-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Atv7GtNtoxNk2tAFewcqf8LiNfB0PCja4o7cehYHJINkOYRbkX7aPEihNoHbMaSh LcovVF0ffyd5a4fj2k4VxQ== 0001016843-96-000139.txt : 19961224 0001016843-96-000139.hdr.sgml : 19961224 ACCESSION NUMBER: 0001016843-96-000139 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 19960927 FILED AS OF DATE: 19961223 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: RAYMOND JAMES FINANCIAL INC CENTRAL INDEX KEY: 0000720005 STANDARD INDUSTRIAL CLASSIFICATION: SECURITY BROKERS, DEALERS & FLOTATION COMPANIES [6211] IRS NUMBER: 591517485 STATE OF INCORPORATION: FL FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-09109 FILM NUMBER: 96684682 BUSINESS ADDRESS: STREET 1: 880 CARILLON PKWY STREET 2: P O BOX 12749 CITY: ST PETERSBURG STATE: FL ZIP: 33716 BUSINESS PHONE: 8135733800 FORMER COMPANY: FORMER CONFORMED NAME: RJ FINANCIAL CORP/FL DATE OF NAME CHANGE: 19870303 10-K 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 (Mark one) FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED) For the fiscal year ended SEPTEMBER 27, 1996 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED) For the transition period from ______________to____________ Commission file number 1-9109 RAYMOND JAMES FINANCIAL, INC. ---------------------------------------------------- (Exact name of registrant as specified in its charter) FLORIDA NO. 59-1517485 ------------------------------ ------------------ (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 880 CARILLON PARKWAY, ST. PETERSBURG, FLORIDA 33716 - --------------------------------------------- ---------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (813) 573-3800 ----------------- Securities registered pursuant to Section 12(b) of the Act: TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED - ---------------------------- ----------------------------------------- Common Stock, $.01 Par Value New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: NONE -------------- (Title of class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] Aggregate market value of the voting stock held by non-affiliates of the registrant as of December 13, 1996: $284,886,701. Number of common shares outstanding (December 13, 1996): 20,970,681 DOCUMENTS INCORPORATED BY REFERENCE Proxy Statement for Annual Meeting of Shareholders to be held on February 13, 1997. (The Company intends to file with the Commission a definitive proxy statement pursuant to Regulation 14A prior to January 24, 1997.) PART I ITEM 1. BUSINESS (a) GENERAL DESCRIPTION OF BUSINESS Raymond James Financial, Inc. ("RJF") is a Florida-based holding company that was incorporated in 1974 as a successor to its predecessor corporation founded in 1962. Its principal subsidiaries include Raymond James & Associates, Inc. ("RJA"), Investment Management & Research, Inc. ("IM&R"), Robert Thomas Securities, Inc. ("RTS"), Eagle Asset Management, Inc. ("Eagle"), Heritage Asset Management, Inc. ("Heritage") and Raymond James Bank, FSB. All of these subsidiaries are wholly-owned by RJF. RJF and its subsidiaries are hereinafter collectively referred to as the "Company". RJF's principal subsidiary, RJA, was organized in Florida in 1962. RJA is a regional securities brokerage firm engaged in most aspects of the securities business. All but 11 of RJA's 42 retail branch offices are located in Florida, and the Company is the largest brokerage and investment firm headquartered in that state. RJA also has 16 institutional sales offices, 7 of which are located in Europe. RJA is a member of the New York Stock Exchange ("NYSE") and other principal stock and option exchanges. IM&R was formed in 1973 as an independent contractor financial planning organization and participates in the distribution of all products and services offered by RJA to its retail customers through its 439 offices and 78 satellite offices in all 50 states. IM&R is a member of the National Association of Securities Dealers ("NASD") and Securities Investor Protection Corporation ("SIPC"), but not of any exchange, as it clears its trades on a fully-disclosed basis through RJA. RTS was organized in 1981. It serves independent contractor brokers who do a majority of their business in individual securities and currently operates 299 branch offices and 106 satellite offices in 48 states. RTS, like IM&R, is a member of the NASD and SIPC, but not of any exchange, as it also clears all of its business on a fully-disclosed basis through RJA. Eagle was formed in 1984 as a registered investment advisor and at September 27, 1996 had approximately $2.4 billion of client assets under management. Prior to the inception of Eagle, the asset management operation had been a division of RJA. Heritage was organized in 1985 to act as the manager of the Company's internally sponsored Heritage family of mutual funds. At September 27, 1996 the eleven funds managed by Heritage had a total of approximately $2.4 billion in assets. Raymond James Bank was formed in 1994 in conjunction with the purchase from the RTC of the deposits of a failed thrift. Its primary purpose is to provide traditional banking products and services to the clients of the Company's broker-dealer subsidiaries. At September 27, 1996, Raymond James Bank had $227 million in assets. 1 (b) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS The Company's operations consist of various financial services provided to its clients. The following table shows revenues by source for the last three years:
YEAR ENDED -------------------------------------------------------------------- Sept. 27, Sept. 29, Sept. 30, 1996 % 1995 % 1994 % -------- ------ -------- ------ -------- ------ (dollar amounts in thousands) SECURITIES COMMISSIONS: Listed products $ 90,536 12.5 $ 82,738 14.9 $ 68,938 13.6 Over-the-counter .. 133,543 18.5 110,062 19.9 92,609 18.3 Mutual funds 96,099 13.3 68,994 12.4 76,115 15.0 Asset management .. 45,005 6.2 31,159 5.6 27,202 5.4 Annuities and other insurance products 56,964 7.9 34,238 6.2 36,199 7.1 Other 340 0.1 356 .1 2,130 .4 -------- ------ -------- ------ -------- ------ Total 422,487 58.5 327,547 59.1 303,193 59.8 -------- ------ -------- ------ -------- ------ INVESTMENT BANKING: Corporate finance (including underwriting sales credits) 67,799 9.4 38,262 6.9 54,238 10.7 Limited partnerships 4,797 0.7 4,742 .9 5,981 1.2 -------- ----- -------- ----- -------- ----- Total 72,596 10.1 43,004 7.8 60,219 11.9 -------- ----- -------- ----- -------- ----- INVESTMENT ADVISORY FEES 50,715 7.0 42,922 7.7 51,153 10.1 INTEREST 126,453 17.5 97,211 17.5 58,542 11.5 CORRESPONDENT CLEARING 3,985 0.6 3,721 .7 3,866 .8 NET TRADING PROFITS 12,243 1.7 12,637 2.3 6,843 1.3 FINANCIAL SERVICE FEES 18,191 2.5 14,740 2.7 13,446 2.7 OTHER 15,082 2.1 12,288 2.2 9,874 1.9 -------- ----- -------- ----- -------- ----- Total revenues $721,752 100.0 $554,070 100.0 $507,136 100.0 ======== ===== ======== ===== ======== ===== SECURITIES COMMISSIONS BY BROKER-DEALER: Raymond James & Associates, Inc. $190,042 45.0 $146,004 44.6 $130,565 43.1 Investment Management & Research, Inc. 149,181 35.3 118,738 36.3 114,506 37.8 Robert Thomas Securities, Inc. 83,264 19.7 62,805 19.1 58,122 19.1 -------- ----- -------- ----- -------- ----- Total $422,487 100.0 $327,547 100.0 $303,193 100.0 ======== ===== ======== ===== ======== =====
(c) NARRATIVE DESCRIPTION OF BUSINESS At September 27, 1996 the Company employed 2,986 individuals. RJA employed 2,445 of these individuals, 510 of whom were full-time retail account executives. In addition, 1,993 full-time retail account executives were affiliated with the Company as independent contractors through IM&R and RTS. Through its broker-dealer subsidiaries, the Company provides securities services to approximately 500,000 client accounts. No single client accounts for a material percentage of the Company's total business. 2 RAYMOND JAMES & ASSOCIATES, INC. RJA's activities in the securities business include retail and institutional securities brokerage, origination and distribution of limited partnership interests, management of and participation in underwritings of equity and fixed income securities, market making in corporate and municipal securities, origination, distribution and management of mutual funds and unit trusts, and research and investment advisory services. RJA also offers financial planning services for individuals and provides clearing services for IM&R, RTS and other unaffiliated broker-dealers. For the year ended September 27, 1996 the revenues of RJA accounted for 62% of the consolidated revenues of the Company. RJA is a member of the NYSE, American Stock Exchange, Philadelphia Stock Exchange, Chicago Board Options Exchange, New York Futures Exchange, Pacific Exchange and Chicago Stock Exchange. It is also a member of the Securities Industry Association, NASD and SIPC. SIPC provides insurance protection for customers' accounts of up to $500,000 each (limited to $100,000 for claims for cash) in the event of the Company's liquidation. In addition, RJA carries up to $24,500,000 per account of excess customer insurance. BROKERAGE TRANSACTIONS. RJA provides securities brokerage services to both retail and institutional customers. RJA charges commissions to its retail customers, on both exchange and over-the-counter transactions, in accordance with its established commission schedule. In certain instances, varying discounts from the schedule are given, generally based upon the customer's level of business, the trade size and other relevant factors. RJA discounts its commissions substantially on institutional transactions based on trade size and the amount of business conducted annually with each institution. Customers' transactions in securities are effected on either a cash or margin basis. In margin transactions, the customer pays a portion of the purchase price, and RJA makes a loan to the customer for the balance, collateralized by the securities purchased or by other securities owned by the customer. Interest is charged to customers on the amount borrowed to finance margin transactions. The financing of margin purchases is an important source of revenue to RJA, since the interest rate paid by the customer on funds loaned by RJA exceeds RJA's cost of short-term funds. The interest rates charged to customers on such loans depend on the average margin loan balance in the customer's account and range from prime plus 1% to prime minus .75%. Typically, secured bank borrowings and equity capital are the primary sources of funds to finance customers' margin account borrowings. Since the inception of the Credit Interest Program in 1981, however, the Company's primary source of funds to finance customers' margin account balances has been cash balances in customers' accounts which are awaiting investment. In addition, pursuant to written agreements with customers, broker-dealers are permitted by Securities and Exchange Commission ("SEC") and NYSE rules to lend customer securities in margin accounts to other brokers. SEC regulations, however, restrict the use of customers' funds derived from pledging and lending customers' securities, as well as funds awaiting investment, to the financing of margin account balances, and to the extent not so used, such funds are required to be deposited in a special account for the benefit of customers. The regulations also require broker-dealers, within designated periods of time, to obtain possession or 3 control of, and to segregate, customers' fully paid and excess margin securities. OVER-THE-COUNTER AND OTHER TRADING. Trading securities in the over-the-counter ("OTC") market involves the purchase of securities from, and the sale of securities to, clients of the Company or other dealers who may be purchasing or selling securities for their own account or acting as agent for their clients. Profits and losses are derived from the spreads between bid and asked prices, as well as market trends for the individual securities during the holding period. RJA makes markets in corporate stocks and bonds, municipal bonds and various government securities. At September 27, 1996 RJA made markets in 198 common stocks traded in the OTC market. Most of these are companies with whom RJA has an investment banking relationship or companies whose securities are followed by RJA Research. RJA frequently acts as agent in the execution of OTC orders for its customers and as such transacts these trades with other dealers. When RJA receives a customer order in a security in which it makes a market, it may act as principal if it matches or improves upon the best price in the dealer market, plus or minus a mark-up or mark-down not exceeding the equivalent agency commission charge. Recently adopted regulations require that customer limit orders be satisfied prior to the brokerage firm buying securities into their own inventory at the same price. STOCK BORROW/STOCK LOAN PROGRAM. This program involves the borrowing and lending of securities from and to other broker-dealers and other financial institutions. The borrower of the securities puts up a cash deposit, commonly 102% of the market value of the securities. This deposit, which is adjusted daily to reflect changes in current market value, earns interest at a negotiated rate, typically .2% to .5% below what the lender of the securities can earn on the funds. MUTUAL FUNDS. RJA sells a number of professionally managed, load mutual funds and offers, in addition, a selection of no-load funds. RJA maintains dealer-sales agreements with most major distributors of mutual fund shares sold through broker-dealers. Commissions on such sales generally range from 1% to 5% of the dollar value of the transaction. Alternative sales compensation structures typically include front-end charges, "back-end" or deferred sales charges, and an annual charge in the form of a fund expense. At September 27, 1996, the Company had eleven internally sponsored mutual funds for which RJA acts as distributor. (See Heritage Asset Management, Inc. description on pages 7 & 8.) As the distributor of these funds, RJA has the right to enter into dealer agreements with other broker-dealers for the sale of Heritage funds to their clients. ASSET MANAGEMENT SERVICES ("AMS"). RJA formed this department in April 1990 to encompass several programs involving portfolio management, primarily Investment Advisory Services ("IAS"), the Passport Program ("Passport"), the Managed Investment Program ("MIP") and the Preferred Portfolio Account ("PPA"). IAS, which commenced operations in August 1987, assists clients in selecting portfolio managers, establishes custodial facilities, monitors performance of client accounts, provides clients with accounting and other administrative services and assists portfolio managers with certain trading management activities. IAS earns fees generally ranging from .5%-1.0% of asset balances per annum, a substantial portion of 4 which is paid to portfolio managers who direct the investment of the client's account. At September 27, 1996, this program had approximately $980 million in assets under management through agreements with 22 independent investment advisors. In addition, two proprietary asset managers, Awad and Associates Asset Management ("AWAD") and Carillon Asset Management ("Carillon"), are offered through this program. Passport is a non-discretionary advisory fee alternative that allows clients of RJA, IM&R and RTS to pay a quarterly fee plus low transaction charges in lieu of commissions. Fees are based on the individual account size and are also dependent on the type of securities in the account. In addition, AMS collects an administrative fee of up to .2% of asset balances annually, for which clients receive a quarterly performance report and other services. As of September 27, 1996, Passport had approximately $1.3 billion in assets serviced by account executives. MIP is a program that allows selected account executives to manage customer portfolios on a discretionary, wrap fee basis. The account executives must satisfy certain criteria and complete educational courses to be selected for this program. Fees are dependent on the size of the account and the type of securities in the account. AMS establishes custodial facilities, monitors performance of client portfolios, provides clients with accounting and other administrative services and assists the account executives with certain trading management activities. AMS collects an administrative fee of up to .2% of asset balances. As of September 27, 1996, MIP had approximately $92 million in assets serviced by fourteen account executives. PPA is another non-discretionary wrap fee pricing alternative that allows clients to pay a quarterly fee in lieu of commissions. Unlike Passport, no transaction charge is imposed. The fee structure and services provided by AMS are similar to Passport and MIP. As of September 27, 1996, PPA had approximately $56 million in assets. AWAD is primarily a small and mid-cap equity portfolio management division of RJA which was formed in March of 1992. Clients pay fees and/or commissions for management of their accounts. Present fees range from .5% to 1.0% of asset balances annually. In addition to private accounts, AWAD also manages a portion of the Heritage Small Cap Stock Fund Portfolio. AWAD, which is offered through the IAS program, had approximately $560 million under management at September 27, 1996. Carillon commenced operations in 1993. Carillon manages approximately $50 million for private accounts investing exclusively in closed-end funds. Fees are currently .375% of assets annually. In addition to the foregoing programs, AMS also monitors various outside money managers that are not a part of the IAS program. INSTITUTIONAL SALES, TRADING AND RESEARCH. RJA has a domestic staff of 144 professionals who provide research, sales and execution services to RJA's institutional clients. In addition, RJA services 7 institutional sales offices located in Europe which have 45 account executives. RJA's research is focused on the identification of industries and companies which its staff believe are undervalued and/or have above average growth potential. These professionals also attempt to provide general coverage on public companies located in Florida and throughout the southeastern United 5 States. Proprietary research reports, supplemented by research purchased from outside services, are also provided to retail clients. INVESTMENT BANKING GROUP. The 55 professionals of RJA's Investment Banking Group, located primarily in St. Petersburg with satellite offices in Atlanta, Boston, Dallas, and Houston, operate in two distinct areas. The Corporate Finance Department is involved in a variety of activities including public and private debt and equity financing for corporate clients, merger and acquisition consulting services, fairness opinions and evaluations. The Real Estate Investment Banking Department originates, syndicates, markets and monitors the performance of public and private limited partnerships, primarily in the real estate and equipment leasing industries. An active secondary trading market is also maintained for the purchase and resale of public limited partnership units. RJA's affiliates frequently act as a general or co-general partner for the limited partnerships the Company syndicates and/or manages. See the description of the Company's other subsidiaries on page 10. SYNDICATE DEPARTMENT. The Syndicate Department coordinates the distribution of newly issued securities to institutional and retail investors. They handle public offerings that are managed or co-managed by RJA as well as selling group and syndicate participations managed by other firms. This department primarily deals with equity underwritings and brokered certificate of deposit offerings. FIXED INCOME DEPARTMENT. Through the Fixed Income Department, RJA distributes both taxable and tax-exempt fixed income products to its institutional and retail clients. These products include municipal, corporate, government and mortgage-backed bonds, preferred stock and unit investment trusts. RJA carries inventory positions of taxable and municipal securities in both the primary and secondary market. The department's Public Finance Division, operating out of 6 offices located throughout the State of Florida as well as Atlanta and Birmingham, acts as financial advisor or underwriter to various municipal agencies or political subdivisions. RJA also acts as an underwriter or selling group member for corporate bonds, agency bonds, preferred stock and unit investment trusts. When underwriting new issue securities, RJA agrees to purchase the issue through a negotiated sale or submits a competitive bid. In addition to St. Petersburg, the Fixed Income Department maintains institutional sales and trading offices in New York, Chicago, Los Angeles, Houston, Boston, Washington D.C., and Dublin, Ohio. To assist our institutional clients, the department's Fixed Income Research Group provides value-added services and publishes research reports containing both specific product information and information on topics of interest such as market and regulatory developments. OPERATIONS AND ADMINISTRATION. RJA's operations/administrative personnel are responsible for the execution of orders, processing of securities transactions, custody of customer securities, receipt, identification and delivery of funds and securities, compliance with regulatory and legal requirements, internal financial accounting and controls and general office administration for most of the Company's operations. 6 INVESTMENT MANAGEMENT & RESEARCH, INC. IM&R participates in the distribution of all the products and services offered by RJA to its retail customers through 1,071 independent contractor registered representatives in 517 offices and satellite offices throughout all 50 states. The number of registered representatives in these offices ranges from 1 to 21. Such representatives devote all or substantially all of their time to the sale of securities and, while these independent contractors must conduct all securities business through IM&R, their contracts permit them to conduct insurance, real estate brokerage, accounting services or other business for their clients or for their own account. Many IM&R registered representatives are better characterized as financial planners than as stock brokers, although they are not required to conduct their business as financial planners. Independent contractors are responsible for all of their direct costs. ROBERT THOMAS SECURITIES, INC. RTS has 922 full-time independent contractor registered representatives in 48 states who offer securities and investment advice to individuals and institutions through a network of 405 branch offices and satellite offices. Of these branches, 101 are located within depository institutions (banks, savings and loans and credit unions). RTS representatives offer the full range of securities products and services of RJA. RTS branches have the independence to set their own commissions on agency business within regulatory guidelines. RTS branches and their registered personnel may offer non-securities financial products (i.e., life insurance) to customers outside of their relationship with RTS. EAGLE ASSET MANAGEMENT, INC. Eagle is a registered investment advisor with approximately $2.4 billion under management at September 27, 1996. Eagle's clients include pension and profit sharing plans, retirement funds, foundations, endowments, trusts and individuals. Accounts are managed on a discretionary basis in accordance with the investment objective(s) specified by the client. Eagle manages approximately $400 million for 173 institutional clients and $2.0 billion for 7,658 retail accounts. Eagle's investment management fee generally ranges from .25%-1.0% of asset balances per year depending upon the size and investment objective of the account. In addition to the management fees, clients are required to pay brokerage commissions (or a fee in lieu thereof) for transactions in their account. HERITAGE ASSET MANAGEMENT, INC. Heritage is the manager of the internally sponsored Heritage family of mutual funds, currently consisting of Heritage Cash Trust (a money market fund with taxable and tax-exempt portfolios), Heritage Capital Appreciation Trust (a mutual fund seeking long-term appreciation), Heritage Income-Growth Trust (a mutual fund seeking long-term total return with approximately equal emphasis on current income and capital appreciation), Heritage Income Trust (a trust consisting of the High Yield Bond Fund which seeks high current income and the Intermediate Government Fund which seeks 7 high current income consistent with the preservation of capital), Heritage Series Trust (a trust consisting of the Small Cap Stock Fund which seeks long-term capital appreciation through investments in small capitalization stocks, the Value Equity Fund which seeks long-term capital appreciation and secondarily current income, and the Growth Equity Fund which seeks growth through long-term capital appreciation), and the Heritage U.S. Government Income Fund (a closed-end fund seeking high current income with the potential for capital appreciation). Heritage also serves as the administrator for the Heritage Series Trust-Eagle International Equity Portfolio, which seeks long-term capital appreciation through investments in international stocks. Heritage serves as the transfer agent for all Heritage open-end funds and as fund accountant for all Heritage open-end funds except for the Eagle International Equity Portfolio; however, custody of all assets is maintained by State Street Bank, Boston, Mass. Net assets at September 27, 1996 were as follows (in thousands): Heritage Cash Trust: Money Market Fund $1,679,652 Municipal Money Market Fund 319,880 Heritage Capital Appreciation Trust 74,306 Heritage Income-Growth Trust 48,867 Heritage Income Trust: High Yield Bond Fund 39,703 Intermediate Government Fund 18,117 Heritage Series Trust: Small Cap Stock Fund 120,430 Value Equity Fund 24,870 Eagle International Equity Portfolio 3,975 Growth Equity Fund 15,544 Heritage U.S. Government Income Fund 37,326 ---------- $2,382,670 ========== Portfolio management for the Growth Equity Fund and the Income-Growth Trust is subcontracted to Eagle. Portfolio management for the Small Cap Stock Fund is subcontracted to AWAD and Eagle. Portfolio management for the Capital Appreciation Trust is subcontracted to Liberty Investment Management, Inc. (See Notes to Consolidated Financial Statements.) PLANNING CORPORATION OF AMERICA Planning Corporation of America ("PCA"), a wholly-owned subsidiary of RJA, is a general insurance agency and represents a number of insurance companies. PCA provides products and marketing support for a broad range of insurance products, principally fixed and variable annuities, all forms of life insurance, disability insurance and long-term care coverage to the account executives of the Company's broker-dealer subsidiaries. RJ PROPERTIES, INC. RJ Properties, Inc. ("RJP"), headquartered in Atlanta, Georgia, acts as a general or co-general partner for private and public limited partnerships currently owning 33 apartment properties and 5 shopping centers. RJP acquires properties for syndications for which it serves as a 8 general partner and receives acquisition fees and residual interests in profits and proceeds from future sales of the projects. Through its subsidiary, Raymond James Realty Advisors, RJP acts as the advisor for real estate portfolios of institutional clients. At September 27, 1996, RJP acted as advisor for approximately $837 million of such assets. In addition, RJP performs the property management function for certain properties owned either by partnerships in which RJP is a general partner or properties in portfolios of institutional clients. At September 27, 1996, RJP had 32 properties with a total of 7,087 apartment units under management. The Company owns 85% of the outstanding shares of RJP. Mr. Francis S. Godbold, President and a Director of the Company, owns 7.5%, and Mr. J. Robert Love, President of RJP, owns the remaining 7.5%. RAYMOND JAMES TRUST COMPANY SOUND TRUST COMPANY Raymond James Trust Company was chartered in 1992 and opened for business in September 1992. This wholly-owned subsidiary of the Company was formed primarily to provide personal trust services to existing clients of the broker-dealer subsidiaries. Portfolio management of trust assets is generally subcontracted to the asset management operations of the Company. In October 1993 the Company acquired a second trust company, Sound Trust Company, in Tacoma, Washington. This subsidiary provides personal trust services primarily to broker-dealer clients outside the State of Florida. These two subsidiaries had a combined total of $297 million in client assets at September 27, 1996. RAYMOND JAMES BANK, FSB Raymond James Bank, FSB, ("RJ Bank") was chartered as a federal savings bank on May 6, 1994, in conjunction with the acquisition of deposits of certain branches of a failed thrift from the Resolution Trust Corporation. As a member of the Federal Deposit Insurance Corporation ("FDIC"), RJ Bank offers FDIC-insured deposit and residential lending products to clients of the broker-dealer subsidiaries and directly to the public within its assessment area. At September 27, 1996, RJ Bank had total assets of approximately $227 million. RAYMOND JAMES INTERNATIONAL HOLDINGS, INC. Raymond James International Holdings, Inc. is a Delaware corporation formed in 1994 to house the Company's foreign operations. To date, operations consist of joint venture investments in broker-dealers in India and South Africa, as well as participation in asset management companies in Dublin and Paris. 9 OTHER SUBSIDIARIES Over time, the Company has formed several subsidiaries to act as general or co-general partner for various public and private limited partnerships syndicated by RJA. These subsidiaries include: SUBSIDIARY TYPE OF PARTNERSHIP(S) ---------------------------- -------------------------------- RJ Leasing, Inc. Equipment leasing RJ Leasing - 2, Inc. Equipment leasing RJ Equities, Inc. Real estate RJ Health Properties, Inc. Nursing homes RJ Credit Partners, Inc. Government subsidized apartments Raymond James Partners, Inc. Various RJ Medical Investors, Inc. Nursing homes RJ Partners, Inc. Various The Company has several other subsidiaries, but their activities are not material to the Company's operations. COMPETITION The Company's subsidiaries compete with many larger, better capitalized providers of financial services, including other securities firms, some of which are affiliated with major financial services companies, insurance companies, banking institutions and other organizations. They also compete with a number of firms offering discount brokerage services, usually with lower levels of service, to individual customers. The Company's subsidiaries compete principally on the basis of service, product selection, location and reputation in local markets. SECURITIES VOLUME AND PRICES The securities industry can be subject to substantial fluctuations in volume of securities transactions. These fluctuations can occur on a daily basis as well as over longer periods as a result of national and international economic and political events, and broad trends in business and finance. Reduced volume generally results in lower brokerage and investment banking revenues. Profitability is adversely affected in periods of reduced volume because fixed costs remain relatively unchanged. To the extent that purchases of securities are permitted to be made on margin, securities firms also are subject to risks inherent in extending credit, especially during periods of rapidly declining securities prices, in that a market decline could reduce collateral value below the amount of a customer's indebtedness. REGULATION The securities industry in the United States is subject to extensive regulation under federal and state laws. The Securities and Exchange Commission ("SEC") is the federal agency charged with administration of the federal securities laws. Much of the regulation of broker-dealers, however, has been delegated to self-regulatory organizations, principally the NASD and the NYSE. These self-regulatory organizations adopt rules (which are subject to approval by the SEC) for governing the industry and 10 conduct periodic examinations of member broker-dealers. Securities firms are also subject to regulation by state securities commissions in the states in which they are registered. RJA, IM&R and RTS are currently registered in all 50 states. The regulations to which broker-dealers are subject cover all aspects of the securities business, including sales methods, trade practices among broker-dealers, capital structure of securities firms, record keeping and the conduct of directors, officers and employees. Additional legislation, changes in rules promulgated by the SEC and by self-regulatory organizations or changes in the interpretation or enforcement of existing laws and rules often directly affect the method of operation and profitability of broker-dealers. The SEC and the self-regulatory organizations may conduct administrative proceedings which can result in censure, fine, suspension or expulsion of a broker-dealer, its officers or employees. The principal purpose of regulation and discipline of broker-dealers is the protection of customers and the securities markets rather than protection of creditors and shareholders of broker-dealers. See Notes 12 and 13 of the Notes to Consolidated Financial Statements for further description of certain SEC regulations. ITEM 2. PROPERTIES Properties owned by the Company at September 27, 1996 include a 310,000 square foot headquarters complex (two buildings) and the 86,000 square foot former headquarters building, both located in St. Petersburg, Florida. The former headquarters building is presently unoccupied and available for sale or lease. In addition, the Company leases 74,000 square feet in a nearby office building. The Company owns 13.87 acres (28.97 acres as of December 13, 1996) near the current headquarters for long-term growth purposes and is planning construction of a third headquarters building. The RJA branch office building in Crystal River, Florida, is owned by the Company; all other RJA branches are leased with various expiration dates through 2002. The IM&R and RJP headquarters offices in Atlanta, Georgia are also under leases. See Notes 4 and 9 of the Notes to Consolidated Financial Statements for further information regarding the Company's leases. Leases for branch offices of IM&R and RTS are the responsibility of the respective independent contractor registered representatives. ITEM 3. LEGAL PROCEEDINGS The Company is a defendant or co-defendant in various lawsuits incidental to its securities business. The Company is contesting the allegations of the complaints in these cases and believes that there are meritorious defenses in each of these lawsuits. In view of the number and diversity of claims against the Company, the number of jurisdictions in which litigation is pending and the inherent difficulty of predicting the outcome of litigation and other claims, the Company cannot state with certainty what the eventual outcome of pending litigation or other claims will be. In the opinion of management, based on discussions with counsel, the outcome of these matters will not result in a material adverse effect on the consolidated financial position or results of operations of the Company. 11 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER MATTERS The Company's common stock is traded on the NYSE under the symbol "RJF". The following table sets forth for the periods indicated the high and low prices for the common stock. 1996 1995 ----------------- ---------------- HIGH LOW HIGH LOW ------- ------- ------- ------- First Quarter $25-1/4 $20-1/8 $15-1/2 $13-1/4 Second Quarter 23-3/8 19 18 13-3/4 Third Quarter 23-1/2 20-1/2 20-1/2 16-1/4 Fourth Quarter 24-3/8 19-3/4 22-5/8 18-1/2 Since the Company initiated payment of a cash dividend in 1985, there have been thirteen increases in the dividend rate, five of which were in the form of stock splits and stock dividends. The dividend rate in fiscal 1996 was $.095 per quarter; the dividend rate was raised to $.11 for the first quarter of fiscal 1997. The payment of dividends on the Company's common stock is subject to the availability of funds from the Company's subsidiaries, including the broker-dealer subsidiaries which may be subject to restrictions under the net capital rules of the SEC and the NYSE. Such restrictions have never become applicable with respect to the Company's dividend payments. (See Note 12 of the Notes to Consolidated Financial Statements.) At December 13, 1996 there were approximately 7,800 holders of the Company's common stock. 12 ITEM 6. SELECTED FINANCIAL DATA (in thousands, except per share data)
YEAR ENDED -------------------------------------------------------------- SEPT. 27, SEPT. 29, SEPT. 30, SEPT. 24, SEPT. 25, 1996 1995 1994 1993 1992 ---------- ---------- ---------- ---------- ---------- OPERATING RESULTS: Revenues $ 721,752 $ 554,070 $ 507,136 $ 451,747 $ 361,134 Net income $ 65,978 $ 46,141 $ 42,069 $ 49,347 $ 41,022 Net income per share:* Primary $ 3.14 $ 2.23 $ 1.97 $ 2.28 $ 1.89 Fully diluted $ 3.12 $ 2.21 $ 1.97 $ 2.27 $ 1.89 Weighted average shares outstanding:* Primary 21,025 20,705 21,359 21,623 21,737 Fully diluted 21,116 20,877 21,359 21,713 21,737 Cash dividends declared per share* $ .38 $ .36 $ .32 $ .21 $ .16 FINANCIAL CONDITION: Total assets $2,566,381 $2,012,715 $1,698,262 $1,447,570 $ 806,230 Long-term debt $ 12,909 $ 13,084 $ 13,243 $ 13,387 $ 13,518 Shareholders' equity $ 326,632 $ 266,193 $ 227,452 $ 205,565 $ 160,935 Shares outstanding* 20,894 20,614 20,494 21,316 21,225 Equity per share at end of period* $ 15.63 $ 12.91 $ 11.09 $ 9.64 $ 7.58
* Gives effect to the common stock splits paid on February 3, 1992 and November 15, 1993. 13 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION RESULTS OF OPERATIONS - THREE YEARS ENDED SEPTEMBER 27, 1996 Fiscal 1996 was the Company's twelfth consecutive year of record revenues. More importantly, earnings also reached a new record level as, a very favorable equity market spurred investor and capital markets activity. Fiscal 1995 was a mixed year, with the first six months a continuation of 1994's subdued market conditions in a period of rising interest rates. The second half of fiscal 1995 saw a dramatic turnaround, with a return to declining interest rates and a vibrant, rapidly rising stock market. Fiscal 1994 was a mirror image of 1995, with the first half a continuation of the ebullient 1993 conditions and a dramatic slowdown occurring in the second half as interest rates began a rapid ascent. YEAR ENDED --------------------------------------------------- SEPT. 27, % INCR. SEPT. 29, % INCR. SEPT. 30, 1996 (DECR.) 1995 (DECR.) 1994 --------- ------- --------- ------- --------- Revenues: (000's) (000's) (000's) Securities commissions $422,487 29% $327,547 8% $303,193 Investment banking 72,596 69% 43,004 (29%) 60,219 Investment advisory fees 50,715 18% 42,922 (16%) 51,153 Interest 126,453 30% 97,211 66% 58,542 Correspondent clearing 3,985 7% 3,721 (4%) 3,866 Net trading profits 12,243 (3%) 12,637 85% 6,843 Financial service fees 18,191 23% 14,740 10% 13,446 Other 15,082 23% 12,288 24% 9,874 -------- -------- -------- $721,752 30% $554,070 9% $507,136 ======== ======== ======== Continued strength of the securities markets and record transaction volume in fiscal 1996 resulted in increased securities commissions from the sales of all lines of products, with the largest increases in absolute terms in mutual funds, over-the-counter stocks and annuities. While the sales force grew at an acceptable rate over fiscal 1995, as illustrated below, the increased productivity of existing account executives provided a significant portion of the increased commission revenues. Despite the volatility of the markets in fiscal 1995, the Company managed to realize a modest rate of increase over 1994 in securities commission revenues. From a product line perspective, the largest volume increase, by a wide margin, was in equities.
YEAR ENDED -------------------------------------------------------- SEPT. 27, SEPT. 29, % INCR. SEPT. 30, 1996 % INCR. 1995 (DECR.) 1994 --------- -------- --------- --------- --------- Number of retail account executives at yearend 2,503 9% 2,288 4% 2,207 Retail commission revenues (000's) $332,722 26% $264,211 12% $236,548 Number of institutional salesmen at yearend 129 10% 117 13% 104 Institutional commission revenues (000's) $ 89,765 42% $ 63,336 (5%) $ 66,645 Number of trades processed 2,526,000 20% 2,104,000 12% 1,878,000
14 Fiscal 1996 was a year of record equity underwriting levels and merger and acquisition activity, particularly in our fourth fiscal quarter. Investment banking revenues, including new issue sales credits, increased 69% over the prior year to a record $72.6 million after a decline from fiscal 1994 to 1995. Fiscal 1994 and 1995 revenues each reflected partial years of slower market conditions. The number of managed or co-managed underwritings and the dollar volume of these transactions were as follows: 1996 - 38 offerings for $2.7 billion; 1995 - 24 offerings for $1.4 billion; and 1994 - 35 offerings for $2.2 billion. In addition, merger and acquisition fees have increased each year during this period to $12 million in 1996 from $4.9 million in 1995 and $3.7 million in 1994. Assets under management showed a strong increase during fiscal 1996 as a result of net new account sales and appreciation of existing accounts. The decline in investment advisory fees from 1994 to 1995 reflects the fees on the $4.3 billion in assets previously managed by Eagle for which management was assumed by Liberty Investment Management, Inc. ("Liberty") beginning on January 1, 1995. As described in Note 15 of the Notes to Consolidated Financial Statements, the Company has received 50% of the fees from these accounts while bearing none of the expenses. This was to continue through December 31, 1999, however, subsequent to fiscal 1996 yearend, Liberty entered into an agreement for the sale of Liberty's assets to a third party, scheduled to close in January 1997. Accordingly, the Company will receive a lump sum settlement for its remaining 3 years' interest in Liberty's revenues, as well as for its option to purchase 20% of Liberty at a future date. As shown in the table below, the Company's various asset management operations have had somewhat disparate growth rates:
SEPT. 27, % INCR. SEPT. 29, % INCR. SEPT. 30, 1996 (DECR.) 1995 (DECR.) 1994 ----------- ---- ---------- ---- ---------- (000's) (000's) (000's) Eagle Asset Management $ 2,388,922 29% $1,856,284 (70%) $6,129,827 Heritage Family of Mutual Funds 2,382,670 24% 1,921,377 30% 1,479,711 Investment Advisory Services 980,415 17% 836,065 10% 763,313 Awad and Associates Asset Management 490,477 48% 331,236 64% 202,301 Focus Investment Advisors -- -- -- (100%) 50,775 Carillon Asset Management 50,795 (28%) 70,217 (25%) 93,636 ----------- ---------- ---------- Subtotal 6,293,279 25% 5,015,179 (42%) 8,719,563 Liberty Investment Management, Inc. 5,468,913 14% 4,806,210 -- ----------- ---------- ---------- Total Financial Assets Under Management $11,762,192 20% $9,821,389 13% $8,719,563 =========== ========== ==========
During 1995, real estate assets under management increased significantly and continued to grow in fiscal 1996, as the Company's RJ Properties subsidiary has become a recognized manager of institutional real estate portfolios. Including partnerships for which the Company's various subsidiaries act as general or co-general partner, total tangible assets under management at yearend for 1996, 1995 and 1994 were $1.6 billion, $1.3 billion and $980 million, respectively. 15 Net interest income is a growing source of earnings. A large majority of the increase has been a result of the dramatic growth in retail brokerage account balances, including resultant segregated account assets. The major components of interest earnings are as follows:
YEAR ENDED --------------------------------------------------------- SEPT. 27, SEPT. 29, SEPT. 30, 1996 1995 1994 --------- --------- --------- (balances in 000's) Margin balances: Average balance $386,422 $337,969 $298,674 Average rate 8.2% 8.3% 6.3% -------- -------- -------- $31,529 $27,974 $18,875 Stock borrowed: Average balance 947,412 761,204 955,597 Average rate 4.7% 4.8% 2.8% -------- -------- -------- 44,361 36,228 26,625 Assets segregated pursuant to Federal Regulations: Average balance 452,710 294,664 132,169 Average rate 5.4% 5.7% 3.9% -------- -------- -------- 24,538 16,813 5,184 Raymond James Bank, FSB 11,980 7,197 597 Other interest revenue 14,045 8,999 7,261 ------- -------- -------- Total interest revenue 126,453 97,211 58,542 ------- -------- -------- Credit interest program: Average balance 678,910 482,985 303,123 Average rate 4.8% 5.1% 3.3% -------- -------- -------- 32,374 24,625 9,908 Stock loaned: Average balance 941,937 765,799 955,328 Average rate 4.4% 4.4% 2.6% -------- -------- -------- 41,165 33,867 24,584 Raymond James Bank,FSB 7,782 4,268 221 Other interest expense 2,150 1,998 1,441 -------- -------- -------- Total interest expense 83,471 64,758 36,154 -------- -------- -------- Net interest $ 42,982 $ 32,453 $ 22,388 ======== ======== ========
Net trading profits remained consistent in total from fiscal 1995 to 1996. These profits arose primarily from over-the-counter equity inventory positions as the equity markets continued to rise and record volume generated higher spread retention. In addition, 1996 is the first year of trading profits from the newly acquired specialist operations. The large improvement in trading results from fiscal 1994 to 1995 is a reflection of the difficult environment for fixed income securities during 1994. The increase in financial service fees in both fiscal 1996 and 1995 is a result of the growth of the Company's retail client base. Examples of items in this category are IRA account fees, transfer and postage fees, passport transaction fees and money market distribution and processing fees. The increase in other income from 1995 to 1996 was due to increased floor brokerage revenues as the Company increased its number of floor traders during this active market period. In addition, the Company's RJ Properties subsidiary 16 has increased substantially the number of apartment units for which it receives property management fees.
YEAR ENDED -------------------------------------------------------- SEPT. 27, % INCR. SEPT. 29, % INCR. SEPT. 30, 1996 1995 (DECR.) 1994 --------- ------- --------- ------- --------- (000's) (000's) (000's) Expenses: Employee compensation: Sales commissions $294,031 33% $221,629 1% $219,291 Administrative and benefit costs 80,092 12% 71,364 8% 65,895 Incentive compensation 49,781 49% 33,433 2% 32,893 -------- -------- -------- Total employee compensation 423,904 30% 326,426 3% 318,079 -------- -------- -------- Communications 30,585 19% 25,619 (3%) 26,420 Occupancy and equipment 23,927 10% 21,653 37% 15,758 Clearance and floor brokerage 10,098 22% 8,257 8% 7,644 Interest 83,471 29% 64,758 79% 36,154 Business development 16,053 13% 14,210 - 14,220 Other 25,189 35% 18,688 (14%) 21,644 -------- -------- -------- $613,227 28% $479,611 9% $439,919 ======== ======== ========
Since several of the expense line items are explained by the fluctuation in related revenues and others were relatively constant or experienced a general corporate growth rate during this three year period, the following discussion will focus on the expense items not falling into either of these two categories. Incentive compensation expenses are based on departmental, subsidiary and firm-wide profitability and reflect the record earnings in fiscal 1996. The increase in communications expense in fiscal 1996 reflects the costs of increased automation: software, communication and archival equipment, satellites and quote services. General increased business volume also resulted in increased telephone, printing and supplies costs. The occupancy and equipment expense increase between fiscal 1994 and 1995 is a result of increased and upgraded retail office space and account executive workstations, the latter being depreciated over very short periods (e.g. two years) for financial statement purposes. The fluctuation in other expense is primarily the result of the timing of legal expenses and settlements. In addition, there was a one-time FDIC assessment of approximately $600,000 for RJ Bank in 1996. LIQUIDITY AND CAPITAL RESOURCES Net cash from operating activities during the current year was $394,531,000. Cash was generated by increased customer balances in the credit interest program and by fluctuations in various asset and liability accounts. Investing activities required $84,342,000 during fiscal 1996. Net additions to fixed assets consumed $10,093,000, the majority of which was for the purchase of computers and office furniture and equipment. Net purchases of investments consumed $74,249,000. These investments were primarily mortgage-backed securities purchased by RJ Bank. 17 Financing activities provided $4,702,000, primarily the result of borrowings from banks and employee stock purchases and exercise of stock options. The Company has notes payable consisting of long-term debt in the amount of $12.9 million in the form of a mortgage on its headquarters office building and a balance of $11.9 million on the Raymond James Credit Corporation line of credit. The Company has two committed lines of credit. During 1995, the parent company obtained an unsecured $50 million line for general corporate purposes. In addition, a $50 million line was established to finance Raymond James Credit Corporation, a Regulation G subsidiary organized to provide loans collateralized by restricted or control shares of public companies. In addition, RJA has uncommitted lines of credit aggregating $255,000,000. The Company's broker-dealer subsidiaries are subject to requirements of the SEC relating to liquidity and capital standards (see Notes to Consolidated Financial Statements). EFFECTS OF RECENTLY ISSUED ACCOUNTING STANDARDS During fiscal 1996, the Financial Accounting Standards Board issued Statement No. 123 "Accounting for Stock-Based Compensation" ("FAS 123") and No. 125 "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities" ("FAS 125"). The Company will adopt FAS 123 in fiscal year 1997. FAS 123 is not expected to have a material impact on the Company's financial position or results of operations but will require several disclosures regarding the Company's stock option and employee stock purchase plans. The impact of adopting FAS 125 is not anticipated to be material to the Company's financial position or results of operation. The Company plans to adopt the provisions of FAS 125 when required, beginning in fiscal 1997. EFFECTS OF INFLATION The Company's assets are primarily liquid in nature and are not significantly affected by inflation. Management believes that the replacement cost of property and equipment would not materially affect operating results. However, the rate of inflation affects the Company's expenses, including employee compensation, communications and occupancy, which may not be readily recoverable through charges for services provided by the Company. FACTORS AFFECTING "FORWARD-LOOKING STATEMENTS" From time to time, the Company may publish "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities and Exchange Act of 1934, as amended, or make oral statements that constitute forward-looking statements. These forward-looking statements may relate to such matters as anticipated financial performance, future revenues or earnings, business prospects, projected ventures, new products, anticipated market performance, and similar matters. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for for forward-looking statements. In order to comply with the terms of the safe harbor, the Company cautions readers that a variety of factors could cause the Company's actual results to differ materially from the anticipated results or other expectations expressed in the Company's forward- 18 looking statements. These risks and uncertainties, many of which are beyond the Company's control, include, but are not limited to: (i) transaction volume in the securities markets, (ii) the volatility of the securities markets, (iii) fluctuations in interest rates, (iv) changes in regulatory requirements which could affect the cost of doing business, (v) fluctuations in currency rates, (vi) general economic conditions, both domestic and international, (vii) changes in the rate of inflation and related impact on securities markets, (viii) competition from existing financial institutions and other new participants in the securities markets, (ix) legal developments affecting the litigation experience of the securities industry, and (x) changes in federal and state tax laws which could affect the popularity of products sold by the Company. The Company does not undertake any obligation to publicly update or revise any forward-looking statements. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (a) Financial statements, schedules and exhibits filed under this item are listed in the index appearing on page F-1 of this report. (b) QUARTERLY FINANCIAL INFORMATION (In thousands, except share amounts) 1996 1ST QTR. 2ND QTR. 3RD QTR. 4TH QTR. - ---- -------- -------- -------- -------- Revenues $152,026 $178,719 $198,194 $192,813 Income before income taxes 20,288 24,665 30,522 33,050 Net income 12,541 15,313 18,582 19,542 Net income per share .60 .73 .88 .93 1995 1ST QTR. 2ND QTR. 3RD QTR. 4TH QTR. - ---- -------- -------- -------- -------- Revenues $115,712 $125,678 $148,943 $163,737 Income before income taxes 12,524 16,295 21,670 23,970 Net income 7,891 10,100 13,838 14,312 Net income per share .38 .49 .67 .69 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. 19 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Executive officers of the registrant (including its significant subsidiaries) who are not Directors of the registrant are as follows: Lynn Pippenger 58 Treasurer, Senior Vice President - Finance of RJA, Secretary and/or and Treasurer Director of certain RJF subsidiaries. Jeffrey P. Julien 40 Vice President - Finance and Chief Financial Officer, Director and/or officer of certain RJF subsidiaries. Barry S. Augenbraun 57 Senior Vice President and Corporate Secretary. Mary Jean Kissner 39 Vice President and Tax Manager. Jennifer Ackart 32 Controller. The information required by Item 10 relating to Directors of the registrant is incorporated herein by reference to the registrant's definitive proxy statement for the 1997 Annual Meeting of Shareholders. Such proxy statement will be filed with the SEC prior to January 24, 1997. ITEMS 11,12 AND 13. The information required by Items 11, 12 and 13 is incorporated herein by reference to the registrant's definitive proxy statement for the 1997 Annual Meeting of Shareholders. Such proxy statement will be filed with the SEC prior to January 24, 1997. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) Financial statement schedules required by this Item are listed in the index appearing on page F-1 of this report. (b) No reports on Form 8-K were filed during the fiscal year ended September 27, 1996. (c) Exhibits required by this Item are listed in the index on page F-2. 20 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of St. Petersburg, State of Florida, on the 20th day of December, 1996. RAYMOND JAMES FINANCIAL, INC. By /s/ THOMAS A. JAMES -------------------------- Thomas A. James, Chairman Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. SIGNATURE TITLE DATE --------- ----- ---- /s/ THOMAS A. JAMES Chairman and Chief December 20, 1996 - --------------------------- Executive Officer Thomas A. James /s/ FRANCIS S. GODBOLD President and Director December 20, 1996 - --------------------------- Francis S. Godbold /s/ M. ANTHONY GREENE Executive Vice President December 20, 1996 - --------------------------- and Director M. Anthony Greene /s/ ROBERT F. SHUCK Vice Chairman and Director December 20, 1996 - --------------------------- Robert F. Shuck /s/ JEFFREY P. JULIEN Vice President - Finance December 20, 1996 - --------------------------- (Chief Financial Officer) Jeffrey P. Julien /s/ JENNIFER C. ACKART Controller (Chief December 20, 1996 - --------------------------- Accounting Officer) Jennifer C. Ackart /s/ JONATHAN A. BULKLEY Director December 20, 1996 - --------------------------- Jonathan A. Bulkley /s/ HERBERT E. EHLERS Director December 20, 1996 - --------------------------- Herbert E. Ehlers /s/ THOMAS S. FRANKE Director December 20, 1996 - --------------------------- Thomas S. Franke /s/ HARVARD H. HILL, JR. Director December 20, 1996 - --------------------------- Harvard H. Hill, Jr. /s/ CHRISTOPHER W. JAMES Director December 20, 1996 - --------------------------- Christopher W. James Director December 20, 1996 - --------------------------- Paul W. Marshall /S/ J. STEPHEN PUTNAM Executive Vice President December 20, 1996 - --------------------------- and Director J. Stephen Putnam /S/ DENNIS W. ZANK Director December 20, 1996 - --------------------------- Dennis W. Zank 21 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES INDEX TO FINANCIAL STATEMENTS, SCHEDULES AND EXHIBITS FINANCIAL STATEMENTS PAGE(S) - -------------------- ------- Report and Consent of Independent Certified Public Accountants F-3 Consolidated Statement of Financial Condition as of September 27, 1996 and September 29, 1995 F-4 Consolidated Statement of Income for the Three Years Ended September 27, 1996 F-5 Consolidated Statement of Changes in Shareholders' Equity for the Three Years Ended September 27, 1996 F-6 Consolidated Statement of Cash Flows for the Three Years Ended September 27, 1996 F-7-8 Summary of Significant Accounting Policies F-9-12 Notes to Consolidated Financial Statements F-13-22 F - 1 EXHIBITS PAGE(S) - -------- ------- 3.1 Certificate Incorporation of RJ Financial Corp. as filed on January 24, 1974, and amendments thereto filed on March 26, 1974, May 16, 1983, June 2, 1983, February 20, 1987, June 13, 1991, March 8, 1993, and February 28, 1994. X-1-36 3.2 By-Laws of the Company, incorporated by reference to Exhibit 3(b) to Registration statements on form S-1, No. 2-84010. 10.1 Raymond James Financial, Inc. Amended Stock Option Plan for Outside Directors, dated December 12, 1986, incorporated by reference to Exhibit 4.1(b) to Registration Statement on Form S-8, No. 33-38350. 10.2 Raymond James Financial, Inc. 1992 Incentive Stock Option Plan effective August 20, 1992, incorporated by reference to Exhibit 4.1 to Registration Statement on From S-8, No. 33-60608. 10.3 Raymond James Financial, Inc. Deferred Management Bonus Plan, effective as of October 1, 1989. X-37-49 10.4 Employment contract with Corporate Secretary effective as of October 21, 1996. X-50-51 10.5 Termination and Release Agreement between Liberty Asset Management, Inc. and Raymond James Financial, Inc. X-52-64 11 Computation of Earnings per Share X-65 21 List of Subsidiaries X-66 23 Independent Auditor's Consent X-67 27 Financial Data Schedule (for SEC use only) SCHEDULES AND EXHIBITS EXCLUDED All schedules and exhibits not included are not applicable, not required or would contain information which is included in the Consolidated Financial Statements, Summary of Significant Accounting Policies, or the Notes to Consolidated Financial Statements. F - 2 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS To the Board of Directors and Shareholders of Raymond James Financial, Inc. In our opinion, the consolidated financial statements listed in the index appearing on page F-1 present fairly, in all material respects, the financial position of Raymond James Financial, Inc. and its subsidiaries at September 27, 1996 and September 29, 1995, and the results of their operations and their cash flows for each of the three years in the period ended September 27, 1996, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. PRICE WATERHOUSE LLP Tampa, Florida November 18, 1996 F - 3 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF FINANCIAL CONDITION (in thousands, except share amounts) SEPTEMBER 27, SEPTEMBER 29, 1996 1995 ------------- ------------- ASSETS Cash and cash equivalents $ 258,206 $ 86,417 Assets segregated pursuant to Federal Regulations: Cash and cash equivalents 119 3,158 Securities purchased under agreements to resell 476,945 330,804 Short-term investments -- 34,017 Securities owned: Trading and investment account securities 124,253 74,815 Available for sale securities 208,897 114,941 Held to maturity securities -- 11,210 Receivables: Customers 459,180 397,201 Stock borrowed 864,140 775,288 Brokers, dealers and clearing organizations 24,306 49,135 Other 28,980 24,886 Investment in leveraged leases 20,318 10,581 Property and equipment, net 39,585 40,946 Deferred income taxes 21,189 20,980 Deposits with clearing organizations 22,044 22,157 Prepaid expenses and other assets 18,219 16,179 ----------- ----------- $ 2,566,381 $ 2,012,715 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY Notes payable $ 24,898 $ 15,594 Payables: Customers 1,086,406 774,476 Stock loaned 848,595 785,784 Brokers, dealers and clearing organizations 56,928 17,542 Trade and other 54,007 56,211 Trading account securities sold but not yet purchased 57,210 17,377 Accrued compensation 101,300 73,367 Income taxes payable 10,405 6,171 ----------- ----------- 2,239,749 1,746,522 ----------- ----------- Commitments and contingencies (Note 9) Shareholders' equity: Preferred stock; $.10 par value; authorized 10,000,000 shares; issued and outstanding -0- shares -- -- Common stock; $.01 par value; authorized 50,000,000 shares; issued 21,777,271 shares 217 217 Additional paid-in capital 50,271 50,685 Unrealized gain (loss) on securities available for sale, net of deferred taxes (791) 146 Retained earnings 289,096 231,029 ----------- ----------- 338,793 282,077 Less: 882,811 and 1,163,573 common shares in treasury, at cost (12,161) (15,884) ----------- ----------- 326,632 266,193 ----------- ----------- $ 2,566,381 $ 2,012,715 =========== =========== The accompanying Summary of Significant Accounting Policies and Notes to Consolidated Financial Statements are integral parts of these financial statements. F - 4 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF INCOME (in thousands, except per share amounts) YEAR ENDED -------------------------------------------- SEPTEMBER 27, SEPTEMBER 29, SEPTEMBER 30, 1996 1995 1994 ------------- ------------- ------------- Revenues: Securities commissions $422,487 $327,547 $303,193 Investment banking 72,596 43,004 60,219 Investment advisory fees 50,715 42,922 51,153 Interest 126,453 97,211 58,542 Correspondent clearing 3,985 3,721 3,866 Net trading profits 12,243 12,637 6,843 Financial service fees 18,191 14,740 13,446 Other 15,082 12,288 9,874 -------- -------- -------- 721,752 554,070 507,136 -------- -------- -------- Expenses: Employee compensation 423,904 326,426 318,079 Communications 30,585 25,619 26,420 Occupancy and equipment 23,927 21,653 15,758 Clearance and floor brokerage 10,098 8,257 7,644 Interest 83,471 64,758 36,154 Business development 16,053 14,210 14,220 Other 25,189 18,688 21,644 -------- -------- -------- 613,227 479,611 439,919 -------- -------- -------- Income before provision for income taxes 108,525 74,459 67,217 Provision for income taxes 42,547 28,318 25,148 -------- -------- -------- Net income $ 65,978 $ 46,141 $ 42,069 ======== ======== ======== Net income per share $ 3.14 $ 2.23 $ 1.97 ======== ======== ======== Average common and common equivalent shares outstanding 21,025 20,705 21,359 ======== ======== ======== The accompanying Summary of Significant Accounting Policies and Notes to Consolidated Financial Statements are integral parts of these financial statements. F - 5
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (in thousands, except per share amounts) UNREALIZED GAIN (LOSS) TREASURY STOCK PREFERRED STOCK COMMON STOCK ADDITIONAL ON SECURITIES ----------------- --------------- --------------- PAID-IN RETAINED AVAILABLE COMMON SHAREHOLDERS' SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS FOR SALE SHARES AMOUNT EQUITY ------ ------ ------ ------ ---------- -------- ------------- ------ -------- ------------- Balances at September 24, 1993 - - 21,777 $217 $52,141 $156,949 - (462) $ (3,742) $205,565 Net income 42,069 42,069 Cash dividends - common stock ($.32 per share) (6,733) (6,733) Purchase of treasury shares (1,113) (16,604) (16,604) Employee stock purchases 442 165 1,789 2,231 Exercise of stock options (632) 127 1,137 505 Sale of put options 202 202 Tax benefit related to Non-qualified option exercises 222 222 Cash Paid for fractional shares (5) - (5) Balances at ------ ------ ------ ------ ---------- -------- ------------- ------ -------- ------------- September 30, 1994 - - 21,777 217 52,375 192,280 - (1,283) (17,420) 227,452 ------ ------ ------ ------ ---------- -------- ------------- ------ -------- ------------- Net income 46,141 46,141 Cash dividends - common stock ($.36 per share) (7,392) (7,392) Purchase of treasury shares (234) (3,296) (3,296) Employee stock purchases 139 107 1,455 1,594 Exercise of stock options (1,974) 247 3,377 1,403 Tax benefit related to Non-qualified option exercises 145 145 Net unrealized gain on securities available for sale $ 146 146 ------ ------ ------ ------ ---------- -------- ------------- ------ -------- ------------- Balances at September 29, 1995 - - 21,777 217 50,685 231,029 146 (1,163) (15,884) 266,193 ------ ------ ------ ------ ---------- -------- ------------- ------ -------- ------------- Net income 65,978 65,978 Cash dividends - common stock ($.38 per share) (7,911) (7,911) Purchase of treasury shares (18) (367) (367) Employee stock purchases 585 106 1,455 2,040 Exercise of stock options (1,250) 192 2,635 1,385 Tax benefit related to Non-qualified option exercises 251 Net unrealized (loss) on securities available for sale (937) (937) ------ ------ ------ ------ ---------- -------- ------------- ------ -------- ------------- Balances at September 27, 1996 - - 21,777 $217 $50,271 $289,096 $(791) (883) $(12,161) $326,632 ------ ------ ------ ------ ---------- -------- ------------- ------ -------- -------------
The accompanying Summary of Significant Accounting Policies and Notes to Consolidated Financial Statements are integral parts of these financial statements. F - 6 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS (in thousands) (continued on next page) YEAR ENDED ------------------------------------------- SEPTEMBER 27, SEPTEMBER 29, SEPTEMBER 30, 1996 1995 1994 ------------- ------------- ------------- Cash flows from operating activities: Net income $ 65,978 $ 46,141 $ 42,069 -------- -------- -------- Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 11,299 9,673 7,011 Unrealized loss (gain) and premium amortization on securities 152 (1,033) (716) Gain on sale of securities (199) (489) - Gain on sale of property and equipment 155 117 128 Provision for bad debts 27 234 (25) Provision for other accruals (1,690) 2,890 5,041 Decrease (increase) in assets: Short-term investments 34,017 500 20,490 Securities and investments (12,963) (13,905) Receivables: Customers (62,006) (49,358) (80,712) Stock borrowed (88,852) (28,016) 16,106 Brokers, dealers and clearing organizations 24,829 (34,725) 17,588 Other (4,094) (10,243) 10,579 Trading and investment account securities, net (18,992) 50,260 (64,202) Deferred income taxes (209) (396) (2,690) Prepaid expenses and other assets (11,664) (2,689) 2,683 Increase (decrease) in liabilities: Payables: Customers 311,930 257,682 183,835 Stock loaned 62,811 14,118 20,226 Brokers, dealers and clearing organizations 39,386 (6,295) 7,870 Trade and other (514) 6,510 359 Accrued compensation 27,933 13,853 (2,706) Income taxes payable 4,234 258 (2,384) -------- -------- -------- Total adjustments 328,553 209,888 124,576 -------- -------- -------- Net cash provided by operating activities 394,531 256,029 166,645 -------- -------- -------- The accompanying Summary of Significant Accounting Policies and Notes to Consolidated Financial Statements are integral parts of these financial statements. F - 7
RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS (in thousands) (continued from preceding page) YEAR ENDED ------------------------------------------- SEPTEMBER 27, SEPTEMBER 29, SEPTEMBER 30, 1996 1995 1994 ------------- ------------- ------------- Cash flows from investing activities: Additions to property and equipment (10,093) (9,646) (14,677) Sales of property and equipment -- 990 627 Sales of securities 51,050 28,805 5,076 Purchases of securities (167,512) (92,926) (63,303) Purchases of held to maturity securities 0 (8,033) -- Security maturations and repayments 42,213 23,157 -- --------- --------- --------- Net cash used in investing activities (84,342) (57,653) (72,277) --------- --------- --------- Cash flows from financing activities: Repayments on mortgage note (2,686) (159) (144) Borrowings from banks 11,990 2,510 Exercise of stock options and employee stock purchases 3,676 3,142 2,958 Purchase of treasury stock (367) (3,296) (16,604) Cash dividends on common stock (7,911) (7,392) (6,733) Sale of stock options -- -- 202 Cash paid for fractional shares -- -- (5) --------- --------- --------- Net cash provided by (used in) financing activities 4,702 (5,195) (20,326) --------- --------- --------- Net increase in cash and cash equivalents 314,891 193,181 74,042 Cash and cash equivalents at beginning of year 420,379 227,198 153,156 --------- --------- --------- Cash and cash equivalents at end of year $ 735,270 $ 420,379 $ 227,198 ========= ========= ========= Supplemental disclosures of cash flow information: Cash paid for interest $ 88,599 $ 57,834 $ 36,663 ========= ========= ========= Cash paid for taxes $ 41,371 $ 29,216 $ 30,033 ========= ========= =========
The accompanying Summary of Significant Accounting Policies and Notes to Consolidated Financial Statements are integral parts of these financial statements. F - 8 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Raymond James Financial, Inc. is a holding company which, through its subsidiaries, is engaged principally in the securities brokerage business, including the underwriting, distribution, trading and brokerage of equity and debt securities and the sale of mutual funds and other investment products. In addition, it provides investment management services for retail and institutional customers and banking services for retail customers. The accounting and reporting policies of Raymond James Financial, Inc. and its subsidiaries (the "Company") conform to generally accepted accounting principles, the more significant of which are summarized below: BASIS OF CONSOLIDATION The consolidated financial statements include the accounts of Raymond James Financial, Inc. and its subsidiaries. All material intercompany balances and transactions have been eliminated in consolidation. The consolidated subsidiaries at September 27, 1996 are as follows: Raymond James & Associates, Inc. RJ Government Securities, Inc. Investment Management & Research, Inc. RJ Health Properties, Inc. Robert Thomas Securities, Inc. RJ Leasing, Inc. Eagle Asset Management, Inc. RJ Leasing - 2, Inc. Heritage Asset Management, Inc. RJ Medical Investors, Inc. Raymond James Trust Company RJ Mortgage Acceptance Corporation Raymond James Bank, FSB RJ Partners, Inc. Sound Trust Company RJ Realty, Inc. Planning Corporation of America RJ Specialist, Inc. RJ Properties, Inc. RJ Washington Square Gateway Assignor Corporation, Inc. Raymond James Credit Corporation, Inc. Heritage International, Ltd. Raymond James International Raymond James International, Ltd. Holdings, Inc. PCAF, Inc. Raymond James Mortgage Capital, RJA Municipal ABS, Inc. Inc. RJ Communication, Inc. Raymond James Partners, Inc. RJ Credit Partners, Inc. Raymond James Realty Advisors, Inc. RJ Equities, Inc. Value Partners, Inc. RJ Equities - 2, Inc. All consolidated subsidiaries are 100% owned by the Company except for RJ Properties, Inc., which is 85% owned. REPORTING PERIOD The Company's fiscal year ends on the last Friday in September of each year. RECOGNITION OF REVENUES Securities transactions and related commission revenues and expenses are recorded on a trade date basis for fiscal years 1996 and 1995 and on a settlement date basis for fiscal year 1994, which was not materially different from trade date. F - 9 Revenues from limited partnerships and investment banking are recorded at the time the transaction is completed and the related income is reasonably determinable. Investment banking revenues include sales credits earned in connection with the distribution of the underwritten securities. The Company earns an advisory fee based on a client's portfolio value on portfolios managed by its investment advisory subsidiaries. These fees are recorded under the accrual method. In addition, on certain portfolios, the Company earns performance fees which are recorded when earned. MANAGEMENT ESTIMATES AND ASSUMPTIONS The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. CASH AND CASH EQUIVALENTS The Company considers all highly liquid investments with an initial maturity of three months or less to be cash equivalents for purposes of the consolidated statement of cash flows. These consist primarily of U.S. Treasury securities and are stated at cost, which approximates market at fiscal yearend. It is the Company's policy to obtain possession and control of securities purchased under resale agreements. The net fair value of securities purchased under resale agreements approximates their carrying value, as such financial instruments are predominantly short-term in nature. The Company monitors the risk of loss by assessing the market value of the underlying securities as compared to the related receivable or payable, including accrued interest, and requests additional collateral where deemed appropriate. At September 27, 1996, there were no agreements with any individual counterparties where the risk of loss exceeded 10% of shareholders' equity. SHORT-TERM INVESTMENTS Short-term investments segregated pursuant to Federal Regulations are stated at market. SECURITIES OWNED The Company adopted Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities" ("FAS 115"), as of October 1, 1994. FAS 115 requires investments in debt and equity securities to be classified as either "held to maturity," "trading," or "available for sale." The accounting treatment for unrealized gains and losses on those securities is then determined by the classification chosen. The trading and investment account securities held by the brokerage F - 10 subsidiaries are classified as trading. Investment account securities not readily marketable are carried at estimated fair value as determined by management with unrealized gains and losses included in earnings. Trading securities are carried at market value with realized and unrealized gains and losses included in earnings. Securities available for sale are carried at fair value, with unrealized gains and losses reported as a separate component of shareholders' equity, net of deferred taxes, and realized gains and losses, determined on a specific identification basis, included in earnings. Securities classified as held to maturity are carried at amortized cost and adjusted for premium amortization or discount accretion with realized gains and losses included in earnings. At September 29, 1995, Raymond James Bank, FSB, held one FHLMC mortgage-backed security in its held to maturity portfolio with an amortized cost of $2,800,000 and an estimated market value of $2,865,000, and the parent company held U.S. Treasury Notes and municipal bonds with an amortized cost of $8,410,000 and an estimated market value of $8,475,000. U.S. Treasury Notes with an amortized cost of $3,003,000 matured within the year. In November, 1995 the Company took advantage of a one-time opportunity and reclassified all securities classified as held to maturity to available for sale. At September 27, 1996, the Company had no securities classified as held to maturity. For fiscal year 1994, trading and investment account securities are recorded at market value with unrealized appreciation or depreciation reflected in income currently. Other short-term investments are stated at amortized cost, which approximates market value at fiscal yearend. PROPERTY AND EQUIPMENT Property, equipment and leasehold improvements are stated at cost less accumulated depreciation. Depreciation of assets is provided principally using the straight-line method for financial reporting purposes over the estimated useful lives of the assets, which range from two to seven years for furniture and equipment and fifteen to thirty-one years for buildings and land improvements. Leasehold improvements are amortized using the straight-line method over the shorter of the lease term or the estimated useful lives of the assets. For income tax purposes, assets are depreciated using accelerated methods. Additions, improvements and expenditures for repairs and maintenance that significantly extend the useful life of an asset are capitalized. Other expenditures for repairs and maintenance are charged to operations in the period incurred. Gains and losses on disposals of fixed assets are reflected in income in the period incurred. GOODWILL Goodwill is stated at cost less accumulated amortization. Amortization of goodwill is provided using the straight-line method for financial reporting purposes over three to ten years. Goodwill is reflected in prepaid expenses and other assets. F - 11 CORRESPONDENT CLEARING Under clearing agreements, the Company clears trades for unaffiliated correspondent brokers and retains a portion of commissions as a fee for its services. The Company records clearing charges net of commissions remitted. Total commissions generated by correspondents were $18,742,000, $16,155,000 and $17,232,000, and commissions remitted totaled $14,757,000, $12,434,000 and $13,366,000 for the years ended September 27, 1996, September 29, 1995 and September 30, 1994, respectively. INCOME TAXES The Company utilizes the asset and liability approach defined in Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("FAS 109"). FAS 109 requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial statement amounts and the tax bases of assets and liabilities. NET INCOME PER SHARE Earnings per share are computed using weighted average common stock and common stock equivalents outstanding. Common stock equivalents include shares issuable under stock options and are determined under the treasury stock method. All per share amounts have been restated to give retroactive effect to the common stock dividend on November 15, 1993. RECLASSIFICATIONS Certain amounts from prior years have been reclassified for consistency with current year presentation. These reclassifications were not material to the consolidated financial statements. F - 12 RAYMOND JAMES FINANCIAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - RECEIVABLES FROM AND PAYABLES TO CUSTOMERS: Receivables from and payables to customers include amounts arising from normal cash and margin transactions. Securities owned by brokerage customers are held as collateral for receivables. Such collateral is not reflected in the accompanying consolidated financial statements. The amount receivable from customers is shown net of an allowance for doubtful accounts of approximately $1,204,000 and $1,177,000 as of September 27, 1996 and September 29, 1995, respectively. The Company pays interest at varying rates for qualifying customer funds on deposit awaiting reinvestment. Such funds on deposit totaled $755,281,000 and $571,628,000 at September 27, 1996 and September 29, 1995, respectively. Other funds on deposit on which the Company does not pay interest totaled $130,547,000 and $101,160,000 at September 27, 1996 and September 29, 1995, respectively. Unsecured receivables, other than affiliated company amounts which are eliminated in consolidation, are not significant. NOTE 2 - TRADING AND INVESTMENT ACCOUNT SECURITIES (IN THOUSANDS): SEPTEMBER 27, 1996 SEPTEMBER 29, 1995 ------------------------ ------------------------ SECURITIES SECURITIES SOLD BUT SOLD BUT SECURITIES NOT YET SECURITIES NOT YET OWNED PURCHASED OWNED PURCHASED ---------- ---------- ----------- ---------- Marketable: Stocks and warrants $ 12,341 $11,177 $ 14,348 $ 10,897 Municipal obligations 72,881 454 20,366 979 Corporate obligations 7,894 1,536 11,346 434 Government obligations 26,086 44,031 15,611 5,067 Other 4,904 12 11,229 - Non-marketable 147 - 1,915 - ------- ------- -------- -------- $124,253 $57,210 $ 74,815 $ 17,377 ======== ======= ======== ======== NOTE 3 - AVAILABLE FOR SALE SECURITIES (IN THOUSANDS): The amortized cost and estimated market values of securities available for sale at September 27, 1996 are as follows: GROSS GROSS ESTIMATED AMORTIZED UNREALIZED UNREALIZED MARKET COST GAINS LOSSES VALUE --------- ---------- ---------- ------------ Mortgage-backed securities: FNMA $ 75,014 $ 194 $ (433) $ 74,775 FHLMC 95,076 206 (246) 95,036 GNMA 29,053 - (949) 28,104 U.S. Treasury Securities 11,047 24 (98) 10,973 Stocks 5 4 - 9 -------- -------- ------ -------- $210,195 $ 428 $(1,726) $208,897 ======== ======== ======== ======== F - 13 The amortized cost and estimated market values of securities available for sale at September 29, 1995 are as follows: GROSS GROSS ESTIMATED AMORTIZED UNREALIZED UNREALIZED MARKET COST GAINS LOSSES VALUE --------- ---------- ---------- --------- Mortgage-backed securities: FNMA $ 38,912 $182 $ (10) $ 39,084 FHLMC 44,837 157 (85) 44,909 GNMA 15,183 42 (31) 15,194 CMO 771 - (2) 769 U.S. Treasury securities 10,013 57 (5) 10,065 U.S. government agency obligations 4,988 - (68) 4,920 -------- ---- ----- -------- $114,704 $438 $(201) $114,941 ======== ==== ===== ======== The U.S. Treasury securities and U.S. government agency obligations mature after one year and within 5 years. NOTE 4 - LEVERAGED LEASES (IN THOUSANDS): On September 24, 1993, the Company became the lessor in their first leveraged commercial aircraft transaction with a major domestic airline. On June 27, 1996, the Company entered into their second such transaction. The Company's combined equity investments represented 21% of the aggregate purchase prices; the remaining 79% was funded by public debt issues in the form of equipment trust certificates. The residual values of the aircrafts at the end of an average lease term of 20 years is projected to be an average of 10% of the original cost. SEPTEMBER 27, SEPTEMBER 29, 1996 1995 ------------- ------------- Rents receivable (net of principal and interest on the non-recourse debt) $ 21,056 $ 9,793 Unguaranteed residual values 10,719 2,026 Unearned income (11,457) (1,238) -------- -------- Investment in leveraged leases 20,318 10,581 Deferred taxes arising from leveraged leases (13,414) (8,617) -------- -------- Net investment in leveraged leases $ 6,904 $ 1,964 ======== ======== NOTE 5 - PROPERTY AND EQUIPMENT (IN THOUSANDS): SEPTEMBER 27, SEPTEMBER 29, 1996 1995 ------------- ------------- Land $ 6,287 $ 6,287 Buildings and improvements 26,626 26,643 Furniture, fixtures, equipment and leasehold improvements 63,280 53,946 ------- ------- 96,193 86,876 Less: accumulated depreciation and amortization (56,608) (45,930) ------- ------- $39,585 $40,946 ======= ======= F - 14 NOTE 6 - BORROWINGS: The mortgage note payable requires monthly principal and interest payments of approximately $120,000 with a balloon payment due December 1, 1997. The mortgage bears interest at 9.75% and is secured by land, buildings and improvements with a net book value of $9,595,570 at September 27, 1996. Principal maturities under this mortgage note payable for the succeeding five fiscal years are as follows: 1997 - $193,000; 1998 - $12,716,000; 1999 and beyond - $0. The Company currently has two $50 million committed lines of credit with commercial banks. Borrowings under the lines of credit bear interest at various rates (Fed Funds plus 2%, the lesser of prime rate or Fed Funds plus 1/2%, or LIBOR plus 3/4%). One of these lines of credit requires that the Company maintain certain net worth levels, limit other leases and debt and requires the Company to follow certain other sound business practices. The Company paid $64,000 and $100,000 in loan commitment fees during fiscal years 1996 and 1995, respectively. There were borrowings of $11,989,000 at September 27, 1996 at 6.2% on one of the lines of credit. All borrowings on this line of credit were collateralized by customer securities with a maximum loan to value of fifty percent. The interest rate on these borrowings was the one-month LIBOR rate plus .75%, and ranged from 6.1% to 6.8% during 1996. At September 29, 1995, there were borrowings of $2,510,000 at 8.2%, collateralized by mortgage loans with a fair value of $7,376,000, outstanding on a separate $50 million line of credit for the mortgage companies which was terminated during fiscal 1996. During 1996, there were maximum borrowings of $2,510,000 on this line of credit, collateralized by mortgage loans. The interest rate on these borrowings was Fed Funds plus 2% and ranged 7.6% to 8.3% in 1996 and from 7.5% to 8.2% during 1995. The Company also maintains uncommitted lines of credit aggregating $255,000,000 with commercial banks ($200,000,000 secured and $55,000,000 unsecured). Borrowings under the lines of credit bear interest, at the Company's option, at the bank's prime rate, Fed Funds rate plus 1 1/4%, or LIBOR plus 3/4%. There were no short-term borrowings outstanding at September 27, 1996 or September 29, 1995. The interest rate on these borrowings ranged from 5.64% to 6.50% in 1996 and 5.08% to 7.00% in 1995. Loans on the secured, uncommitted lines of credit are collateralized by firm or customer margin securities. NOTE 7 - BANK OPERATIONS AND DEPOSITS: On May 6, 1994, the Company chartered Raymond James Bank, FSB, ("RJ Bank") in conjunction with the purchase of the deposits of certain branches of a federal savings bank from the Resolution Trust Corporation ("RTC") for a nominal purchase price. The Company contributed $25 million in capital to fund the bank's start-up. F - 15 A summary of customer deposit accounts (in thousands) and weighted average interest rates follows: SEPTEMBER 27, 1996 SEPTEMBER 29, 1995 ----------------------- ----------------------- WEIGHTED WEIGHTED BALANCE AVERAGE RATE BALANCE AVERAGE RATE -------- ------------ -------- ------------ Demand deposits: Non-interest bearing $ 161 - $ 56 - Interest bearing 1,056 2.33% 525 2.95% Money market accounts 1,256 3.58% 235 3.49% Savings accounts 155,131 4.63% 89,998 4.95% Certificates of deposit 42,892 5.43% 10,874 5.59% -------- -------- (3.00% - 9.00%) $200,496 4.78% $101,688 5.00% ======== ======== The certificates of deposit at September 27, 1996 mature as follows: $32,370,000 in 1997, $5,885,000 in 1998, $2,034,000 in 1999, $1,071,000 in 2000 and $1,532,000 in 2001. Certificates of deposit and savings accounts in amounts of $100,000 or more at September 27, 1996 and September 29, 1995 were approximately $43,834,000 and $22,558,000, respectively. A summary of loan distribution (in thousands) is as follows: SEPTEMBER 27, SEPTEMBER 29, 1996 1995 ------------- ------------- Residential mortgage loans $6,365 $10 Consumer loans 20 30 ------ --- 6,385 40 Allowance for loan losses (64) - Purchase premium 40 - ------ --- $6,361 $40 ====== === Activity in the allowance for loan losses for 1996 consists solely of the provision for loan losses. There were no loan losses in 1996 or 1995. Generally, mortgage loans are secured by either first or second mortgages on residential property, and consumer loans are secured by time deposit accounts. As of September 27, 1996 and September 29, 1995, all of RJ Bank's loan portfolio was secured. RJ Bank is subject to various regulatory and capital requirements and was in compliance with all requirements throughout the fiscal year. F - 16 Pursuant to the Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA"), RJ Bank is subject to rules limiting brokered deposits and related interest rates. Under these rules, banks that are deemed "well-capitalized" may accept brokered deposits without restriction, and banks deemed "adequately capitalized" may do so with a waiver from the FDIC. An "undercapitalized" bank is not eligible for a waiver and may not accept brokered deposits. At September 27, 1996, management believes RJ Bank met the definition of the well-capitalized category. At September 27, 1996, RJ Bank exceeded the tangible capital, core capital, core/leverage capital, tier 1/risk-based capital and total risk-based capital levels mandated by the Financial Institutions Reform, Recovery and Enforcement Act of 1989 and FDICIA. As part of the purchase of deposits from the RTC, RJ Bank was required to maintain a tier 1 capital ratio of at least 10% for its first three years of operations. This requirement was subsequently reduced to 6%. At September 27, 1996, RJ Bank's tier 1 capital to average assets ratio was 13.8%. NOTE 8 - FEDERAL AND STATE INCOME TAXES (IN THOUSANDS): The provision (benefit) for income taxes consists of: YEAR ENDED ------------------------------------------- SEPTEMBER 27, SEPTEMBER 29, SEPTEMBER 30, 1996 1995 1994 ------------- ------------- ------------- Current provision: Federal $35,473 $24,790 $23,975 State 6,730 4,000 3,762 ------- ------- ------- 42,203 28,790 27,737 ------- ------- ------- Deferred provision (benefit): Federal 383 (425) (2,277) State (39) (47) (312) ------- ------- ------- 344 (472) (2,589) ------- ------- ------- $42,547 $28,318 $25,148 ======= ======= ======= The Company's effective tax rate on pre-tax income differs from the statutory federal income tax rate due to the following: YEAR ENDED ------------------------------------------- SEPTEMBER 27, SEPTEMBER 29, SEPTEMBER 30, 1996 1995 1994 ------------- ------------- ------------- Provision calculated at statutory rates $38,034 $26,061 $23,526 State income taxes, net of federal benefit 4,349 2,570 2,243 Other 164 (313) (621) ------- ------- ------- $42,547 $28,318 $25,148 ======= ======= ======= F - 17 The major deferred tax asset (liability) items, as computed under FAS 109, are as follows: SEPTEMBER 27, SEPTEMBER 29, 1996 1995 ------------- ------------- Deferred tax assets: Deferred compensation $18,658 $ 15,728 Accrued expenses 13,259 13,501 Other 5,625 3,558 -------- -------- Total deferred tax assets 37,542 32,787 -------- -------- Deferred tax liabilities: Aircraft leases (13,416) (8,617) Other, net (2,937) (3,190) -------- -------- Total deferred tax liabilities (16,353) (11,807) -------- -------- Net deferred tax assets $ 21,189 $ 20,980 ======== ======== NOTE 9 - COMMITMENTS AND CONTINGENCIES: Long-term lease agreements expire at various times from 1997 through 2002. Minimum annual rentals under such agreements for the succeeding five fiscal years are approximately: $6,064,000 in 1997, $4,581,000 in 1998, $3,405,000 in 1999, $3,112,000 in 2000, and $2,712,000 in 2001. Rental expense incurred under all leases, including equipment under short-term agreements, aggregated $7,589,000, $5,481,000, and $5,435,000 in 1996, 1995 and 1994, respectively. At September 27, 1996, the Company had committed to lend to, or guarantee other debt for, Gateway Tax Credit Funds ("Gateway") up to $6 million upon request. Subsequent to yearend, the amount was increased to $10 million. Any borrowings bear interest at broker call plus 1% per annum. Gateway is charged 1% for amounts guaranteed. The borrowings are secured by properties under development. At September 27, 1996, balances of $1,892,000 were guaranteed. The commitment expires in November 1997, at which time any outstanding balances would be due and payable. In the normal course of business, the Company enters into underwriting commitments. Transactions relating to such commitments that were open at September 27, 1996 and were subsequently settled had no material effect on the consolidated financial statements as of that date. At September 27, 1996, the Company had a letter of credit outstanding of $100,000 and excess customer margin securities valued at $20,599,000 on deposit with a clearing organization, which are used to satisfy margin deposit requirements. In the normal course of business, the Company, as general partner, is contingently liable for the obligations of various limited partnerships engaged primarily in securities investments and real estate activities. In the opinion of the Company, such liabilities, if any, for the obligations of the partnerships will not in the aggregate have a material adverse effect on the Company's consolidated financial position. F - 18 The Company is a defendant or co-defendant in various lawsuits incidental to its securities business. The Company is contesting the allegations of the complaints in these cases and believes that there are meritorious defenses in each of these lawsuits. In view of the number and diversity of claims against the Company, the number of jurisdictions in which litigation is pending and the inherent difficulty of predicting the outcome of litigation and other claims, the Company cannot state with certainty what the eventual outcome of pending litigation or other claims will be. In the opinion of management, based on discussions with counsel, the outcome of the matters will not result in a material adverse effect on the financial position or results of operations of the Company. NOTE 10 - CAPITAL TRANSACTIONS: The Company's Board of Directors has, from time to time, adopted resolutions authorizing the Company to repurchase its common stock for the funding of its incentive stock option and stock purchase plans and other corporate purposes. On May 12, 1994, the Board of Directors authorized the repurchase of 1,000,000 shares of common stock, and on February 17, 1995, the Board of Directors authorized the purchase of an additional 386,000 shares of common stock, bringing the cummulative total authorized to 5,745,000. Of these, 4,764,000 shares have been purchased through September 27, 1996. NOTE 11 - EMPLOYEE BENEFIT PLANS: The Company's profit sharing plan and employee stock ownership plan provide certain death, disability or retirement benefits for all employees who meet certain service requirements. Such benefits become fully vested after seven years of qualified service. The Company also offers a plan pursuant to section 401(k) of the Internal Revenue Code which, effective January 1, 1994, provides for the Company to match 100% of the first $500 and 50% of the next $500 of compensation deferred by each participant annually. The Company's deferred management bonus plan is a non-qualified plan that provides retirement benefits for employees who meet certain length of service and compensation requirements. Contributions to these plans are made in amounts approved annually by the Board of Directors. Compensation expense includes aggregate contributions to these plans of $12,527,000, $8,530,000, and $7,257,000 for 1996, 1995 and 1994, respectively. The employee stock purchase plan allows employees to purchase shares of the Company's common stock on four specified dates throughout the year at a 15% discount from market value, subject to certain limitations. On September 30, 1982, the Board of Directors of the Company adopted an Incentive Stock Option Plan ("1982 Plan"), which covered an aggregate of 1,900,125 shares of common stock. On August 20, 1992, the Board of Directors adopted the 1992 Incentive Stock Option Plan which covers an aggregate of 1,050,000 shares of common stock. The Plan was established to replace, on substantially the same terms and conditions, the 1982 Plan. Options are granted to registered representatives of Raymond James & Associates, Inc. who achieve certain gross commission levels and to key administrative employees of the Company. The options are granted at fair market value. No compensation expense was recognized with respect to these options. Options F - 19 are exercisable in the 36th to 72nd months following the date of grant and only in the event that the grantee is an employee of the Company at that time. On December 13, 1985, the Company's Board of Directors adopted a non-qualified stock option plan which currently covers 1,013,000 shares of common stock for the benefit of independent contractor registered representatives of the Company. Options are exercisable five years after grant date provided that the representative is still associated with the Company. The directors who are also employees of the Company adopted a non-qualified stock option plan on December 13, 1990 under which the Company's outside directors have been granted options covering 66,560 shares of the Company's common stock. Options vest over a five year period from grant date provided that the director is still associated with the Company. The following table summarizes the option activity under these programs for the three years ended September 27, 1996: SHARES UNDER OPTION PRICE OPTION RANGE ------------ ------------ Outstanding at September 24, 1993 1,081,314 $ 2.74 to $18.75 Granted 208,999 16.36 to 16.63 Canceled (31,787) 4.21 to 14.83 Exercised (127,475) 2.74 to 5.00 --------- Outstanding at September 30, 1994 1,131,051 3.00 to 16.63 Granted 109,625 13.75 to 21.75 Canceled (66,771) 4.74 to 18.08 Exercised (247,064) 3.25 to 14.67 ---------- Outstanding at September 29, 1995 926,841 3.00 to 21.75 Granted 340,700 19.38 to 23.13 Canceled (23,428) 5.00 to 22.13 Exercised (192,516) 3.00 to 18.08 ---------- Outstanding at September 27, 1996 1,051,597 $11.22 to $23.13 NOTE 12 - NET CAPITAL REQUIREMENTS: The broker-dealer subsidiaries of the Company are subject to the requirements of the Uniform Net Capital Rule (Rule 15c3-1) under the Securities Exchange Act of 1934 and the rules of the securities exchanges of which Raymond James & Associates, Inc. is a member, whose requirements are substantially the same. This rule requires that aggregate indebtedness, as defined, not exceed fifteen times net capital, as defined. Rule 15c3-1 also provides for an "alternative net capital requirement" which, if elected, requires that net capital be equal to the greater of $250,000 or two percent of aggregate debit items computed in applying the formula for determination of reserve requirements (see Note 13). The New York Stock Exchange may require a member organization to reduce its business if its net capital is less F - 20 than four percent of aggregate debit items and may prohibit a member firm from expanding its business and declaring cash dividends if its net capital is less than five percent of aggregate debit items. Net capital positions of the Company's broker-dealer subsidiaries were as follows: SEPTEMBER 27, SEPTEMBER 29, 1996 1995 -------------- ------------- RAYMOND JAMES & ASSOCIATES, INC.: (dollar amounts in thousands) (alternative method elected) Net capital as a percent of aggregate debit items 26.00% 23.00% Net capital $127,302 $97,955 Required net capital 9,703 8,594 -------- ------- Excess net capital $117,599 $89,361 ======== ======= INVESTMENT MANAGEMENT & RESEARCH, INC.: Ratio of aggregate indebtedness to net capital 1.28 2.14 Net capital $ 5,261 $ 2,877 Required net capital 449 410 -------- ------- Excess net capital $ 4,812 $ 2,467 ======== ======= ROBERT THOMAS SECURITIES, INC.: Ratio of aggregate indebtedness to net capital 5.99 4.95 Net capital $ 1,213 $ 1,217 Required net capital 484 402 -------- ------- Excess net capital $ 729 $ 815 ======== ======= NOTE 13 - RESERVE REQUIREMENTS: Rule 15c3-3 of the Securities Exchange Act of 1934 specifies certain conditions under which brokers and dealers carrying customer accounts are required to maintain cash or qualified securities in a special reserve account for the exclusive benefit of customers. Amounts to be maintained, if required, are computed in accordance with a formula defined in the Rule. At September 27, 1996, Raymond James & Associates, Inc. had $477,064,000 in special reserve accounts which consisted of $476,945,000 of securities purchased under agreements to resell and $119,000 in cash as compared to a reserve requirement of $474,430,000 at that date. At September 29, 1995, this subsidiary had $367,979,000 in special reserve accounts which consisted of $330,804,000 of securities purchased under agreements to resell, $34,017,000 in U.S. Treasury Notes and $3,158,000 in cash as compared to a reserve requirement of $321,377,000 at that date. At September 27, 1996, and September 29, 1995, all such repurchase agreements were on an overnight basis with Cantor Fitzgerald Partners, Eastbridge Capital, Inc., BT Securities Corporation and First Union Capital Markets Corp. The Company monitors the market value of the underlying securities as compared to the related receivable, including accrued interest, and requires additional collateral where deemed appropriate. Investment Management & Research, Inc. and Robert Thomas Securities, Inc. are exempt from the provisions of Rule 15c3-3, since they clear all transactions with and for customers on a fully disclosed basis with Raymond James & Associates, Inc. F - 22 NOTE 14 - FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK: In the normal course of business, the Company purchases and sells securities and commodities as either principal or agent on behalf of its customers. If either the customer or a counterparty fails to perform, the Company may be required to discharge the obligations of the nonperforming party. In such circumstances, the Company may sustain a loss if the market value of the security or futures contract is different from the contract value of the transaction. The Company also acts as an intermediary between broker-dealers and other financial institutions whereby the Company borrows securities from one broker-dealer and then lends them to another. Securities borrowed and securities loaned are carried at the amount of cash collateral advanced and received in connection with the transactions. The Company measures the market value of the securities borrowed and loaned against the cash collateral on a daily basis. The market value of securities borrowed and securities loaned was $816,362,000 and $798,968,000, respectively, at September 27, 1996 and $772,101,000 and $784,767,000, respectively, at September 29, 1995. Additional cash is obtained as necessary to ensure such transactions are adequately collateralized. If another party to the transaction fails to perform as agreed (such as failure to deliver a security or failure to pay for a security), the Company may incur a loss if the market value of the security is different from the contract amount of the transaction. The Company has also loaned, to brokers and dealers, securities owned by customers and others for which it has received cash or other collateral. If a borrowing institution or broker-dealer does not return a security, the Company may be obligated to purchase the security in order to return it to the owner. In such circumstances, the Company may incur a loss equal to the amount by which the market value of the security on the date of nonperformance exceeds the value of the loan from the institution or the collateral from the broker or dealer. The Company has sold securities that it does not currently own and will, therefore, be obligated to purchase such securities at a future date. The Company has recorded $57,210,000 and $17,377,000 at September 27, 1996 and September 29, 1995, respectively, which represents the market value of the related securities at such dates. The Company is subject to loss if the market price of those securities not covered by a hedged position increases subsequent to September 27, 1996. The Company utilizes short government obligations and equity securities to hedge long proprietary inventory positions. At September 27, 1996, the Company had $31,203,000 in short government obligations and $512,000 in short equity securities which represented hedge positions. At September 29, 1995, the Company had $7,712,000 in short government obligations and $3,844,000 in short equity securities which represented hedge positions. The Company enters into security transactions involving forward settlement. Transactions involving future settlement give rise to market risk, which represents the potential loss that can be caused by a change in the market value of a particular financial instrument. The Company's exposure to market risk is determined by a number of factors, including the size, composition and diversification of positions held, the absolute and relative levels of interest rates, and market volatility. F - 22 The majority of the Company's transactions and, consequently, the concentration of its credit exposure is with customers, broker-dealers and other financial institutions in the United States. These activities primarily involve collateralized arrangements and may result in credit exposure in the event that the counterparty fails to meet its contractual obligations. The Company's exposure to credit risk can be directly impacted by volatile securities markets which may impair the ability of counterparties to satisfy their contractual obligations. The Company seeks to control its credit risk through a variety of reporting and control procedures, including establishing credit limits based upon a review of the counterparties' financial condition and credit ratings. The Company monitors collateral levels on a daily basis for compliance with regulatory and internal guidelines and requests changes in collateral levels as appropriate. NOTE 15 - RELATED PARTIES: On October 27, 1994, the Company and the then President and Chief Investment Officer of its Eagle Asset Management, Inc. ("Eagle") subsidiary, Herbert E. Ehlers ("Ehlers"), entered into a Separation Agreement by which Ehlers (a director of the Company) and certain other Eagle personnel became employees of a new firm, Liberty Investment Management, Inc. ("Liberty"), effective December 31, 1994. Ehlers began operating Liberty as of January 1, 1995, and he remained a dual employee of Eagle and Liberty through June 1995, continuing as investment manager on certain retail accounts until they were assigned to other portfolio managers. As of January 1, 1995, Liberty assumed the responsibility for providing investment management services to institutional growth equity accounts totaling $4.3 billion formerly managed by Eagle. In accordance with Ehlers' employment agreement, Eagle received 50% of the revenues from these accounts, while bearing none of the expenses. In addition, the Company was granted an option to purchase 20% of Liberty in the year 2000 at a predetermined price. For the years ended September 27, 1996 and September 29, 1995, Eagle recognized $9,813,000 and $7,233,000, respectively, in fees from Liberty, which are included in investment advisory fees in the consolidated statement of income. At September 29, 1996 and September 29, 1995, $5,004,000 and $4,921,000 due from Liberty is included in other receivables on the consolidated statement of financial condition. Subsequent to year end, Liberty entered into an agreement to sell substantially all of its assets to Goldman Sachs Asset Management. Accordingly, the Company, Eagle, Ehlers and Liberty reached an agreement in principle whereby the Company will receive a lump sum settlement for its remaining three years' interest in Liberty's revenue stream and the Company's option to purchase 20% of Liberty at a future date. Upon closing, the Company will receive up to $30 million pretax income as its settlement amount. The amount and timing of the payments to the Company from Liberty are contingent upon the occurrence of several events prior to or shortly after the scheduled closing date of January, 1997. Eagle will continue to receive 50% of fee revenues until the closing. F - 23 EX-3.1 2 EXHIBIT 3.1 STATE OF FLORIDA DEPARTMENT OF STATE [SEAL] I, RICHARD (DICK) STONE, Secretary of State of the State of Florida, do hereby certify that the following is a true and correct copy of CERTIFICATE OF INCORPORATION OF R J FINANCIAL CORP. a corporation organized and existing under the Laws of the State of Florida, filed on the 24th day of January A.D., 1974 as shown by the records of this office. [SEAL] GIVEN under my hand and the Great Seal of the State of Florida, at Tallahassee, the Capital, this the 25th day of January A.D., 1974 /s/ RICHARD (DICK) STONE ----------------------------- SECRETARY OF STATE ARTICLES OF INCORPORATION OF R J FINANCIAL CORP. The undersigned natural persons of the age of twenty-one or more, acting as incorporators under the provisions of Florida Statutes, Chapter 608, adopt the following Articles of Incorporation; ARTICLE I NAME The name of this corporation shall be: R J FINANCIAL CORP. ARTICLE II TERM OF EXISTENCE The duration of this corporation is to be perpetual. ARTICLE III PURPOSES The principal purposes of the corporation shall be: To engage in and carry on a general securities brokerage and financial business. To underwrite, subscribe for, buy, sell, pledge, mortgage, hold and otherwise deal in stocks, bonds, obligations X - 2 or securities of any private or public corporation, government or municipality, trusts, syndicates, partnerships or individuals and to do any other act or thing permitted by law for the preservation, protection, improvement or enhancement of the value of such shares of stock, bonds, securities or other obligations including the right to vote thereon. To undertake and carry on any business transaction or operation commonly carried on or undertaken by capitalists, promoters, financiers, contractors, merchants, commission men or agents. To promote or assist financially or otherwise, corporations, syndicates, partnerships, individuals or associations of all kinds and to give any guarantee in connection therewith for the payment of money or for the performance of any obligation or undertaking. To deal in shares, stocks, bonds, notes, debentures, or other evidence of indebtedness or securities of any domestic or foreign corporations, or mutual investment companies, either as principal, or as agent or broker, or otherwise. To acquire by lease, purchase, gift, devise, contract, concession, or otherwise, and to hold, own, develop, explore, exploit, improve, operate, lease, enjoy, control, manage, or otherwise turn to account, mortgage, grant, sell, exchange, convey, or otherwise dispose of, wherever situated, within or without the State of Florida, any and all real estate, lands, options, concessions, X - 3 grants, land patents, franchises, rights, privileges, easements, tenements, estates, hereditaments, interests, and properties of every kind, nature and description whatsoever. To acquire, and to make payment therefor in cash or the stock or bonds of the corporation, or by undertaking or assuming the obligations and liabilities of the transferor, or in any other way, the good will, rights and property, the whole or any part of the assets, tangible or intangible, and to undertake or assume the liabilities of, any person, firm, association or corporation, to hold or in any manner dispose of the whole or any part of the property so purchased, to conduct in any lawful manner the whole or any part of the business so acquired and to exercise all of the powers necessary or convenient for the conduct and management thereof. To adopt, apply for, obtain, register, produce, take, purchase, exchange, lease, hire, acquire, secure, own, hold, use, operate, contract, or negotiate for, take licenses or other rights in respect of, sell, transfer, grant licenses and rights in respect of, manufacture under, introduce, sell, assign, collect the royalties on, mortgage, pledge, create liens upon, or otherwise dispose of, deal in, and turn to accounts letters patent, patents, patent rights, patents applied for or to be applied for, trade-marks, trade names and symbols, distinction marks and indications of origin or ownership, copyrights, X - 4 syndicate rights, inventions, discoveries, devices, machines, improvements, licenses, processes, data, and formulae of any and all kinds granted by, or recognized under or pursuant to laws of the United States of America, or of any other country or countries whatsoever and with a view to the working and development of the same, to carry on any business, whether manufacturing or otherwise, which the corporation may think calculated, directly or indirectly, to effectuate these objects. To manufacture, purchase, or otherwise acquire, hold, own, sell, assign, transfer, lease, exchange, invest in, mortgage, pledge, or otherwise encumber or dispose of and generally deal and trade in and with, both within and without the State of Florida, and in any part of the world, goods, wares, merchandise, and property of every kind, nature and description. To enter into, make and perform contracts of every kind and description with any person, firm, association or corporation, municipality, body politics, country, territory, state, government or colony or dependency thereof. To borrow or raise money for any of the purposes of the corporation, without limit as to amount, and in connection therewith to grant collateral or other security either alone or jointly with any other person, firm or corporation, and to make, execute, draw, accept, endorse, discount, pledge, issue, sell or otherwise dispose of promissory notes, drafts, bills of X - 5 exchange, warrants, bonds, debentures and other evidences of indebtedness, negotiable or non-negotiable, transferable or non-transferable, and to confer upon the holders of any of its obligations such powers, rights and privileges as from time to time may be deemed advisable by the Board of Directors, to the extent permitted under the General Corporation Law of the State of Florida; to lend and advance money, extend credit, take notes, open accounts and every kind and nature of evidence of indebtedness and collateral security in connection therewith. To purchase or otherwise acquire, hold, sell, pledge, transfer or otherwise dispose of shares of its own capital stock, provided that the funds or property of the corporation shall not be used for the purchase of its own shares of capital stock when such use would cause any impairment of the capital of the corporation and provided further, that shares of its own capital stock belonging to the corporation shall not be voted upon directly or indirectly. To have one or more offices, conduct and carry on its business and operations and promote its objects within and without the State of Florida, in other states, the District of Columbia, the territories, colonies and dependencies of the United States, and in foreign countries, without restriction as to place or amount, but subject to the laws of such state, district, territory, colony dependency or country. X - 6 To engage in any other business or businesses, whether related thereto or not, as may be approved by the Board of Directors and which businesses are permitted by law. In general to do any or all of the things herein set forth to the same extent as natural persons might or could do and in any part of the world, as principals, agents, contractors, trustees, or otherwise, within or without the State of Florida, either alone or in company with others, and to carry on any other business in connection therewith whether manufacturing or otherwise, and to do all things not forbidden, and with all the powers conferred upon corporations by the laws of the State of Florida. It is the intention that each of the objects, purposes and powers specified in each of the paragraphs of this third article of this Certificate of Incorporation shall, except where otherwise specified, be nowise limited or restricted by reference to or inference from the terms of any other paragraph or of any other article in this Certificate of Incorporation, but that the objects, purposes and powers specified in this article and in each of the articles or paragraphs of this Certificate shall be regarded as independent objects, purposes and powers, and the enumeration of specific purposes and powers shall not be construed to restrict in any manner the general terms and powers of this corporation, nor shall X - 7 the expression of one thing be deemed to exclude another, although it be of like nature. The enumeration of objects or purposes herein shall not be deemed to exclude or in any way limit by inference any powers, objects, or purposes which this corporation is empowered to exercise, whether expressly by force of the laws of the State of Florida, now or hereafter in effect, or impliedly by any reasonable construction of said law. ARTICLE IV STOCK CLAUSE The aggregate number of shares of stock which this corporation shall have authority to issue shall be 2,000,000 shares of Common Stock (each with a par value of $0.01 [one cents]). ARTICLE V MINIMUM, CAPITAL The amount of capital with which the corporation shall begin business shall not be less than $500.00. ARTICLE VI SUBSCRIBERS, INCORPORATORS & DIRECTORS The names and addresses of the Subscribers, Incorporators and Directors are: X - 8 NAME ADDRESS ---- ------- STEVEN C. KOEGLER 14006-79th Avenue North Seminole, Florida RICHARD 0. JACOBS 1742 Serpentine Drive South St. Petersburg, Florida H. ANNE THOMAS 5531-E 17th Way South St. Petersburg, Florida ARTICLE VII PRE-EMPTIVE RIGHTS No holder of any shares of stock of the corporation shall have any pre-emptive rights whatsoever to subscribe for or acquire additional shares of the corporation of any class, whether such shares shall be hereby or hereafter authorized; and no holder of shares shall have any right to subscribe to or acquire any shares which may be hold in the treasury of the corporation; nor shall any holder have a right to subscribe to or acquire any bonds, certificates of indebtedness, debentures or other securities convertible into stock, or carrying any right to purchase stock. All such additional or treasury shares or securities convertible into stock or carrying any right to purchase stock may be sold for such consideration, at such time, on such terms and to such person or persons, firms, corporations or associations as the Board of Directors may from time to time determine. Florida Statute 608.42(2), pre-emptive rights, shall not apply to this corporation. X - 9 ARTICLE VIII DIRECTORS A. NUMBER The business of the corporation shall be managed initially by a board of not less than three (3) directors. The number of directors may, as provided in the by-laws, be from time to time increased or decreased, but shall never be less than three (3) nor more than twelve (12). B. INTERESTED DIRECTORS No contract or other transaction between this corporation and any other corporation, whether or not a majority of the shares of the capital stock of such other corporation is owned by this corporation, and no act of this corporation, shall in any way be affected or invalidated by the fact that any of the directors of this corporation are pecuniarily or otherwise interested in, or are directors or officers of, such other corporation. Any director individually, or any firm of which such director may be a member, may be a party to, or may be pecuniarily or otherwise interested in, any contract or transaction of the corporation, provided that the fact that he or such firm is so interested shall be disclosed or shall have been known to the Board of Directors, or a majority thereof. Any director of this corporation who is also a director or officer of such other corporation, or who is so interested, X - 10 may be counted in determining the existence of a quorum at any meeting of the Board of Directors of this corporation that shall authorize such contract or transaction, and may vote thereat to authorize such contract or transaction, with like force and effect as if he were not such director or officer of such other corporation or not so interested. C. AUTHORITY TO MAKE LONG-TERM EMPLOYMENT CONTRACTS The Board of Directors may authorize the corporation to enter into employment contracts with any executive officer for periods longer than one year, and any charter or by-law provision for annual election shall be without prejudice to the contract rights, if any, of executive officer under such contracts. D. RELIANCE ON CORPORATION BOOKS Each officer, director, or member of any committee designated by the Board of Directors shall, in the performance of his duties, be fully protected in relying in good faith upon the books of account or reports made to the company by any of its officials or by an independent public accountant or by an appraiser selected with reasonable care by the Board of Directors or by any such committee or in relying in good faith upon other records of the company. ARTICLE IX INITIAL OFFICE AND REGISTERED AGENT The address of the initial office of corporation X - 11 is 6090 Central Avenue, St. Petersburg, Florida. The name of the initial registered agent of this corporation is RICHARD 0. JACOBS, 445 - 31st Street North, St. Petersburg, Florida. ARTICLE X AMENDMENTS The corporation reserves the right to amend, alter or repeal any provision contained in the Certificate of Incorporation in the manner now or hereafter prescribed by the statutes of Florida, and all rights and powers conferred on directors and stockholders herein are granted subject to this reservation. IN WITNESS WHEREOF, the undersigned, being the incorporators of this corporation, execute these Articles of Incorporation and certify to the truth of the facts herein stated, this 18th day of January, 1974. /s/ STEVEN C. KOEGLER ------------------------------- Steven C. Koegler /s/ RICHARD O. JACOBS -------------------------------- Richard O. Jacobs /s/ H. ANNE THOMAS -------------------------------- H. Anne Thomas STATE OF FLORIDA COUNTY OF PINELLAS Before me the undersigned officer duly authorized to administer oaths and take acknowledgments, personally appeared X - 12 STEVEN C. KOEGLER, RICHARD O. JACOBS and H. ANNE THOMAS, who, after being duly cautioned and sworn, depose and say that they have affixed their names to the foregoing Articles of Incorporation of R J FINANCIAL CORP. as the original subscribers to said corporation, for the purposes therein expressed. WITNESS my hand and official seal at St. Petersburg, Pinellas County, Florida, this 18th day of January, 1974. /s/ ILLEGIBLE ------------------------------- NOTARY PUBLIC My commission expires: NOTARY PUBLIC, STATE of FLORIDA at LARGE MY COMMISSION EXPIRES JULY 4, 1977 Bonded By American Bankers Insurance Co. X - 13 STATE OF FLORIDA DEPARTMENT OF STATE I, RICHARD (DICK) STONE, Secretary of State of the State of Florida, do hereby certify that the following is a true and correct copy of Certificate of Amendment to Certificate of Incorporation of R J FINANCIAL CORP., a corporation organized and existing under the Laws of the State of Florida, amending ARTICLE IV, filed on the 26th day of March, A. D., 1974 as shown by the records of this office. [SEAL] GIVEN UNDER MY HAND AND THE GREAT SEAL OF THE STATE OF FLORIDA, AT TALLAHASSEE, THE CAPITAL, THIS THE 27TH DAY OF MARCH, A.D., 1974. /s/ RICHARD (DICK) STONE ---------------------------------- SECRETARY OF STATE X - 14 AMENDMENT TO THE ARTICLES OF INCORPORATION OF R J FINANCIAL CORP. We, the undersigned, being all of the Directors (there being no President and Secretary) of R J FINANCIAL CORP., a corporation organized under the laws of the State of Florida and located in the City of St. Petersburg, hereby certify: 1. The name of the corporation is R J FINANCIAL CORP. 2. The Articles of Incorporation are amended by the following resolution adopted by the Board of Directors (there being no Shareholders): "RESOLVED, That the Articles of Incorporation shall be amended so that Article IV is eliminated and the following substituted for such Article IV: ARTICLE IV STOCK CLAUSE 1. SHARES AUTHORIZED. The aggregate number of shares of stock which this corporation shall have authority to issue shall be Two Million (2,000,000) shares of common stock (each with a par value of One Cents [$0.01]) and Two Hundred Thousand (200,000) shares of preferred stock, (each with a par value of Two Dollars [$2.00]). X - 15 2. PREFERRED STOCK. Except as limited elsewhere in this Article IV, the rights, preferences and privileges of the shares thereof shall be determined by the Board of Directors in the resolution or resolutions by which it authorizes the issuance of such stock. By way of illustration, and not by way of limitation, the Board of Directors shall have the power to decide on the following terms: (a). whether the shares of preferred stock shall be participating; (b). the dividend rate or rates, if any, on the shares of preferred stock and the relation which dividends of preferred stock shall bear to the dividends payable on any other class or classes or of any other series of any class or classes of capital stock of the corporation; (c). the terms and conditions upon which and the periods in respect to which any such dividends shall be payable; (d). whether and upon what conditions any dividends of preferred stock shall be cumulative and, if cumulative, the date or dates from which dividends shall accumulate; (e). whether the shares shall be limited in dividends, if any, or whether they shall participate in dividends over and above the dividend rate, if any, provided for the shares; (f). whether any such dividends shall be payable in cash in shares of such series, in shares of any other class or classes or of any other series of any class or classes of capital stock of the corporation, or in other property, or in more than one of the foregoing; (g). whether the shares of preferred stock shall be redeemable or callable, the limitations and restrictions with respect to such redemption or call, the time or times of redemption, and the price or prices (which may be greater than par value) at which and the manner in which shares shall be redeemable or callable, including the manner of selecting shares for redemption if less than all shares are to be redeemed or called; X - 16 (h). whether the shares of preferred stock shall be subject to the operation of a purchase, retirement or sinking fund, and, if so, whether and upon what conditions the purchase, retirement or sinking fund shall be cumulative or non-cumulative, and the extent to which and the manner in which the fund shall be applied to the purchase or redemption of the shares for retirement or to other corporate purposes and the terms and provisions relative to the operation thereof; (i). the terms on which preferred stock shall be convertible into or exchangeable for shares of any other class or classes or of any other series of any class or classes of capital stock of the corporation, and the price or prices or the rate or rates of conversion or exchange and the method, if any, of adjusting the same, and any other terms and conditions of such conversion or exchange; (j). the extent to which holders of preferred stock shall be entitled to vote generally with respect to matters relating to the corporation and the matters on which the holders of preferred stock shall be entitled to vote as a class; (k). the preferences in respect to the assets of the corporation upon liquidation or winding up the corporation including the amount (which may be greater than par value) payable to holders of preferred stock before any amount is payable to holders of common stock; and (1). any other preferences, privileges and powers, and relative, participating, optional or other special rights and qualifications of or limitations or restrictions which the Board of Directors may deem advisable, provided they are not inconsistent with the provisions of these Articles of Incorporation. Notwithstanding anything herein to the contrary, each share of preferred stock shall stand on a parity with each other share of preferred stock upon the voluntary or involuntary liquidation, dissolution or distribution of assets, or winding up of the corporation. No dividend shall be paid, declared or set apart for payment on any preferred stock in respect of any period unless X - 17 accumulated dividends shall be or shall have been paid, or declared and set apart for payment, pro rata, on all shares of outstanding preferred stock. 3. COMMON STOCK. Whenever cash dividends upon the preferred stock at the time outstanding, to the extent of the preference to which such stock is entitled, shall have been paid in full for all past dividend periods or declared and set apart for payment, such dividends, payable in cash, stock or otherwise, as may be determined by the Board of Directors, may be declared by the Board of Directors, and paid from time to time to the holders of common stock out of the remaining net profit or surplus of the corporation. In the event of any liquidation, dissolution or winding up of the affairs of the corporation, whether voluntary or involuntary, all assets and funds of the corporation remaining after the payment to the holders of the preferred stock of the full amounts to which they shall be entitled, as provided by the Board of Directors in the resolution or resolutions by which it authorizes the issuance of such stock, shall be divided and distributed among the holders of the common stock according to their respective shares. The corporation may issue and sell its authorized shares of capital stock from time to time for such consideration as, from time to time, may be fixed by the Board of Directors, and any and all shares so issued shall be deemed X - 18 fully paid and non-assessable and the holder of such shares shall not be liable to the corporation or its creditors in respect thereto." SIGNED AND DATED at St. Petersburg, Pinellas County, Florida, this day of 1974. R J FINANCIAL CORP. BY /s/ STEVEN C. KOEGLER -------------------------- Director BY /s/ H. ANNE THOMAS -------------------------- Director BY /s/ RICHARD O. JACOBS --------------------------- Director SWORN AND SUBSCRIBED to before me this 7th day of March, 1974. /s/ ILLEGIBLE --------------------------- NOTARY PUBLIC Notary Public, State of Florida My Commission Expires. AUG. 11, 1974 My commission expires: X - 19 STATE OF FLORIDA DEPARTMENT OF STATE I certify that the attached is a true and correct copy of Certificate of Amendment to Articles of Incorporation of R J FINANCIAL CORP., a Florida corporation, filed on May 16, 1983, as shown by the records of this office. The charter number of this corporation is 444750. Given under my hand and the Great Seal of the State of Florida, at Tallahassee, the Capital, this the 16th day of May, 1983. /s/ George Firestone --------------------- George Firestone Secretary of State [SEAL} X - 20 AMENDMENT TO ARTICLES OF INCORPORATION OF R J FINANCIAL CORP. FILED MAY 16 12 27PM'83 SECRETARY OF STATE TALLAHASSEE, FLORIDA The undersigned officers of R J Financial Corp., (the "Corporation") do hereby certify that at a duly held meeting of the Board of Directors of the Corporation held May 9, 1983 and at the Annual Meeting of Shareholders of the Corporation held May 9, 1983, the following Resolutions were adopted amending the Corporation's Articles of Incorporation as follows: RESOLVED, that Article IV of the Articles of Incorporation of this Corporation is hereby amended in its entirety to read as follows: ARTICLE IV STOCK CLAUSE 1. SHARES AUTHORIZED. The aggregate number of shares of stock which this corporation shall have authority to issue shall be Ten Million (10,000,000) shares of common stock (each with a par value of One Cent [$0.01]) and One Million (1,000,000) shares of preferred stock (each with a par value of Two Dollars [$2.00]). 2. PREFERRED STOCK. Except as limited elsewhere in this Article IV, the rights, preferences and privileges of the shares thereof shall be determined by the Board of Directors shall have the power to decide on the following terms: (a). whether the shares of preferred stock shall be participating; (b). the dividend rate or rates, if any, on the shares of preferred stock and the relation which dividends of preferred stock shall bear to the dividends payable on any other class or classes or of any other series of any class or classes of capital stock of the corporation; (c). the terms and conditions upon which and the periods in respect to which any such dividends shall be payable; (d). whether and upon what conditions any dividends of preferred stock shall be cumulative and, if cumulative, the date or dates from which dividends shall accumulate; (e). whether the shares shall be limited in dividends, if any, or whether they shall participate in dividends over and above the dividend rate, if any, provided for the shares; (f). whether any such dividends shall be payable in cash, in shares of such series, in shares of any other class or classes or of any other series of any class or classes of capital stock of the corporation, or in other property, or in more than one of the foregoing; X - 21 (g). whether the shares of preferred stock shall be redeemable or callable, the limitations and restrictions with respect to such redemption or call, the time or times of redemption, and the price or prices (which may be greater than par value) at which and the manner in which shares shall be redeemable or callable, including the manner of selecting shares for redemption if less than all shares are to be redeemed or called; (h). whether the shares of preferred stock shall be subject to the operation of a purchase, retirement or sinking fund, and, if so, whether and upon what conditions the purchase, retirement or sinking fund shall be cumulative or non-cumulative, and the extent to which and the manner in which the fund shall be applied to the purchase or redemption of the shares for retirement or to other corporate purposes and the terms and provisions relative to the operation thereof; (i). the terms on which preferred stock shall be convertible into or exchangeable for shares of any other class or classes or of any other series of any class or classes of capital stock of the corporation, and the price or prices or the rate or rates of conversion or exchange and the method, if any, of adjusting the same, and any other terms and conditions of such conversion or exchange; (j). the extent to which holders of preferred stock shall be entitled to vote generally with respect to matters relating to the corporation and the matters on which the holders of preferred stock shall be entitled to vote as a class; (k). the preferences in respect to the assets of the corporation upon liquidation or winding up the corporation including the amount (which may be greater than par value) payable to holders of preferred stock before any amount is payable to holders of common stock; and (1). any other preferences, privileges and powers, and relative, participating, optional or other special rights and qualifications of or limitations or restrictions which the Board of Directors may deem advisable, provided they are not inconsistent with the provisions of these Articles of Incorporation. Notwithstanding anything herein to the contrary, each share of preferred stock shall stand on a parity with each other share of preferred stock upon the voluntary or involuntary liquidation, dissolution or distribution of assets, or winding up of the corporation. No dividend shall be paid, declared or set apart for payment on any preferred stock in respect of any period unless accumulated dividends shall be or shall have been paid, or declared and set apart for payment, pro rata, on all shares of outstanding preferred stock. 3. COMMON STOCK. Whenever cash dividends upon the preferred stock at the time outstanding, to the extent of the preference to which such stock is entitled, shall have been paid in full for all past dividend periods or declared and set apart for payment, such dividends, payable in cash, stock or otherwise, as may be determined by the Board of Directors, may be declared by the Board of Directors, and paid from time to time to the holders of common stock out of the remaining net profit or surplus of the corporation. X - 22 In the event of any liquidation, dissolution or winding up of the affairs of the corporation, whether voluntary or involuntary, all assets and funds of the corporation remaining after the payment to the holders of the preferred stock of the full amounts to which they shall be entitled, as provided by the Board of Directors in the resolution or resolutions by which it authorizes the issuance of such stock, shall be divided and distributed among the holders of the common stock according to their respective shares. The corporation may issue and sell its authorized shares of capital stock from time to time for such consideration as, from time to time, may be fixed by the Board of Directors, and any and all shares so issued shall be deemed fully paid and non-assessable and the holder of such shares shall not be liable to the corporation or its creditors in respect thereto. RESOLVED, that a new Article V to the Articles of Incorporation is hereby adopted to read as follows: ARTICLE V VOTE TO EFFECT BUSINESS COMBINATION The affirmative vote of two-thirds (2/3) of all the shares outstanding and entitled to vote shall be required to approve any of the following: (a). any merger or consolidation of the corporation with or into any other corporation; (b). any share exchange in which a corporation, person, or entity acquires the issued or outstanding shares of stock of this corporation pursuant to a vote of stockholders; (c). any sale, lease, exchange or other transfer of all, or substantially all, of the assets of this corporation to any other corporation, person or entity; (d). any transaction similar to, or having a similar effect as, any of the foregoing transactions. Such affirmative vote shall be in lieu of the vote of stockholders otherwise required by law. RESOLVED, that a new Article IX to the Articles of Incorporation is hereby amended in its entirety to read as follows: ARTICLE IX AMENDMENT These Articles of Incorporation may be amended in the manner provided by law. Every amendment shall be approved by the Board of Directors, proposed by them to the stockholders, and approved at a stockholders' meeting by a majority of the stock entitled to vote thereon; provided, however, that the provisions set forth in Article V may not be altered, amended or repealed unless such alteration, amendment or repeal is approved by the affirmative vote of two-thirds (2/3) of all of the shares outstanding and entitled to vote. X - 23 The current Article V and all subsequent Articles were renumbered to reflect the addition of the new Article V. IN WITNESS WHEREOF, we have duly executed this certificate for and on behalf of said Corporation, this 13TH day of May, 1983. Corporate R J FINANCIAL CORP. Seal By: /s/ THOMAS A. JAMES ----------------------------- Thomas A. James, President Attest: By: /s/ LYNN PIPPENGER ----------------------------- Lynn Pippenger, Secretary STATE OF FLORIDA ) ) ss. COUNTY OF PINELLAS ) I HEREBY CERTIFY that on this 13d, day of May, 1983, before me personally appeared Thomas A. James and Lynn Pippenger, known to me and known to be the President and Secretary, respectively, of R J Financial Corp., the persons described in and who executed the foregoing Amendment, and they acknowledged before me the execution thereof to be their free act and deed as such, for the use and purposes therein mentioned. /S/ JEAN C. CRANE ----------------------------- Notary Jean E. Crane Seal Notary Public My Commission Expires: X - 24 STATE OF FLORIDA DEPARTMENT OF STATE I certify that the attached is a true and correct copy of Certificate of Amendment to the Articles of Incorporation of R J FINANCIAL CORP., changing its name to RJ FINANCIAL CORPORATION, a Florida corporation, filed on June 2, 1983, as shown by the records of this office. The charter number of this corporation is 444750. Given under my hand and the Great Seal of the State of Florida at Tallahassee, the Capital, this the 7TH day of June, 1983. /s/ GEORGE FIRESTONE ------------------- George Firestone Secretary of State X - 25 [SEAL] AMENDMENT TO ARTICLES OF INCORPORATION OF R J FINANCIAL CORP. FILED 1983 JUN-2 AM 10:58 SECRETARY OF STATE TALLAHASSEE, FLORIDA The undersigned officers of R J Financial Corp., (the "Corporation") do hereby certify that at a duly held meeting of the Board of Directors of the Corporation held May 9, 1983 and at the Annual Meeting of Shareholders of the Corporation held May 9, 1983, the following Resolutions were adopted amending the Corporation's Articles of Incorporation as follows: RESOLVED, that Article I of the Articles of Incorporation of this Corporation is hereby amended in its entirety to read as follows: ARTICLE I NAME The name of the corporation shall be: RJ FINANCIAL CORPORATION. IN WITNESS WHEREOF, we have duly executed this certificate for and on behalf of said Corporation, this 25TH day of May, 1983. Corporate R J FINANCIAL CORP. Seal By: /s/ THOMAS A. JAMES -------------------------------- Thomas A. James, President Attest: By: /s/ LYNN PIPPENGER -------------------------------- Lynn Pippenger, Secretary STATE OF FLORIDA ) ) ss. COUNTY OF PINELLAS ) I HEREBY CERTIFY that on this 25TH day of May, 1983, before me personally appeared Thomas A. James and Lynn Pippenger, known to me and known to be the President and Secretary, respectively, of R J Financial Corp., the persons described in and who executed the foregoing Amendment, and they acknowledged before me the execution thereof to be their free act and deed as such, for the use and purposes therein mentioned. Notary /s/ JEAN E. CRANE Seal ----------------------------- Jean E. Crane Notary Public My Commission Expires: X - 26 STATE OF FLORIDA DEPARTMENT OF STATE I certify that the attached is a true and correct copy of the Articles of Amendment, filed on February 20, 1987, to the Articles of Incorporation for RJ FINANCIAL CORPORATION, changing its name to RAYMOND JAMES FINANCIAL, INC., a Florida corporation, as shown by the records of this office. The document number of this corporation is 444750. Given under my hand and the Great Seal of the State of Florida at Tallahassee, the Capital, this the 24TH day of February, 1987. /s/ GEORGE FIRESTONE --------------------- George Firestone Secretary of State [SEAL] X - 27 AMENDMENT TO ARTICLES OF INCORPORATION OF RJ FINANCIAL CORPORATION FILED 1987 FEB 20 PM 1:00 SECRETARY OF STATE TALLAHASSEE, FLORIDA The undersigned officers of RJ Financial Corporation, (the Corporation), do hereby certify that at the Annual Meeting of the Shareholders Corporation, held February 12, 1987, at the recommendation of the Board of Directors, the following Resolution was adopted amending the Corporation's Articles Incorporation as follows: RESOLVED, that Article I of the Articles of Incorporation of this Corporation is hereby amended in its entirety to read as follows: ARTICLE I NAME The name of the Corporation shall be: RAYMOND JAMES FINANCIAL, INC. IN WITNESS WHEREOF, we have duly executed this certificate for and on behalf of said Corporation, this 12TH day of FEBRUARY 1987. ARTICLE I NAME The namn of the Corporation shall be: RAYMOND JAMES FINANCIAL, INC. IN WITNESS WHEREOF, we have duly executed this certificate for and on behalf of said Corporation, this 12TH day of FEBRUARY, 1987. (Corporate Seal) RJ FINANCIAL CORPORATION By /s/ FRANCIS S. GODBOLD --------------------------- Francis S. Godbold President By /s/ LYNN PIPPENGER --------------------------- Lynn Pippenger Secretary STATE OF FLORIDA COUNTY OF PINELLAS I HEREBY CERTIFY that on this 12TH day of FEBRUARY 1987, before me personally appeared Francis S. Godbold and Lynn Pippenger, known to me and known to be the President and Secretary, respectively, of RJ Financial Corporation, the persons described in and who executed the foreagoing Amendment, and they acknowledged before me the execution thereof to be their free act and deed as such, for the use and purposes therein mentioned. /s/ JEAN E. CRANE ----------------------------- Notary Seal Jean E. Crane Notary Public My Commission Expires: Notary Public, State of Florida at Large My Commission, Expires JULY 27, 1989 X - 28 STATE OF FLORIDA STATE OF FLORIDA I certify that the attached is a true and correct copy of the Article of Amendment, filed on June 13, 1991, to Article of Incorporation for RAYMOND JAMES FINANCIAL, INC., a Florida corporation, as shown by the record of this office. The document number of this corporation is 444750. Given under my hand and the Great Seal of the State of Florida at Tallahassee, the Capital, this the 25th day of June, 1991. /s/ JIM SMITH ------------------- Jim Smith Secretary of State [SEAL] X-29 AMENDMENT TO ARTICLES OF INCORPORATION OF RAYMOND JAMES FINANCIAL, INC. FILED 1991 JUNE 13 AM 10:25 SECRETARY OF STATE TALLAHASSEE, FLORIDA The undersigned officers of Raymond James Financial, Inc., (the Corporation), do hereby certify that at a Special Meeting of the Shareholders of the Corporation, held June 4, 1991, at the recommendation of the Board of Directors, the following Resolution was adopted amending the Corporation's Articles of Incorporation as follows: RESOLVED, that Article IV of the Articles of Incorporation of this corporation is hereby amended in its entirety to read as follows: ARTICLE IV STOCK CLAUSE 1. SHARES AUTHORIZED. The aggregate number of shares of stock which this corporation shall have authority to issue shall be twenty-five million (25,000,000) shares of common stock (each with a par value of one cent ($.0l)) and one million (1,000,000) shares of preferred stock (each with a par value of two dollars ($2.00)). IN WITNESS WHEREOF, we have duly executed this certificate for and on behalf of said Corporation, this 7TH day of JUNE, 1991. RAYMOND JAMES FINANCIAL, INC. By /s/ FRANCIS S. GOLDBOLD ---------------------------------- (Corporate Seal) Francis S. Goldbold By /s/ LYNN PIPPENGER ---------------------------------- Lynn Pippenger President X - 30 STATE OF FLORIDA COUNTY OF PINELLAS I HEREBY CERTIFY, that on this 7TH day of June, 1991, before me personally appeared Francis S. Godbold, Lynn Pippenger, known to me to be the President and Secretary, respectively, of Raymond James Financial, Inc., the persons described in and who executed the foregoing Amendment, and they acknowledged before me the execution thereof to be their free act and deed as such, for the use and purposes therein mentioned. /s/ JEAN E. CRANE ---------------------- Jean E. Crane Notary Public Notary Public, State of Florida at Large My Commission expires July 27,1993 X - 31 STATE OF FLORIDA DEPARTMENT OF STATE I certify the attached is a true and correct copy of the Articles of Amendment, filed on March 8, 1993, to Article of Incorporation for RAYMOND JAMES FINANCIAL, INC., a Florida corporation, as shown by the records of this office. The document number of this corporation is 444750. Given under my hand and the Great Seal of the State of Florida, at Tallahassee, the Capital, this the Eighth day of March, 1993 /s/ JIM SMITH ------------------ Jim Smith Secretary of State X - 32 AMENDMENT TO ARTICLES OF INCORPORATION OF RAYMOND JAMES FINANCIAL, INC. FILED 1993 MAR -8 PM 12:21 SECRETARY OF STATE TALLAHASSEE, FLORIDA Article IV of the Articles of Incorporation of Raymond James Financial, Inc. was amended at the Annual Meeting of Shareholders of Raymond James Financial, Inc., held on February 11, 1992. 1. The name of the Corporation is Raymond James Financial, Inc. 2. Article IV of the Articles of Incorporation of Raymond James Financial, Inc., was amended as follows: "SHARES AUTHORIZED. The aggregate number of shares of stock which this corporation shall have authority to issue shall be fifty million (50,000,000) shares of common stock (each with a par value of one cent ($.01) and ten million (10,000,000) shares of preferred stock (each with a par value of ten cents ($.l0))." 3. The foregoing amendment was approved and adopted by the shareholders at the Annual Meeting of Shareholders held on February 11, 1993. 4. Of the issued and outstanding 14,045,702 shares of common stock, 12,837,499 shares were represented either in person or by proxy, constituting 91.3% of the outstanding shares, which represented a quorum. The number of votes cast for the amendment was sufficient for approval. IN WITNESS WHEREOF, we have duly executed this certificate for and on behalf of said corporation, this 3RD day of MARCH, 1993. RAYMOND JAMES FINANCIAL, INC. By: /s/ FRANCIS S. GODBOLD ----------------------------- Francis S. Godbold, President By: /s/ LYNN PIPPENGER ----------------------------- Lynn P. Pippenger, Secretary (Corporate Seal) X - 33 STATE OF FLORIDA DEPARTMENT OF STATE I certify the attached is a true and correct copy of the Articles of Amendment, filed on February 28, 1994, to Articles of Incorporation for RAYMOND JAMES FINANCIAL, INC., a Florida corporation, as shown by the records of this office. The document number of this corporation is 444750. Given under my hand and the Great Seal of the State of Florida, at Tallahassee, the Capital, this the Seventh day of March, 1994 /s/ JIM SMITH -------------------- Jim Smith Secretary of State [SEAL] X - 34 AMENDMENT TO ARTICLES OF INCORPORATION OF RAYMOND JAMES FINANCIAL FILED 94 FEB 28 PM 2:29 SECRETARY OF STATE TALLAHASSEE, FLORIDA Article VIII of the Articles of Incorporation of Raymond James Financial, Inc., was amended at the Annual Meeting of the Shareholders of Raymond James Financial, Inc., held February 10, 1994. 1. The name of the Corporation is Raymond James Financial, Inc. 2. Article VIII of the Articles of Incorporation of Raymond James Financial, Inc., was amended as follows: "A. NUMBER The business of the corporation shall be managed initially by a board of not less than three (3) directors. The number of directors may, as provided in the by-laws, be from time to time increased or decreased, but shall never be less than three (3) nor more than thirteen (13)." 3. The foregoing amendment was approved and adopted by the shareholders at the Annual Meeting of Shareholders held on February 10, 1994. 4. Of the issued and outstanding 21,342,622 shares of common stock, 19,265,549 shares were represented either in person or by proxy, constituting over 91.75% of the outstanding shares, which represented a quorum. The number of votes cast for the amendment was sufficient for approval. IN WITNESS WHEREOF, we have duly executed this certificate for and on behalf of said corporation, this day of February, 1994. RAYMOND JAMES FINANCIAL, INC. By: /s/ FRANCIS S. GODBOLD ----------------------------- Francis S. Godbold, President By: /s/ LYNN PIPPENGER ----------------------------- Lynn Pippenger, Secretary (Corporate Seal) X - 35 STATE OF FLORIDA COUNTY OF PINELLAS I HEREBY CERTIFY, that on the 18TH day of February, 1994, before me personally appeared Francis S. Godbold and Lynn Pippenger, known to me to be the President and Secretary, respectively, of Raymond James Financial, Inc., the persons described in and who executed the foregoing Amendment, and they acknowledged before me the execution thereof to be their free act and deed as such, for the use and purposes therein mentioned. NOTARY PUBLIC, STATE OF FLORIDA. MY COMMISSION EXPIRES: Feb. 21, 1995. BONDED THRU NOTARY PUBLIC UNDERWRITERS. /s/ GRACE M. PALSHA -------------------- Grace M. Palsha Notary Public My Commission expires________________________ X - 36 EX-10.3 3 EXHIBIT 10.3 RAYMOND JAMES FINANCIAL, INC. DEFERRED MANAGEMENT BONUS PLAN This document, consisting of the 22 sections set forth below, constitutes the Raymond James Financial, Inc. Deferred Management Bonus Plan (the "Plan"). The Plan shall be effective as of October 1, 1989. 1. PURPOSE. The purpose of the Plan is to enhance the ability of Raymond James Financial, Inc. and its subsidiaries (the "Company") to attract and retain key management employees. 2. DEFINITIONS. As used herein, the following definitions shall apply: (a) "COMMITTEE" shall mean the Deferred Management Bonus Plan Committee consisting of such members as the Board of Directors may deem appropriate. (b) "GROSS COMPENSATION" shall mean the total salary, commissions, bonuses and other amounts paid to an employee during the Plan Year (including amounts contributed to the Raymond James Financial, Inc. STAR Plan and Cafeteria Plan). (c) "EXCESS COMPENSATION" shall mean the amount of Gross Compensation that exceeds the minimum level as set annually by the Committee, and does not exceed the maximum level as set annually by the Committee. (d) "MANAGEMENT EMPLOYEE" ("ME") shall mean any employee who satisfies the criteria established by the Committee. This X - 37 definition shall exclude any full time retail account executive who is eligible, subject to achieving specified gross commission levels, to participate in the Raymond James & Associates, Inc. Deferred Sales Bonus Compensation Plan, or any other employee who is eligible to participate in a comparable deferred compensation plan. (e) "PLAN YEAR" shall mean the fiscal year of the Company. (f) "ENTRY DATE" shall mean April 1 or October 1. (g) "YEAR OF SERVICE" shall mean a consecutive 12-month period of service during which time the employee completes at least 1,000 hours of service. (h) "BREAK IN SERVICE" shall mean a Plan Year in which an employee has 500 or fewer hours of service. (i) "DISABILITY" shall mean a medically determinable physical or mental impairment which can be expected to result in death or which has lasted, or can be expected to last, for a continuous period of twelve months or longer and which renders him unable to engage in any substantial gainful employment. Disability must be certified by a physician acceptable to the Plan Administrator. 3. ELIGIBILITY. All MEs, as defined herein, are eligible to participate in the Plan commencing on the first Entry Date following their completion of one continuous year of service. In the case of a break in service an ME will become immediately eligible to re-enter the Plan at the next entry date if the break in service was for a shorter time than their employment prior to the break in service. However, if X - 38 the break in service exceeds five (5) Plan Years, the ME will be deemed to be a new employee for purposes of eligibility. 4. PLAN CONTRIBUTIONS. Plan contributions shall be made annually at the discretion of the Company's Board of Directors. Contributions shall be allocated to each eligible ME based on relative excess compensation for such Plan Year. If an ME is first eligible to enter the plan on April 1, his Gross Compensation used to determine his eligibility for a contribution and his allocated contribution that Plan Year shall be based on his gross compensation from April 1 through the end of the Plan Year. 5. VESTING PERIOD. The contribution amount computed for each Plan Year shall vest at the rate of twelve and one half percent (12.5%) per year over the subsequent eight year period subject to the exceptions provided in sections 7, 10 and 11 below. Unless otherwise provided, a contribution amount shall be considered fully vested at the end of the eighth Plan Year following the year in which such bonus amount was earned. A participant shall not receive vesting credit for a given Plan Year unless such participant is employed by the Company on the last day of the Plan Year. 6. INTEREST CREDIT. Any contribution amount allocated to an ME shall be recorded by the Company in a Deferred Management Bonus Plan Account maintained in the name of the ME. As of the last day of each Plan Year, all contribution amounts which were allocated to an ME's account as of the first day of the Plan Year then ended shall be X - 39 credited with an amount equal to one year's interest based on the average annual rate of the Raymond James & Associates, Inc. Credit Interest Program. Such interest credits shall be computed and compounded annually. Interest earned on a year's contribution shall be vested to the same extent as that year's contribution. 7. RIGHT OF OFFSET. Notwithstanding any other provision in the Plan to the contrary, any distribution payable hereunder shall be used, at the discretion of the Committee, to offset any debt owed by the ME to the Company at the date such distribution would otherwise be made. In the event that the Company is aware of any outstanding or pending potential liabilities to the Company arising from actions of the ME, the Committee may withhold distribution hereunder until such time as said liabilities are satisfied or extinguished or the Company has determined that a potential liability no longer exists. 8. DEATH, DISABILITY, AGE 65. At the end of the Plan Year during which occurs death, disability or the attainment of age 65 by the ME, all contribution amounts and interest accrued thereon shall be fully vested. Distributions shall commence as soon as practicable following the end of the Plan Year in which occurs death or disability. Distributions shall commence as soon as practicable after the end of the Plan Year following the Plan Year in which occurs retirement on or after the attainment of age 65, unless payment is forfeited in accordance with section 11 below. Said distribution shall include interest earned through the end of the Plan Year preceding distribution. X - 40 9. EARLY RETIREMENT. An ME shall be deemed to have retired for purposes of determining vesting in the Plan if at the time of his departure from the firm he is either a) at least 55 years old and the sum of his age at retirement plus his years of service with the Company equals at least 75 or b) at least 60 years old and has a minimum of 5 years of service with the Company. If an employee meets these qualifications for early retirement then he shall be fully vested in his account balance. Distribution will be made in three equal annual installments commencing as soon as practicable after the end of the Plan Year FOLLOWING the Plan Year during which the retirement of the ME occurs, subject to forfeiture in accordance with section 11 below. Said distribution shall include interest earned through the end of the Plan Year preceding distribution. An employee eligible for early retirement treatment shall have the right to elect to be treated as a regular termination, in which case his vesting and distribution will be in accordance with sections 5 and 10, respectively. 10. TERMINATION. Upon termination prior to reaching age 65, and if not eligible for early retirement, all vested amounts as of the end of the Plan Year preceding the Plan Year during which termination occurs shall be distributed as soon as practicable after the end of the Plan Year FOLLOWING the Plan Year during which termination occurs unless payment is forfeited in accordance with section 11 below. Said distribution shall include interest earned through the end of the Plan Year preceding distribution. Any non-vested amounts as of the end of the Plan Year preceding the Plan Year during which termination occurs X - 41 shall be forfeited as of the date of termination. Forfeited amounts shall revert back to the Company and will not be allocated to other MEs. 11. NON-COMPETE REQUIREMENT. If a terminated or retired ME engages in competition with the Company prior to the date of distribution the balance in the ME's account, both vested and nonvested (including interest earned thereon), shall be forfeited in its entirety. (a) For purposes of this section, an ME shall be deemed to have "engaged in competition" with the Company if he/she: (i) owns, manages, operates, controls, is employed by, acts as an agent for, participates in or is connected in any manner with the ownership, management, operation or control of any business which is engaged in businesses which are or may be competitive to the business of the Company; provided further that this restrictive covenant shall encompass the State of Florida and any other states where the Company is engaged in business, and every city, county, and other political subdivision of such states; or (ii) solicits or calls, either by himself or at his direction has any other person or firm solicit or call, any of the customers of the Company on whom the ME called, with whom the ME became acquainted, or of whom the ME learned of during his employment with the Company. (iii) discloses a list of the Company's customers or any part thereof to any person, firm, corporation, X - 42 association, or other entity for any reason or purpose whatsoever; or (iv) discloses to any persons, firm, corporation, association, or other entity any information regarding the Company's general business practices or procedures, methods of sale, list of products, personnel information and any other valuable, special information unique to the Company's business; (b) It is the intention of the Company that this section be given the broadest protection allowed by law with regard to the restrictions herein contained. Each restriction set forth in this section shall be construed as a condition separate and apart from any other restriction or condition. To the extent that any restriction contained in this section is determined by any court of competent jurisdiction to be unenforceable by reason of it being extended for too great a period of time, or as encompassing too large a geographic area, or over too great a range of activity, or any combination of these elements, then such restriction shall be interpreted to extend only over the maximum period of time, geographic area, and range of activities which said court deems reasonable and enforceable. (c) In the event any ME who terminates employment is concerned as to the potential application of this section, he may request a ruling from the Committee as to its application, which determination shall be a binding upon all parties. X - 43 (d) If the Committee in its discretion determines that an activity otherwise described herein would not be injurious to the Company, it may waive the application of this section to such activity, which waiver shall be binding upon the ME and the Company. The Company shall exercise such discretion in a uniform, nondiscriminatory manner. 12. NATURE OF ACCOUNT AND COMPANY'S OBLIGATION. The Plan at all times shall be entirely unfunded. The Deferred Management Bonus Plan Account is merely a record for measuring and determining the amount of deferred compensation benefits to be paid by the Company to, or with respect to, the ME under this Plan, and such Account shall be established solely for such bookkeeping purposes. The Company shall not be required to segregate any funds or other assets to be used for payment of benefits under this Plan. The Deferred Management Bonus Plan Account shall not be, or be considered as evidence of the creation of, a trust fund, an escrow or any other segregation of assets or funding arrangement for the benefit of the ME or any beneficiary of the ME and thus there is no guarantee of benefit payments to the ME. The obligation of the Company to make the payments described in the Plan is an unsecured contractual obligation only, and neither the ME nor any beneficiary of the ME shall have any beneficial or preferred interest by way of trust, escrow, lien or otherwise in and to any specific assets or funds. The ME and each beneficiary of the ME shall look solely to the general assets of the Company for satisfaction of X - 44 any obligations due or to become due under this Plan. If the Company should, in its sole discretion, earmark or set aside any funds or other assets in preparation for the payment of benefits hereunder, the same shall, nevertheless, remain and be regarded as part of the general assets of the Company subject to the claims of its general creditors (and shall not be considered to be held in a fiduciary capacity for the benefit of the ME or any beneficiary hereunder), and neither the ME nor any beneficiary of the ME shall have any legal, beneficial, security or other property interest therein. 13. REPORTS. As soon after the close of each Plan Year as is administratively feasible, the Committee shall provide a report to the ME (or, in the event of the ME's death, to the ME's beneficiary) showing the status of the ME's Deferred Management Bonus Plan Account as of the end of the Plan Year. 14. BENEFICIARY. The ME may designate, upon forms to be furnished by and filed with the Committee, one or more primary beneficiaries or contingent beneficiaries under the Plan to receive all or a specified part of any deferred compensation benefits which, at the time of the ME's death, remain unpaid under this Plan. An ME may change or revoke any such designation from time to time. No such designation, change or revocation shall be effective unless executed by the ME and accepted by the Committee during the ME's lifetime. Each such designation, change or revocation shall be applicable to all balances in the ME's Deferred Management Bonus Plan Account, including X - 45 all such amounts subsequently credited, and any such beneficiary designation under the Plan presently on file with the Committee shall be effective under this Plan until changed or revoked in the manner specified herein. No such change or revocation shall require the consent of any beneficiary theretofore designated by the ME. If an ME fails to designate a beneficiary, or subsequent facts render a designation invalid or inoperative, then the benefits shall be payable to a personal representative of the ME's estate. Unless the ME has otherwise specified in the beneficiary designation, the beneficiary or beneficiaries designated by the ME shall become fixed as of the ME's death so that, if a beneficiary survives the ME but dies before the receipt of all payments due such beneficiary, such remaining payments shall be payable to the representative of such beneficiary's estate. 15. BENEFITS NOT TRANSFERABLE. Neither the ME nor any beneficiary hereunder shall have any transferable interest in the payments due hereunder nor any right to anticipate, alienate, dispose of, pledge or encumber the same prior to actual receipt thereof, nor shall the same be subject to attachment, garnishment, execution following judgment or other legal process instituted by creditors of the ME or any such beneficiary; provided, however, that the balance of the ME's Deferred Management Bonus Plan Account and any payments due hereunder shall at all times be subject to set-off for debts owed by the ME to the Company as set forth in paragraph 7 of this document. 16. WITHHOLDING TAXES. The Company shall withhold from any payment to be made under this Plan (and transmit to the proper taxing X - 46 authority) such amount as it may be required to withhold under any federal, state or other law. 17. EFFECT ON EMPLOYMENT RIGHTS AND OTHER BENEFIT PROGRAMS. The provisions of the Plan shall not give the ME any right to be retained in the employment of the Company. This Plan shall not replace any contract of the ME but shall be considered a supplement thereto. This Plan is in addition to, and not in lieu of, any other employee benefit plan or program in which the ME may be or become eligible to participate by reason of employment with the Company, and the timing of receipt of benefits hereunder shall have such effect on contributions to and benefits under such other plans or programs as the provisions of each such plan or program may specify. 18. ADMINISTRATION. The Committee, which will initially be comprised of Thomas A. James, Jeffrey P. Julien and Mary Jean Kissner, shall have full power to interpret, construe and administer this Plan, including authority to determine any dispute or claim with respect thereto. The determination of the Committee in any matter within the powers and discretions granted to it under this Plan, made in good faith, shall be binding and conclusive upon the Company, the ME and all other persons having any right or benefit hereunder. If the ME should be a member of the Committee at any time, the ME shall have no authority as such member with respect to any matter specifically affecting the ME's interest hereunder (such as determination of the amount, form or time of benefit payments to the ME), all such authority being reserved to the other Committee members, to the X - 47 exclusion of the ME, and the ME shall act only in his or her individual capacity in connection with any such matter. 19. CONTROLLING LAW. This Plan shall be construed and the legal relations between the parties determined in accordance with the laws of the State of Florida. 20. NO GUARANTEE OF BENEFITS. Nothing contained in the Plan shall constitute a guarantee by the Company or any other entity or person that the assets of the Company will be sufficient to pay any benefit hereunder. 21. AMENDMENT OR TERMINATION. The Company intends the Plan to be permanent but reserves the right to amend or terminate the Plan when, in the sole opinion of the Company, such amendment or termination is advisable. Any such amendment or termination shall be made pursuant to a resolution of the Board and shall be effective as of the date of such resolution. 22. EFFECT OF AMENDMENT OR TERMINATION. No amendment or termination of the Plan shall directly or indirectly deprive any ME (or his designated beneficiary) of all or any portion of a benefit payment which has commenced prior to the effective date of such amendment or termination or which would be payable if the ME terminated employment for any reason on such effective date. /s/ THOMAS A. JAMES ------------------------- Thomas A. James, Chairman X - 48
Exhibit A REVISED 19X1 19X2 19X3 19X4 19X5 19X6 19X7 19X8 19X9 19X0 19Y1 ---- ---- ---- ---- ---- ---- ----- ----- ----- ----- ----- Contribution 2500 3000 2700 3200 3300 3250 2750 2900 3100 3000 3050 Vested balance 0 338 1134 2420 4337 6991 10480 14854 20252 26212 32652 Interest rate 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8%
CONTRIBUTION YEAR BALANCE - ----------------- ----------------------------------------------------------------------------------- 19X1 2500 2700 2916 3149 3401 3673 3967 4285 2627 4998 5397 19X2 3000 3240 3499 3779 4081 4408 4761 5141 5553 5997 19X3 2700 2916 3149 3401 3673 3967 4285 4627 4998 19X4 3200 3456 3732 4031 4354 4702 5078 5484 19X5 3300 3564 3849 4157 4490 4849 5237 19X6 3250 3510 3791 4094 4422 4775 19X7 2750 2970 3208 3464 3741 19X8 2900 3132 3383 3653 19X9 3100 3348 3616 19X0 3000 3240 19Y1 3050 ----------------------------------------------------------------------------------- 2500 5700 8856 12764 17086 21702 26189 31184 36778 42721 49188
Example 1 If an ME left the Company during 19X6 he would receive his distribution following the close of 19X7. The distribution would be calculated as follows: BALANCE INTEREST INTEREST VESTED VESTED l9X5 19X6 19X7 BALANCE % BALANCE ------- -------- ------- ------- ------ ------- 19Xl 3401 272 294 3967 50.0% 1983 19X2 3779 302 327 4408 37.5% 1653 19X3 3149 252 272 3673 25.0% 918 19X4 3456 276 299 4031 12.5% 504 19X5 3300 264 285 3849 0.0% 0 ------- 5059 Example 2 If an ME retired, after age 65 during 19X6 he would receive his distribution following the close of 19X7. The distribution would be calculated as follows: INTEREST INTEREST VESTED VESTED 19X6 19X7 BALANCE % BALANCE -------- ------- ------- ------ ------- 19Xl 3673 294 3967 100% 3967 19X2 4081 326 4407 100% 4407 19X3 3401 272 3673 100% 3673 19X4 3732 299 4031 100% 4031 19X5 3564 285 3849 100% 3894 19X6 3250 260 3510 100% 3510 ------- 23437 X - 49 EX-10.4 4 EXHIBIT 10.4 This letter agreement sets out the terms under which we have agreed that you will serve as Corporate Secretary and Senior Vice President of Raymond James Financial, Inc. (the Company). 1. EFFECTIVE DATE: TERM OF AGREEMENT. This agreement is effective immediately, but you will not receive a salary or any benefits until you begin performing services for the Company, which is anticipated to be on October 21, 1996. The term of this agreement will be through September 30, 1998. At that time, employment will be terminable at will and not subject to an agreement. The "at will" doctrine and many other important policies and procedures, which will govern your employment and the below terms, are set forth in the RJ Employee Handbook. A copy of the Handbook will be provided for your review. 2. OFFICES AND REPORTING RESPONSIBILITIES. As Secretary of the Company, you shall be responsible for management of the Corporate Secretary function, including attendance at meetings of the Board of Directors and Committees thereof, preparation of minutes, co-ordination of the corporate calendar and other related functions. As Senior Vice President, you shall be responsible for supervising risk management for the Company and all subsidiaries and divisions: your responsibilities shall include supervision of the legal department, the compliance function, the internal audit function and other such other duties as may be assigned to you from time to time by the Company, consistent with your primary responsibility for supervising the risk management function of the Company. You shall report directly to the Chairman of the Board and Chief Executive Officer of the Company. 3. DUTIES. You shall devote all of your business time, attention and efforts to the business of the Company and shall serve the Company's interests diligently and to the best of your ability. During your employment hereunder you may: (a) serve on civic, professional and charitable boards and committees, (b) undertake speaking engagements and (c) manage your personal investments, so long as these activities do not interfere with the performance of your duties as a senior executive of the Company. 4. SALARY: BONUS: OTHER BENEFITS: STOCK OPTIONS. Your salary during the fiscal year ending September 30, 1997 will be $150,000 per year payable in semi-monthly increments, and shall be subject to annual review thereafter in accordance with Company policy. Upon satisfying eligibility requirements, you shall be entitled to participate in all benefits and programs made available to senior management of the Company to the full extent made available to them, including (but not limited to) medical, disability and life insurance, retirement plans, deferred compensation plans, employee stock purchase plans, and other benefit programs. During each year of your employment, you shall be entitled to participate in the Bonus program for senior executives of the Company. For the fiscal year ending September 30, 1997, you shall receive a minimum bonus of $75,000. Upon commencement of your employment hereunder, you shall receive options to purchase 3,000 shares of the Company's common stock under the Company's 1992 Incentive Stock Option Plan; the exercise price shall be fixed at the price of the Company's common stock at the close of business on the day of the next Board of Directors meeting. The option grant shall be reflected in a stock option agreement in the form customarily used by the Company for senior executives. You shall be eligible for consideration for the grant of additional options at future award dates. 5. VACATION. You shall be entitled to four weeks of paid vacation during each year of employment and shall be eligible to take vacation during your first year of employment. X - 50 RAYMOND JAMES FINANCIAL, INC. 6. REIMBURSEMENT OF EXPENSES. You shall be entitled to reimbursement of expenses incurred in accordance with Company policy. You shall be reimbursed for costs of attendance at meetings of the American Bar Association, and for bar membership and bar association fees which are approved in advance by the Company. 7. RIGHTS UPON TERMINATION. In the event your employment is terminated without cause by the Company during the first year of this agreement, you shall be entitled to receive the prompt payment of your current salary for the balance of the term plus the $75,000 first year bonus guaranteed under your agreement. If a termination without cause occurs during year two, you will be entitled to the remainder of your current salary for that year. It shall constitute termination without cause within the meaning of this agreement if you are assigned duties materially inconsistent with those set out in paragraph 2 above, or if you suffer any material diminution in your title, position, authority or responsibilities. The following shall constitute cause for termination under this agreement: (i) any illness or other disability which makes it impossible for you to perform your duties for a period of 120 consecutive days; (ii) a plea of guilty or conviction of a felony offense by you; (iii) a material breach by you of a fiduciary duty owed by you to the Company; (iv) violation of regulatory polices imposed by securities industry regulators, including but not limited to the NYSE, Securities and Exchange Commission or state securities regulators; (v) violation of the firm's internal policies, or (vi) the willful and gross neglect by you of the material duties required to be performed by you under this agreement; PROVIDED, HOWEVER that you shall be given thirty days' notice that grounds exist for termination for "cause" under clauses (iii) or (vi) above, and a reasonable opportunity to cure such breach or neglect. In the event you are terminated for cause by the Company, you shall receive no further compensation other than salary accrued to the date of termination. Bonuses are earned only if you are still employed on the date of distribution. 8. INDEMNIFICATION. You shall be indemnified by the Company to the fullest extent permitted by Florida law and the Company's Certificate of Incorporation and by-laws for any claim of damage or liability, or any expenses incurred, which arise from actions taken by you as an officer of the Company or any of its subsidiaries, to the same extent as the indemnification rights made available to other senior executives of the Company. 9. APPOINTMENT BY THE BOARD OF DIRECTORS. The Company will promptly submit to the Board of Directors for approval your employment as Corporate Secretary and Senior Vice President. 10. BINDING AGREEMENT. This agreement shall be binding upon the Company, its successors and assigns. Please confirm your agreement to these terms of employment by signing and returning to me a copy of this letter agreement. Very truly yours, /s/ THOMAS A. JAMES -------------------------------- Thomas A. James Chairman and Chief Executive Officer Accepted and agreed to as of the date set forth above: /s/ BARRY S. AUGENBRAUN ------------------- Barry S. Augenbraun X - 51 RAYMOND JAMES FINANCIAL, INC. EX-10.5 5 EXHIBIT 10.5 LIBERTY - RJF TERMINATION AND RELEASE AGREEMENT THIS TERMINATION AND RELEASE AGREEMENT (the "AGREEMENT") is made and entered into this 17 day of December, 1996, by and among RAYMOND JAMES FINANCIAL , INC., a Florida corporation ("RJF"), EAGLE ASSET MANAGEMENT, INC., a Florida corporation ("EAGLE"), HERITAGE ASSET MANAGEMENT, INC., a Florida corporation ("HERITAGE") (RJF, Eagle and Heritage are collectively referred to herein as the "RJF GROUP"), HERBERT E. EHLERS, an individual ("EHLERS"), and LIBERTY INVESTMENT MANAGEMENT, INC., formerly known as Eagle Institutional Asset Management, Inc., a Florida corporation (the "CORPORATION"). BACKGROUND AND PURPOSE WHEREAS, RJF, Eagle, Heritage, Ehlers and the Corporation are parties to that certain Separation Agreement dated October 27, 1994, as amended on May 19, 1995, (the "SEPARATION AGREEMENT"), pursuant to which the parties agreed to terminate Ehlers' full-time employment with Eagle, subject to the terms and conditions set forth therein, and the Corporation agreed to pay to Eagle "Institutional Customer Liquidated Damages" as such term is defined in the Separation Agreement (herein, the "INSTITUTIONAL CUSTOMER LIQUIDATED DAMAGES"), subject to the terms and conditions of the Separation Agreement; and WHEREAS, the Corporation and RJF are parties to that certain Option and Option Agreement dated as of December 31, 1994 (the "OPTION AGREEMENT"), pursuant to which RJF was granted an option by the Corporation to acquire a number of non-voting shares of common stock of the Corporation which, upon exercise, would represent twenty percent (20%) of the issued and outstanding common stock of the Corporation, subject to the terms and conditions set forth therein (the "OPTION"); and WHEREAS, the Corporation has agreed to sell substantially all of the assets of the Corporation (collectively, the "ASSETS") to Goldman, Sachs & Co., a New York limited partnership ("GOLDMAN") pursuant to the terms and conditions of an Agreement to Acquire the Business of Liberty Investment Management, dated October 23, 1996 (the "ACQUISITION AGREEMENT"), in exchange for certain payments to be made by Goldman to the Corporation as described in the Acquisition Agreement, and WHEREAS, the Corporation has furthermore agreed to purchase the Option from RJF, AND RJF has agreed to sell the Option to the Corporation; and X - 52 WHEREAS, pursuant to the terms and conditions set forth herein, the Corporation has agreed to prepay the Institutional Customer Liquidated Damages due under the Separation Agreement, and in consideration of such prepayment Eagle has agreed to waive the right to receive any further Institutional Customer Liquidated Damages under the Separation Agreement and, accordingly, RJF, Eagle, Heritage, Ehlers and the Corporation have agreed to terminate the Separation Agreement subject to and effective as of the closing of the transactions described in the Acquisition Agreement; and WHEREAS, RJF and the Corporation have agreed to terminate the Option Agreement, subject to the terms and conditions set forth herein. NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, the parties do hereby agree as follows: AGREEMENT 1 . PAYMENT OF INSTITUTIONAL CUSTOMER LIQUIDATED DAMAGES AND TERMINATION OF SEPARATION AGREEMENT. Subject to and in accordance with the terms and conditions of this Agreement, the Corporation agrees to pay to RJF the amounts described in this Section 1 (the "TOTAL PAYMENT"), which shall be allocated as described in Section 5 of this Agreement: 1.1 The Corporation shall pay to RJF, on behalf of Eagle, the installments due on January 15, 1997, and April 15, 1997, for the Institutional Customer Liquidated Damages (the "1996 INSTALLMENTS"), such installments to be paid on or before their respective due dates in accordance with and computed pursuant to the terms and conditions of the Separation Agreement. The 1996 Installments shall represent the payments due to Eagle pursuant to Section 1.2 of the Separation Agreement for investment advisory services rendered by the Corporation through December 31, 1996. Any of the 1996 Installments which are paid prior to the due date described in the Separation Agreement may be discounted by the Corporation on a 5% per annum discounted basis. 1.2 Subject to the provisions of Section 1.3 hereof, the Corporation shall pay to RJF (for itself and on behalf of any member of the RJF Group, including Eagle, who is owed payments under the Separation Agreement or under the Option) one-half (1/2) of the "Net Proceeds" to be received by the Corporation as the "Initial Purchase Price" pursuant to the terms and conditions of the Acquisition Agreement. For purposes of this Agreement, the term "Net Proceeds" shall mean (i) the gross proceeds paid to the Corporation by Goldman as the "Initial Purchase Price" described in Section 2.5(a) of the Acquisition Agreement to be paid for the Assets of the Corporation, MINUS (ii) any and all fees, costs and expenses associated with the sale of the Assets under the Acquisition Agreement (other than the amounts to be paid by the Corporation to RJF under this Agreement), but not in excess of $450,000. X - 53 1.3 Notwithstanding the provisions of Section 1.2 above, to the extent the "Initial Purchase Price" of $61,743,270 is adjusted as described in Section 2.5(a) of the Acquisition Agreement, RJF and the Corporation agree to share in any such adjustment as follows: (a) To the extent any such adjustment to the "Initial Purchase Price" of $61,743,270 is equal to or less than $2,400,000, such adjustment shall be allocated to and solely borne by RJF; and (b) To the extent such adjustment to the "Initial Purchase Price" of $61,743,270 exceeds $2,400,000, the excess of such adjustment over $2,400,000 shall be borne on an equal basis (50%-50%) by RJF and the Corporation. 1.4 To the extent the adjustments described in Section 1.3 above are recaptured by the Corporation pursuant to Section 2.5(b) or Section 2.5(c) of the Acquisition Agreement, the Corporation shall pay a portion of such recaptured amount to RJF as follows: (i) first, such recaptured amount shall be allocated to the Corporation and RJF to the extent of any adjustment previously allocated pursuant to the provisions of Section 1.3(b) above, and (ii) then, the balance of any such recaptured amount, if any, shall be allocated to RJF to the extent of any adjustment previously allocated to RJF pursuant to the provisions of Section 1.3(a) above. 1.5 By way of example only, the "Initial Purchase Price" is currently specified to be $61,743,270. Therefore, assuming there were no adjustments to the "Initial Purchase Price," RJF and the Corporation would each receive $30,871,635 prior to any fees, costs or expenses as described above. If the "Initial Purchase Price" is adjusted pursuant to Section 2.5(a) of the Acquisition Agreement by $2,000,000, then RJF would receive $28,871,635 and the Corporation would receive $30,871,635 prior to any fees, costs or expenses as described above. If the "Initial Purchase Price" is adjusted by $3,000,000, then RJF would receive $28,171,635 and the Corporation would receive $30,571,635. If the "Initial Purchase Price" is adjusted by $3,000,000 pursuant to Section 2.5(a) of the Acquisition Agreement, and if $1,500,000 of such adjustment were recaptured pursuant to Section 2.5(c) of the Acquisition Agreement, then such $1,500,000 of recapture amount would be paid $1,200,000 to RJF and $300,000 to the Corporation. 1.6 Except for the 1996 Installments, which shall be paid as described in Section 1.1 hereof, any amount allocated to the payment of the Institutional Customer Liquidated Damages as described in Section 5 hereof (the "LIQUIDATED DAMAGES PAYMENT") shall be paid by the Corporation to RJF prior to or simultaneously with the closing of the transactions described in the Acquisition Agreement. The balance of the Total Payment due to RJF hereunder, after deducting the payment of the 1996 Installments and the Liquidated Damages Payment (such balance is hereinafter referred to as the X - 54 "OPTION PAYMENT") shall be paid by the Corporation to RJF simultaneously with the closing of the transactions described in the Acquisition Agreement. 2. PURCHASE OF OPTION AND TERMINATION OF OPTION AGREEMENT. On the Closing Date, RJF hereby agrees to sell the Option, and the Corporation hereby agrees to purchase the Option. Effective as of the Closing Date, and subject to the performance by the Corporation of its obligations hereunder, RJF and the Corporation agree that the Option Agreement shall be terminated in its entirety and shall be considered null, void and of no further force or effect whatsoever. 3. CLOSING DATE. The closing of the transactions contemplated by this Agreement (the "CLOSING") shall occur simultaneously on the date of the closing of the transactions described in the Acquisition Agreement (the "CLOSING DATE"). 4. DOCUMENTS TRANSFERRED AT CLOSING. 4.1 Upon the Closing Date at the Closing, the Corporation will deliver to RJF, on behalf of Eagle, the Liquidated Damages Payment (to the extent not previously paid) by wire transfer or certified funds. The RJF Group shall provide documentation reasonably safisfactory to Ehlers and the Corporation to the effect that all obligations under the Separation Agreement have been fulfilled and Ehlers, the Corporation and the Corporation's employees are thereby released of and from any and all restrictions under the terms of the Separation Agreement. 4.2 Upon the Closing Date at the Closing, RJF shall transfer, sell and assign the Option to the Corporation pursuant to such documents and instruments of transfer as are reasonably acceptable to the Corporation and the Corporation shall pay to RJF the Option Payment by wire transfer or by certified funds. 4.3 The Corporation and the RJF Group shall provide such other documents, agreements, certificates or instruments as may be reasonably requested by any other party hereto in order to fully consummate the transactions described in this Agreement. 5. ALLOCATION OF PAYMENTS. The parties hereto agree that the 1996 Installments and an amount equal to the lesser of (x)(i) the Total Payment, MINUS (ii) the 1996 Installments, and MINUS (iii) $275,000, or (y) $25,000,000, shall be allocated to the prepayment of the Institutional Customer Liquidated Damages under the Separation Agreement. The balance of the Total Payment shall be allocated to the Option. It is the intent of the parties hereto that the payment of the Institutional Customer Liquidated Damages hereunder, excluding, the 1996 Installments, is to be allocated for the twelve payments due from the Corporation to RJF for investment advisory services to be rendered by the Corporation during the period beginning on January 1, 1997, and ending on December 31, 1999. X - 55 6. REPRESENTATIONS AND WARRANTIES. 6.1 CORPORATION. The Corporation hereby represents and warrants to the other parties hereto as follows: (a) The Corporation is a corporation duly organized, validly existing and in good standing under the laws of the State of Florida and has all requisite power and authority, corporate and otherwise, to own, lease, and operate its properties and carry on its business as and in the places where such properties are now owned, leased or operated or such business is now being conducted. (b) The Corporation has all requisite capacity, power and authority, corporate or otherwise, to enter into this Agreement and to assume and perform its obligations hereunder. The execution and delivery of this Agreement and the performance by the Corporation of its obligations hereunder have been duly and validly authorized by all necessary corporate action and no further action or approval, corporate or otherwise, is required in order to constitute this Agreement as a valid and binding obligation of the Corporation, enforceable in accordance with its terms. The execution and delivery of this Agreement and the performance by the Corporation of its obligations hereunder (i) do not and will not conflict with or violate any provision of the Articles of Incorporation or By-Laws of the Corporation, (ii) do not and will not conflict with or result in any breach of any condition or provisions of, or constitute a default under or give rise to any right of termination, cancellation or acceleration of any contract, mortgage, lien, lease, agreement, indenture, instrument, judgment or decree to which the Corporation is a party or which is binding upon the Corporation, and (iii) does not and will not result in the creation or imposition of any lien, charge, pledge, security interest or other encumbrance upon the Corporation. (c) The Corporation is acquiring the Option for its own account for investment purposes only within the meaning of the Securities Act of 1933, with no intention of assigning, selling, or otherwise transferring the Option or any participation or interest therein and with no view to the sale or distribution thereof in violation of any Federal or State securities laws. 6.2 REPRESENTATIONS AND WARRANTIES OF THE RJF GROUP. Each member of the RJF Group. Jointly and severally, hereby represents and warrants to the Corporation and to Ehlers, as follows: (a) Each member of the RJF Group is a corporation duly organized, validly existing, and in good standing under the laws of its respective state of incorporation and each such member has all requisite power and authority, corporate and otherwise, to own, lease, and operate its properties and carry on its X - 56 business as and in the places where such properties are now owned, leased or operated or such business is now being conducted. (b) The Option and the right to receive payments under the Separation Agreement for the Institutional Customer Liquidated Damages are owned solely by RJF and Eagle, respectively, free and clear of any and all security interests, liens, pledges, claims, charges, escrows, encumbrances, rights of first refusal, security interests or other contracts, and RJF has the unrestricted right to sell the Option hereunder and to accept prepayment on behalf of Eagle, in full satisfaction of all Institutional Customer Liquidated Damages owed under the Separation Agreement. (c) Each member of the RJF Group has all requisite capacity, power and authority, corporate or otherwise, to enter into this Agreement and to assume and perform its obligations hereunder. The execution and delivery of this Agreement and the performance by each such member of the RJF Group of its obligations hereunder have been duly and validly authorized by all necessary corporate action on the part of each member of the RJF Group and no further action or approval, corporate or otherwise, is required in order to constitute this Agreement as a valid and binding obligation of each member of the RJF Group, enforceable in accordance with its terms. The execution and delivery of this Agreement and the performance by each member of the RJF Group of its obligations hereunder (i) do not and will not conflict with or violate any provisions of the Articles of Incorporation or By-Laws of any member of the RJF Group, (ii) do not and will not conflict with or result in any breach of any condition or provisions of, or constitute a default under or give rise to any right of termination, cancellation or acceleration of any contract, mortgage, lien, lease, agreement, indenture, instrument, judgment or decree to which a member of the RJF Group is a party, and (iii) does not and will not result in the creation or imposition of any lien, charge, pledge, security interest or other encumbrance upon the Option or any of the rights of RJF to payments of Institutional Customer Liquidated Damages under the Separation Agreement. (d) RJF has had access to such information concerning the Corporation as RJF has deemed necessary in order for RJF to enable it to make an informed decision concerning its disposition of the Option and its acceptance of the prepayments for the Institutional Customer Liquidated Damages due to RJF under the Separation Agreement. RJF has consulted with its investment, accounting, legal and tax advisors concerning the transactions described herein and is sufficiently experienced in financial and business matters to fully evaluate the risks and merits of the transactions described in this Agreement. RJF understands that no Federal or state agency has made any finding, or determination as to the fairness of the terms and conditions of this Agreement as it relates to RJF. X - 57 7. INDEMNITY. 7.1 Notwithstanding the provisions of Section 1.2 hereof, RJF hereby agrees to indemnify and hold the Corporation and Ehlers harmless of and from 35% of any payments required to be made by the Corporation or Ehlers in connection with the indemnity provisions contained in the Acquisition Agreement as described in Article VIII thereof but not in excess of the Option Payment; provided, however, that in no event shall RJF be required to indemnify the Corporation or Ehlers if such indemnification obligation arises as a result of the gross negligence or willful misrepresentation by the Corporation or Ehlers under the Acquisition Agreement. 7.2 In the event Ehlers or the Corporation seek indemnity from RJF pursuant to the provisions of Section 7.1, the party seeking such indemnification (the "INDEMNIFIED PARTY") shall give written notice to RJF of the loss or potential loss. Written notice to RJF of the existence of the loss or potential loss shall be given by the Indemnified Party promptly after notice of the loss or potential loss; provided, however, that the Indemnified Party shall not be foreclosed from seeking indemnification pursuant to Section 7.1 by any failure to provide prompt notice of the existence of a loss or potential loss except and only to the extent that RJF actually incurs an incremental out-of-pocket expense or otherwise has been materially damaged or prejudiced as a result of such delay. 7.3 Except as otherwise provided herein, RJF may elect to defend at RJF's own expense and by RJF's own counsel (which counsel shall be reasonably satisfactory to the Indemnified Party), any claim giving rise to a loss or potential loss to the extent of RJF's indemnification obligation hereunder. If RJF elects to defend the potential claim it shall, within thirty (30) days after receiving notice of the claim, notify the Indemnified Party of RJF's intent to defend and the Indemnified Party shall cooperate, at the expense of RJF, in the defense of the third party claim. Such cooperation shall include, if requested by RJF, not opposing RJF's intervention in any judicial actions concerning the third party claim. If RJF elects not to defend against a third-party claim or fails to notify the Indemnified Party of its election to do so as herein provided or otherwise abandons the defense of the third party claim (i) the Indemnified Party may pay (without prejudice of any of its rights as against RJF), compromise or defend the third party claim and (ii) the costs and expenses of the Indemnified Party incurred in connection therewith to the extent indemnification is due hereunder shall be indemnifiable by RJF pursuant to the terms of this Agreement. Notwithstanding anything to the contrary contained herein, in connection with any third party claim in which the Indemnified Party and RJF shall reasonably conclude based upon the written advice of their respective counsel, that (x) there is a conflict of interest between RJF and the Indemnified Party in the conduct of the defense of the claim or (y) there are specific defenses available to the Indemnified Party which are different from or additional to those available to RJF and which could be materially adverse to RJF, then the Indemnified Party shall have the right to assume and direct the defense of the third party claim as it relates to the Indemnified Party. Notwithstanding, the X - 58 foregoing, the Indemnified Party shall have the right to settle or compromise any claim upon providing written notice to RJF unless and only to the extent that the settlement of the claim is proven by RJF in a court of competent jurisdiction to have been unreasonable and the claim was without merit. In any other event, RJF and the Indemnified Party may each participate, at their own expense, in the defense of the third party claim. RJF and the Indemnified Party shall cooperate with each other in the defense of any claim in all respects including making reasonably available to the other party any personnel or any books, records or other documents within their control which are reasonably necessary or appropriate for the defense, subject to the receipt of appropriate confidentiality agreements or such other agreements as counsel to the parties may deem reasonably necessary in order to ensure that the attorney-client privileges applicable to a party are not inadvertently waived. 8. MUTUAL RELEASE. Except for (i) the obligations of the parties as described herein, and (ii) subject to verification by RJF that all obligations of the Corporation under the Separation Agreement which have accrued prior to the date hereof (the "Prior Obligations") have been fully paid in accordance with the terms thereof (which PRIOR OBLIGATIONS shall not be released until fully paid as described in the Separation Agreement), each member of the RJF Group, on the one hand, and the Corporation and Ehlers, on the other hand, on behalf of themselves, and their successors and assigns, jointly and severally, hereby mutually agree to fully remise, release, acquit and forever discharge one another, and each of their respective successors and assigns, their boards of directors, shareholders, officers, employees and agents, and their respective partners, agents, employees, stockholders, officers, successors and assigns, jointly and severally, of and from any and all debts, costs, liabilities, obligations, losses, suits, controversies, disputes, rights, claims, demands, damages, actions and causes of action of any nature whatsoever, whether arising at law or in equity, which any of the foregoing parties may have had, may now have, or may have, or may hereafter have, against one another by reason of any matter, cause, happening, thing, document, agreement, partnership agreement, separation agreement, option agreement, lease, note, instrument or any other matter whatsoever, from the beginning of time, to and including this date hereof. Without limiting the foregoing, after payment of the Total Payment, and subject to verification by RJF that the Prior Obligations have been paid in full (which verification RJF agrees to complete within six (6) months after the Closing Date), the parties hereto agree that the Corporation shall have no further obligation to RJF or any member of the RJF Group, including Eagle, to make any other payments whatsoever under this Agreement, the Separation Agreement, the Option Agreement or any other agreement between the parties hereto. Effective as of the Closing Date, and subject to the obligations of the parties hereto to consummate the transactions described herein, the parties hereto agree that the Separation Agreement shall be terminated in its entirety and shall be considered null, void and of no further force or effect whatsoever. 9. OTHER AGREEMENTS OF THE PARTIES. 9.1 The Corporation agrees to provide RJF with such documents, schedules and financial information as RJF shall reasonably request in connection with the verification X - 59 by RJF that all amounts due to it or Eagle under the provisions of the Separation Agreement and this Agreement shall have been fully paid. 9.2 RJF and Eagle agree that, prior to December 31, 1999, neither RJF nor Eagle shall amend their respective articles of incorporation or bylaws in any way or manner so as to limit the indemnity available to officers and directors (or former officers and directors) of RJF and Eagle and shall ensure that Ehlers and any employees of the Corporation who would be entitled to indemnification under the provisions of the current articles of incorporation and bylaws of RJF, Eagle or Heritage continue in full force and effect. Until December 31, 1999, Eagle will maintain "Directors and Officers Errors and Omissions Liability Insurance" in an amount of not less that $10,000,000 and will cause such policies to include as "Insureds" any past directors or officers as is provided presently by Eagle pursuant to its insurance policy with Gulf Underwriters Insurance Company. 9.3 RJF shall indemnify and hold Ehlers harmless of and from any and all costs, expenses, liability, damages or other impositions whatsoever (including reasonable attorneys' fees) incurred by Ehlers with respect to that certain litigation styled DAVID W. JONSSON V. RAYMOND JAMES & ASSOCIATES, INC., ET AL; NASD Arbitration No. 93-01860, and any other suits or actions filed by David W. Jonsson. 10. AUTOMATIC TERMINATION. In the event of the termination of the Acquisition Agreement pursuant to the terms thereof, this Agreement shall automatically terminate and shall be deemed null, void and of no further force or effect whatsoever effective as of the date of such termination of the Acquisition Agreement, and the parties hereto acknowledge and agree that the Separation Agreement and the Option Agreement shall remain in full force and effect in the event of such termination of the Acquisition Agreement. 11. COOPERATION. The RJF Group hereby agrees to cooperate and to do all things necessary in order to assist the Corporation in obtaining the approval of any and all mutual funds and accounts controlled by the RJF Group to the assignment of the investment advisory agreements or subadvisory agreements from the Corporation to Goldman; including, without limitation, the Heritage Capital Appreciation Trust, the RJF Profit Sharing Plan and Trust and the United Way of Pinellas County, Inc. Endowment Fund and Reserve Fund. 12. WAIVER. In connection with the termination of the Separation Agreement, each party to this Agreement hereby agrees to waive and fully discharge any and all rights and continuing obligations whatsoever existing under the Separation Agreement effective as of the date of such termination, including, without limitation, any and all restrictive covenants and nonsolicitation provisions contained therein (including, without limitation, Section 4.2, Section 4.3 and Section 9.1 of the Separation Agreement). 13. NOTICES. All notices or other communications required or permitted to be given pursuant to this Agreement shall be in writing and shall be deemed to have been properly given X - 60 or made, when deposited in the United States mail, postage prepaid, addressed to the parties at their respective addresses shown on the signature pages hereof. No other method of providing notice is hereby precluded, provided that (i) such method is a reasonably acceptable, commercially utilized means of providing notices (such as Federal Express, Purolator or United States Mail Next Day Delivery, or if delivered by hand-delivery), (ii) such method of delivery provides the sender with a receipt or other evidence that the person to whom the notice has been sent has received same, and (iii) the postage or any charge required to be paid in connection with such notice is prepaid by the sender. 14. GOVERNING LAW. The validity, construction, interpretation and enforceability of this Agreement shall be governed by the laws of the State of Florida. 15. NO JOINT VENTURE. The provisions of this Agreement shall not be deemed to create any type of joint venture, partnership or other joint enterprise between Ehlers and the Corporation, on the one hand, and RJF, Eagle or Heritage, on the other hand. 16. COUNTERPARTS AND ORIGINALS. The parties may execute this Agreement in counterparts. Each executed counterpart shall be deemed an original, and all of them, together, shall constitute the same agreement. 17. SUCCESSORS AND ASSIGNS. This Agreement is not assignable by any party without the prior written consent of the other parties, and any attempted assignment without the prior written consent of the other parties shall be invalid and unenforceable against the other parties. Subject to the foregoing, this Agreement is binding upon, and inures to the benefit of, the respective heirs, authorized assignees, successors and personal representatives of the parties to it. 18. HEADINGS, CAPTIONS AND PRONOUNS. The section headings, captions or abbreviations are included solely for convenient reference and shall not control the meanings or interpretation of any of the provisions of this Agreement. As used herein, words in the singular include the plural and the words in the masculine include the feminine and neuter gender, and vice versa whenever the context so requires. 19. WAIVER. No waiver of any breach or default under this Agreement shall be deemed to be a waiver of any subsequent breach or default. 20. FURTHER ASSURANCES. Each of the parties hereto agrees to take such action as may be reasonably requested by any other party hereto in order to more effectively carry out the terms and conditions of this Agreement or any exhibit hereto. 21. INCORPORATION OF RECITALS. The recitals set forth at the beginning of this Agreement are hereby incorporated into this Agreement by this reference and this Agreement shall be interpreted with reference to such recitals. X - 61 22. SEVERABILTY. This Agreement shall not be severable in any way, but if any provision shall be held to be invalid, the invalidity shall not affect the validity of the remainder of this Agreement and the remainder of this Agreement shall continue in full force and effect. 23. COSTS AND EXPENSES. Each of the parties hereto shall bear its own costs and expenses with respect to the negotiation, execution and performance of this Agreement and all exhibits hereto, including, without limitation, the costs and expenses of each party's attorneys, accountants and financial advisors. 24. ANNOUNCEMENTS. Except for such statements and regulatory filings as may be required by any applicable law, and except as may be required in order to allow a party to comply with the terms and conditions of this Agreement, no party shall make any public statements or disclose the terms and conditions of this Agreement including, without limitation, making any press releases with respect to this Agreement and the transactions contemplated herein without the prior written consent of the other parties hereto (which consent may not be unreasonably withheld). * * * X - 62 IN WITNESS WHEREOF, have executed this Termination and Release Agreement the day and year first above written. Attest: RAYMOND JAMES FINANCIAL, INC. By: /s/ SHARRY L MAUNEY By: /s/ THOMAS A. JAMES ---------------------------- -------------------------- Sharry L. Mauney, Thomas A. James, Chairman Assistant Secretary "RJF" (Corporate Seal) Address: 880 Carillon Parkway St. Petersburg, Florida 33716 Attest: EAGLE ASSET MANAGEMENT, INC. By: /s/ STEPHEN W. FABER By: /s/ THOMAS A. JAMES ---------------------------- -------------------------- Stephen Faber, Secretary Thomas A. James, Chairman "Eagle" (Corporate Seal) Address: 880 Carillon Parkway St. Petersburg, Florida 33716 Witnesses: HERITAGE ASSET MANAGEMENT, INC. /s/ LINDA HARTER By: /s/ THOMAS A. JAMES - ------------------------------- ----------------------------- Name: Linda Harter Thomas A. James, Chairman -------------------------- (Type or Print Name) (Corporate Seal) /s/ DEBBIE GESUALDA - ------------------------------- Name: Debbie Gesualda -------------------------- "Heritage" (Type or Print Name) Address: 880 Carillon Parkway St. Petersburg, Florida 33716 [Signature Lines Continued on Next Page] X - 63 Witnesses: /s/ LYNN A TABER /s/ HERBERT E. EHLERS - ------------------------------ ------------------------------ Name Lynn A. Taber Herbert E. Ehlers ------------------------- (Type or Print Name) "Ehlers" /s/ BEATRICE BREWER LEE - ------------------------------ Name: Beatrice Brewer Lee ------------------------ (Type or Print Name) Address: Two Seaside Lane, Apt. 204 Belleair, Florida 34616 Attest: LIBERTY INVESTMENT MANAGEMENT, INC., formerly known as Eagle Institutional Asset Management, Inc., a Florida corporation By:/s/ Sidney D. Goff By: /s/ HERBERT E. EHLERS --------------------------- ------------------------------ Sydney D. Goff, Secretary W Herbert E. Ehlers, Chairman (Corporate Seal) "Corporation" Address: Suite 500 2502 Rocky Point Drive Tampa, Florida 33607 [Signature Page to termination and Release Agreement] X - 64 EX-11 6 EXHIBIT 11 RAYMOND JAMES FINANCIAL, INC. COMPUTATION OF EARNINGS PER SHARE (in thousands, except per share amounts) YEAR ENDED ------------------------------------------- SEPTEMBER 27, SEPTEMBER 29, SEPTEMBER 30, 1996 1995 1994 ------------- ------------- ------------- Net income applicable to common stock and other dilutive securities $65,978 $46,141 $42,069 ======= ======= ======= Average number of common shares and equivalents outstanding during the period (1) 20,791 20,520 21,038 Additional shares assuming exercise of stock options and warrants (1)(2) 234 185 321 ------- ------- ------ Average number of common shares used to calculate earnings per share (1) 21,025 20,705 21,359 ======= ======= ======= Income per share $ 3.14 $ 2.23 $ 1.97 ======= ======= ======= (1) Restated to give retroactive effect to all common stock dividends. (2) Represents the number of shares of common stock issuable on the exercise of dilutive employee stock options less the number of shares of common stock which could have been purchased with the proceeds from the exercise of such options. These purchases were assumed to have been made at the average market price of the common stock during the period, or that part of the period for which the option was outstanding. X - 65 EX-21 7 EXHIBIT 21
RAYMOND JAMES FINANCIAL, INC. LIST OF SUBSIDIARIES The following listing includes the registrant's subsidiaries all of which are included in the consolidated financial statements: STATE OF NAME OF COMPANY INCORPORATION SUBSIDIARY OF - --------------- ------------- ------------- Raymond James & Associates, Inc. Florida Raymond James Financial, Inc. ("RJF") Eagle Asset Management, Inc. Florida RJF Heritage Asset Management, Inc. Florida RJF Investment Management & Research, Inc. Florida RJF Planning Corporation of America ("PCA") Florida Raymond James & Associates, Inc. ("RJA") PCAF, Inc. Florida PCA Raymond James Bank, FSB Florida RJF Raymond James Credit Corporation Delaware RJF Raymond James International Holdings, Inc. Delaware RJF Raymond James Mortgage Capital, Inc. Delaware RJF Raymond James Partners, Inc. Florida RJF Raymond James Realty Advisors, Inc. Florida RJP Raymond James Trust Company Florida RJF RJ Communication, Inc. Florida RJF RJ Credit Partners, Inc. Florida RJF RJ Equities, Inc. Florida RJF RJ Equities-2, Inc. Florida RJF RJ Government Securities, Inc. Florida RJF RJ Health Properties, Inc. Florida RJF RJ Leasing, Inc. Florida RJF RJ Leasing-2, Inc. Florida RJF RJ Medical Investors, Inc. Florida RJF RJ Mortgage Acceptance Corporation Delaware RJF RJ Partners, Inc. Florida RJF RJ Properties, Inc. ("RJP") Florida RJF RJ Realty, Inc. Florida RJF RJ Specialist, Inc. Florida RJF RJ Washington Square Georgia RJF RJA Municipal ABS, Inc. Delaware RJF Robert Thomas Securities, Inc. Florida RJF Sound Trust Company Washington RJF Value Partners, Inc. Florida RJF Heritage International, Ltd. Mauritius Raymond James International Holdings, Inc. ("RJIH") Raymond James & Associates, Ltd. Bermuda RJIH Raymond James Financial International, Ltd. United Kingdom RJIH
X - 66 EX-23 8 EXHIBIT 23 CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 33-54071, 33-60608 and 33-38390) of Raymond James Financial, Inc. of our report dated November 18, 1996 appearing on page F-3 of this Form 10-K. PRICE WATERHOUSE LLP Tampa, Florida December 12, 1996 X - 67 EX-27 9
BD 12-MOS SEP-27-1996 SEP-30-1995 SEP-27-1996 98,566,000 512,466,000 636,704 864,140,000 333,150,000 39,585,000 2,566,381,000 11,989,000 1,309,046,000 0 848,595,000 57,210,000 12,909,000 0 0 217,000 326,415,000 2,566,381 12,243,000 126,453,000 422,487,000 72,596,000 68,906,000 83,471,000 423,904,000 108,525,000 0 0 0 65,978,000 3.14 3.12
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