCharles Financial Services, Inc. Common Stock,
NASDAQ Composite Index and NASDAQ Financial Index.
15
<PAGE>
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Price Waterhouse LLP ("Price Waterhouse") has examined and reported
upon the financial statements of the Company for the fiscal year ended
December 31, 1996 and has been selected by the Board of Directors to
examine and report upon the financial statements of the Company for the
year ending December 31, 1997. Price Waterhouse has no direct or
indirect interest in the Company or any affiliate of the Company. A
representative of Price Waterhouse is expected to be present at the
Annual Meeting, with the opportunity to make a statement if he desires to
do so, and is expected to be available to respond to appropriate
questions.
STOCKHOLDERS' PROPOSALS FOR 1998 ANNUAL MEETING
Stockholders who wish to present proposals appropriate for
consideration at the Company's 1998 Annual Meeting of Stockholders must
submit the proposals in proper form to the Company at its address set
forth on the first page of this Proxy Statement no later than February
28, 1998 in order for the proposals to be considered for inclusion in the
Company's proxy statement and form of proxy relating to such annual
meeting.
OTHER MATTERS
All of the expenses involved in preparing, assembling and mailing
this Proxy Statement and the materials enclosed herewith and soliciting
proxies will be paid by the Company. It is estimated that such costs
will be nominal. The Company may reimburse banks, brokerage firms and
other custodians, nominees and fiduciaries for expenses reasonably
incurred by them in sending proxy materials to beneficial owners of
stock. The solicitation of proxies will be conducted primarily by mail
but may include telephone, telegraph or oral communications by directors,
officers or regular employees of the Company, acting without special
compensation.
The Board of Directors is aware of no other matters, except for
those incidental to the conduct of the Annual Meeting, that are to be
presented to stockholders for formal action at the Annual Meeting. If,
however, any other matters properly come before the Annual Meeting or any
postponement, adjournment or adjournments thereof, it is the intention of
the persons named in the proxy to vote the proxy in accordance with their
judgment.
Stockholders are urged to fill in, date and sign the accompanying
form of proxy and return it to the Company as soon as possible.
BY ORDER OF THE BOARD OF DIRECTORS
Joel E. Marks
Secretary
16
