<PAGE>
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant /X/
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(e) (2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to rule 14a-11(c) or Rule 14a-12
FINANCIAL SERVICES ACQUISITION CORPORATION
(Name of Registrant as Specified in Its Charter)
- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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) and 0-11.
(1) Title of each class of securities to which transaction applies:
- - --------------------------------------------------------------------------------
(2) Aggregate number 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):
- - --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- - --------------------------------------------------------------------------------
(5) Total fee paid:
- - --------------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
- - --------------------------------------------------------------------------------
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11 (a) (2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
- - --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- - --------------------------------------------------------------------------------
(3) Filing Party:
- - --------------------------------------------------------------------------------
(4) Dated Filed:
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<PAGE>
FINANCIAL SERVICES ACQUISITION CORPORATION
April 30, 1997
Dear Stockholder:
You are cordially invited to attend the 1997 Annual Meeting of
Stockholders of Financial Services Acquisition Corporation (the "Company"), to
be held at the Company's New York City offices at Two World Trade Center, 84th
Floor, on Wednesday, June 18, 1997, at 9:00 A.M. local time.
In addition to electing a class of directors and attending to other
business as described in the attached Proxy Statement, we will review the
Company's results of operations for fiscal 1996 and first quarter 1997 and
report on other matters of interest. There will also be an opportunity following
the formal Meeting for informal questions and discussion.
Whether or not you expect to attend the Meeting, please sign and date
the enclosed proxy card and return it in the accompanying postage-paid return
envelope as promptly as possible. This will not prevent you from voting by
ballot or changing your proxy should you attend the Meeting and wish to vote in
person or simply wish to change your vote.
Also, please mark the appropriate space on the proxy card if you plan
to attend the Meeting in person, so that we can make appropriate arrangements
with security at the World Trade Center for your attendance.
On behalf of the Board of Directors and management of Financial
Services Acquisition Corporation, we thank you for your continued support and
confidence in the Company.
Sincerely,
/s/ Gilbert D. Scharf
-----------------------
Gilbert D. Scharf
Chairman, President
and CEO
- - --------------------------------------------------------------------------------
YOUR VOTE IS IMPORTANT
PLEASE MARK, SIGN, DATE AND RETURN YOUR PROXY CARD PROMPTLY, WHETHER
OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING.
- - --------------------------------------------------------------------------------
FSAC
Two World Trade Center, 84th Floor, New York, New York 10048 o
Tel. 212-748-7000 o Fax. 212-748-7329
<PAGE>
FINANCIAL SERVICES ACQUISITION CORPORATION
Two World Trade Center, 84th Floor
New York, New York 10048
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 18, 1997
The Annual Meeting of Stockholders of Financial Services Acquisition
Corporation, a Delaware corporation (the "Company"), will be held at the
Company's New York offices, Two World Trade Center, 84th Floor, New York, New
York 10048, at 9:00 a.m., New York time, on Wednesday, June 18, 1997. The
meeting will be held for the purpose of considering and acting upon the
following matters:
1. The election of two Class I directors to serve until the third
succeeding annual meeting of stockholders;
2. The ratification of the appointment of Price Waterhouse LLP as the
Company's independent auditors for the year ending December 31, 1997;
3. The amendment of the Company's Restated Certificate of Incorporation to
change the name of the Company from "Financial Services Acquisition
Corporation" to such new name as the Board of Directors determines and
timely informs stockholders of prior to the meeting; and
4. The transaction of such other business as may properly come before
the meeting or any adjournments or postponements thereof.
Information relating to the matters to be considered and voted on at
the meeting is set forth in the Proxy Statement attached to this Notice. The
Board of Directors has fixed the close of business on April 24, 1997, as the
record date for determining stockholders of the Company entitled to notice of
and to vote at the meeting. For ten days prior to (and at) the meeting, a list
of stockholders entitled to vote at the meeting will be maintained at the
Company's New York offices and will be subject to inspection during regular
business hours by any stockholder.
You are cordially invited to attend the meeting. However, so that your
shares will be represented whether or not you plan to attend the meeting, please
sign, date and promptly return the enclosed proxy card in the pre-addressed
stamped envelope provided.
By Order of the Board of Directors,
Michael J. Scharf
Secretary
New York, New York
April 30, 1997
<PAGE>
FINANCIAL SERVICES ACQUISITION CORPORATION
Two World Trade Center, 84th Floor
New York, New York 10048
----------------------------
PROXY STATEMENT
----------------------------
General
The accompanying proxy is solicited on behalf of the Board of Directors
of Financial Services Acquisition Corporation, a Delaware corporation (the
"Company"), with principal executive offices at Two World Trade Center, 84th
Floor, New York, New York 10048, for use at the Annual Meeting of Stockholders
to be held at 9:00 a.m., New York time, on Wednesday, June 18, 1997, and at any
adjournments or postponements thereof (the "Annual Meeting"), for the purposes
set forth in the foregoing Notice.
This Proxy Statement and the accompanying Notice and proxy card are
first being sent to stockholders on or about April 30, 1997. The Company's
annual report to stockholders for the fiscal year ended December 31, 1996 has
been integrated with the Company's annual report on Form 10-K for the same
period. Accordingly, the Form 10-K is being mailed to all stockholders of record
and accompanies this Proxy Statement.
Revocability of Proxies
All stockholders are cordially invited to attend the Annual Meeting.
However, so that your shares will be represented whether or not you plan to
attend the Annual Meeting, please sign, date and promptly return the enclosed
proxy card in the pre-addressed stamped envelope provided. You have the right to
revoke your proxy at any time prior to its being voted at the Annual Meeting by
(i) filing with the Secretary of the Company, at or before the taking of the
vote at the Annual Meeting, a written notice of revocation bearing a later date
than the proxy, (ii) duly executing a subsequent proxy relating to the same
shares and delivering it to the Secretary of the Company before the Annual
Meeting or (iii) attending the Annual Meeting and voting in person (although
presence at the Annual Meeting without further action will not revoke a proxy).
Voting Rights
The Board of Directors has fixed the close of business on April 24,
1997 as the record date (the "Record Date") for the Annual Meeting. Accordingly,
only holders of record of Common Stock at the close of business on such date are
entitled to notice of and to vote at the Annual Meeting. At the close of
business on the Record Date, 8,949,656 shares of the Common Stock, par value
$.001 per share ("Common Stock"), of the Company were issued and outstanding. On
all matters voted upon at the Annual Meeting, holders of shares of Common Stock
vote as a single class with each record holder entitled to one vote per share.
Stockholders do not have cumulative voting rights with respect to the election
of directors.
1
<PAGE>
Voting Procedures; Quorum
Proxies received prior to the Annual Meeting and not revoked will be
voted at the Annual Meeting in accordance with the instructions indicated on
such proxies. If no instructions are indicated on a returned proxy card, the
shares represented thereby will be voted in accordance with the recommendations
of the Board of Directors (i) "FOR" the election of the two nominees to the
Board of Directors, (ii) "FOR" ratification of the appointment of Price
Waterhouse LLP as the Company's independent auditors for 1997 and (iii) "FOR"
approval of the amendment to the Company's Restated Certificate of Incorporation
to change the Company's name. The Board of Directors is not aware of any other
matter which is to come before the Annual Meeting, but if any other matter is
properly presented for consideration, the persons named in the enclosed proxy
card will have discretion to vote on such matter in accordance with their best
judgment. So-called "street name" shares that are held of record by brokers or
other nominees, in the absence of instructions or withheld authority from the
beneficial owner, may be voted in the discretion of such brokers or nominees
with respect to each of the three proposals set forth herein (although if any
other matter properly comes before the Annual Meeting, the nature of such matter
will determine whether the broker or nominee has such discretion).
The presence in person or by properly executed proxy, of holders of a
majority of outstanding shares of Common Stock entitled to vote at the Annual
Meeting will constitute a quorum. For purposes of determining the number of
shares present in person or represented by proxy at the Annual Meeting, all
votes cast "for," "against" or "abstain" are included. "Broker non-votes," which
occur when brokers or other nominees are prohibited by applicable rules from
exercising discretionary voting authority on a particular proposal for
beneficial owners who have not provided voting instructions, are also deemed
present for purposes of determining a quorum, but are not counted for the
purpose of determining the vote required for approval of such proposal.
Required Votes
Assuming the presence of a quorum at the Annual Meeting, (i) directors
will be elected (Proposal 1) if they receive a plurality of the votes cast at
the Annual Meeting (and, accordingly, abstentions and broker non-votes have no
effect), (ii) the appointment of Price Waterhouse LLP as the Company's
independent auditors (Proposal 2) will be ratified if the Proposal receives the
affirmative vote of a majority of the votes cast at the Annual Meeting (and,
accordingly, abstentions and broker non-votes have the same effect as a negative
vote) and (iii) the amendment to the Company's Restated Certificate of
Incorporation to change the Company's name (Proposal 3) will be approved if the
Proposal receives the affirmative vote of a majority of the votes entitled to be
cast at the Annual Meeting (and, accordingly, abstentions and broker non-votes
have the same effect as a negative vote). A "plurality" means that the director
nominees who receive the greatest number of votes present or represented by
proxy (up to the maximum number of two directors to be elected at the Annual
Meeting) are elected as the directors.
2
<PAGE>
ELECTION OF DIRECTORS
(Proposal 1 on the proxy card)
Article SIXTH of the Company's Restated Certificate of Incorporation
provides that the number of directors shall be not less than three nor more than
twelve, and empowers the Company's Board of Directors to fix the exact number of
directors and to fill any vacancies on the Board of Directors. Article SIXTH
further provides that the Board of Directors shall be divided into three
classes: Class I, Class II and Class III, with each class to consist, as nearly
as possible, of one-third of the members of the Board. The Company's Board of
Directors has set the number of directors at eight, with two directors in Class
I and three directors in each of Classes II and III. The term of the Class I
directors will expire at the Annual Meeting, the term of the Class II directors
will expire at the next annual meeting of stockholders and the term of the Class
III directors will expire at the second succeeding annual meeting of
stockholders. Under Article SIXTH, directors elected at an annual meeting of
stockholders to succeed those whose terms expire are identified as being of the
same class as those directors they succeed and are elected for a term to expire
at the third annual meeting of stockholders after their election.
At the Annual Meeting, two Class I directors will be elected to hold
office until the third succeeding annual meeting of stockholders or until their
successors are elected and shall have qualified. James W. Stevens and Frederick
B. Whittemore have been nominated for election as Class I directors of the
Company. Both directors currently are serving as Class I directors of the
Company.
Shares authorized to be voted by the proxies named in a returned proxy
card will be voted "FOR" the election of Messrs. Stevens and Whittemore unless
authority to do so is withheld as provided in the proxy card. The nominees have
consented to serve if elected and the Board of Directors has no reason to
believe that the nominees will be unable to accept the office of director, but
if such contingency should arise, it is the intention of the proxies named in
the proxy card to vote for such person or persons as the Board of Directors may
recommend.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THESE TWO
NOMINEES AS DIRECTORS OF THE COMPANY.
Certain information with respect to the nominees for election as
directors proposed by the Company and the other directors whose terms of office
as directors will continue after the Annual Meeting is set forth below.
Class I Directors
James W. Stevens, 60, has been a director of the Company since its
August 1996 acquisition of Euro Brokers Investment Corporation ("Euro Brokers")
in a merger transaction (the "Merger"), when he became the designee to the Board
of Directors, pursuant to the Merger agreement, of Euro Brokers and its largest
shareholder, Welsh, Carson, Anderson & Stowe VI, L.P. ("Welsh Carson"). Mr.
Stevens has held various senior positions at The Prudential Insurance Company of
America ("Prudential") from October 1987 through December 1994. Mr. Stevens
3
<PAGE>
retired from Prudential in January 1995. As an Executive Vice President of
Prudential, from October 1987 to December 1994, his responsibilities included
serving on the Operating Council since 1993 and serving as Chairman and Chief
Executive Officer of the Prudential Asset Management Group with responsibility
for global institutional money management since 1993. From April 1985 to October
1987, he was a Managing Director of Dillon Read & Co. Inc. ("Dillon Read") in
its investment banking and private investment origination group. From 1974 to
1985, Mr. Stevens held several senior positions at Citicorp, including Chairman
of Citicorp Venture Capital Ltd. and Group Executive of the Capital Markets
Group, responsible for the Western Hemisphere merchant banking and investment
management activities of Citicorp. Mr. Stevens currently serves on the boards of
directors of the following companies: Biogen, Inc., Markem Corporation, MSO
America, Polyfibron Technologies, Inc., Walsh International, Inc. and Prudential
Equity Investors. Mr. Stevens received his B.A. degree from Williams College and
his M.B.A. from New York University. He is Chairman of the Board's Audit
Committee.
Frederick B. Whittemore, 65, has been a director of the Company since
its inception in 1994. Mr. Whittemore currently serves as a member of the boards
of directors of Partner Re Services Ltd., Southern Pacific Petroleum, Integon
Insurance and Chesapeake Energy Corporation. Since 1989, Mr. Whittemore has been
an Advisory Director at Morgan Stanley & Co. ("Morgan Stanley") and he is
Chairman of several of Morgan Stanley's mutual funds. Mr. Whittemore started at
Morgan Stanley in 1958; he was a Partner from 1967 to 1970 and a Managing
Director from 1970 until 1988. He was a senior banker in Corporate Finance,
Mergers and Acquisitions and Capital Markets, and Syndicate Manager responsible
for organizing and pricing all public offerings. Mr. Whittemore has also been a
member of the Council of Foreign Relations since 1983 and was Chairman of the
Board, Amos Tuck School of Business Administration at Dartmouth College from
1988 to June 1992. From 1977 to 1984, Mr. Whittemore was a Governor of the
American Stock Exchange ("AMEX") and from 1982 to 1984 he was Vice Chairman of
AMEX. Mr. Whittemore earned an A.B. degree from Dartmouth College and an M.B.A.
from the Amos Tuck School of Business Administration. He is a member of the
Board's Audit Committee.
Class II Directors
Denis Martin, 47, has been a director of the Company since its
inception in 1994. Since April 1997, Mr. Martin has been a management consultant
for Dynanet Ltd., a real estate management company based in the Isle of Man.
Beginning in June 1997, it is anticipated that Mr. Martin will become employed
by the Company as its Director of Risk Management. Mr. Martin has also been a
private investor since July 1993. From January 1992 to July 1993, Mr. Martin
served as risk investment manager at Cragnotti & Partners Capital Investment.
From January 1990 to December 1991, Mr. Martin headed the Investment Group at
BNP Securities, and from 1985 to December 1989, he was a partner in the Lazard
Brothers Capital Markets Group, where he was responsible for risk management.
From 1980 to 1985, Mr. Martin was a Eurobond market-maker at Morgan Stanley and,
prior thereto, he was in the actuarial and investment departments at Legal and
General Assurance, a major U.K. insurance company. Mr. Martin earned a B.S.
degree from the University of Leicester, England.
4
<PAGE>
William B. Wigton, 50, has been a director of the Company since its
August 1996 acquisition of Euro Brokers. Mr. Wigton was a founding member and
has been a managing partner of Merrion Group, L.P., a broker-dealer, since its
inception in 1989. He is also a managing director of and investor in Merrion
Investors, L.P., a private investment fund, and in 1996 was appointed a director
of Munn, Bernhard & Associates, a registered investment advisor. From 1981 to
1989, Mr. Wigton was employed at Lazard Freres & Co. and was a general partner
from 1987 to 1989, with responsibility for corporate bond sales. From 1979 to
1981, Mr. Wigton was a senior vice president at Dillon Read. Prior thereto, he
was associated with Morgan Stanley (1975 to 1979) and Morgan Guaranty Trust
Company (1970 to 1975). Mr. Wigton received his B.A. degree from Lynchburg
College. He is a member of the Board's Compensation Committee.
Keith E. Reihl, 45, has been a director of the Company since April
1997, when he was appointed to the Board of Directors to fill the vacancy
created by the resignation in November 1996 of Donald Marshall, the former CEO
of Euro Brokers. Mr. Reihl also is the Chief Operating Officer and Treasurer of
Euro Brokers and a number of its subsidiaries, as well as a member of such
companies' respective boards of directors. Prior to being appointed Chief
Operating Officer in November 1996, Mr. Reihl had served since 1983 as the Chief
Financial Officer of Euro Brokers and such subsidiaries. Prior to that time, Mr.
Reihl was employed for nine years by Price Waterhouse LLP, serving lastly as
Senior Manager. Mr. Reihl is a Certified Public Accountant and received his BA.
degree in Accounting from Elizabethtown College in 1974.
Class III Directors
Gilbert D. Scharf, 48, has been Chairman of the Board, President and
Chief Executive Officer of the Company since its inception in 1994. Since April
1993, Mr. Scharf has been Vice President, Secretary, Treasurer and a director of
Niagara Corporation, a holding company with operating subsidiaries in the
business of manufacturing cold drawn steel bars ("Niagara"). Since 1989, Mr.
Scharf has been a private investor and Chairman of Scharf Advisors, Inc.
("Scharf Advisors"). From 1985 to January 1989, Mr. Scharf was a Managing
Director of Lazard Brothers & Co. Ltd. in London, where he was responsible for
establishing and managing capital market activities. From 1983 to 1985, Mr.
Scharf was the General Partner of Mendez, Scharf & Co., a private investment
partnership. Prior thereto, Mr. Scharf was a Managing Director at Morgan Stanley
from 1978 to 1983, where he managed all corporate and international bond trading
and new issue commitments and the money market department, and was co-chairman
of the risk management committee. Upon consummation of the Company's acquisition
of Euro Brokers, Mr. Scharf became the Vice-Chairman of Euro Brokers and is
currently the Chairman, President and Chief Executive Officer of Euro Brokers,
as well as of a number of its subsidiaries. Mr. Scharf earned a B.A. degree from
Duke University. He is the Chairman of the Board's Executive Committee.
5
<PAGE>
Michael J. Scharf, 54, has been Vice President, Secretary, Treasurer
and a director of the Company since its inception in 1994. Since April 1993, Mr.
Scharf has been the Chairman of the Board, President and Chief Executive Officer
of Niagara. From August 1989 to April 1994, he was a private investor. From
October 1983 to August 1989, Mr. Scharf was the Chairman and Chief Executive
Officer of Edgcomb Steel of New England, Inc. and its successor corporation,
Edgcomb Corporation, which was, from 1984 to 1989, one of the largest
independent metals service center and distribution companies in the United
States. Edgcomb Corporation was sold in 1989 to a company controlled by The
Blackstone Group. Mr. Scharf received an A.B. degree from Princeton University
and an M.B.A. from Harvard Business School. He is a member of the Board's
Executive Committee.
Larry S. Kopp, 54, has been a director of the Company since its
inception in 1994. Since November 1992, Mr. Kopp has been Managing Director of
Frank Russell and Company, a pension consulting firm which currently has $600
billion under advisement and $22 billion in investment funds. From 1978 to
November 1992, Mr. Kopp held several senior management positions in strategic
growth areas of Citicorp, including General Manager of its bank card business
and Chairman of Citicorp Insurance Services. From 1974 to 1978, Mr. Kopp was
involved in venture capital transactions and was an advisor at E.M. Warburg
Pincus and Company, where he served as a consultant to corporations regarding
strategic planning, turnarounds, financial restructuring and sales of assets.
Mr. Kopp earned B.A. and M.B.A. degrees from Stanford University. He is Chairman
of the Board's Compensation Committee.
Committees, Meetings and Compensation of the Board of Directors
During 1996, the Board of Directors met four times. All directors
attended at least 75% of the meetings of the Board and Board Committees on which
they serve.
The Board of Directors has standing Executive, Audit and Compensation
Committees. The Executive Committee is currently comprised of Messrs. Gilbert
Scharf (Chairman) and Michael Scharf, and is authorized to exercise all powers
and authority of the Board of Directors, except those reserved to the Board by
law, Board resolution or the Company's Restated Certificate of Incorporation or
By-laws. The Executive Committee did not meet during 1996.
The Audit Committee is comprised of Messrs. Stevens (Chairman) and
Whittemore and recommends to the Board of Directors the accounting firm to be
appointed as independent accountants for the Company; reviews with the Company's
management and independent accountants the Company's quarterly and annual
operating results; and reviews with the Company's independent accountants the
scope and results of their audit and the adequacy of the Company's internal
accounting procedures and systems. The Audit Committee met once during 1996.
The Compensation Committee is comprised of Messrs. Kopp (Chairman) and
Wigton and determines the cash and non-cash compensation payable to executive
officers of the Company.
6
<PAGE>
The Compensation Committee also administers the Company's 1996 Stock Option Plan
(the "Option Plan"). The Compensation Committee met twice during 1996.
The members of the Board of Directors are compensated in a manner and
at a rate determined from time to time by the full Board. In August 1996, each
non-employee member of the Board of Directors (then consisting of Messrs.
Stevens, Whittemore, Martin, Kopp and Wigton) received as compensation a
one-time grant of options under the Option Plan to acquire 10,000 shares of
Common Stock, exercisable at $5.00 per share, and vesting in equal 50%
increments on the dates respectively six months and twelve months after the date
of grant. Non-employee directors are also compensated annually in arrears (on or
before the time of the Company's annual meeting, with the first such payment to
be on or before the time of the Annual Meeting) at the rate of $500 for each
Board or Committee meeting attended, plus reimbursement of reasonable expenses
to attend.
Certain Other Relationships and Related Transactions
In August 1994, the Company issued an aggregate of 833,333 shares of
Common Stock to its six initial stockholders, consisting of Messrs. G. Scharf,
M. Scharf, Kopp, Whittemore, Martin and William D. Birch (a former director of
the Company who resigned, effective as of the Merger, and was replaced by Mr.
Wigton), for an aggregate price of $25,000, or $.03 per share. Pursuant to
agreements entered into at the time between the holders of all such shares (the
"Pre-IPO Shares") and the Company, the Pre-IPO Shares were placed in escrow for
a period that will end on November 30, 1997. In addition, pursuant to such
agreements, the Pre-IPO Shares (i) were required to vote with respect to any
initial business combination of the Company (i.e., the Merger) in proportion to
the vote of all other shares of Common Stock and (ii) were not entitled (as
opposed to other shares of Common Stock, which were so entitled) either (x) to
redemption rights in connection with such initial business combination or (y) to
the proceeds of the liquidation of the Company that would have been required by
its Certificate of Incorporation as then in effect if the Company had not been
able to consummate an initial business combination such as the Merger within two
years of its December 1994 initial public offering (the "IPO")). As a result of
the Merger, the characteristics described above with respect to the Pre-IPO
Shares, other than the escrow requirement, no longer apply. During the remaining
balance of the escrow period, the beneficial owners of the Pre-IPO shares are
not able to sell or otherwise transfer such shares (with certain limited
exceptions), but retain full and unrestricted voting rights.
Through August 1996, the Company paid $5,000 per month to Scharf
Advisors for office space and certain office and secretarial services. In
addition, Scharf Advisors received reimbursement for certain out-of-pocket
expenses incurred in connection with activities on behalf of the Company. Scharf
Advisors is wholly-owned by Gilbert Scharf, the Chairman, President and Chief
Executive Officer of the Company. Management of the Company believes that the
arrangement with Scharf Advisors was on terms at least as favorable as would
have been available from an unaffiliated third party.
7
<PAGE>
On August 16, 1996, the Merger was consummated, with Euro Brokers
becoming a wholly-owned subsidiary of the Company. In the Merger, former
shareholders of Euro Brokers (some of whom, Welsh Carson and Messrs. Donald R.A.
Marshall, Alistair H. Johnstone and Brian G. Clark, as a result became
beneficial owners of more than 5% of the Common Stock, and some of whom, Messrs.
Keith E. Reihl, Walter E. Dulski and Michael C. Morrison, are currently deemed
executive officers of the Company) received, in exchange for each share of Euro
Brokers common stock they held at the time of the Merger, consideration
consisting of, after giving effect to certain adjustments and subject to certain
escrow arrangements, approximately (i) 2.70 shares of Common Stock, (ii) 4.53
redeemable common stock purchase warrants of the Company ("Warrants") and (iii)
$13.14 in cash.
In connection with the Merger, the Company entered into a registration
rights agreement with Welsh Carson and certain related investors, certain
members of Euro Brokers management (including Messrs. Marshall, Reihl, Dulski,
Johnstone and Clark) and the Company's initial stockholders (Messrs. G. Scharf,
M. Scharf, Martin, Kopp, Whittemore and Birch) providing for two demand
registration rights, and certain "piggy-back" registration rights, with respect
to their shares of Common Stock. The first demand may only be initiated by
holders of at least a majority of the total shares of Common Stock issued in the
Merger to Welsh Carson and certain related investors, but will extend to the
other stockholders who are parties to the agreement. The second demand may be
made by holders of a majority of the total shares of Common Stock held by all
stockholders who are parties to the agreement.
In connection with the Merger, the Company also entered into a security
transfer agreement with certain of its security holders, including Welsh Carson
and Messrs. G. Scharf, M. Scharf, Marshall, Reihl, Dulski, Johnstone and Clark,
obligating such holders, if the Company consummates a Common Stock for Warrants
exchange offer prior to November 30, 1997 (an "Exchange Offer"), to tender into
the Exchange Offer at least such portion of the Warrants then held by such
holder as is proportionate to the percentage of Warrants tendered by all other
Warrant holders.
Also in connection with the Merger, the Company entered into an escrow
agreement pursuant to which, among other things, 10% of the shares of Common
Stock issued in the Merger to former Euro Brokers stockholders (including Welsh
Carson and Messrs. Marshall, Reihl, Dulski, Morrison, Johnstone and Clark) were
placed in escrow to pay, among other things, indemnities, if any, that become
owed to the Company under the Merger agreement. Such escrow shares are to be
released, unless an adjustment remains in dispute, by August 16, 1997. Pending
such release, the escrow shares are to be voted by the escrow trustee on any
matter submitted to a vote of the Company's stockholders (including the
Proposals at the Annual Meeting) in proportion to the vote of all other shares
of Common Stock voted with respect to such matter.
Gilbert D. Scharf and Michael J. Scharf are brothers. There are no
other family relationships among the Company's directors, executive officers or
persons nominated or chosen by the Company to become a director or executive
officer.
8
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Set forth below is certain information concerning beneficial ownership
of Common Stock (i) as of the Record Date, by (x) each director and director
nominee of the Company, (y) each named executive officer (see below) of the
Company and (y) all executive officers and directors of the Company as a group
and (ii) based on public filings made through April 25, 1997, by persons known
to the Company to be the beneficial owners of 5% or more of the outstanding
shares of Common Stock.
Beneficial Ownership of Shares of Common Stock
<TABLE>
<CAPTION>
Percentage
Name (1) Number of Shares (2)(3) Beneficially Owned (4)
- - -------- ----------------------- ----------------------
<S> <C> <C>
Gilbert D. Scharf (5)(6)............. 1,548,332 16.0
Michael J. Scharf (5)(6) ............ 720,001 7.8
Donald R.A. Marshall (6)(7).......... 1,428,946 14.5
Denis Martin (5)(8).................. 60,000 *
James W. Stevens..................... 15,000 *
Frederick B. Whittemore (5).......... 80,000 *
Larry S. Kopp (5).................... 59,000 *
William B. Wigton.................... 5,000 *
Keith E. Reihl (6)(7)................ 363,781 4.0
Walter E. Dulski (6)(7).............. 389,894 4.2
Roger E. Schwed...................... -- --
Michael C. Morrison (7).............. 34,310 *
Alistair H. Johnstone (6)(7)......... 865,864 9.1
Brian G. Clark (6)(7)................ 507,946 5.5
Welsh, Carson, Anderson & Stowe VI,
L.P. ("Welsh Carson") (6)(7)......... 6,146,242 48.0
All executive officers and directors
as a group (11 persons).............. 3,275,318 30.9
</TABLE>
- - ---------------
* Less than 1%
(1) The address of each stockholder, other than Welsh Carson, is c/o Financial
Services Acquisition Corporation, Two World Trade Center, 84th Floor, New
York, New York 10048. The address of Welsh Carson is 320 Park Avenue,
Suite 2500, New York, New York 10022. Information with respect to Welsh
Carson and its holdings is derived from its Schedule 13D with respect to
the Common Stock, dated August 16, 1996, and filed with the Securities and
Exchange Commission (the "SEC") on August 23, 1996.
(2) Includes shares of Common Stock issuable upon exercise of all Warrants
held by each stockholder. Although the Company has two series of Warrants
outstanding that are separately traded, the economic terms of both series
are identical and, accordingly, ownership of each series is not
distinguished herein. Each Warrant (both series) is currently exercisable
at $5.00 for one share of Common Stock and expires on November 30, 2001.
Beneficial ownership of Warrants is as follows: Gilbert D. Scharf -
716,666; Michael J. Scharf - 333,334;
9
<PAGE>
Donald R.A. Marshall - 895,631; Denis Martin - 10,000 (jointly with his
wife); Frederick B. Whittemore - 50,000; Larry S. Kopp - 21,000; Keith E.
Reihl - 228,010; Walter E. Dulski - 244,377; Michael C. Morrison - 21,505;
Alistair H. Johnstone - 542,704; Brian G. Clark - 318,369; Welsh Carson -
3,852,326; and all executive officers and directors as a group -
1,624,892.
(3) Includes shares of Common Stock issuable upon exercise of stock options
held by each stockholder that are currently exercisable or exercisable
within 60 days ("Exercisable Options"). The exercise price for each
Exercisable Option is $5.00 per share. Beneficial ownership of Exercisable
Options is as follows: Denis Martin - 5,000; James W. Stevens - 5,000;
Frederick B. Whittemore - 5,000; Larry S. Kopp - 5,000; William B. Wigton
- 5,000; and all executive officers and directors as a group - 25,000.
(4) Based on 8,949,656 shares of Common Stock outstanding as of the Record
Date, plus any shares issuable upon exercise of Warrants or Exercisable
Options held by the stockholder (but not by any other stockholders).
(5) Certain of the shares of Common Stock indicated as owned by the
stockholder are Pre-IPO Shares, held in escrow with Continental Stock
Transfer & Trust Company, as escrow agent, for a period ending on November
30, 1997. During the remaining balance of such escrow period, the
beneficial owners of such shares retain full and unrestricted voting
rights but are not able to sell or otherwise transfer them (with certain
limited exceptions). Beneficial ownership of Pre-IPO Shares is as follows:
Gilbert D. Scharf - 498,333; Michael J. Scharf - 220,000; Mr. Martin -
40,000; Mr. Whittemore - 25,000; Mr. Kopp - 25,000; and all executive
officers and directors as a group - 808,333.
(6) All Warrants held by the stockholder are subject to the terms of a
security transfer agreement entered into in connection with the Merger
that obligates the holder thereof, if the Company consummates an Exchange
Offer, to tender into the Exchange Offer at least such portion of the
Warrants then held by such stockholder as is proportionate to the
percentage of Warrants tendered by all other Warrant holders.
(7) Includes shares of Common Stock held in escrow with the United States
Trust Company of New York, as trustee, pending the making of certain
post-Merger adjustments (the "Escrow Shares"). The Escrow Shares are to be
released, unless an adjustment remains in dispute, by August 16, 1997.
Pending such release, the Escrow Shares are to be voted by the escrow
trustee on any matter submitted to a vote of the Company's stockholders in
proportion to the vote of all other shares of Common Stock on such matter.
Beneficial ownership of Escrow Shares is as follows: Donald R.A. Marshall
- 53,330 Escrow Shares; Keith E. Reihl - 13,577 Escrow Shares; Walter E.
Dulski - 14,552 Escrow Shares; Michael C. Morrison - 1280 Escrow Shares;
Alistair H. Johnstone - 32,316 Escrow Shares; Brian G. Clark - 18,958
Escrow Shares; and WCAS VI -- 229,392 Escrow Shares.
(8) Includes 5,000 shares of Common Stock beneficially owned jointly with
Mr. Martin's wife.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors, officers and persons who
beneficially own more than 10% of a registered class of the Company's equity
securities ("10% stockholders") to file with the SEC initial reports of
ownership and changes in ownership in the Company's equity securities and to
furnish the Company with copies of all such forms. Based solely on its review of
the copies of such forms received by it, and written representations from
certain of the reporting persons that no other reports were required, the
Company believes that all such Section 16(a) filing requirements applicable to
its directors, officers and 10% stockholders with respect to the Company's
fiscal year ending December 31, 1996 and its prior fiscal years were complied
with on a timely basis, except that one director, Mr. Whittemore, reported late
on a Form 5 a single acquisition of Warrants of the Company that should have
earlier been reported on a Form 4.
10
<PAGE>
EXECUTIVE OFFICERS OF THE COMPANY
Set forth below is certain information with respect to each of the
executive officers of the Company who is not also a director or director nominee
of the Company.
Walter E. Dulski, 56, became an Executive Vice President of Euro
Brokers and a number of its subsidiaries in 1997. Prior thereto, Mr. Dulski had
been a Senior Vice President of Euro Brokers and such subsidiaries since 1979.
Mr. Dulski is also a director of Euro Brokers Inc. and a number of other Euro
Brokers subsidiaries. Mr. Dulski was a member of the American Stock Exchange
from 1977 to 1984. Mr. Dulski received his B.S. degree in Economics from
Villanova University in 1963.
Roger E. Schwed, 39, has been Vice President, General Counsel and
Assistant Secretary of the Company since October 1996. Mr. Schwed is also
Executive Vice President, General Counsel and Secretary of Euro Brokers and
Executive Vice President and Secretary of a number of Euro Brokers subsidiaries.
Prior to joining the Company, from March 1995 to September 1996, Mr. Schwed was
Counsel at the law firm Skadden, Arps, Slate, Meagher & Flom LLP in New York,
and, from October 1987 to February 1995, an associate at the law firm Cleary
Gottlieb, Steen & Hamilton. Mr. Schwed received an A.B. degree from Princeton
University in 1979 and a J.D. degree from Columbia University School of Law in
1986.
Michael C. Morrison, 38, has been the Chief Operating Officer of the
Company's Euro Brokers London operations since November 1996. Mr. Morrison also
is, and has been since 1987, the Chief Financial Officer and Secretary of such
operations and a member of the boards of directors of the companies comprising
such operations. Prior to that time, Mr. Morrison was employed for five years
with Price Waterhouse in London, serving lastly as Audit Manager. Mr. Morrison
is a Chartered Accountant and graduated Ardingly College in 1976, receiving his
Diploma in Accountancy from City of London Polytechnic in 1977.
COMPENSATION OF EXECUTIVE OFFICERS
Summary Compensation Table
The following table summarizes compensation paid by the Company and its
subsidiaries, during each of the last three fiscal years, to its Chief Executive
Officer, its four remaining most highly compensated executive officers as of
December 31, 1996, and Donald Marshall, the former CEO of Euro Brokers who
resigned in November 1996 (collectively, the "Named Executive Officers").
11
<PAGE>
Summary Compensation Table and Long-Term Compensation Awards
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation
Name and Fiscal Securities Underlying All Other
Principal Position Year Salary Bonus Options (# of shares) Compensation(1)
------------------ ------ ------ ----- --------------------- ---------------
<S> <C> <C> <C> <C> <C>
Gilbert D. Scharf, 1996 $ 168,750 $ -- 250,000 $ --
Chairman of the 1995 -- -- -- --
Board, President 1994 -- -- -- (3)
and Chief Executive
Officer (2)
Keith E. Reihl, 1996 281,250 50,000 100,000 6,419
Chief Operating Officer 1995 270,000 90,000 -- 6,293
of Euro Brokers 1994 293,750 -- -- 6,302
Walter E. Dulski, 1996 270,000 75,000 30,000 3,673
Executive Vice President 1995 270,000 -- -- 3,673
of Euro Brokers 1994 293,750 -- -- 3,805
Roger E. Schwed, 1996 62,500 25,000 50,000 1,780
Vice President and
General Counsel (4)
Michael C. Morrison, 1996 157,300 133,705 50,000 382
Chief Operating Officer 1995 158,140 95,951 -- 432
of Euro Brokers 1994 140,947 104,704 -- 424
London operations (5)
Donald R.A. Marshall, 1996 450,000 50,000 150,000 14,883
Former Chief Executive 1995 450,000 100,000 -- 14,607
Officer of Euro Brokers 1994 446,833 -- -- 14,673
(6)
</TABLE>
(1) Amounts, for each of Messrs. Reihl, Dulski and Marshall, are comprised of
(i) annual premiums ranging from $612 to $1,861 paid by Euro Brokers Inc.
on travel accident insurance policies providing coverage of $2.5 million
for Mr. Marshall and $1 million for each of Messrs. Reihl and Dulski and
(ii) annual premiums ranging from $1,281 to $11,574 paid by Euro Brokers
Inc. on long-term disability policies currently providing for, in the
event of disability, monthly payments for life to Mr. Marshall of $13,500
and to Mr. Reihl of $6,900 and monthly payments for two years to Mr.
Dulski of $3,000. Amounts also include (x) for such persons and Mr.
Schwed, $1,000 contributions annually to the Euro Brokers Inc. 401(k)
Savings Plan and (y) for all Named Executive Officers, other than Mr.
Morrison, annual premiums of $780 paid by Euro Brokers Inc. on life
insurance policies providing coverage for such officers of two times the
prior year's reported Form W-2 earnings (or base salary and guaranteed
bonus, if higher), up to a maximum coverage of $500,000. Amounts for Mr.
Morrison are comprised of pro rated annual premiums paid by Euro Brokers
London operations on a group life insurance policy providing coverage for
Mr. Morrison of four times his base salary. Certain perquisites and other
personal benefits that aggregate in each case to less than 10% of the
Named Executive Officer's annual salary and bonus have been omitted
pursuant to item 402(b)(1)(iii)(C)(1) of Regulation S-K.
(2) Mr. Scharf did not draw a salary from the Company prior to the date of
the Merger (August 16, 1996). His compensation disclosed for 1996 relates
only to the partial year following the Merger (reflecting an annual base
salary of $450,000).
12
<PAGE>
(3) In August 1994 Mr. Scharf was issued 498,333 Pre-IPO Shares at $.03 per
share that, as discussed above, were subject to certain restrictions,
including having no value if the Company were forced to liquidate by its
inability to consummate an initial business combination within two years
of its December 1994 IPO. In the IPO, each unit offered for sale to the
public (consisting of one share of Common Stock and two Warrants) was
priced at $6.00.
(4) Mr. Schwed did not join the Company until October 1, 1996. His
compensation disclosed for 1996 relates only to a partial year
(reflecting an annual base salary, inclusive of guaranteed bonus, of
$250,000). Mr. Schwed's option grants include 25,000 options granted in
February 1997, but relating to fiscal year 1996.
(5) All amounts for Mr. Morrison reflect the U.S. Dollar equivalent of
amounts actually paid in Pounds Sterling, using average U.S.
Dollar/Pounds Sterling exchange rates of 1.5730, 1.5814 and 1.5376 for
1996, 1995 and 1994, respectively.
(6) Mr. Marshall resigned as a director of the Company, and as Chief
Executive Officer of Euro Brokers and a number of its subsidiaries, in
November 1996. He will continue to be paid by the Company in his
remaining capacity as a consultant, at an annual compensation rate of
$450,000, through November 22, 1999.
Stock Option Grant Table
The following table sets forth certain information concerning grants of
stock options made during the fiscal year ended December 31, 1996 to each of the
Named Executive Officers.
Stock Option Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Potential Realizable Value
at Assumed Annual Rates of
Number of Percentage of Stock Price Appreciation
Securities Total Options Option for
Underlying Granted to Exercise Term Option Term (2)(3)
Options Employees in Price Per Expiration ------------------
Name Granted(1) Fiscal Year Share Date 5% 10%
---- ---------- ----------- ----- ---- ------------------------
<S> <C> <C> <C> <C> <C> <C>
Gilbert Scharf (4) 150,000 11.7 $ 5.00 8/26/06 $ 471,671 $1,195,307
100,000 7.8 5.50 8/26/01 88,141 255,255
Keith Reihl 100,000 7.8 5.00 8/26/06 314,447 796,871
Walter Dulski 30,000 2.3 5.00 8/26/06 94,334 239,061
Roger Schwed (5) 25,000 1.9 5.1875 9/30/06 81,560 206,688
25,000 1.9 4.8125 2/03/07 42,577 139,062
Michael Morrison 50,000 3.9 5.00 8/26/06 157,224 398,436
Donald Marshall (6) 90,000 7.0 5.00 2/22/00 77,443 163,924
60,000 4.7 5.50 2/22/00 21,629 79,283
</TABLE>
(1) All options are grants under the Option Plan to acquire shares of Common
Stock and, except as noted below, are incentive stock options ("ISOs")
granted on August 27, 1996 at an exercise price of $5.00, which was the
fair market value of the Common Stock on the date of grant (as determined
under the Option Plan), and vest in equal 20% increments on each of the
first through fifth anniversaries of the date of grant. Upon the
occurrence of a "Change in Control" (as defined in the Option Plan), all
outstanding options that are not then exercisable will become immediately
exercisable.
13
<PAGE>
(2) These amounts reflect the difference obtained by subtracting (i) the
product of the option's exercise price per share of Common Stock and the
total number of shares of Common Stock underlying the option from (ii)
the stated rate of interest (5% or 10%) applied, on a compounded basis
over the term of the option, to the product of the fair market value of a
share of Common Stock on the option grant date and the total number of
shares of Common Stock underlying the option.
(3) These amounts represent certain assumed rates of appreciation only, in
accordance with SEC rules. Actual gains, if any, on stock option
exercises are dependent upon the future market performance of the Common
Stock and the date(s) on which the options are exercised, and may be
significantly greater or less than the amounts reflected in the table.
(4) Mr. Scharf's options consist of 100,000 ISOs and 150,000 non-qualified
stock options. Mr. Scharf's ISOs were granted at an exercise price of
$5.50, or 110% of fair market value of the Common Stock on the date of
grant, and vest in equal 20% increments on each of the first through
fourth anniversaries of the date of grant and on January 1, 2001.
(5) Mr. Schwed's options consist of 25,000 that were granted on October 1,
1996, at an exercise price $5.1875, which was the then-prevailing fair
market value of the Common Stock, and 25,000 that were granted on
February 4, 1997 (relating to fiscal year 1996), at an exercise price of
$4.8125, which was above the then-prevailing $4.00 fair market value of
the Common Stock.
(6) Mr. Marshall's options consist of 60,000 ISOs and 90,000 non-qualified
stock options. Mr. Marshall's ISOs were granted at an exercise price of
$5.50, or 110% of the fair market value of the Common Stock on the date
of grant. All of Mr. Marshall's options vest in equal one-third
increments on November 22 of each of 1997, 1998 and 1999.
Option Exercises and Fiscal Year End Values
The Company's Option Plan was implemented in August 1996 and,
accordingly, at the Company's December 31, 1996 fiscal-year end, the number of
options held by each Named Executive Officer was the same as the total number
granted to him in fiscal year 1996 (as set forth in the table above). At
December 31, 1996, none of the options granted in 1996 to any of the Named
Executive Officers was exercisable (and, accordingly, none had been exercised).
In addition, based on the December 31, 1996 closing sale price for the Common
Stock of $3-1/16 per share, none of such options were "in-the-money" (i.e., none
had an exercise price below such closing sale price).
Employment Agreements
Each of the Named Executive Officers has an employment agreement with
the Company or one of its subsidiaries, except for Mr. Marshall, who has a
consulting agreement. Each of Mr. Scharf's and Mr. Reihl's agreements
(respectively with the Company and Euro Brokers) became effective August 16,
1996, for initial three-year terms, with annual, automatic one-year extensions
beginning on the second anniversary of the effective date unless either party
gives notice of non-renewal on or prior to such anniversary. These agreements
provide Mr. Scharf and Mr. Reihl with minimum annual base salaries of $450,000
and $300,000, respectively, as from time-to-time reviewed and increased by the
employer's board of directors. Each agreement provides for annual bonuses that
will be determined by the board, but only if the book value per share of Common
Stock increases during the applicable period or in accordance with any annual
14
<PAGE>
incentive plan adopted by the employer, and for participation in current and
future employee benefit plans. If the executive's employment is terminated by
death, by the employer for "Cause" (as defined in such agreements) or by the
executive other than for "Good Reason" (as defined in such agreements), he will
be entitled to no further payments under his agreement. If the executive's
employment is terminated for "Disability" (as defined in such agreements), he
will be entitled to an additional six months of base salary, followed by such
benefits as are provided under any applicable disability plan. If the
executive's employment is terminated by the employer without "Cause" or by the
executive for "Good Reason," the executive will be entitled to (i) continuation
of base salary to the end of the employment term or, if longer, for one year (a
"Salary Continuation Period"), and (ii) continuation of coverage under all
health, medical and life insurance benefit plans for the longer of one year and
the remainder of the employment term or, if earlier, until the executive is
re-employed and is entitled to similar benefits from his new employer. Under the
agreements, the executive is subject to certain confidentiality obligations and,
during any Salary Continuation Period or, if the executive's employment is
terminated by the employer for "Cause" or by the executive other than for "Good
Reason," during the one-year period following any such termination (the
"Non-Compete Period"), is obliged not to engage in certain competitive
businesses (in consideration of the employer continuing to pay the executive at
a rate equal to one-half of his base salary), not to solicit employees of the
employer (or its subsidiaries) to work in such competitive businesses and not to
solicit customers of the employer (or its subsidiaries) for such competitive
businesses.
Mr. Schwed's employment agreement is with the Company and is similar to
the ones described above, except that (i) it has a two-year initial term from an
effective date of October 1, 1996 (with annual, automatic one-year extensions
beginning on the first anniversary of the effective date unless either party
gives notice of non-renewal on or prior to such anniversary), (ii) it provides
for a minimum annual base salary (inclusive of minimum annual bonus) of
$250,000, (iii) it does not require an increase in the Company's per share book
value for the payment of discretionary bonuses, (iv) it permits unilateral
termination by the executive upon 60 days prior written notice, (v) the
continuation of base salary after a termination by the employer without "Cause"
or by the executive for "Good Reason" will terminate to the extent the executive
is re-employed and is entitled to similar base salary from his new employer and
(vi) the Non-Compete Period is six months, with the employer having the choice
to enforce executive's covenant not to engage in certain competitive businesses
during such time by continuing to pay the executive at a rate equal to his base
salary and minimum bonus.
Mr Dulski's employment agreement is with Euro Brokers Inc. and has a
term that began on September 1, 1996 and ends on June 30, 1999, subject to
automatically continuing past such termination date unless and until either
party gives the other not less than six months prior written notice of
termination expiring on or after such termination date. Under the agreement, Mr.
Dulksi's base salary is $270,000, and he is entitled to be considered for
discretionary semi-annual bonuses. Upon the executive's death or termination of
the executive's employment unilaterally by the executive or by the employer for
"Cause" (as defined in the agreement), he is entitled to no further payments
under the agreement. The agreement provides for certain confidentiality
obligations, a six-month post-termination non-competition period with respect to
not engaging in certain competitive businesses or soliciting clients of the
employer (in
15
<PAGE>
consideration of the continuance of the executive's base salary during such
period), and a one-year post-termination period with respect to non-solicitation
of employees.
Mr. Morrison's employment agreement is with Euro Brokers International
Limited and had a fixed term that began on June 1, 1994 and ended on May 31,
1996, and an automatic rolling term that continues past such termination date
unless and until either party gives the other not less than six months prior
written notice of termination. Under the agreement, Mr. Morrison's base salary
is (pound)100,000, and he is entitled to be considered for discretionary
semi-annual bonuses. The agreement provides for certain confidentiality
obligations, a six-month non-competition period (running from the earlier of the
date a termination notice is given and the date the executive's employment is
terminated) with respect to not engaging in certain competitive businesses or
soliciting clients of the employer, and a one-year period (running from the same
date) with respect to non-solicitation of employees.
Mr. Marshall's consulting agreement is with Euro Brokers and has a
fixed term that began on November 23, 1996 and ends on November 22, 1999. During
the term of the agreement, Mr. Marshall receives annual compensation of
$450,000, reimbursement of certain expenses and continued coverage under certain
life, medical, accident and disability insurance plans. Following the term, the
agreement provides for the continuance for certain defined periods of certain of
the expense reimbursement provisions and, subject to certain availability and
cost limits, Mr. Marshall's medical insurance coverage. During the first year of
the term, the Company is obligated to use its reasonable best efforts to arrange
for the private sale or sales, at mutually agreed prices, of up to 50% of the
shares of Common Stock owned by Mr. Marshall. During the first two years of the
term, Mr. Marshall is obligated not to engage in certain competitive businesses.
During all three years of the term, Mr. Marshall is also obligated not to
solicit any clients of Euro Brokers (or its subsidiaries) for such competitive
businesses and not to solicit any employees of Euro Brokers (or its
subsidiaries) or assist any such competitive businesses to hire such employees.
Certain provisions in the agreement relating to the right of Euro Brokers to
purchase shares of Common Stock held by Mr. Marshall using the proceeds of a key
man life insurance policy with respect to Mr. Marshall are, with the lapsing of
such policy in March 1997, no longer of any effect.
PERFORMANCE GRAPH
The following graph compares cumulative total return of the Common
Stock with the cumulative total return of (i) the Standard & Poor's Midcap 400
Index (the "S&P Index"), (ii) a new industry peer group index comprised of seven
other publicly-traded financial companies (the "Peer Group Index") and (iii) an
old peer group index consisting of ten publicly-traded "Specified Purpose
Acquisition Companies"(R) (the "SPAC Index"). The graph assumes $100 was
invested on December 7, 1994 (the day the Common Stock was first traded on the
OTC Bulletin Board) in shares of Common Stock, stocks comprising the S&P Index,
stocks comprising the Peer Group Index and stocks comprising the SPAC Index, and
the reinvestment of all dividends.
16
<PAGE>
The companies comprising the Peer Group Index are publicly-traded
financial companies that either (i) are, or have a subsidiary that is, an
inter-dealer broker (these companies are: Exco plc and Trio Holdings PLC) or
(ii) are, or have subsidiaries that are, broker-brokers, share the Company's SIC
code and have a market capitalization within a certain range of the Company's
(these companies are: First Albany Companies, Inc., Kinnard Investments, Inc.,
Rodman & Renshaw Capital Group, Inc., Hoenig Group Inc. and Stifel Financial
Corp). The returns of each company have been weighted according to their
respective stock market capitalization for purposes of arriving at a peer group
average. Market prices, dividends and capitalization for the two companies (Exco
and Trio) traded on the London Stock Exchange have been converted to U.S.
Dollars at a rate of 1.5376.
Prior to the Merger, the Company had used the SPAC Index because it at
such time shared in common with the companies comprising such index certain
unique business purposes and investor-protection features. Because the Company
no longer has such purposes and features, the Company believes use of the new
Peer Group Index is more appropriate. Although the Company will not be using the
SPAC Index in the future, it is an SEC requirement to include an old index for
comparative purposes in the first performance graph that changes from such old
index to a new index. The companies comprising the SPAC Index are: HDS
Corporation, Concord Health Group, Inc., SourceMedia, Inc., Niagara Corporation,
Bogen Communications, Zydeco Energy, Inc., Kellstrom Industries, Restructuring
Acquisition Corporation, Production Systems Acquisition Corporation and Silver
Diner, Inc.
Comparison of Cumulative Total Return of the Company (1)
[GRAPH]
1) The comparisons in the performance graph above (and the table below) are
set forth in response to SEC disclosure requirements, and therefore are
not intended to forecast or be indicative of future performance of the
Common Stock (or of any of the indices or the companies comprising them).
17
<PAGE>
12/7/94 12/31/94 12/31/95 12/31/96
------- -------- -------- --------
S&P Index 100.00 100.00 128.08 151.10
FSAC 100.00 100.00 102.78 68.05
Peer Group Index 100.00 103.37 76.77 104.51
SPAC Index 100.00 98.77 104.09 120.76
REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
Compensation Committee Interlocks and Insider Participation
The Compensation Committee of the Board of Directors, formed in August
1996 after the Merger, is comprised of Messrs. Larry S. Kopp (Chairman) and
William B. Wigton, each of whom is an independent outside director and a
"disinterested person" within the meaning of Rule 16b-3 under the Exchange Act.
There are no "interlocks," as defined by the SEC with respect to any director
who serves or for any part of fiscal year 1996 served as a member of the
Compensation Committee.
General
The Compensation Committee is responsible for determining the
compensation of the Company's executive officers, including the Chief Executive
Officer and the other Named Executive Officers, and also is charged with
administering the Company's Option Plan, which was adopted and approved by the
Company's stockholders in connection with the Merger. The Committee is also in
the process of reviewing all of the Company's existing compensation and benefit
plans and programs with the goal of revising existing and/or adding new plans
and programs, if and to the extent necessary, in order to enhance the Company's
long-term profitability by attracting, motivating and retaining high-quality
executives and aligning their individual interests with the long-term interests
of the Company and its stockholders.
Currently, the Compensation Committee's objectives are implemented
through compensation packages for executive officers comprised of three major
components - base salary, annual bonus and stock option awards. In considering
and determining (or, in certain instances, recommending to the full Board) these
components, the Committee will for the relevant compensation period, among other
things, review the Company's performance, looking at factors such as its
earnings per share, any increase/decrease in its book value and its financial
and other performance (both compared to prior periods and other financial
companies or industry competitors), review the individual executive's
performance in light of his or her duties (both objectively and subjectively),
and receive the recommendations of the Chief Executive Officer. The Committee
also takes into account the salary and bonus provisions in existing employment
agreements with certain of the Company's executives. In making compensation
decisions (or
18
<PAGE>
recommendations to the full Board), the Committee exercises its discretion and
judgment based on the foregoing and other criteria, without applying a specific
formula to determine the weight of each factor considered. The Committee also
considers equity and fairness when comparing compensation packages among the
Company's executives, in an effort to maintain consistency throughout the
executive compensation program.
Prior to the Merger, the Company did not pay compensation to any of its
officers, who consisted solely of Messrs. Gilbert Scharf and Michael Scharf. In
connection with the Merger, Mr. G. Scharf entered into a three-year employment
agreement with the Company, effective only from and after the Merger, providing
for an annual base salary of $450,000 and, if the book value of the Company has
increased over the relevant period, discretionary annual bonuses (this agreement
is described in further detail above - see "Employment Agreements"). The terms
of this agreement were negotiated prior to the Merger by Mr. G. Scharf with Euro
Brokers, Welsh Carson and their respective counsel, and were not reviewed,
negotiated or set by the Compensation Committee.
Prior to the Merger, compensation paid by Euro Brokers to its officers
was set either by Mr. Marshall, who was then the Chairman, Chief Executive
Officer and President of Euro Brokers, and/or by the Board of Directors of Euro
Brokers. Euro Brokers did not have a separate compensation committee.
CEO Fiscal 1996 Compensation
In reviewing and establishing Mr. Gilbert Scharf's cash compensation in
1996, the Compensation Committee determined, reflective of Mr. Scharf's own
recommendation, not to increase the base salary provided for in his employment
agreement or to pay any cash bonus. In making this determination, the Committee
considered (i) the Company's post-Merger financial performance, including the
need for substantial write-offs in connection with management and operational
changes in the last quarter of 1996, (ii) the brevity of Mr. Scharf's tenure at
the head of the post-Merger entity and (iii) the difficult operating environment
encountered by most inter-dealer brokers during this period.
In reviewing and establishing Mr. Gilbert Scharf's non-cash
compensation in 1996, the Compensation Committee determined to grant Mr. Scharf
250,000 stock options under the Option Plan, 100,000 of which were incentive
stock options granted at an exercise price equal to 110% of the fair market
value of the underlying Common Stock on the date of grant (vesting in equal 20%
increments on each of the first through fourth anniversaries of the date of
grant and on January 1, 2001) and 150,000 of which were non-qualified stock
options granted at an exercise price equal to the fair market value of the
underlying Common Stock on the date of grant (vesting in equal 20% increments on
each of the first through fifth anniversaries of the date of grant). In making
this determination, the Committee considered (i) Mr. Scharf's long-term
contributions to the Company and, in particular, his successful shepherding of
the Company through its acquisition of Euro Brokers, (ii) the fact that he had
served as the Company's Chairman, Chief Executive Officer and President without
cash compensation for over two years, and (iii) the non-cash compensation levels
and equity holdings of Euro Brokers employees.
19
<PAGE>
Tax Considerations
Section 162(m) of the U.S. Internal Revenue Code limits the tax
deductibility by a company of compensation in excess of $1 million paid to its
chief executive officer and four remaining most highly compensated executive
officers in a taxable year. However, compensation which qualifies as
"performance-based" is excluded from the $1 million limit if, among other
requirements, the compensation is payable only upon attainment of
pre-established, objective performance goals under a plan approved by
stockholders. Compensation attributable to the Option Plan has been designed to
be, and should qualify as, "performance-based" under Section 162(m).
The Compensation Committee does not presently expect total compensation
payable to any individual Named Executive Officer to exceed the $1 million
taxable year limit. The Committee will continue to monitor the compensation
levels potentially payable under the Company's compensation programs, but
intends to retain the flexibility necessary to provide total compensation in
line with the Company's compensation philosophy and the Company's strategic
goals and best interests.
Compensation Committee
Larry S. Kopp, Chairman
William B. Wigton
RATIFICATION OF APPOINTMENT OF AUDITORS
(Proposal 2 on the proxy card)
Subject to stockholder ratification, the Board of Directors, upon
recommendation of the Audit Committee, has reappointed Price Waterhouse LLP
("Price Waterhouse") as the Company's independent auditors for the fiscal year
ending December 31, 1997. Price Waterhouse has acted as the independent auditors
for the Company's Euro Brokers group of subsidiaries since the organization of
Euro Brokers in 1986 (and for the predecessor business of Euro Brokers prior to
that time). For the fiscal year ended December 31, 1996, Price Waterhouse
audited the Company's consolidated financial statements, consulted in the
preparation of the Company's Annual Report on Form 10-K and provided assistance
to Company personnel on accounting, tax and related matters. As noted above,
certain executive officers of the Company, prior to their employment by the
Company, were employees of Price Waterhouse.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCK-HOLDERS RATIFY SUCH
APPOINTMENT. If no instructions are provided, shares authorized to be voted by
the proxies named in a returned proxy card will be voted "FOR" the ratification
of Price Waterhouse as the Company's independent auditors for 1997.
20
<PAGE>
Representatives of Price Waterhouse are expected to attend the Annual
Meeting and will have the opportunity to make a statement if they desire and to
respond to appropriate questions from stockholders.
The following disclosure is required by Item 304 of Regulation S-K
under the Exchange Act. Similar disclosure has previously been made in the
Company's Amendment No. 1 to its Current Report on Form 8-K/A, dated December 2,
1996 and filed with the SEC on December 16, 1996.
On December 2, 1996, the Company engaged Price Waterhouse as its
independent accountant and dismissed BDO Seidman, LLP ("BDO Seidman") as such
independent accountant. The change related to the Company's acquisition of Euro
Brokers in the Merger that was consummated on August 16, 1996. Price Waterhouse,
as noted above, had acted as the independent accountant for Euro Brokers for
many years, and Euro Brokers and its subsidiaries comprise substantially all of
the Company's business and assets. As a result, management of the Company
believed Price Waterhouse was better positioned, following the Merger, to act as
its independent accountant.
The Board of Directors of the Company, including both members of the
Board's Audit Committee, approved the change in accountants at a special meeting
of the Board of Directors held on November 27, 1996. The engagement of Price
Waterhouse and the dismissal of BDO Seidman occurred on December 2, 1996.
During the period from August 18, 1994 (inception of the Company) to
December 31, 1994, the year ended December 31, 1995 and the subsequent interim
period up to December 2, 1996, (i) there were no disagreements between the
Company and BDO Seidman on any matter of accounting principles or practices,
financial statement disclosure or auditing scope or procedure, which
disagreement(s), if not resolved to the satisfaction of BDO Seidman, would have
caused BDO Seidman to make reference to the subject matter of the
disagreement(s) in connection with its report, and (ii) BDO Seidman has not
advised the Company of any reportable events described in paragraphs (A) through
(D) of Item 304(a)(1)(v) of Regulation S-K. The report of BDO Seidman on the
financial statements of the Company for the year ended December 31, 1995 and the
period from August 18, 1994 (inception) to December 31, 1994 did not contain any
adverse opinion or a disclaimer of opinion, and was not qualified or modified as
to uncertainty, audit scope or accounting principles.
Pursuant to the requirements of Regulation S-K, the Company has
provided each of Price Waterhouse and BDO Seidman with a copy of the above
statements relating to the change in accountants and an opportunity to furnish
the Company with a brief statement, to be included herein, if either accountant
believes any of such statements are incorrect or incomplete. Each of Price
Waterhouse and BDO Seidman has orally indicated to the Company that it does not
believe any such incorrectness or incompleteness exists and, accordingly,
neither will be furnishing such a statement.
21
<PAGE>
NAME CHANGE AMENDMENT
(Proposal 3 on the proxy card)
The Board of Directors has unanimously adopted a resolution declaring
the advisability of amending Article FIRST of the Company's Restated Certificate
of Incorporation to change the Company's name from "Financial Services
Acquisition Corporation" to such new name as the Board of Directors determines
and timely informs stockholders of prior to the Annual Meeting (the "Name Change
Amendment").
The Board of Directors is still in the process of sorting through a
number of new name possibilities, which process includes reviewing the
availability of each such name for use under corporate, trademark and other
intellectual property laws in each jurisdiction where the Company does business.
Accordingly, the Board does not expect to make a final decision as to a new name
until mid- to late- May. Once the new name is selected, all stockholders of
record as of the Record Date will be informed thereof by a supplement to this
Proxy Statement (which will be mailed no later than June 6, 1997) and will
thereby be afforded an opportunity, if they so desire, to change their vote (or
to render their initial vote) on this Proposal.
The Board of Directors believes that a name change will be advantageous
to the Company and its stockholders. The name "Financial Services Acquisition
Corporation" was derived from the Company's original status as a SPAC(R), an
entity with certain unique business purposes and investor-protection features.
Upon the Company's acquisition of Euro Brokers on August 16, 1996, such purposes
and features generally ceased to apply. The Board of Directors accordingly
believes it is appropriate to have a name less-associated with such no-longer
applicable purposes and features and more associated with the Company's existing
and anticipated future businesses.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSED NAME CHANGE
AMENDMENT. If no instructions are provided, shares authorized to be voted by the
proxies named in a returned proxy card will be voted "FOR" the Name Change
Amendment.
If sufficient proxy cards voting "FOR" the proposed Name Change
Amendment are received prior the Annual Meeting, a Certificate of Amendment to
the Company's Restated Certificate of Incorporation, approved by the Board and
specifying the new name determined by the Board, will be approved at the Annual
Meeting by the proxies named in the proxy cards and will be filed with the
office of the Secretary of State of Delaware as promptly as practicable
thereafter. The name change will become effective upon such filing.
Any change in the Company's name will not affect the validity or
transferability of stock certificates presently outstanding or the listing of
the Company's securities on the Nasdaq National Market (although it is
anticipated that the Company will adopt a new Nasdaq trading symbol, of which
stockholders will be informed at the same time as they are informed of the new
name). Stockholders will not be required to surrender for exchange any stock
certificates presently held by them.
22
<PAGE>
Form 10-K and Exhibits
THE COMPANY'S ANNUAL REPORT ON FORM 10-K IS BEING MAILED TO ALL
STOCKHOLDERS OF RECORD AND ACCOMPANIES THIS PROXY STATEMENT. STOCKHOLDERS OF
RECORD WHO SO DESIRE MAY OBTAIN COPIES OF ANY EXHIBIT TO THE FORM 10-K BY
WRITING TO FINANCIAL SERVICES ACQUISITION CORPORATION (ATTENTION OF THE
SECRETARY), TWO WORLD TRADE CENTER, 84TH FLOOR, NEW YORK, NEW YORK 10048 AND
SPECIFYING (I) THAT THEY WERE A STOCKHOLDER OF RECORD AS OF APRIL 24, 1997, (II)
THE EXHIBIT OR EXHIBITS DESIRED AND (III) THEIR AGREEMENT TO REIMBURSE THE
COMPANY FOR ITS REASONABLE COSTS OF COPYING AND MAILING SUCH EXHIBIT(S).
Solicitation of Proxies
The cost of solicitation of proxies will be borne by the Company.
Solicitation will be made by mail, and may be made by directors, officers and
employees of the Company, personally or by telephone or telegram. Proxy cards
and materials also will be distributed to beneficial owners of shares of Common
Stock through brokers, custodians, nominees and other parties, and the Company
expects to reimburse such parties for their reasonable charges and expenses. If
the Company determines further solicitation of proxies is necessary, Continental
Stock & Transfer Trust Company has agreed that it will act as proxy solicitor
for a fee of $1,000.
Stockholder Proposals
Recommendations for nominees to be elected to the Board of Directors
and proposals of stockholders intended to be presented at the next annual
meeting must be submitted in writing to Financial Services Acquisition
Corporation (attention of the Secretary), Two World Trade Center, 84th Floor,
New York, New York 10048. Stockholder proposals must be received by the
Secretary no later than January 1, 1998 in order to be included in next year's
proxy statement and proxy card.
Other Matters
The Board of Directors is not aware of any other matter which is to
come before the Annual Meeting, but if any other matter is properly presented
for consideration, the persons named in the enclosed proxy card will have
discretion to vote on such matter in accordance with their best judgment.
By Order of the Board of Directors,
Michael J. Scharf
Secretary
April 30, 1997
<PAGE>
FINANCIAL SERVICES ACQUISITION CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF FINANCIAL SERVICES ACQUISITION CORPORATION
FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JUNE 18, 1997
The undersigned hereby appoints Gilbert D. Scharf, Michael J. Scharf and Roger
E. Schwed, and each of them, proxies for the undersigned with full power of
substitution, to vote all shares of common stock, par value $.001 per share, of
Financial Services Acquisition Corporation (the "Company"), held of record by
the undersigned on April 24, 1997, at the Annual Meeting of Stockholders of the
Company, to be held on June 18, 1997 at 9:00 A.M. local time, and at any and all
adjournments or postponements thereof (the "Annual Meeting"), upon the matters
set forth below and described in the accompanying Proxy Statement and upon such
other business as may properly come before the Annual Meeting. The undersigned
hereby acknowledge(s) receipt of the Notice of Annual Meeting of Stockholders
and the accompanying Proxy Statement. Any and all proxies heretofore given by
the undersigned are hereby revoked.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN.
IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR ALL OF THE PROPOSALS. IF
ANY OTHER BUSINESS PROPERLY COMES BEFORE THE ANNUAL MEETING, THE PROXIES WILL
HAVE DISCRETIONARY AUTHORITY TO VOTE THIS PROXY WITH RESPECT THERETO IN
ACCORDANCE WITH THEIR JUDGMENT.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF PROPOSALS 1, 2 AND 3.
Proposal 1. Election of Directors:
NOMINEES: James W. Stevens and Frederick B. Whittemore.
(INSTRUCTIONS: To withhold authority to vote for any
individual nominee, mark the "For All Except" box and write
that nominee's name in the space provided below.)
For Withhold For All
All All Except
/ / / / / / -------------------------------------
(Continued and to be signed on reverse side.)
<PAGE>
Proposal 2. Ratification of the appointment of Price Waterhouse LLP as the
Company's independent auditors for the year ending December 31, 1997.
For Against Abstain
/ / / / / /
Proposal 3. Approval of Amendment to the Company's Restated Certificate of
Incorporation to change the Company's name from "Financial Services
Acquisition Corporation" to such new name as the Board of Directors
determines and timely informs stockholders of prior to the Annual
Meeting.
For Against Abstain
/ / / / / /
<TABLE>
<S> <C>
I PLAN TO ATTEND THE ANNUAL MEETING / /
MARK HERE FOR ADDRESS CHANGE AND NOTE BELOW / / IF NO BOXES ARE MARKED, THIS PROXY
WILL BE VOTED IN THE MANNER
DESCRIBED ON THE REVERSE SIDE.
Dated: ______________________, 1997
Signature: ________________________
___________________________________
NOTE: Please sign exactly as your
name appears hereon. Joint
owners should each sign. When
signing as attorney,
executor, administrator,
trustee, or guardian, please
give your full title as such.
</TABLE>
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
