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 14 a-
6(e)(2)
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
Fechtor, Detwiler, Mitchell & Co.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement if Other Than the Registrant)
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[X] No fee required.
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1. Title of each class of securities to which transaction applies:
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2. Aggregate number of securities to which transaction applies:
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3. Per unit price or other underlying value of transaction computed pursuant
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[_] Fee paid previously with preliminary materials.
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or the Form or Schedule and the date of its filing.
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9. Date Filed:
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[LOGO OF FDM & CO.]
FECHTOR, DETWILER, MITCHELL & CO.
225 Franklin Street, 20/th/ Floor
Boston, MA 02110
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held March 26, 2001
To the Stockholders of Fechtor, Detwiler, Mitchell & Co.:
Notice is hereby given that the Annual Meeting of Stockholders (the
"Annual Meeting") of Fechtor, Detwiler, Mitchell & Co., a Delaware corporation,
will be held in the Board Room of the State Street Bank located on the 30th
Floor at 225 Franklin Street, Boston, Massachusetts, 02110 on March 26, 2001, at
10:00 a.m., Eastern Standard Time, for the following purposes:
1. To approve the amendment of the Certificate of Incorporation of our company
to effect a one-for-four reverse split of the Common Stock of our company.
2. To change the name of our company to Detwiler, Mitchell & Co.
3. To elect three Directors of our company, each to serve for three years or
until his successor shall be duly appointed or elected.
4. To ratify the selection of PricewaterhouseCoopers LLP as our company's
independent accountants for year 2001.
5. To transact such other business as may properly come before the Annual
Meeting or any adjournment(s) or postponement(s) thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only stockholders of record at the close of business on February 19,
2001 will be entitled to notice of, and to vote at, the Annual Meeting or any
adjournment thereof.
All stockholders are cordially invited to attend the Annual Meeting in
person. However, whether or not you plan to attend in person, to assure your
representation at the Annual Meeting, you are urged to mark, sign, date, and
return the enclosed Proxy as promptly as possible in the postage-prepaid
envelope provided for that purpose. Any stockholder attending the meeting may
vote in person even if such stockholder returned a completed Proxy.
Requests for additional copies of proxy materials and other
information should be addressed to Investor Relations at the executive offices
of our company, 225 Franklin Street, 20/th/ Floor, Boston, Massachusetts 02110,
(617) 451-0100.
By Order of the Board of Directors
Boston, Massachusetts
March 2, 2001
[LOGO OF FDM & CO.]
FECHTOR, DETWILER, MITCHELL & CO.
225 Franklin Street, 20/th/ Floor
Boston, MA 02110
Proxy Statement For
Annual Meeting of Stockholders
To Be Held on March 26, 2001
GENERAL
The enclosed Proxy is solicited by the Board of Directors of Fechtor,
Detwiler, Mitchell & Co., a Delaware corporation, for use at the Annual Meeting
of Stockholders (the "Annual Meeting") to be held on March 26, 2001 at 10:00
a.m., Eastern Standard Time, or at any adjournment(s) or postponement(s)
thereof, for the purposes set forth herein and in the accompanying Notice of
Annual Meeting of Stockholders. The Annual Meeting will be held in the Board
Room of the State Street Bank located on the 30/th/ Floor at 225 Franklin
Street, Boston, Massachusetts, 02110.
Our company's telephone number is (617) 451-0100. These proxy
solicitation materials were first mailed on or about March 5, 2001 to all
stockholders entitled to vote at the Annual Meeting.
INFORMATION CONCERNING VOTING, SOLICITATION AND PROXIES
Record Date and Shares Outstanding
Stockholders of record at the close of business on February 19, 2001
(the "Record Date") are entitled to notice of, and to vote at, the Annual
Meeting. On the Record Date, our company had approximately 10,447,251 shares of
Common Stock, $0.01 par value (the "Common Stock"), and no shares of preferred
stock issued and outstanding.
Voting and Solicitation
Each stockholder is entitled to one vote for each share of Common
Stock held by him.
Shares of Common Stock represented by properly executed proxies will,
unless such proxies have been previously revoked, be voted in accordance with
the instructions indicated thereon. In the absence of specific instructions to
the contrary, properly executed proxies will be voted FOR the proposal to effect
a one-for-four reverse split of the Common Stock, FOR the change in the name of
our company, FOR the election of each person nominated by the Board of Directors
for election as a Director and FOR ratification of the independent auditors. The
effect of an abstention or a broker nonvote on a proposal is the same as that of
a vote against such proposal. No business other than that set forth in the
accompanying Notice of Annual Meeting of Stockholders is expected to come before
the Annual Meeting. Should any other matter requiring a vote of stockholders
properly arise, the persons named in the enclosed form of proxy (the "Proxy
Holders") will have discretionary authority to vote such proxy in accordance
with their best judgment on such matter.
Directors are elected by a plurality vote.
The cost of this proxy solicitation will be paid by our company. Our
company will reimburse brokerage firms and other persons representing beneficial
owners of shares for their expenses in forwarding soliciting materials to such
beneficial owners. Proxies may be solicited by certain of our company's
Directors, officers, and employees, without additional compensation, personally
or by telephone or telegram.
Revocability of Proxies
Any proxy given pursuant to this solicitation may be revoked by the
person giving it at any time before its use by delivering to our company a
written notice of revocation or a duly executed proxy bearing a later date or by
attending the Annual Meeting and voting in person. Attending the Annual Meeting
in and of itself will not constitute a revocation of a proxy.
Deadlines for Receipt of Stockholder Nominations, Proposals and Proposals for
Inclusion in the Proxy Statement for the 2002 Annual Meeting
Section 2.5 of our company's Bylaws provides that nominations may be
made by the Board of Directors or by any stockholder entitled to vote in the
election of Directors generally, provided that all stockholders intending to
nominate Director candidates for election must deliver written notice thereof to
the Secretary of our company, which notice must be received not less than sixty
nor more than ninety days prior to the meeting or, if less than seventy days'
notice or prior public disclosure of the date of the meeting is given or made to
stockholders, within ten days after the date on which notice of such meeting is
first given to stockholders. Such notice must set forth certain information
concerning such stockholder and his or her nominee(s), including their names and
addresses, such other information as would be required to be in the proxy
statement soliciting proxies for the election of the nominees of such
stockholder and the consent of each nominee to serve as a Director of our
company if so elected. The chairman of the Annual Meeting will refuse to
acknowledge the nomination of any person not made in compliance with the
foregoing procedure.
Our company's Bylaws also require that stockholders give advance
notice and follow certain other procedures with regard to business they wish to
bring before an annual meeting of stockholders. Section 2.6 of our company's
Bylaws provides that all stockholders intending to bring business before the
meeting deliver written notice thereof to the Secretary of our company in the
same manner and within the same periods as required for stockholder nominees for
the Board of Directors, as described in the preceding paragraph. Such notice
shall set forth certain information concerning such stockholder and the proposed
business, including any material interest of the stockholder in such business.
The chairman of the Annual Meeting will refuse to permit business to be brought
before the Annual Meeting if notice is not given in compliance with the
foregoing procedure.
We intend to hold our next Annual Meeting of Stockholders on or about
May 1, 2002. Stockholders seeking to include a proposal in the Proxy Statement
for our company's 2002 Annual Meeting must ensure that such proposal is received
at the executive offices of our company on or before March 1, 2002. Inclusion of
any such proposal is subject to certain other requirements.
Board Meetings and Committees
The business affairs of our company are managed by or under the
direction of the Board of Directors, although it is not involved in day-to-day
operations. During the year ended December 31, 2000, the Board of Directors met
four times.
The Board of Directors of our company has standing Audit and
Compensation Committees.
Audit Committee. The Audit Committee recommends to the Board of
Directors the appointment of the firm selected to be independent public
accountants for our company and monitors and evaluates the performance of such
firm; reviews and approves the scope of the annual audit and evaluates with the
independent public accountants our company's annual audit and annual
consolidated financial statements; reviews our company's financial reporting
policies and practices; reviews with management the status of internal control
procedures, adequacies of financial staff and other matters and makes such
recommendations to the Board of Directors as may be appropriate; evaluates
matters having a potential financial impact on our company which may be brought
to its attention by management,
2
the independent public accountants or the Board of Directors; and reviews all
public financial reporting documents of our company. The current members of the
Audit Committee are Frank Jenkins (chairman), Edward Baran and Barton Beek, each
of whom is "independent" as defined in the NASD listing standards. The Board of
Directors has adopted a written charter for the Audit Committee, a copy of which
is attached as Appendix A. The Audit Committee held three meetings during fiscal
2000. See "Audit Committee Report" below.
Compensation Committee. The Compensation Committee reviews and makes
recommendations to the full Board of Directors with respect to the specific
compensation to be paid or provided to executive officers and also recommends
incentive stock options under our company's 2000 Omnibus Equity Incentive Plan.
The current members of the Compensation Committee are Messrs. Sharp, Beek and
Jenkins. Mr. Sharp is the Chairman. The Compensation Committee held two meetings
during fiscal 2000.
During the fiscal year ended December 31, 2000, each of the Directors of
our company attended all of the meetings of the Board of Directors and all of
the meetings of the committee(s) of the Board on which he served during the
period he served in such capacities.
BOARD OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth names and certain other information
concerning our company's Directors and executive officers, as of February 19,
2001:
Term of
Office as
Director
Name Age Position Will Expire
- -----------------------------------------------------------------------------------------------------------------------
James Mitchell 62 Chairman, Chief Executive Officer 2001
and Director
Andrew Detwiler 41 President and Director 2002
Edward Hughes 60 Chief Operating Officer 2003
and Director
Edward Baran 64 Director 2003
Barton Beek 77 Director 2002
Robert Detwiler 71 Director 2002
Frank Jenkins 64 Director 2001
Robert Sharp 65 Director 2001
Stephen Martino 44 Chief Financial Officer
Stephen Frank 48 Chief Legal Officer and Secretary
Information with respect to the principal occupation during the past
five years of each nominee, each current Director and each executive officer is
set forth below. There are no family relationships among Directors or executive
officers of our company except for Robert Detwiler being the father of Andrew
Detwiler.
James Mitchell became a Director in October 1988 and became Chairman
of our company on January 1, 1993 and served as Chief Executive Officer between
January 1, 1993 and August 30, 1999 and again, since May 22, 2000. He served as
President of our company between January 1, 1997 and May 22, 2000. Mr. Mitchell
is the founder of one of our operating subsidiaries, James Mitchell & Co. In
1973, Mr. Mitchell was a founding officer of Security First Group, a financial
services firm that pioneered the concept of marketing insurance and annuity
3
products through stock brokerage firms. Before joining that firm, Mr. Mitchell
served as Vice President of Marketing for the Variable Annuity Life Insurance
Company of Houston, Texas. He attended Portland State University and is a
registered General Securities Principal with the NASD.
Andrew Detwiler has been with Fechtor, Detwiler for 17 years having
previously served as Director of Research. Currently, Mr. Detwiler serves as
Managing Director of Capital Markets and as a sales representative in the
Instititutional Sales Department. He became CEO of Fechtor, Detwiler on April
1, 2000. He also became president of our company on May 22, 2000. He graduated
from the University of Vermont and is a registered General Securities Principal
with the NASD.
Edward Hughes has been with Fechtor, Detwiler for 14 years serving as
Director of Operations. He is currently Chief Operations Officer and a Director
of our company. He holds a Bachelor of Science degree in Business
Administration and an Associates Degree in Finance from Northeastern University.
Mr. Hughes has served as a member and as Chairman of the 13th District Committee
of the NASD. He is a registered General Securities and Financial Principal with
the NASD.
Edward Baran became a Director in August 1992. Mr. Baran, who has
spent more than forty years in the insurance business, is currently Chairman and
Chief Executive Officer of BCS Financial Corporation, a financial services
holding company. Prior to joining BCS in November 1987, Mr. Baran was Vice
Chairman, President and Chief Executive Officer of Capitol Life Insurance
Company of Denver, Colorado. He is a graduate of Georgetown University and a
member of the Audit Committee of the Board of Directors.
Barton Beek became a Director in January 1984. Mr. Beek is a
securities attorney specializing in mergers and acquisitions and a senior
partner of O'Melveny & Myers, a law firm that he joined in 1955, with offices
worldwide. Mr. Beek is a graduate of the California Institute of Technology, the
Stanford University Graduate School of Business and Loyola College of Law. He is
a member of the Audit and Compensation Committees of the Board of Directors.
Robert Detwiler is Director and the President of one of our principal
subsidiaries, Fechtor, Detwiler & Co., Inc. ("Fechtor, Detwiler"). Mr. Detwiler
has been with Fechtor, Detwiler since 1975 since he invested in one third of
that company. He owned one third of Fechtor, Detwiler until the merger between
that company and JMC Group, Inc. in August 1999. He was named a Director of our
company May 22, 2000. Prior to joining Fechtor, Detwiler, Mr. Detwiler had been
employed in the securities industry since 1957 at Smith Barney, Laird & Company
and Wood, Struthers & Winthrop. He is a registered General Securities Principal
with the NASD.
Frank Jenkins is an Associate Professor of Finance at RPI Lally School
of Management in Hartford, Connecticut, and also provides ongoing financial,
marketing and business strategy consulting to clients internationally. He was
formerly the Chief Financial Officer, Vice President and managing partner of
Harbridge House, Inc. for 25 years until it was purchased by Coopers & Lybrand
in 1993. Mr. Jenkins retired as Managing Director of Coopers & Lybrand in 1998.
He graduated from North Carolina State University with a BSME and has a MBA from
Wharton School, University of Pennsylvania. He is currently on the Board of
Directors of Metro West Health, Inc., Metro West Community Healthcare
Foundation, Inc., Clark, Cutler & McDermott, Inc. and the Boston Classical
Orchestra. He is Chairman of the Audit Committee and a member of the
Compensation Committee of the Board of Directors.
Robert Sharp became a Director in May 1995. Mr. Sharp retired from his
position as President and Chief Executive Officer of Keyport Life Insurance
Company in February 1992 after having served in that position since 1979. Mr.
Sharp is the past chairman of the National Association for Variable Annuities
and a former director of the National Association of Life Companies. Mr. Sharp
is a graduate of the California State University at Sacramento and is a
registered Principal with the NASD. He is also a director of Navallier Variable
Funds, a mutual fund. He is Chairman of the Compensation Committee of the Board
of Directors.
Stephen Martino became the Chief Financial Officer of our company in
October 1999. Prior to joining us, Mr. Martino was Senior Vice President of
Finance for Nvest, a New York Stock Exchange listed firm with approximately $125
billion in assets under management. Previously, he served in senior management
positions with
4
First Data Corporation and KPMG Peat Marwick. He received a BS in Business
Administration, graduating magna cum laude, from Northeastern University. He is
a member of the American Institute of CPAs.
Stephen Frank has been the Chief Legal Officer, Chief Compliance
Officer and Secretary of Fechtor, Detwiler & Co., Inc. since 1993 and the Chief
Legal Officer and Secretary of our company since the merger. He has a BA in
Psychology from C.W. Post College and a JD from New York Law School. Mr. Frank
has served both as an arbitrator and as chairperson in NASD sponsored
arbitrations and has been a member of the NYSE and NASD Content Committee for
national continuing education. He is a registered General Securities Principal
with the NASD.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth certain information regarding
compensation paid during our company's last three fiscal years to our Chief
Executive Officer, President, Chief Operating Officer, Chief Financial Officer
and Chief Legal Officer (the "named executive officers") (1):
Long-Term
Compensation
Awards
Securities
Underlying All Other
Annual Compensation Options/ Compensation
-------------------
Name and Principal Position Year Salary ($) Bonus ($) SARs (#)(2) ($)(3)
- ---------------------------------------------------------------------------------------------------------------------------
James Mitchell, Chairman and 2000 $225,000 $105,000 0 $ 9,929
Chief Executive Officer 1999 $225,000 $ 61,868 125,000 $ 9,529
1998 $225,000 $ 0 0 $ 9,740
Andrew Detwiler, President (4) 2000 $ 0 $ 0 200,000 $1,132,250
Edward Hughes, Chief Operating Officer 2000 $102,308 $ 39,000 0 $ 3,069
Stephen Martino, Chief Financial Officer 2000 $161,637 $ 39,000 0 $ 4,099
Stephen Frank, Chief Legal Officer 2000 $ 90,000 $ 18,000 50,000 $ 2,700
_______________________
(1) Messrs. Detwiler, Hughes, Martino and Frank only qualified as "named
executive officers" pursuant to the specification under Regulation S-K, Item
402a(3) during 2000.
(2) The 125,000 shares listed under Long Term Compensation for Mr. Mitchell are
Incentive Stock Options granted under the 1993 Executive Stock Option Plan.
The 200,000 and 50,000 shares for Messrs. Detwiler and Frank represent
shares granted under our company's 2000 Omnibus Equity Incentive Plan. Our
company does not have any outstanding Stock Appreciation Rights ("SARs").
(3) Amounts reported for Messrs. Mitchell, Detwiler, Hughes, Martino and Frank
in the "All Other Compensation" column include $5,100, $5,100, $3,069,
$4,099 and $2,700, respectively for 2000 and $4,700 and $4,911,
respectively, for 1999 and 1998 for Mr. Mitchell, representing our company's
contributions to its 401(k) Savings Plan on their behalf. Additionally, Mr.
Mitchell received benefits of $4,829 for each of 2000, 1999 and 1998,
representing life insurance premiums advanced by our company pursuant to a
split dollar insurance agreement.
(4) Mr. Detwiler's compensation is solely commission-based. The amounts shown
reflect all compensation paid to Mr. Detwiler in all capacities.
5
Option Grants
The following table provides information related to grants of options
to purchase Common Stock to the named executive officers during the 2000 fiscal
year:
Individual Grants
- --------------------------------------------------------------------------------------
Percent of Total Potential Realizable
Number of Options/SARs Value at Assumed
Securities Granted to All Annual Rate of
Underlying Employees Exercise Price Stock Price
Options/SARs During Fiscal or Base Price Expiration Appreciation for
Name Granted (1) Year (1) ($/sh) Date Option Term (2)
---- ----------- -------- ------ ---- ---------------
5% ($) 10%($)
----------------------
Andrew Detwiler 200,000 13.50% $0.7188 12/05/10 $199,383 $257,597
Stephen Frank 50,000 3.37% $ 1.00 06/22/10 $ 63,814 $ 80,526
____________________
(1) The option for Mr. Detwiler vests in annual installments of 66,667, 66,667
and 66,666 shares beginning December 5, 2001. The option for Mr. Frank
vests in annual installments of 16,667, 16,667 and 16,666 shares beginning
December 13, 2000. Our company does not have any outstanding SARs.
(2) The 5% and 10% assumed rates of appreciation are mandated by rules of the
Securities and Exchange Commission and do not represent our company's
estimate or projection of the future Common Stock price. The potential
realizable value for Mr. Detwiler's option was calculated using the closing
price of the Common Stock on December 5, 2000 of $0.7188 per share. The
potential realizable value for Mr. Frank's option was calculated using the
closing price of the Common Stock on June 22, 2000 of $1.00 per share. The
exercise prices were determined by using the same closing prices on the date
of grant of the options.
Option Exercises and Fiscal Year-End Option Values
The following table provides information related to options exercised
by the named executive officers during the 2000 fiscal year and the number and
value of options held at fiscal year-end.
Number of Securities
Underlying Unexercised Value of Unexercised
Options/SARs at FY- In-the-Money Options/
Shares Acquired Value End (#)(1)(2) SARs at FY-End ($)(1)(2)
Name On Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
- -------------------------------------------------------------------------------------------------------------
James Mitchell 0 0 141,667 83,333 $ 0 $ 0
Andrew Detwiler 0 0 233,334 266,666 $20,000 $ 0
Edward Hughes 0 0 83,334 66,666 $ 5,000 $ 0
Stephen Martino 0 0 33,334 66,666 $ 0 $ 0
Stephen Frank 0 0 16,667 33,333 $ 0 $ 0
_____________________
(1) Our company does not have any outstanding SARs.
(2) The closing price for the Common Stock on December 29, 2000, as reported by
the NASDAQ SmallCap Market, was $0.625. Mr. Detwiler's exercisable options
include 200,000 options to purchase Common Stock of our company at a price
of $0.10 per share granted under the Fechtor, Detwiler & Co., Inc. 1999
Special Stock Option Plan (the "1999 Plan") and no other in-the-money
options at the end of 2000. Mr. Hughes' exercisable options include options
to purchase 50,000 shares of Common Stock at a price of $0.10 per share
granted under the 1999 Plan and no other in-the-money options. Messrs.
Mitchell, Martino and Frank had no in-the-money options at the end of 2000.
6
Compensation of Directors
The members of the Board of Directors who are not full-time employees
of our company are entitled to receive reimbursement for out-of-pocket expenses
they incur in attending Board meetings and otherwise performing their duties and
receive fees of $1,000 for each meeting of the Board of Directors which they
attend. Members of committees additionally receive $500 per committee meeting
held on the same day as a Board of Directors' meeting, or $1,000 per committee
meeting if held on a different day. Non-employee Directors receive formula
grants of non-qualified stock options under our company's 2000 Omnibus Equity
Incentive Plan. Options to acquire 24,000 shares of Common Stock are to be
granted within six months after an individual takes office as a Director and
options to acquire an additional 24,000 shares are to be granted within six
months after every third anniversary of such Director's taking office. As
reported in the Form 10-K for the year ended December 31, 1997, on February 17,
1998, in addition to their regular formula grants, all of the outside Directors
of our company, except for Mr. Jenkins, were each granted stock options to
purchase 25,000 shares of Common Stock at a price of $1.125, which was equal to
the closing price for the Common Stock on June 30, 1998.
Compensation Committee Report
During 2000, executive compensation policy and practice were
recommended to the Board by the Compensation Committee (the "Committee"). The
Committee is composed of Robert Sharp, Chairman, Frank Jenkins and Barton Beek.
The Committee held two meetings during 2000.
No member of the Compensation Committee served as an officer or
employee of our company or its subsidiaries. No executive officers of our
company served during fiscal 2000 on the board of directors of any company which
had a representative on our company's Board of Directors. No member of our
company's Board of Directors served during 2000 as an executive officer of a
company whose board of directors had a representative from our company on its
Board of Directors.
The Committee's compensation policy is to provide our company's senior
officers, including the executive officers named in this proxy statement, with
base salaries commensurate with the base salaries of executives in our industry,
augmented by (i) performance-based bonuses and (ii) stock incentives, primarily
stock options. The objectives of the Committee's policies are to attract and
retain outstanding executives by providing compensation opportunities comparable
to those offered by other companies in our industry, and to motivate and reward
these executives with bonuses and stock awards which link their total
compensation to the enhancement of stockholder values.
Mr. Mitchell is the only executive under an Employment Agreement. His
compensation was $225,000 for each of 2000, 1999 and 1998. His base salary of
$225,000 was established pursuant to a three-year employment contract entered
into in 1998. The contract was renewed as of January 1, 2001 for an additional
three-year term, amending it as well to increase his base salary to $285,000 and
providing for Mr. Mitchell to participate in the same annual bonus award plan as
other senior executives of our company.
The Committee at its December 5, 2000 meeting considered the operating
results for 2000 (excluding merger-related costs) and awarded cash bonuses to
Messrs. Mitchell, Martino, Hughes and Frank, the Chief Executive Officer, Chief
Financial Officer, Chief Operating Officer and Chief Legal Officer of our
company, respectively. The Committee also considered Andrew Detwiler's
contributions to our company but decided not to grant him a bonus in addition to
his commission-only compensation.
The Committee considers from time to time the grant of options or
other stock-based compensation awards to senior executives of our company. The
Committee has not developed any specific formula for such awards. At its
December 5, 2000 meeting, the Committee reviewed the accomplishments of our
senior officers and key employees and recommended to grant Andrew Detwiler
options to purchase 200,000 shares of Common Stock for assuming the role of
President of our company without taking additional compensation to hold such
office or participating in the incentive bonus compensation plan of our company
and to reward him for his valuable contributions. Stephen Frank, Chief Legal
Officer of our company, also received options to purchase 50,000 shares of
Common Stock during the year 2000. The Committee noted that Robert Detwiler had
made, and was expected to continue to make, very
7
substantial contributions to the success of our company, but in view of his
large shareholdings, the Committee did not recommend grants of options to him at
this time.
This report shall not be deemed incorporated by reference by any
general statement incorporating this proxy statement by reference into any
filing under the Securities Acts, except to the extent that our company
specifically incorporates this information by reference, and shall not otherwise
be deemed "filed" under such Acts.
The Compensation Committee of the Board of
Directors of Fechtor, Detwiler, Mitchell & Co.
Robert Sharp, Chairman
Barton Beek
Frank Jenkins
Audit Committee Report
The Audit Committee assists the Board of Directors in fulfilling its
oversight responsibilities relating to our company's financial reporting
process, its systems of internal accounting and financial controls, and the
independent audit of its financial statements.
The Audit Committee has reviewed and discussed with management the
audited financial statements of our company for the fiscal year ended December
31, 2000. The Audit Committee has reviewed and discussed with
PricewaterhouseCoopers LLP, our company's independent accountants who are
responsible for expressing an opinion on the conformity of those audited
financial statements with generally accepted accounting principles, their
judgment as to the quality, not just the acceptability, of our company's
accounting practices and such other matters as are required to be discussed by
the independent accountants with the Audit Committee under generally accepted
auditing standards including the matters required to be discussed by Statement
on Auditing Standards No. 61.
The Audit Committee has also received the written disclosures from
PricewaterhouseCoopers LLP required by Independence Standards Board Standard No.
1 and the Audit Committee has discussed the independence of
PricewaterhouseCoopers LLP with that firm.
Based on the Audit Committee's review and discussions noted above, the
Audit Committee recommended to the Board of Directors that our company's audited
financial statements be included in our company's Annual Report on Form 10-K for
the fiscal year ended December 31, 2000 for filing with the Securities and
Exchange Commission.
Respectfully Submitted: The Audit Committee
Frank Jenkins, chairman
Edward Baran
Barton Beek
8
Performance Graph
The following chart compares the yearly percentage change in the cumulative
total stockholder return on the Common Stock during the five fiscal years ended
December 31, 2000 with the cumulative total return on the S&P 500 Index and the
NASDAQ Financial Stocks Industry Index.
[PERFORMANCE GRAPH APPEARS HERE]
1995 1996 1997 1998 1999 2000
NASDAQ 100.00 128.36 196.31 190.71 189.44 187.95
S&P 500 100.00 123.36 164.36 212.07 256.84 328.76
FEDM 100.00 106.95 72.41 103.53 151.77 68.98
---------------------------------------
Assumes $100 invested on December 31,
1995 in NASDAQ Financial Stock Industry
Index, S&P 500 Index and Fechtor,
Detwiler, Mitchell & Co.
---------------------------------------
The foregoing information shall not be deemed incorporated by reference by
any general statement incorporating by reference this proxy statement into any
filing under the Securities Act of 1933 or under the Securities Exchange Act of
1934, except to the extent our company specifically incorporates this
information by reference, and shall not otherwise be deemed filed under such
Acts.
9
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Unless otherwise noted below, the following table presents certain
information with respect to the ownership of the Common Stock as of February 19,
2001 by each person known by our company to own beneficially more than 5% of the
Common Stock, by each person who is a Director or nominee for Director of our
company, by each named executive officer and by all executive officers and
Directors of our company as a group:
Shares of Common
Stock
Beneficially Owned
as of February 19, 2001 (1)
Name Number (2)(3) %
- --------------------------------------------------------------------------------
Robert Detwiler (4)(5) 2,422,500 21.99%
James Mitchell 893,036 8.11%
Andrew Detwiler 476,293 4.32%
Edward Hughes 182,269 1.65%
Stephen Martino 75,279 *
Stephen Frank 67,508 *
Robert Sharp 199,000 1.81%
Frank Jenkins 174,000 1.58%
Barton Beek 156,000 1.42%
Edward Baran 45,000 *
All Executive Officers and Directors as a
group (10 persons) 4,548,098 41.28%
Total outstanding shares 11,016,586
* Less than 1%
- ----------------------
(1) All ownership figures include options to purchase shares of Common Stock
exercisable within 60 days of February 19, 2001, as set forth below. Except
as otherwise noted below, each individual, directly or indirectly, has sole
or shared voting and investment power with respect to the shares listed.
(2) Includes approximately 24,643, 7,959, 935, 1,945, 841 and 36,323 vested
shares of Common Stock contributed by our company to its 401(k) Savings Plan
for Messrs. Mitchell, A. Detwiler, Hughes, Martino, Frank and for all
executive officers and Directors as a group. Outside Directors do not have
401(k) Plan holdings with our company.
(3) Includes options to purchase 141,667, 233,334, 83,334, 33,334, 16,667,
37,000, 4,000, 37,000, 33,000 and 619,336 shares of Common Stock for Messrs.
Mitchell, A. Detwiler, Hughes, Martino, Frank, Sharp, Jenkins, Beek, Baran
and for all executive officers and Directors as a group, respectively.
(4) Includes 200,000 shares of Common Stock for Mr. R. Detwiler which represent
shares held in trust to reimburse our company for any shares issued by our
company upon exercise of stock options under the 1999 Special Stock Option
Plan assumed by our company after the merger. Reimbursed shares will be
summarily canceled upon receipt by our company.
(5) Includes 10,000 shares owned by Mr. Robert Detwiler's wife to which he
disclaims beneficial ownership.
10
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires our company's
Directors and executive officers, and persons who own more than 10% of a
registered class of its equity securities, to file with the Securities and
Exchange Commission, NASDAQ and the Pacific Stock Exchange initial reports of
ownership and reports of changes in ownership of Common Stock and other equity
securities of our company. Executive officers, Directors and greater than 10%
stockholders are required by Securities and Exchange Commission regulations to
furnish our company with copies of all Section 16(a) reports they file.
Specific due dates for these reports have been established and we are
required to identify those persons who failed to timely file these reports. To
our knowledge, based solely on review of the copies of such reports furnished to
us and written representations that no other reports were required, during the
fiscal year ended December 31, 2000, all Section 16(a) filing requirements
applicable to its executive officers, Directors and greater than 10% beneficial
owners were complied with except for reports on Form 4 due in December 2000 and
January 2001 to report purchases by Frank Jenkins in November and December of
2000. The underlying transactions were reported on Mr. Jenkins subsequent Form
5 filed February 12, 2001.
I. PROPOSED AMENDMENT TO CERTIFICATE OF INCORPORATION
The Board of Directors has proposed submission to the stockholders of the
following amendment of the Certificate of Incorporation of our company:
Article IV of the Certificate of Incorporation shall be amended by
inserting an additional paragraph as the first paragraph of said Article, as
follows:
"The shares of Common Stock outstanding on the Effective Date hereof shall
be consolidated, combined and reconstituted to effect a one-for-four
reverse stock split of such Common stock, such that each Common share
outstanding on the Effective Date shall become one fourth of a
reconstituted share of Common Stock, two shares of Common Stock outstanding
on the Effective Date shall become one half of a reconstituted share of
Common Stock and three shares of Common Stock outstanding on the Effective
Date shall become three fourths of a reconstituted share of Common Stock.
The "Effective Date" hereof shall be the day upon which a Certificate of
Amendment of the Certificate of Incorporation of the Corporation setting
forth this paragraph shall be filed with the Secretary of State of
Delaware."
The approval of the proposed Amendment requires the affirmative vote of the
holders of a majority of the outstanding shares of Common Stock.
Effect of Amendment On Outstanding Shares
If adopted, the proposed Amendment (the "Reverse Split") will change each
outstanding share of Common Stock into one fourth of a reconstituted Common
Share (a "New Share"). Thus, if the Amendment is adopted, there will be
approximately 2,611,813 New Shares outstanding and our company will have no
other outstanding shares. The Amendment will not change the number of
authorized shares of Common Stock.
The total number of shares of Common Stock issuable upon exercise of
outstanding options to acquire such shares, and the exercise price of such
options, will be adjusted proportionally to reflect the Reverse Split.
Under our company's Stockholders' Rights Plan, each share of Common Stock
will continue to have one preferred share purchase right (a "Right") associated
with it following the Reverse Split; however, the number of shares of Preferred
Stock issuable upon the exercise of each Right will be proportionally adjusted.
11
Fractional Shares
No fractional shares of Common Stock will be issued as a result of the
Reverse Split and fractional share interests will not entitle the holder thereof
to exercise any right of a stockholder. In lieu of fractional shares resulting
from the Reverse Split, stockholders will be paid, in cash, the dollar amount
(rounded to the nearest whole cent), without interest, determined by multiplying
such fractional shares (after aggregating all fractional shares of Common Stock
owned by such stockholder) by the average of the reported closing prices for the
shares on the NASDAQ Market System for the ten trading days immediately
preceding the Effective Date.
Procedures for Exchange of Certificates
As soon as practicable after the Effective Date, our company's Transfer
Agent (the "Exchange Agent") will mail to the registered holders of Common Stock
a Letter of Transmittal and instructions for surrender of Common Stock
certificates for certificates representing New Shares and, if applicable, cash
in lieu of fractional shares. Stockholders will not receive certificates for
New Shares unless and until their certificates for shares of Common Stock have
been surrendered with an appropriate letter of transmittal. There will be no
service charge in connection with the issuance of certificates for New Shares
and cash in lieu of fractional shares following the Reverse Split.
Federal Income Tax Consequences
The following summary of the federal income tax consequences of the Reverse
Split is based on current law, including the Internal Revenue Code of 1986, as
amended, and is for general information only. The tax treatment for any
stockholder may vary depending upon the particular facts and circumstances of
such stockholder. Certain stockholders, including insurance companies, tax-
exempt organizations, financial institutions, broker-dealers, non-resident
aliens, foreign corporations and persons who do not hold Common Stock of our
company as a capital asset, may be subject to special rules not discussed below.
ACCORDINGLY, EACH STOCKHOLDER SHOULD CONSULT HIS OR HER TAX ADVISOR TO DETERMINE
THE PARTICULAR TAX CONSEQUENCES TO HIM OR HER OF THE REVERSE SPLIT, INCLUDING
THE APPLICATION AND EFFECT OF FEDERAL, STATE, LOCAL OR FOREIGN INCOME TAXES AND
OTHER LAWS.
The receipt of whole New Shares (excluding fractional New Shares) in the
Reverse Split should be non-taxable for federal income tax purposes.
Consequently, a stockholder receiving New Shares will not recognize either gain
or loss, or any other type of income, with respect to whole New Shares received
as a result of the Reverse Split. In addition, the aggregate tax basis of such
stockholder's shares of Common Stock prior to the Reverse Split will carry over
as the aggregate tax basis of the stockholder's New Shares. The holding period
of the New Shares should also include the stockholder's holding period of the
Common Stock prior to the Reverse Split, provided that such Common Stock was
held by the stockholder as a capital asset on the Effective Date.
Any stockholder who receives cash in lieu of a fractional New Share
pursuant to the Reverse Split will recognize gain or loss equal to the
difference between the amount of cash received and the portion of the aggregate
tax basis in his or her shares of Common Stock allocable to such fractional New
Share. If the shares of Common Stock were held as a capital asset on the
Effective Date, then the stockholder's gain or loss will be a capital gain or
loss. Such capital gain or loss will be a long-term capital gain or loss if the
stockholder's holding period for the shares of Common Stock is longer than
eighteen months, a short-term capital gain or loss if the stockholder's holding
period is twelve months or less and mid-term gain or loss if the stockholder's
holding period is longer than twelve months and less than eighteen months.
Based on certain exceptions contained in regulations issued by the Internal
Revenue Service, our company does not believe that it or its stockholders would
be subject to backup withholding or informational reporting with respect to cash
distributed in lieu of fractional New Shares.
12
Reasons for Proposed Amendment
Our company has been advised by NASDAQ that the Common Stock may no longer
meet the requirements for continued listing and trading on the NASDAQ Market
System. Approval of the Reverse Split is being proposed to address the minimum
bid price requirement of $1.00 per share.
Our company believes that if the Reverse Split is effectuated, our
company's Common Stock should initially have a minimum bid price in excess of
the $1.00 per share necessary to satisfy the NASDAQ requirement. Our company
would also need to continue to satisfy all other maintenance criteria and there
can be no assurance that our company will be able to do so, or that, even if
these criteria are met, the Common Stock will continue to be traded on the
NASDAQ SmallCap Market.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE AMENDMENT TO THE
CERTIFICATE OF INCORPORATION.
II. PROPOSED NAME-CHANGE AMENDMENT TO CERTIFICATE OF INCORPORATION
The Board of Directors has proposed the following amendment of the
Certificate of Incorporation:
Name Change Amendment
Article I shall be amended to read: "The name of the Corporation is
Detwiler, Mitchell & Co."
The approval of the proposed Amendment requires the affirmative vote of the
holders of a majority of the outstanding shares of Common Stock.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE NAME-CHANGE AMENDMENT TO
THE CERTIFICATE OF INCORPORATION.
III. ELECTION OF DIRECTORS
Nominees
Three of our company's total of eight Directors are to be elected at the
Annual Meeting. The Board of Directors of our company has authorized the
nomination at the Annual Meeting of the persons named below as candidates.
Unless otherwise directed, the Proxy Holders will vote the proxies received by
them for the nominee named below. In the event that any nominee is unable or
declines to serve as a Director at the time of the Annual Meeting, the proxies
will be voted for any nominee who shall be designated by the existing Board of
Directors to fill the vacancy. It is not expected the nominees will be unable or
will decline to serve as Directors.
Information with respect to the nominees to the Board of Directors is set
forth above in "Directors and Executive Officers." The nominees are:
Frank Jenkins
James Mitchell
Robert Sharp
The Directors elected at this Annual Meeting will serve three-year terms,
until the annual meeting of stockholders in 2004, and until their successors are
duly elected.
13
Required Vote
The affirmative vote of a plurality of the shares of Common Stock present
in person or represented by proxy and entitled to vote is required for the
election of each Director nominee.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF THE PERSONS
NOMINATED FOR ELECTION AS DIRECTOR.
IV. RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS
The Board of Directors is recommending the ratification of its selection of
PricewaterhouseCoopers LLP as independent accountants to audit our financial
statements for the current fiscal year ending December 31, 2001.
PricewaterhouseCoopers LLP has audited our financial statements for calendar
year 2000. In October 2000, PricewaterhouseCoopers LLP was engaged by our
company to replace Deloitte & Touche LLP as our independent accountants,
pursuant to approval and recommendation by the Audit Committee. We reported
this change in a Current Report on Form 8-K filed with the Securities and
Exchange Commission ("SEC") on October 16, 2000. Deloitte & Touche LLP's report
on our 1999 financial statements did not contain any adverse opinion or
disclaimer of opinion and was not qualified or modified as to uncertainty, audit
scope or accounting principles, and during 1999 and the interim period through
October 16, 2000 there were no disagreements with Deloitte & Touche LLP on any
matter of accounting principles or practices or financial statement disclosure,
and no disagreements or differences of opinion regarding any "reportable event"
as defined in Item 304(a)(1)(v) of SEC Regulation S-K.
PricewaterhouseCoopers LLP has advised our Audit Committee that it is
"independent" of us within the rules and guidelines of the SEC, the American
Institute of Certified Public Accountants and the Independence Standards Board.
Audit Fees:
- ----------
Audit fees billed to our company by PricewaterhouseCoopers for review of
our annual financial statements and quarterly financial statements included in
quarterly reports on Form 10-Q, for the year 2000, totaled $120,000.
We did not engage PricewaterhouseCoopers LLP to provide advice regarding
financial information systems design and implementation during 2000.
Fees billed to our company by PricewaterhouseCoopers LLP with respect to
the year 2000 for all other non-audit services rendered to our company including
tax related services and regulatory advisory services totaled $30,000.
The Audit Committee has concluded that the provision of the other services
including tax related services by PricewaterhouseCoopers LLP is compatible with
maintaining their independence.
A representative of PricewaterhouseCoopers LLP is expected to be present at
the Annual Meeting, will have an opportunity to make a statement if desired, and
will be available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF
INDEPENDENT ACCOUNTANTS.
14
OTHER MATTERS
The Board of Directors knows of no other business which will be presented
at the Annual Meeting. If any other business is properly brought before the
Annual Meeting, it is intended that proxies in the enclosed form will be voted
in respect thereof in accordance with the judgments of the persons voting the
proxies. It is important that your shares be represented at the meeting,
regardless of the number of shares which you hold. WHETHER OR NOT YOU INTEND TO
BE PRESENT AT THE ANNUAL MEETING, YOU ARE URGED TO COMPLETE, SIGN, AND RETURN
YOUR PROXY PROMPTLY.
By Order of the Board of Directors
Dated: March 2, 2001
15
[Side One]
FECHTOR, DETWILER, MITCHELL & CO.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned appoints James Mitchell and Stephen Frank, and each of
them, proxies with full power of substitution, to vote all shares of Common
Stock of Fechtor, Detwiler, Mitchell & Co. (the "Company") held of record by the
undersigned as of February 19, 2001 at the Annual Meeting of Stockholders of the
Company, to be held in the Board Room of the State Street Bank Building, 225
Franklin Street, 30th Floor, Boston, Massachusetts, on March 26, 2001, at 10:00
a.m., Eastern Standard Time, and at any and all adjournments thereof, upon the
following matters:
ANNUAL MEETING OF STOCKHOLDERS
(continued and to be signed on the reverse side)
[Side Two]
Please mark your vote as this X
-------
(1) Proposal to approve the amendment of the For Against Abstain (4) Proposal to ratify the For Against Abstain
Certificate of Incorporation of our company selection of
to effect a one-for-four reverse split of the ___ _______ _______ PricewaterhouseCoopers ___ _______ _______
Common Stock of our company. LLP as our company's
independent accountants
for year 2001.
(2) Proposal to change the name of our company For Against Abstain (5) In accordance with the
to Detwiler, Mitchell & Co. discretion of the proxy
___ _______ _______ holders, upon such other
matters as may properly
(3) Proposal to elect three Directors of our For Withhold Authority come before the Annual
company, each to serve for three years or Meeting and at any and
until his successor shall be duly appointed ___ ________ all Adjournments thereof.
or elected.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR EACH OF THE
FOREGOING PROPOSALS. THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE
VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER.
IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR EACH OF THE
ABOVE PROPOSALS.
Signature or signatures of Stockholder(s) ___________________ __________________
Dated: ________, 2001
(Your signature should conform exactly to your name as printed hereon. Any
co-owners may sign. Executors, administrators, trustees, etc. should give full
title as such. If the stockholder is a corporation, a duly authorized officer
should sign on behalf of the corporation and should indicate his or her title.)