<PAGE>
Registration No. 33- ______
As filed with the Securities and Exchange Commission on December 12, 1996
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________________
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
FIDELITY BANKSHARES, INC.
--------------------------------------------------
(Exact name of registrant as specified in charter)
Delaware 6120 To be applied for
- ------------------------------- ---------------- ----------------------
(State or other jurisdiction of (Primary SIC No.) (I.R.S. Employer
incorporation or organization) Identification Number)
218 Datura Street
West Palm Beach, Florida 33401
(407) 659-9800
-----------------------------------------------------------------------
(Address, including Zip Code, and telephone number, including area code
of Registrant's principal executive offices)
Eric Luse, Esq.
Alan Schick, Esq.
Luse Lehman Gorman Pomerenk & Schick
A Professional Corporation
5335 Wisconsin Avenue, N.W.
Suite 400
Washington, D.C. 20015
(202) 274-2000
---------------------------------------------------------
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC:
As soon as practicable after receipt of all regulatory approvals.
If the securities being registered on this form are being offered in connection
with the formation of a holding company and there is compliance with General
Instruction G, check the following box. [X]
<TABLE>
<CAPTION>
=====================================================================================================
CALCULATION OF REGISTRATION FEE
- -----------------------------------------------------------------------------------------------------
Title of each class of Amount to Proposed maximum Proposed Amount of
securities to be be offering price per unit maximum registration fee
registered registered offering price
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, 3,202,689 $17.50/(1)/ $56,847,730 $17,230
$.10 par value shares
- -----------------------------------------------------------------------------------------------------
Common Stock, 222,533 $ 9.09/(2)/ $ 2,022,825 $620
$.10 par value shares
- -----------------------------------------------------------------------------------------------------
Total Fee Paid $17,850
=====================================================================================================
</TABLE>
/(1)/Pursuant to Rule 457(c), the registration fee is based upon the average of
the high and low prices for the Fidelity Federal Savings Bank of Florida as of
December 10, 1996.
/(2)/Represents shares underlying options. Such options have an exercise price
of $9.09 per share.
<PAGE>
__________ __, 1997
Dear Stockholder:
A Special Meeting of Stockholders (the "Special Meeting") of Fidelity
Federal Savings Bank of Florida (the "Bank") will be held at
_______________________, _______________________, _____________, Florida, on
January 21, 1997 at __:__ __.m., local time.
The attached Notice of Special Meeting and Prospectus/Proxy Statement
describe the formal business to be transacted at the Special Meeting.
Stockholders will vote upon a proposal to approve an Agreement and Plan of
Reorganization (the "Plan of Reorganization") which provides for the
establishment of Fidelity Bankshares, Inc. (the "Stock Holding Company") as a
stock holding company parent of the Bank. The Stock Holding Company will be
majority owned by Fidelity Bankshares, M.H.C. (the "Mutual Holding Company").
Pursuant to the Plan of Reorganization: (i) the Bank will become a wholly-owned
subsidiary of the Stock Holding Company, which will become a majority-owned
subsidiary of the Mutual Holding Company, and (ii) each outstanding share of
common stock, par value $1.00 per share, of the Bank will be converted into one
share of common stock, par value $.10 per share, of the Stock Holding Company.
Accordingly, after the Reorganization each stockholder of the Bank will have the
same ownership interest in the Stock Holding Company immediately after the
Reorganization as such stockholder had in the Bank immediately prior to the
Reorganization.
Management believes that the establishment of the Stock Holding Company
will be in the best interests of stockholders because it will permit the Bank,
through the Stock Holding Company, to have substantially the same benefits
available to other savings associations in a stock holding company structure.
These include the ability to facilitate acquisitions of other financial
institutions, to repurchase common stock as market conditions permit, and to
diversify holding company operations. Directors and officers of the Bank will
be present to respond to any questions that our stockholders may have.
YOUR VOTE IS IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES YOU OWN. On
behalf of the Board of Directors, we urge you to please sign, date and return
the enclosed proxy card in the enclosed postage-prepaid envelope as soon as
possible even if you currently plan to attend the Special Meeting. This will
save the Bank added expense and will not prevent you from voting in person. It
will also assure that your vote is counted if you are unable to attend the
Special Meeting.
Sincerely,
Vince A. Elhilow
President and Chief Executive Officer
<PAGE>
- --------------------------------------------------------------------------------
FIDELITY FEDERAL SAVINGS BANK OF FLORIDA
218 DATURA STREET
WEST PALM BEACH, FLORIDA 33401
- --------------------------------------------------------------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON JANUARY 21, 1997
A Special Meeting of Stockholders (the "Special Meeting") of Fidelity
Federal Savings Bank of Florida (the "Bank") will be held at
_______________________, _______________________, _____________, Florida, on
January 21, 1997, at __:__ .m., local time.
The Special Meeting is for the following purpose which is more completely
described in the accompanying Prospectus/Proxy Statement:
1. The approval of an Agreement and Plan of Reorganization (the "Plan of
Reorganization") providing for the establishment of Fidelity Bankshares,
Inc. (the "Stock Holding Company") as a stock holding company parent of the
Bank which stock holding company will be majority-owned by Fidelity
Bankshares, M.H.C. (the "Mutual Holding Company"), the Bank's mutual
holding company. Pursuant to the Plan of Reorganization: (i) the Bank
will become a wholly-owned subsidiary of the Stock Holding Company which
will become a majority-owned subsidiary of the Mutual Holding Company, and
(ii) each outstanding share of common stock, par value $1.00 per share, of
the Bank will be converted into one share of common stock, par value $.10
per share, of the Stock Holding Company.
The Board of Directors is not aware of any other business to come before
the Special Meeting.
Any action may be taken on the foregoing proposal at the Special Meeting or
any adjournments thereof. Stockholders of record at the close of business on
December 23, 1996, are the stockholders entitled to vote at the Special Meeting
and any adjournment thereof.
BY ORDER OF THE BOARD OF DIRECTORS
Vince A. Elhilow
President and Chief Executive Officer
West Palm Beach, Florida
January 7, 1997
YOU ARE REQUESTED TO FILL IN AND SIGN THE ENCLOSED PROXY WHICH IS SOLICITED
BY THE BOARD OF DIRECTORS AND TO MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE. THE
PROXY WILL NOT BE USED IF YOU ATTEND AND VOTE AT THE SPECIAL MEETING IN PERSON.
- --------------------------------------------------------------------------------
IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE THE BANK THE EXPENSE OF A
FURTHER REQUEST FOR PROXIES IN ORDER TO INSURE A QUORUM. A SELF-ADDRESSED
ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. NO POSTAGE IS REQUIRED IF MAILED
WITHIN THE UNITED STATES.
- --------------------------------------------------------------------------------
<PAGE>
FIDELITY FEDERAL SAVINGS BANK OF FLORIDA
PROSPECTUS/PROXY STATEMENT FOR SPECIAL
MEETING OF STOCKHOLDERS
- --------------------------------------------------------------------------------
PROSPECTUS/PROXY STATEMENT
- --------------------------------------------------------------------------------
This Prospectus/Proxy Statement is being furnished to the holders of common
stock of Fidelity Federal Savings Bank of Florida (the "Bank"), a federally-
chartered stock savings bank, in connection with the solicitation of proxies by
the Board of Directors of the Bank for use at a Special Meeting of Stockholders
to be held at ___________________, Florida, on January 21, 1997. The
accompanying Notice of Special Meeting and this Prospectus/Proxy Statement are
first being mailed to stockholders on or about January 7, 1997.
THE COMMON STOCK OF FIDELITY BANKSHARES, INC. (THE "STOCK HOLDING COMPANY")
HAS BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE
SECURITIES ACT OF 1933. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION, THE OFFICE OF THRIFT SUPERVISION OR
ANY STATE SECURITIES AUTHORITY. NOR HAS ANY SUCH COMMISSION, OFFICE OR AUTHORITY
PASSED ON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS/PROXY STATEMENT. ANY
REPRESENTATION TO THE CONTRARY IS A FEDERAL OFFENSE.
THE BANK'S MUTUAL HOLDING COMPANY, FIDELITY BANKSHARES, M.H.C.,
BENEFICIALLY OWNS A MAJORITY OF THE SHARES OUTSTANDING AND ENTITLED TO VOTE ON
THE PROPOSAL TO ADOPT THE AGREEMENT AND PLAN OF REORGANIZATION, AND IT INTENDS
TO VOTE ITS SHARES IN FAVOR OF THE PROPOSAL. CONSEQUENTLY, APPROVAL OF THE
AGREEMENT AND PLAN OF REORGANIZATION TO ESTABLISH A STOCK HOLDING COMPANY IS
ASSURED.
THE SHARES OF COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS OR
DEPOSITS AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY
OTHER GOVERNMENT AGENCY.
The Bank currently files periodic reports and proxy materials in accordance
with the reporting requirements of the Securities Exchange Act of 1934, as
administered by the Office of Thrift Supervision (the "OTS"). Upon completion
of the transactions described herein, the Stock Holding Company will register
its Common Stock with the Securities and Exchange Commission (the "SEC") under
the Securities Exchange Act of 1934 ("Exchange Act") and the Stock Holding
Company will comply with the periodic reporting requirements and proxy
solicitation requirements imposed pursuant to Section 12(g) of the Exchange Act.
<PAGE>
- --------------------------------------------------------------------------------
SUMMARY INFORMATION
ON
PROPOSED FORMATION OF STOCK HOLDING COMPANY
- --------------------------------------------------------------------------------
THE FOLLOWING SUMMARY DOES NOT PURPORT TO BE COMPLETE AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO THE MORE DETAILED INFORMATION APPEARING ELSEWHERE
IN THIS PROSPECTUS/PROXY STATEMENT UNDER "PROPOSED FORMATION OF STOCK HOLDING
COMPANY", AND EXHIBITS A AND B ATTACHED HERETO.
GENERAL
The formation of a stock holding company will be accomplished under an
Agreement and Plan of Reorganization dated April 25, 1996 (the "Plan of
Reorganization"), pursuant to which the Bank will become a wholly owned
subsidiary of Fidelity Bankshares, Inc. (the "Stock Holding Company"), a newly
formed Delaware stock corporation which will be majority owned by Fidelity
Bankshares, M.H.C. (the "Mutual Holding Company"). Under the terms of the
proposed reorganization (the "Reorganization"), each outstanding share of the
Bank common stock, par value $1.00 per share ("Bank Common Stock"), will be
converted into one share of common stock of the Stock Holding Company, par value
$.10 per share ("Holding Company Common Stock"), and the holders of Bank Common
Stock will become the holders of all of the outstanding shares of Holding
Company Common Stock. Accordingly, as a result of the Reorganization, the owners
of Bank Common Stock other than the Mutual Holding Company (the "Minority
Stockholders"), will become minority stockholders of the Stock Holding Company.
The Stock Holding Company was incorporated in April 1996 solely for the purpose
of becoming a savings and loan holding company and has no prior operating
history. The Reorganization will have no impact on the operations of the Bank
and the Mutual Holding Company. The Bank will continue its operations at the
same locations, with the same management, and subject to all the rights,
obligations and liabilities of the Bank existing immediately prior to the
Reorganization. The Mutual Holding Company owns 52.7% of the outstanding shares
of the Bank Common Stock entitled to vote. The balance of Bank Common Stock is
owned by the Minority Stockholders consisting of employees, officers, directors,
the Bank's employee stock benefit plans, and the public. The Mutual Holding
Company intends to vote its shares in favor of the Plan of Reorganization.
Consequently stockholder approval of the Plan of Reorganization is assured.
REASONS FOR THE HOLDING COMPANY REORGANIZATION
The Board of Directors of the Bank believes that the formation of the Stock
Holding Company as a subsidiary of the Mutual Holding Company will be in the
best interests of stockholders and will offer greater flexibility to repurchase
common stock, make investments and undertake acquisitions than is currently
available to the Bank in its existing mutual holding company structure. See
"Proposed Formation of Stock Holding Company--OTS Policy Regarding Two-Tier
Mutual Holding Companies."
The Reorganization will enable the Stock Holding Company to repurchase
Holding Company Common Stock which, particularly in recent years, has been an
important, if not essential, means for banks and savings institutions to enhance
stockholder value and invest capital resources. Historically, the Bank has used
the percentage of taxable income method for establishing its bad debt reserves
for tax purposes. Recent changes in the federal tax laws generally require that
thrift institutions pay the tax on their excess bad debt reserves accumulated
for tax purposes since 1987, but exempt from taxation the pre-1988 tax bad debt
reserves for thrift institutions that have used the percentage of taxable income
method for computing bad debt reserves. However, certain distributions and
redemptions, such as stock repurchases, are not exempt and are subject to
taxation. Accordingly, if the Bank were to repurchase any of its outstanding
common stock, it would cause recapture of all or part of its pre-1988 excess tax
(ii)
<PAGE>
bad debt reserves. The Stock Holding Company, however, will be permitted to
repurchase Holding Company Common Stock without causing any recapture of the
Bank's tax bad debt reserves.
The Mutual Holding Company does not operate as a traditional holding
company at the present time because it is a mutual organization and represents
only the mutual ownership interest in the Bank. As a result, the Mutual Holding
Company may not make investments, conduct business activities or acquire a
controlling interest in other financial institutions in a way that benefits
Minority Stockholders and the Mutual Holding Company in proportion to their
respective stock ownership interests in the Bank, since Minority Stockholders
would have no direct interest in such other business entity or financial
institution. Upon consummation of the Reorganization, the Stock Holding Company
will be able to make investments and acquisitions for the benefit of the Mutual
Holding Company and Minority Stockholders in proportion to their stock ownership
interests.
The Reorganization and the establishment of the Stock Holding Company will
be accomplished as follows: (i) the Bank has organized the Stock Holding Company
as a wholly-owned subsidiary; (ii) the Stock Holding Company will organize an
interim federal stock savings bank ("Interim Federal") as a wholly-owned
subsidiary; (iii) Interim Federal will merge into the Bank, with the Bank as the
surviving corporation; (iv) in connection with the merger in step (iii) above,
all of the issued and outstanding shares of Bank Common Stock will be canceled,
all of the issued and outstanding shares of Bank Common Stock held by the Bank
shareholders will be converted by operation of law into Holding Company Common
Stock, and all of the issued and outstanding shares of Interim Federal, which
are held by the Stock Holding Company, will automatically be converted by
operation of law into an equal number of shares of common stock of the Bank. As
a result of steps (i) through (iii) above, the Bank will become the wholly-owned
subsidiary of the Stock Holding Company, the Stock Holding Company will become
the majority-owned subsidiary of the Mutual Holding Company, and Minority
Stockholders will become minority stockholders of the Stock Holding Company. The
Board of Directors of the Bank presently intends to capitalize the Stock Holding
Company with up to approximately $100,000, subject to the approval of the OTS.
The following diagram sets forth the Bank's current mutual holding company
structure:
---------------------------
Fidelity Bankshares,
M.H.C.
---------------------------
52.7% of Bank
Common Stock
--------------------- ------------------
Fidelity Federal 47.3% of Bank Minority
Savings Bank of Common Stock Stockholders
Florida
-------------------- ------------------
(iii)
<PAGE>
The following diagram sets forth the Bank's proposed mutual holding company
structure following completion of the Reorganization:
---------------------------
Fidelity Bankshares,
M.H.C.
---------------------------
52.7% of Holding Company
Common Stock
------------------------ --------------
Fidelity Bankshares, 47.3% of Holding Minority
Inc. Company Common Stockholders
Stock
----------------------- ---------------
100% Owned
-----------------------
Fidelity federal
Savings Bank of
Florida
-----------------------
MARKET FOR COMMON STOCK
The Bank Common Stock is currently listed on the Nasdaq National Market
under the symbol "FFFL." At September 30, 1996 the Bank had eight market makers
and 945 stockholders of record. Following completion of the Reorganization the
Stock Holding Company Common Stock will be listed on the Nasdaq National Market
under the same symbol. See "Market for Common Stock."
DIVIDENDS
To date, the Bank has paid cash dividends on a quarterly basis. Although
the Stock Holding Company expects to continue to pay cash dividends on the same
basis as the Bank, its principal source of income initially will consist of
dividends from the Bank. The payment of such dividends will depend on a number
of factors, including the Bank's results of operations, financial, regulatory
and tax considerations as well as general economic conditions. In addition, the
Stock Holding Company's ability to pay dividends is subject to limitations under
Delaware law. For further information regarding the Bank's dividend policy and
the expected dividend policy of the Stock Holding Company, see "Dividend Policy"
and "Proposed Formation of Stock Holding Company--Regulation of the Stock
Holding Company."
WAIVER OF DIVIDENDS BY MUTUAL HOLDING COMPANY
The Reorganization is not expected to have an impact on the dividend waiver
policy of the Mutual Holding Company, which is expected to continue to waive the
receipt of cash dividends declared by the Bank, subject to OTS approval, to the
extent that the Mutual Holding Company does not have a business need for such
dividends. Accordingly, while it is the current intention of the Mutual Holding
Company to continue to waive the right to receive dividends, it may determine to
accept such dividends in the future.
(iv)
<PAGE>
Under OTS policy, if the Mutual Holding Company waives the right to receive
cash dividends from the Stock Holding Company, the amount of the waived dividend
is considered a restriction on retained earnings for financial statement
purposes, and in the event the Mutual Holding Company converts to stock form,
the conversion appraisal submitted in connection with the conversion application
must take into account the aggregate amount of the dividends waived by the
Mutual Holding Company. Since the Mutual Holding Company was formed prior to
February 1, 1995, OTS policy provides that no dilution of Minority Stockholders'
ownership interest would occur as a result of dividends waived by the Mutual
Holding Company unless the dividends paid to Minority Stockholders are
significantly in excess of the amount of dividends paid by comparable
institutions. See "Dividend Policy" and "Proposed Formation of Stock Holding
Company - Regulation of Stock Holding Company."
DISSENTERS' RIGHTS
Stockholders of the Bank will not be entitled to dissenters' rights of
appraisal in connection with the Reorganization. See "Proposed Formation of
Stock Holding Company--Rights of Dissenting Stockholders."
MANAGEMENT OF THE STOCK HOLDING COMPANY
The Board of Directors of the Stock Holding Company presently consists of,
and upon the completion of the Reorganization is expected to consist of, all of
the present directors of the Bank. The executive officers of the Stock Holding
Company will consist of those persons now serving as executive officers of the
Bank. See "Management of the Bank" and "Proposed Formation of Stock Holding
Company--Management of the Stock Holding Company."
TAX CONSEQUENCES
Consummation of the Reorganization is expressly conditioned upon receipt by
the Bank of an opinion of its special counsel, Luse Lehman Gorman Pomerenk &
Schick, P.C., that, among other things, the Reorganization will be treated as a
non-taxable transaction to the Bank, the Stock Holding Company, the Mutual
Holding Company and the stockholders of the Bank. This opinion will not be
binding on the Internal Revenue Service. Each holder of Bank Common Stock
should consult his or her own tax counsel as to specific federal, state and
local tax consequences of the Reorganization, if any, to such stockholder. See
"Proposed Formation of Stock Holding Company--Tax Consequences."
CONDITIONS TO THE REORGANIZATION
The Plan of Reorganization sets forth a number of conditions to the
completion of the Reorganization, including: (i) approval of the Plan of
Reorganization by the holders of a majority of the outstanding shares of Bank
Common Stock; (ii) receipt of an opinion of counsel that the Reorganization will
be treated as a non-taxable transaction for federal income tax purposes; (iii)
approval of the Reorganization by the OTS; and (iv) registration of the Holding
Company Common Stock to be issued in the Reorganization under the Securities
Exchange Act of 1934 and the compliance by the Stock Holding Company with all
applicable state securities laws relating to the issuance of the Holding Company
Common Stock. The Stock Holding Company's Common Stock will be registered with
the SEC under the Securities Act of 1933. The Mutual Holding Company owns 52.7%
of the outstanding shares of Bank Common Stock, and intends to vote such shares
in favor of the Reorganization.
(v)
<PAGE>
The Stock Holding Company has filed an application with the OTS to acquire
control of the Bank. The OTS approved the Holding Company Application pursuant
to an approval order dated November 18, 1996 (the "OTS Order"). See "Proposed
Formation of Stock Holding Company--OTS Policy Regarding Two-Tier Mutual Holding
Companies."
COMPARISON OF STOCKHOLDERS' RIGHTS
As a result of the Reorganization, holders of the Bank Common Stock, whose
rights are presently governed by federal law and regulations and the Bank's
federal stock Charter and Bylaws, will become stockholders of the Stock Holding
Company. Accordingly, their rights will be governed by the Delaware General
Corporation Law and the Certificate of Incorporation and Bylaws of the Stock
Holding Company. Certain changes in stockholders' rights arise from this change
of governing law, as well as from distinctions between the Charter and Bylaws of
the Bank and the Certificate of Incorporation and Bylaws of the Stock Holding
Company. See "Proposed Stock Holding Company Formation--Comparison of
Stockholders' Rights."
The Stock Holding Company's Certificate of Incorporation contains
provisions: limiting the liability of directors and officers of the Stock
Holding Company for certain breaches of fiduciary duty; eliminating cumulative
voting for the election of directors; indemnifying directors and officers in
certain proceedings against them; providing for staggered terms of directors;
and providing a supermajority vote requirement in order to remove a director.
Such provisions may have the effect of protecting the management of the Stock
Holding Company against attempts to change or replace it. Directors and
officers of the Bank thus have a personal interest in the completion of the
Reorganization. See "Proposed Stock Holding Company Formation--Management of
the Stock Holding Company--Indemnification of Officers and Directors and
Limitation of Liability" and "--Comparison of Stockholder Rights and Certain
Anti-Takeover Provisions."
RECOMMENDATION
The Board of Directors of the Bank believes that the Reorganization will
enhance the ability of the Bank and the Stock Holding Company to undertake
mergers and acquisitions, enable the Stock Holding Company to repurchase common
stock as market conditions permit, and provide the Stock Holding Company greater
flexibility to diversify its business activities. THE BOARD OF DIRECTORS OF THE
BANK HAS UNANIMOUSLY APPROVED THE REORGANIZATION AND RECOMMENDS THAT THE
STOCKHOLDERS VOTE "FOR" THE PLAN OF REORGANIZATION.
(vi)
<PAGE>
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FIDELITY FEDERAL SAVINGS BANK OF FLORIDA
218 DATURA STREET
WEST PALM BEACH, FLORIDA
(407) 659-9900
SPECIAL MEETING OF STOCKHOLDERS
JANUARY 21, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INTRODUCTION
- --------------------------------------------------------------------------------
This Prospectus/Proxy Statement is furnished in connection with the
solicitation of proxies by the Board of Directors of Fidelity Federal Savings
Bank of Florida (the "Bank") for a Special Meeting of Stockholders of the Bank
(the "Special Meeting") to be held at _______________________,
_______________________, West Palm Beach, Florida on January 21, 1997, at
__:__ _.m., local time. The accompanying Notice of Special Meeting and this
Prospectus/Proxy Statement, together with the enclosed proxy card, are first
being mailed to stockholders on or about January 7, 1997.
- --------------------------------------------------------------------------------
REVOCABILITY OF PROXIES
- --------------------------------------------------------------------------------
Stockholders who execute proxies in the form solicited hereby retain the
right to revoke them in the manner described below. Unless so revoked, the
shares represented by such proxies will be voted at the Special Meeting and all
adjournments thereof. Proxies solicited on behalf of the Board of Directors of
the Bank will be voted in accordance with the directions given thereon. WHERE
NO INSTRUCTIONS ARE INDICATED, PROXIES WILL BE VOTED "FOR" THE PROPOSAL SET
FORTH IN THIS PROSPECTUS/PROXY STATEMENT FOR CONSIDERATION AT THE SPECIAL
MEETING.
Proxies may be revoked by sending written notice of revocation to the
Secretary of the Bank, Patricia C. Clager, at the address of the Bank shown
above or by voting a later dated proxy. The presence at the Special Meeting of
any stockholder who had given a proxy shall not revoke such proxy unless the
stockholder delivers his or her ballot in person at the Special Meeting or
delivers a later dated proxy or a written revocation to the Secretary of the
Bank prior to the voting of such proxy.
- --------------------------------------------------------------------------------
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
- --------------------------------------------------------------------------------
Holders of record of Bank Common Stock as of the close of business on
December 23, 1996 (the "Record Date") are entitled to one vote for each share
then held. As of the Record Date, the Bank had 6,720,821 shares of Bank Common
Stock issued and outstanding. The presence in person or by proxy of a majority
of the outstanding shares of Bank Common Stock entitled to vote is necessary to
constitute a quorum at the Special Meeting. Broker non-votes will not be
counted as shares present and entitled to vote. Approval of the Proposal
requires the vote of a majority of the outstanding shares of Bank Common Stock.
Consequently, broker non-votes will have the same effect as a vote against
Proposal. The Mutual Holding Company owns 3,542,000 shares, or 52.7% of the
outstanding Bank Common Stock, and intends to vote such shares in favor of the
Plan of Reorganization. Consequently approval of the Plan of Reorganization is
assured.
<PAGE>
Persons and groups who beneficially own in excess of five percent of the
Bank Common Stock are required to file certain reports with the OTS regarding
such ownership pursuant to the Securities Exchange Act of 1934 (the "Exchange
Act"). The following table sets forth, as of the Record Date, the shares of
Bank Common Stock beneficially owned by named executive officers individually,
by executive officers and directors as a group and by each person who was the
beneficial owner of more than 5% of the outstanding shares of Bank Common Stock
on the Record Date.
<TABLE>
<CAPTION>
AMOUNT OF SHARES
OWNED AND NATURE PERCENT OF SHARES
NAME AND ADDRESS OF OF BENEFICIAL OF BANK COMMON
BENEFICIAL OWNER OWNERSHIP STOCK OUTSTANDING
------------------- ---------------- -----------------
<S> <C> <C>
Fidelity Bankshares, M.H.C. 3,542,000 52.52%
218 Datura Street
West Palm Beach, Florida 33401
Named Executive Officers: (1)
Vince A. Elhilow (2)
President and Chief Executive Officer 122,860 1.82%
Richard D. Aldred (3)
Executive Vice President--Finance 30,068 .45%
J. Robert McDonald (4)
Executive Vice President--Appraisal 46,782 .69%
Joseph C. Bova (5)
Executive Vice President--Lending Operations 25,381 .38%
Robert L. Fugate (6)
Executive Vice President--Banking Operations 33,928 .50%
Christopher H. Cook (7)
Senior Vice President and Corporate Counsel 17,013 .25%
All named executive officers and directors
as a group (11 persons) (8) 486,927 7.22%
</TABLE>
_________________________
(1) The Bank's executive officers and directors are also executive officers and
directors of the Mutual Holding Company. The address of each named
executive officer is 218 Datura Street, West Palm Beach, Florida 33401.
(2) Includes 14,820 shares of Bank Common Stock subject to options pursuant to
the Fidelity Federal Savings Bank of Florida 1994 Stock Option Plan (the
"Stock Option Plan") that may be exercised within 60 days of the Record
Date and 28,809 shares held by the Fidelity Federal Savings Bank of Florida
Senior Management Performance Incentive Award Plan (the "Management
Performance Plan"). Includes 21,120 shares awarded to the executive under
the Fidelity Federal Savings Bank of Florida Recognition and Retention Plan
for Employees (the "Employee Recognition Plan") which shares vest ratably
over a three year period from the date of the award. Includes 1,572 shares
allocated under the Bank's ESOP. Includes 10,470 shares held under the
Savings Plan for Employees for the benefit of Mr. Elhilow.
(3) Includes 4,862 shares of Bank Common Stock subject to options pursuant to
the Stock Option Plan that may be exercised within 60 days of the Record
Date and 7,295 shares held by the Management Performance Plan. Includes
8,195 shares awarded to the executive under the Employee Recognition Plan
which shares vest ratably over a three year period from the date of the
award. Includes 1,500 shares allocated under the Bank's ESOP. Includes
2,912 shares held under the Savings Plan for Employees for the benefit of
Mr. Aldred.
(4) Includes 3,184 shares of Bank Common Stock subject to options pursuant to
the Stock Option Plan that may be exercised within 60 days of the Record
Date and 18,243 shares held by the Management Performance Plan. Includes
9,515 shares awarded to the executive under the Employee Recognition Plan
which shares vest ratably over a three year period from
2
<PAGE>
the date of the award. Includes 1,384 shares allocated under the Bank's
ESOP. Includes 7,179 shares held under the Savings Plan for Employees for
the benefit of Mr. McDonald.
(5) Includes 7,293 shares of Bank Common Stock subject to options pursuant to
the Stock Option Plan that may be exercised within 60 days of the Record
Date and 7,820 shares held by the Management Performance Plan. Includes
8,195 shares awarded to the executive under the Employee Recognition Plan
which shares vest ratably over a three year period from the date of the
award. Includes 1,455 shares allocated under the Bank's ESOP. Includes
3,351 shares held under the Savings Plan for Employees for the benefit of
Mr. Bova.
(6) Includes 2,431 shares of Bank Common Stock subject to options pursuant to
the Stock Option Plan that may be exercised within 60 days of the Record
Date and 7,819 shares held by the Management Performance Plan. Includes
8,195 shares awarded to the executive under the Employee Recognition Plan
which shares vest ratably over a three year period from the date of the
award. Includes 1,346 shares allocated under the Bank's ESOP. Includes
7,397 shares held under the Savings Plan for Employees for the benefit of
Mr. Fugate.
(7) Includes 11,380 shares subject to options that may be exercised within 60
days of the Record Date granted pursuant to the Directors Plan and 4,510
shares awarded subject to restrictions, pursuant to the Directors
Recognition Plan.
(8) Unless otherwise indicated, includes shares held directly by the
individuals as well as by spouses, in trust, and other indirect forms of
ownership over which shares the individuals effectively exercise sole or
shared voting and investment power. Includes 75,900 shares of Bank Common
Stock which outside directors of the Bank have the right to acquire within
60 days of the Record Date pursuant to the exercise of stock options
granted under the Bank's Stock Option Plan for Outside Directors (the
"Directors Plan"). Includes 34,980 shares awarded, subject to restrictions,
pursuant to the Bank's Recognition and Retention Plan for Outside Directors
(the "Directors' Recognition Plan") which shares vest ratably over a three-
year period commencing one year from the date of award.
- --------------------------------------------------------------------------------
MARKET INFORMATION
- --------------------------------------------------------------------------------
The Bank Common Stock is listed on the Nasdaq National Market under the
symbol "FFFL." As of the Record Date, there were approximately 945 stockholders
of record, and 6,744,689 shares outstanding, which includes shares held by the
Mutual Holding Company.
The following table sets forth market price and dividend information for
the Bank Common Stock in each full quarterly period for the past two complete
fiscal years and interim periods.
<TABLE>
<CAPTION>
QUARTER ENDED HIGH (1) LOW (1) DIVIDENDS (1)
- ------------- -------- ------- -------------
<S> <C> <C> <C>
1994
- ----
March 31....... $13.41 $10.91 $.068
June 30........ 13.41 10.68 .091
September 30... 13.64 12.73 .091
December 31.... 13.52 9.09 .136
1995
- ----
March 31....... 11.82 10.23 .136
June 30........ 11.36 10.45 .136
September 30... 14.55 11.02 .136
December 31.... 17.00 14.09 .15
1996
- ----
March 31....... 16.50 13.25 .15
June 30........ 14.25 13.25 .15
September 30... 15.50 13.00 .20
</TABLE>
________________
(1) Adjusted to reflect a 10% stock dividend paid on November 30, 1995 to
stockholders of record on November 15, 1995.
3
<PAGE>
The last trade of the Bank Common Stock on April 25, 1996, the date immediately
prior to the Bank's announcement of its intention to reorganize pursuant to the
Plan of Reorganization, was at a price of $13.50 per share.
- --------------------------------------------------------------------------------
DIVIDEND POLICY
- --------------------------------------------------------------------------------
The Bank has paid quarterly cash dividends every quarter since the
completion of its mutual holding company reorganization and minority stock
issuance in January 1994. It is the intention of the Stock Holding Company to
continue to pay cash dividends. Dividends paid by the Stock Holding Company
will be determined by the Stock Holding Company's Board of Directors and will be
based upon its consolidated financial condition, results of operations, tax
considerations, economic conditions, regulatory restrictions which affect the
payment of dividends by the Bank to the Stock Holding Company, and other
factors. There can be no assurance that dividends will be paid on the Common
Sock or that, if paid, such dividends will not be reduced or eliminated in the
future. See "Proposed Formation of Stock Holding Company--Comparison of
Stockholder Rights and Certain Anti-Takeover Provisions--Payment of Dividends"
for information regarding regulatory restrictions on the Bank's ability to pay
dividends or make cash contributions to the Stock Holding Company.
The Stock Holding Company is not subject to OTS regulatory restrictions on
the payment of dividends to its stockholders, although the source of such
dividends will be dependent upon the factors set forth above. The Stock Holding
Company is subject, however, to the requirements of Delaware law, which
generally limit dividends to an amount equal to the excess of the net assets of
the Stock Holding Company (the amount by which total assets exceed total
liabilities) over its stated capital, or if there is no such excess, to its net
profits for the current and/or immediately preceding year.
In the past, the Mutual Holding Company has waived the receipt of cash
dividends paid by the Bank, and expects to do so after the Reorganization. OTS
regulations require the Mutual Holding Company to notify the OTS of any proposed
waiver of the receipt of dividends. Current, OTS policy is to review dividend
waiver notices on a case-by-case basis, and, in general, not object to any such
waiver if: (i) the Mutual Holding Company's board of directors determines that
such waiver is consistent with such directors' fiduciary duties to the Mutual
Holding Company's members; (ii) for as long as the savings association
subsidiary is controlled by the Mutual Holding Company, the dollar amount of
dividends waived by the Mutual Holding Company is considered a restriction on
the retained earnings of the savings association, which restriction, if
material, is disclosed in the public financial statements of the savings
association as a note to the financial statements; (iii) the amount of any
dividend waived by the Mutual Holding Company is available for declaration as a
dividend solely to the Mutual Holding Company, and, in accordance with SFAS 5,
where the savings association determines that the payment of such dividend to
the Mutual Holding Company is probable, an appropriate dollar amount is recorded
as a liability; (iv) the amount of any waived dividend is considered as having
been paid by the savings association (and the savings association's capital
ratios adjusted accordingly) in evaluating any proposed dividend under OTS
capital distribution regulations; and (v) in the event the Mutual Holding
Company converts to stock form, the appraisal submitted to the OTS in connection
with the conversion application takes into account the aggregate amount of the
dividends waived by the Mutual Holding Company.
Current OTS policy generally requires that in the event of a conversion of
a mutual holding company to stock form, the aggregate amount of waived dividends
that inure to the benefit of minority stockholders be credited to the mutual
holding company's ownership interest in the subsidiary savings association in
determining the exchange ratio of the savings association shares for stock
holding company shares. The effect of this policy may be to reduce the
ownership interest of minority stockholders in the converted stock holding
company in the event of a conversion of a mutual holding company to stock form.
Mutual holding companies formed prior to February 1, 1995 are exempted from this
policy with respect to both past and future waived dividends, provided the
aggregate dividends paid by the savings
4
<PAGE>
association are not in the aggregate significantly greater than the amount of
dividends paid by comparable institutions. The Mutual Holding Company was
formed prior to February 1, 1995, and management does not believe the aggregate
dividends paid by the Bank exceed the amount of dividends paid by the comparable
savings association. Accordingly, management does not expect any reduction of
Minority Stockholders' ownership interest in the Bank because of past or future
waived dividends by the Mutual Holding Company in the event of a conversion of
the Mutual Holding Company to stock form. While it is the current intention of
the Mutual Holding Company to continue to waive its receipt of dividends, it may
determine to accept such dividends in the future.
- --------------------------------------------------------------------------------
MANAGEMENT OF THE BANK
- --------------------------------------------------------------------------------
The following table sets forth for each director and executive officer of
the Bank such person's name, age (at September 30, 1996), occupation and
position with the Bank. With respect to directors, additional information is
provided regarding the year the director first became a director and the number
of shares and percentage of the Bank Common Stock beneficially owned by each
director. Unless otherwise noted, all directors and officers have held their
position for at least five years.
<TABLE>
<CAPTION>
Shares of Bank
Common Stock
Beneficially
Positions Held Director Current Term Owned on the Percent
Name Age with the Bank Since (1) to Expire Record Date Of Class
---- --- -------------- --------- --------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
DIRECTORS
- ---------
Joseph B. Shearouse, Jr. 72 Chairman of the Board 1961 1999 84,270 1.25%
Vince A. Elhilow 56 President and Chief 1984 1997 122,860(3) 1.82%
Executive Officer
Keith D. Beaty 46 Director 1992 1999 35,081(2) *
F. Ted Brown, Jr. 67 Director 1990 1998 38,974(6) *
Christopher H. Cook 53 Senior Vice President, 1993 1998 15,596(7) *
Corporate Counsel and
Director
Frederic T. DeHon 72 Director 1978 1997 21,510(4) *
Donald E. Warren, M.D. 69 Director 1979 1997 31,060(5) *
</TABLE>
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
- ----------------------------------------
<TABLE>
<CAPTION>
Name Age Position Held with the Bank
---- --- ---------------------------
<S> <C> <C>
Richard D. Aldred 52 Executive Vice President, Treasurer and Chief
Financial Officer
Joseph C. Bova 52 Executive Vice President and Lending Operations
Manager
Robert L. Fugate 48 Executive Vice President and Banking Operations
Manager
J. Robert McDonald 66 Executive Vice President of Bank, President, Fidelity
Realty & Appraisal Services, Inc.
David R. Hochstetler 52 Senior Vice President, Director of Marketing and
CRA Officer
Brian C. Mahoney 36 Senior Vice President and Controller
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
Name Age Position Held with the Bank
---- --- ---------------------------
<S> <C> <C>
Janice R. Newlands 48 Senior Vice President and Director of Human
Resources
Shellie R. Schmidt 40 Senior Vice President and Banking Administrator
Joseph B. Shearouse, III 38 Senior Vice President and Senior Commercial/Real
Estate Loan Officer
Kenneth B. Stone, Jr. 45 Senior Vice President and Loan Production Manager
Daniel F. Turk 41 Senior Vice President and Property and Risk Manager
</TABLE>
___________________________
* Less than 1%.
(1) Reflects initial appointment to the Board of Directors of the Bank's mutual
predecessor.
(2) Includes 15,180 shares subject to options that may be exercised within 60
days of the Record Date granted pursuant to the Directors' Plan and 4,510
shares awarded, subject to restrictions, pursuant to the Directors'
Recognition Plan.
(3) Includes 21,120 shares awarded, subject to restrictions, pursuant to the
Employee Recognition Plan and 10,470 shares held in the Bank's Savings Plan
for Employees for the benefit of Mr. Elhilow. Includes 699 shares held
under the Bank's ESOP. Includes 28,808 shares held under the Bank's
Management Performance Plan for Mr. Elhilow. Includes 7,230 shares subject
to options that may be exercised within 60 days of Record Date.
(4) Includes 10,180 shares subject to options that may be exercised within 60
days of the Record Date granted pursuant to the Directors' Plan and 9,130
shares awarded, subject to restrictions, pursuant to the Directors'
Recognition Plan.
(5) Includes 15,180 shares subject to options that may be exercised within 60
days of the Record Date granted pursuant to the Directors' Plan and 9,130
shares awarded, subject to restrictions, pursuant to the Directors'
Recognition Plan.
(6) Includes 15,180 shares subject to options that may be exercised within 60
days of the Record Date granted pursuant to the Directors' Plan and 7,700
shares awarded, subject to restrictions, pursuant to the Directors'
Recognition Plan.
(7) Includes 11,380 shares subject to options that may be exercised within 60
days of the Record Date granted pursuant to the Directors' Plan and 4,510
shares awarded, subject to restrictions, pursuant to the Directors'
Recognition Plan.
The principal occupation during the past five years of each director of the
Bank is set forth below. All directors and executive officers have held their
present positions for five years unless otherwise stated.
JOSEPH B. SHEAROUSE, JR. is Chairman of the Board of Directors. Mr.
Shearouse joined the Bank in 1954 and has held various positions in the Bank.
Mr. Shearouse became Chairman of the Board in 1987 and was President of the Bank
from 1974 to 1987. Mr. Shearouse has been a Director of the Bank since 1961. Mr.
Shearouse retired as an active officer of the Bank on January 31, 1995, but has
continued as Chairman of the Board.
KEITH D. BEATY is the President and owner of Latham Manufacturing Co., a
manufacturing company located in West Palm Beach. Mr. Beaty is also the
President and Chief Executive Officer of Implant Innovations, Inc. a distributor
of dental implants. Mr. Beaty has been a Director of the Bank since 1992.
VINCE A. ELHILOW has been President of the Bank since 1987 and Chief
Executive Officer since 1992. Prior to his appointment as President of the Bank,
Mr. Elhilow was manager of the Mortgage Loan Department from 1973 to 1992 and
Executive Vice President and Chief Operating Officer from 1981 to 1987. Mr.
Elhilow joined the Bank in January 1963 and has been a Director since 1984.
FREDERIC T. DEHON is a certified public accountant with the accounting firm
of Holyfield Associates, P.A., which is located in West Palm Beach. Mr. DeHon
has been a Director of the Bank since 1978.
6
<PAGE>
DONALD E. WARREN, M.D. is a physician who has practiced in West Palm Beach
for over 36 years. He is associated with Intracoastal Health Systems. Dr. Warren
has been a Director of the Bank since 1979.
F. TED BROWN, JR. is the President of Ted Brown Real Estate, Inc., located
in North Palm Beach. Mr. Brown has been a Director of the Bank since 1990.
CHRISTOPHER H. COOK was employed by the Bank on February 1, 1996 as Senior
Vice President and Corporate Counsel. Prior to February 1, 1996 he was the
managing officer with the law firm of Brackett, Cook, Sned, Welch, Hewitt,
D'Angio & Tucker, P.A., located in West Palm Beach. Mr. Cook has acted as
general counsel to the Bank since 1988. Mr. Cook has been a Director of the Bank
since 1993.
- --------------------------------------------------------------------------------
TRANSACTIONS WITH CERTAIN RELATED PERSONS
- --------------------------------------------------------------------------------
Until joining the Bank as Senior Vice President and Corporate Counsel in
February 1996, Christopher Cook was the managing partner with the law firm of
Brackett, Cook, Sned, Welch, Hewitt, D'Angio & Tucker, P.A. ("Brackett Cook"),
located in West Palm Beach. Brackett Cook has rendered to the Bank a variety of
legal services, primarily in connection with loans originated by the Bank.
During the year ended December 31, 1995, Brackett Cook was paid by the Bank
approximately $1,029,019 in fees for legal services rendered, consisting
primarily of real estate closings. In addition, Brackett Cook leases office
space at the Bank's main office. During the year ended December 31, 1995, the
Bank received rental payments for this space in the amount of $81,616.
Since 1989, federal law requires that all loans or extensions of credit to
executive officers and directors must be made on substantially the same terms,
including interest rates and collateral, as those prevailing at the time for
comparable transactions with the general public and must not involve more than
the normal risk of repayment or present other unfavorable features. Federal law
also requires that loans to a director or executive officer in excess of the
greater of $25,000 or 5% of the Bank's capital and surplus (up to a maximum of
$500,000) be approved in advance by a majority of the disinterested members of
the Board of Directors.
During the year ended December 31, 1995, the Bank had no loans outstanding
in an amount in excess of $60,000 to directors or executive officers that were
made on preferential terms.
- --------------------------------------------------------------------------------
PROPOSED FORMATION OF STOCK HOLDING COMPANY
- --------------------------------------------------------------------------------
SUMMARY
The formation of the Stock Holding Company will be accomplished under the
Plan of Reorganization, pursuant to which the Bank will become a wholly-owned
subsidiary of the Stock Holding Company. Under the terms of the Plan of
Reorganization, each outstanding share of Bank Common Stock will be converted
into one share of Holding Company Common Stock and the holders of Bank Common
Stock will become the holders of all of the outstanding Holding Company Common
Stock. The Stock Holding Company was incorporated in April 1996, solely for the
purpose of becoming a savings and loan holding company and has no prior
operating history. Following the Reorganization, it is intended that the Bank
will continue its operations at the same locations, with the same management,
and subject to all the rights, obligations and liabilities of the Bank existing
immediately prior to the Reorganization.
7
<PAGE>
REASONS FOR THE STOCK HOLDING COMPANY REORGANIZATION
The Board of Directors of the Bank believes that the formation of the Stock
Holding Company as a subsidiary of the Mutual Holding Company will be in the
best interests of stockholders and will offer greater operating flexibility than
is currently available to the Bank in its existing mutual holding company
structure. The Mutual Holding Company does not operate as a traditional holding
company at the present time because it is a mutual organization and represents
only the mutual ownership interest in the Bank. Establishing the Stock Holding
Company as a subsidiary of the Mutual Holding Company will permit the Stock
Holding Company to conduct activities and make investments for the benefit of
all stockholders. It will also provide greater flexibility to structure and
complete acquisitions of other financial institutions and to repurchase shares
of Holding Company Common Stock as market conditions permit. See "Proposed
Formation of Stock Holding Company--OTS Policy Regarding Two-Tier Mutual Holding
Company."
ENHANCED ABILITY TO INVEST THROUGH THE STOCK HOLDING COMPANY. Under the
existing mutual holding company structure the Mutual Holding Company cannot make
investments in other financial institutions or business enterprises for the
benefit of all stockholders of the Bank, and the Bank itself is limited by law
or regulation in its permissible investment activities. For example, if the
Mutual Holding Company invests in 5% of the common stock of another bank or
thrift holding company, any gain on such investment would accrue only to the
Mutual Holding Company. The Reorganization will permit the entity that issues
stock (i.e. the Stock Holding Company) to make investments, diversify business
activities, or acquire other financial institutions, for the benefit of all
stockholders. No specific investments, new business activities or acquisitions
by the Stock Holding Company are planned at the present time.
The Reorganization will also facilitate the approval and completion of
mergers and acquisitions since the Stock Holding Company, acting as the sole
stockholder of the Bank, will be able to approve mergers and acquisitions
involving the Bank. This is consistent with the way other stock holding
companies are able to approve mergers of their bank or savings institution
subsidiaries.
STOCK REPURCHASES. The Reorganization will enable the Stock Holding Company
to repurchase Holding Company Common Stock which, particularly in recent years,
has been an important, if not essential, means for banks and savings
institutions to enhance shareholder value and invest capital resources.
Historically, the Bank has used the percentage of taxable income method for
establishing its bad debt reserves for tax purposes. Recent changes in the
federal tax laws generally require that thrift institutions pay the tax on their
excess bad debt reserves accumulated for tax purposes since 1987, but exempt
from taxation the pre-1988 tax bad debt reserves for thrift institutions that
have used the percentage of taxable income method for computing bad debt
reserves. However, certain distributions and redemptions, such as stock
repurchases, are not exempt and are subject to taxation. Accordingly, if the
Bank were to repurchase any of its outstanding common stock, it would cause
recapture of all or part of its pre-1988 excess tax bad debt reserves. The Stock
Holding Company, however, will be permitted to repurchase Holding Company Common
Stock without causing any recapture of the Bank's tax bad debt reserves. The
ability to repurchase Holding Company Common Stock is an important means of
enhancing stockholder value and investing capital resources.
STOCK HOLDING COMPANY POWERS. The Bank may engage only in those activities
that are permissible for federal savings associations under the Home Owners'
Loan Act ("HOLA") and applicable regulations thereunder. Pursuant to the OTS
order, the Stock Holding Company will be subject to the same restrictions,
including but not limited to activity limitations applicable to the Mutual
Holding Company under Section 10(o)5 of the HOLA and the regulations promulgated
thereunder. The Stock Holding Company will be permitted to engage in activities
that are not permissible for the Bank, such as making investments in up to 5% of
the common stock of another financial institution. The Stock
8
<PAGE>
Holding Company generally would be permitted to engage in the activities that
are permissible for bank holding companies under the Bank Holding Company Act
(i.e. activities that are closely related to banking). See "Stock Holding
Company Regulation" herein.
THE BOARD OF DIRECTORS OF THE BANK HAS UNANIMOUSLY APPROVED THE
REORGANIZATION AND RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE PLAN OF
REORGANIZATION.
PLAN OF REORGANIZATION
The Reorganization will be accomplished under the Plan of Reorganization,
which is attached as Exhibit A hereto. The following discussion is qualified in
its entirety by reference to the Plan of Reorganization. The Plan of
Reorganization was unanimously approved by the Board of Directors on April 25,
1996.
The Stock Holding Company is a newly organized Delaware corporation which
was formed by the Bank solely for the purpose of effecting the Reorganization.
Therefore, the Stock Holding Company has no prior operating history. The Plan of
Reorganization is by and among the Stock Holding Company, the Bank and Fidelity
Interim Savings Bank, F.S.B., a to-be-formed interim federal stock savings bank
("Interim Federal").
The Reorganization and the establishment of the Stock Holding Company will
be accomplished as follows: (i) the Bank has organized the Stock Holding Company
as a wholly owned subsidiary; (ii) the Stock Holding Company will organize an
interim federal stock savings bank ("Interim Federal") as a wholly-owned
subsidiary; (iii) Interim Federal will merge into the Bank, with the Bank as the
surviving corporation; (iv) in connection with the merger in step (iii) above,
all of the issued and outstanding shares of common stock held by the Bank will
be canceled, all of the issued and outstanding shares of Bank Common Stock held
by Bank shareholders will be converted by operation of law into an equal number
of shares of Holding Company Common Stock, and all of the issued and outstanding
shares of Interim Federal, which are held by the Stock Holding Company, will
automatically be converted by operation of law into an equal number of shares of
common stock of the Bank. As a result of steps (i) through (iii) above, the Bank
will become the wholly-owned subsidiary of the Stock Holding Company, the Stock
Holding Company will become the majority-owned subsidiary of the Mutual Holding
Company, and Minority Stockholders will become minority stockholders of the
Stock Holding Company.
The Board of Directors of the Bank presently intends to capitalize the
Stock Holding Company with up to $100,000, subject to the approval of the OTS.
Future capitalization of the Stock Holding Company will depend upon the earnings
of the Bank and dividends declared by the Bank and any issuance of debt or
equity securities. The Board of Directors of the Stock Holding Company has no
present plans or intentions with respect to any future issuance of securities at
this time. Furthermore, at all times, the Mutual Holding Company must own at
least 50.1% of the Stock Holding Company's outstanding voting stock so long as
the Mutual Holding Company remains in existence.
After the Reorganization, the Bank will continue its existing business and
operations as a wholly-owned subsidiary of the Stock Holding Company and the
consolidated capitalization, assets, liabilities, and form of financial
statements of the Stock Holding Company immediately following the Reorganization
will be substantially the same as those of the Bank immediately prior to
consummation of the Reorganization. The Federal Stock Charter and the Bylaws of
the Bank will continue in effect, and will not be affected in any manner by the
Reorganization. The Bank's name will continue to be "Fidelity Federal Savings
Bank of Florida." The corporate existence of the Bank will remain unaffected by
the Reorganization.
9
<PAGE>
EFFECTIVE DATE
The "Effective Date" of the Reorganization will be the date upon which the
Articles of Combination are filed with the OTS.
OPTIONAL EXCHANGE OF STOCK CERTIFICATES
After the Effective Date stock certificates evidencing shares of Bank
Common Stock will represent, by operation of law, the same number of shares of
Holding Company Common Stock. Former holders of the Bank Common Stock will not
be required to exchange their Bank Common Stock certificates for Holding Company
Common Stock certificates, but will have the option to do so. DO NOT SEND YOUR
STOCK CERTIFICATES TO THE BANK AT THIS TIME. Any stockholder desiring more
information about such exchange may request additional information from the Bank
by writing the Secretary of the Bank, Patricia C. Clager, 218 Datura Street,
West Palm Beach, Florida 33401.
RIGHTS OF DISSENTING STOCKHOLDERS
Federal regulations applicable to the Bank generally provide that a
stockholder of a federally chartered savings association that engages in a
merger transaction shall have the right to demand from the savings association
the payment of the fair or appraised value of his or her stock in the savings
association, subject to the satisfaction of specified procedural requirements.
These regulations also provide that stockholders of a federally-chartered
savings association with stock that is quoted on the Nasdaq Stock Market are not
entitled to exercise dissenters' rights of appraisal if the stockholder is
required to accept cash, shares of stock of any association or corporation which
at the effective date of the merger will be quoted on the Nasdaq Stock Market,
or any combination of such shares of stock and cash. Since the Holding Company
Common Stock will be quoted on the Nasdaq Stock Market at the effective date of
the Reorganization, the Bank's stockholders will not have dissenters' rights of
appraisal in connection with the Reorganization.
TAX CONSEQUENCES
The Bank has received an opinion of its special counsel, Luse Lehman Gorman
Pomerenk & Schick, P.C., Washington, D.C., as to certain federal income tax
consequences of the Reorganization. This opinion of counsel, which is not
binding upon the Internal Revenue Service, provides substantially as follows:
(1) The merger of Interim Federal with and into the Bank will constitute a
reorganization under Section 368 of the Internal Revenue Code of 1986,
as amended ("Code"), and the Stock Holding Company, the Bank and
Interim Federal will each be a "party to a reorganization" within the
meaning of Section 368(b) of the Code, provided that the merger of
Interim Federal with and into Bank qualifies as a statutory merger
under applicable law, after the transaction Bank will hold
substantially all of the assets of Interim Federal and Bank
stockholders exchange solely for Holding Company Common Stock an
amount of Bank Common Stock constituting "control" of the Bank.
(2) No gain or loss will be recognized by Bank stockholders on the
exchange of Bank Common Stock for Holding Company Common Stock.
(3) No gain or loss will be recognized by the Stock Holding Company on the
receipt by it of Bank Common Stock solely in exchange for Holding
Company Common Stock.
10
<PAGE>
(4) The basis of the Holding Company Common Stock received by the Bank's
stockholders will be the same as the basis of the Bank Common Stock
surrendered in exchange therefor.
(5) The holding period of the Holding Company Common Stock to be received
by Bank stockholders will include the holding period of the Bank
Common Stock surrendered in exchange therefor, provided the Bank
Common Stock was held as a capital asset on the date of the exchange.
(6) No gain or loss will be recognized by the Bank stockholders as a
result of conversion of their Bank stock options into options to
purchase Holding Company Common Stock.
Each Bank stockholder should consult his own tax counsel as to specific
federal, state and local tax consequences of the Reorganization, if any, to such
stockholder.
CONSEQUENCES UNDER FEDERAL SECURITIES LAWS
The Holding Company Common Stock to be issued to Minority Stockholders will
be registered with the SEC under the Securities Act of 1933. Upon consummation
of the Reorganization, the Stock Holding Company will register the Holding
Company Common Stock under the Exchange Act and will be required to comply with
the insider trading, reporting and proxy requirements under the Exchange Act.
In addition, the Stock Holding Company will file periodic reports with the SEC.
CONDITIONS TO THE REORGANIZATION
The Plan of Reorganization sets forth a number of conditions to the
completion of the Reorganization, including: (i) approval of the Plan of
Reorganization by the holders of a majority of the outstanding shares of Bank
Common Stock; (ii) receipt of an opinion of counsel that the Reorganization will
be treated as a non-taxable transaction for federal income tax purposes; (iii)
approval of the Reorganization by the OTS; and (iv) registration of the Holding
Company Common Stock to be issued in the Reorganization under the Exchange Act
and the compliance by the Stock Holding Company with all applicable state
securities laws relating to the issuance of Holding Company Common Stock.
The Mutual Holding Company, which owns 52.7% of the outstanding shares of
Bank Common Stock, intends to vote its shares in favor of the Plan of
Reorganization thereby assuring stockholder approval of the Plan of
Reorganization. Furthermore, the Bank has received an opinion of special
counsel that the Reorganization will be treated as a non-taxable transaction for
federal income tax purposes.
The Stock Holding Company has filed an application with the OTS to acquire
the Bank. The OTS approved the Holding Company Application on November 18, 1996.
See "--OTS Policy Regarding Two-Tier Mutual Holding Companies."
AMENDMENT, TERMINATION OR WAIVER
The Board of Directors of the Bank may cause the Plan of Reorganization to
be amended or terminated if the Board determines for any reason that such
amendment or termination would be advisable. Such amendment or termination may
occur at any time prior to the filing of Articles of Combination with the OTS,
provided that no such amendment may be made to the Plan of Reorganization after
stockholder approval if such amendment is deemed to be materially adverse to the
stockholders of the Bank. Additionally, any of the terms or conditions of the
Plan of Reorganization may be waived by the party which is entitled to the
benefit thereof.
11
<PAGE>
BUSINESS OF THE BANK
The Bank is a federally chartered savings bank headquartered in West Palm
Beach, Florida. The Bank's deposits are insured by the Savings Association
Insurance Fund of the Federal Deposit Insurance Corporation ("FDIC"). The Bank
was chartered originally as a federal mutual savings and loan association in
1952, and amended its charter in 1983, to become a federally chartered mutual
savings bank. The Bank is a member of the Federal Home Loan Bank ("FHLB")
System. At March 31, 1996, the Bank had total assets of $791.9 million, total
deposits of $611.3 million, and stockholders' equity of $81.1 million.
The Bank is primarily engaged in the business of attracting deposits from
the general public in the Bank's market area, and investing such deposits,
together with other sources of funds, in loans secured by one- to four-family
residential real estate. To a lesser extent, the Bank also originates
construction loans and land loans for single family properties and invests in
mortgage-backed securities issued or guaranteed by the United States Government
or agencies thereof. In addition, the Bank invests a portion of its assets in
securities issued by the United States Government, cash and cash equivalents
including deposits in other financial institutions, and FHLB stock. The Bank's
principal sources of funds are deposits and principal and interest payments on
loans. Principal sources of income are interest received from loans and
investment securities. The Bank's principal expense is interest paid on
deposits and employee compensation and benefits.
The Bank's principal executive office is located at 218 Datura Street, West
Palm Beach, Florida, and its telephone number at that address is (407) 659-9900.
BUSINESS OF THE STOCK HOLDING COMPANY
GENERAL. The Stock Holding Company was formed only recently and currently
has no business activities. Upon the completion of the Reorganization, the Bank
will become a wholly-owned subsidiary of the Stock Holding Company and each
stockholder of the Bank will become a stockholder of the Stock Holding Company
with the same ownership interest therein as such stockholder's ownership
interest in the Bank immediately prior to the Reorganization.
Immediately after consummation of the Reorganization, it is expected that
the Stock Holding Company will not engage in any business activity other than to
hold all of the stock of the Bank. The Stock Holding Company does not
presently have any arrangements or understandings regarding any acquisition or
merger opportunities. It is anticipated, however, in the future that the Stock
Holding Company may pursue other investment opportunities, including possible
diversification through acquisitions and mergers. For information regarding
restrictions on the Stock Holding Company's activities, see "--Regulation of
Stock Holding Company" and "--OTS Policy Regarding Two-Tier Mutual Holding
Companies."
PROPERTY. The Stock Holding Company is not expected to own or lease real
or personal property initially. Instead, it intends initially to utilize the
premises, equipment and furniture of the Bank without the direct payment of any
rental fees to the Bank.
LEGAL PROCEEDINGS. Since its organization, the Stock Holding Company has
not been a party to any legal proceedings.
EMPLOYEES. At the present time, the Stock Holding Company does not intend
to employ any persons other than senior officers of the Bank. It will utilize
the support staff of the Bank from time to time. If the Stock Holding Company
acquires other savings institutions or pursues other lines of business, it may
hire additional employees at such time.
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COMPETITION. It is expected that for the immediate future the primary
business of the Stock Holding Company will be the ownership of the Bank Common
Stock. Therefore, the competitive conditions to be faced by the Stock Holding
Company will be the same as those faced by the Bank.
MANAGEMENT OF THE STOCK HOLDING COMPANY
DIRECTORS. The directors of the Stock Holding Company are, and upon
completion of the Reorganization will continue to be, the same persons who are
at present the directors of the Bank. The three-year terms of the directors are
staggered to provide for the election of approximately one-third of the board
members each year.
EXECUTIVE OFFICERS. The executive officers of the Stock Holding Company
are, and upon completion of the Reorganization will be, the same persons who are
at present the executive officers of the Bank.
REMUNERATION. Since the formation of the Stock Holding Company, none of
its executive officers or directors has received any remuneration from the Stock
Holding Company. It is expected that initially no compensation will be paid to
its directors and officers in addition to compensation paid to them by the Bank.
However, the Stock Holding Company may determine that separate and additional
compensation is appropriate in the future.
INDEMNIFICATION OF OFFICERS AND DIRECTORS AND LIMITATION OF LIABILITY. OTS
regulations require the Bank to indemnify its directors, officers and employees
against legal and other expenses incurred in defending lawsuits brought or
threatened against them by reason of the performance as a director, officer, or
employee. Indemnification may be made to such person only if final judgment on
the merits is in his favor, or in case of (i) settlement, (ii) final judgment
against him, or (iii) final judgment in his favor other than on the merits, if a
majority of the disinterested directors of the Bank determines that he was
acting in good faith within the scope of his employment or authority as he could
reasonably have perceived it under the circumstances and for a purpose he could
have reasonably believed under the circumstances was in the best interests of
the Bank or its stockholders. If a majority of the disinterested directors of
the Bank concludes that in connection with an action any person ultimately may
become entitled to indemnification, the directors may authorize payment of
reasonable costs and expenses arising from defense or settlement of such action.
The Bank is required to give the OTS at least 60 days notice of its intention to
make indemnification and no indemnification shall be made if the OTS objects to
the Bank in writing.
The OTS order provides that the Stock Holding Company will be subject to
the same regulatory requirements regarding indemnification described above, to
which the Bank is subject. In addition, the Certificate of Incorporation of the
Stock Holding Company provides that any individual who is or was a director,
officer, employee or agent of the Stock Holding Company in any proceeding in
which the person has been made a party or is otherwise involved as a result of
his service in such capacity shall be indemnified and held harmless to the
fullest extent authorized under the Delaware General Corporation Law. Under the
Certificate of Incorporation, an indemnified person may be reimbursed for all
expenses, liabilities and losses (including attorney's fees, judgments, fines,
ERISA excise taxes or penalties and amounts paid in settlement) reasonably
incurred or suffered. An indemnified person may be advanced expenses incurred
in defending any proceeding prior to final disposition to the extent permitted
under Delaware law. In accordance with Delaware law, an individual may not be
indemnified (i) in connection with a proceeding by or in the right of the Stock
Holding Company in which the individual was adjudged liable to the Stock Holding
Company, or (ii) in connection with any other proceeding charging improper
personal benefit to him in which he was adjudged liable on the basis that
personal benefit was improperly received by him, unless a court of competent
jurisdiction determines he is fairly and reasonably entitled to indemnification
in view of all the relevant circumstances. Management does not have any plans
to
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provide for indemnification rights beyond those provided in the Stock Holding
Company's Certificate of Incorporation.
The Stock Holding Company's Certificate of Incorporation also provides that
a director shall not be personally liable to the Stock Holding Company or its
stockholders for monetary damages for breach of his fiduciary duty as a
director, except for (i) breach of the director's duty of loyalty to the Stock
Holding Company or its stockholders, (ii) acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii)
certain unlawful distributions, or (iv) any transaction from which the director
derived an improper personal benefit.
This provision eliminates the potential liability of the Stock Holding
Company's directors for failure, through negligence or gross negligence, to
satisfy their duty of care, which requires directors to exercise informed
business judgment in discharging their duties. It may thus reduce the
likelihood of derivative litigation against directors and discourage or deter
stockholders or management from bringing a lawsuit against directors for breach
of their duty of care, even though such an action, if successful, might
otherwise have been beneficial to the Stock Holding Company and its
stockholders. Stockholders will thus be surrendering a cause of action based
upon negligent business decisions, including those relating to attempts to
change control of the Stock Holding Company. The provision will not, however,
affect the right to pursue equitable remedies for breach of the duty of care,
although such remedies might not be available as a practical matter.
To the best of management's knowledge, there is currently no pending or
threatened litigation for which indemnification may be sought or any recent
litigation involving directors of the Bank that might have been affected by the
limited liability provision in the Stock Holding Company's Certificate of
Incorporation had it been in effect at the time of the litigation.
Federal regulations contain no provisions for the limitation of director
liability.
The above-described provisions seek to ensure that the ability of the Stock
Holding Company's directors to exercise their best business judgment in managing
the Stock Holding Company's affairs, subject to their continuing fiduciary
duties of loyalty to the Stock Holding Company and its stockholders, is not
unreasonably impeded by exposure to the potentially high personal costs or other
uncertainties of litigation. The nature of the tasks and responsibilities
undertaken by directors and officers often requires such persons to make
difficult judgments of significant importance which can expose such persons to
personal liability, but from which they will acquire no personal benefit (other
than as stockholders). In recent years, litigation against corporations and
their directors and officers, often amounting to mere "second guessing" of good-
faith judgments and involving no allegations of personal wrongdoing, has become
common. Such litigation often claims damages in large amounts which bear no
relationship to the amount of compensation received by the directors or
officers, particularly in the case of directors who are not officers of the
corporation, and the expense of defending such litigation, regardless of whether
it is well founded, can be enormous. Individual directors and officers can
seldom bear either the legal defense costs involved or the risk of a large
judgment.
In order to attract and retain competent and conscientious directors and
officers in the face of these potentially serious risks, corporations have
historically provided for corporate indemnification in their bylaws and have
obtained liability insurance protecting the company and its directors and
officers against the cost of litigation and related expenses. The Bank
currently has insurance coverage for its directors and officers, and the Bank's
management anticipates that the Stock Holding Company will be able to obtain
such coverage for its directors and officers. The Holding Company's Board of
Directors, the individual members of which will benefit from the inclusion of
the indemnification and limitation of liability provisions, has a personal
interest in including these provisions in the Stock Holding Company's
Certificate of Incorporation at the potential expense of stockholders.
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COMPARISON OF STOCKHOLDER RIGHTS AND CERTAIN ANTI-TAKEOVER PROVISIONS
INTRODUCTION. As a result of the Reorganization, holders of Bank Common
Stock, whose rights are presently governed by federal law and the OTS' Rules and
Regulations as well as the Bank's federal stock charter and Bylaws, will become
stockholders of the Stock Holding Company, a Delaware corporation, regulated as
a savings and loan holding company under HOLA. Accordingly, their rights will
be governed solely by the Delaware General Corporation Law, the Certificate of
Incorporation and Bylaws of the Stock Holding Company and applicable OTS
regulations. In addition, the Stock Holding Company will be required to comply
with the conditions of the OTS Order approving the Reorganization. Certain
differences arise from this change of governing law, as well as from
distinctions between the federal stock charter and Bylaws of the Bank and the
Certificate of Incorporation and Bylaws of the Stock Holding Company. The
following discussion is not intended to be a complete statement of the
differences affecting the rights of stockholders, but summarizes certain
significant differences. The Certificate of Incorporation and Bylaws of the
Stock Holding Company are attached hereto as Exhibit B and should be reviewed
for more detailed information.
Provisions in the Stock Holding Company's Certificate of Incorporation and
Bylaws relating to the calling of a special meeting of stockholders, nomination
of directors and new business provisions, removal of directors, cumulative
voting for the election of directors, staggered directors' terms and the
amendment of the Stock Holding Company's Certificate of Incorporation and
Bylaws, all of which are discussed below, may make it difficult to gain control
of the Stock Holding Company or replace all of incumbent management even if the
Mutual Holding Company is no longer in existence.
ISSUANCE OF CAPITAL STOCK. The Bank's federal stock charter authorizes the
issuance of 30,000,000 shares of capital stock: 20,000,000 of which are Bank
Common Stock, par value $1.00 per share; and 10,000,000 shares of serial
preferred stock. The Certificate of Incorporation of the Stock Holding Company
authorizes the issuance of 8,200,000 shares of Common Stock, par value $.10 per
share and 2,000,000 shares of serial preferred stock. At the record date,
there were approximately 6,720,821 shares of Bank Common Stock outstanding.
Following the Reorganization, there will be the same number of shares of the
Stock Holding Company's Common Stock outstanding.
The Stock Holding Company has no present intention to issue additional
shares of stock at this time, other than upon the exercise of stock options or
in connection with stock dividends. If additional shares were issued, the
percentage ownership interests of existing stockholders would be reduced and,
depending on the terms pursuant to which new shares are issued, the book value
and earnings per share of outstanding stock might be diluted. Moreover, such
additional share issuance could be construed as having an anti-takeover effect.
The ability to issue additional shares, which exists under both the federal
stock charter of the Bank and the Certificate of Incorporation of the Stock
Holding Company, gives management greater flexibility in financing corporate
operations. The ability of the Stock Holding Company to issue additional shares
will be limited so long as the Mutual Holding Company exists since the Mutual
Holding Company must at all times own at least a majority of the outstanding
voting stock of the Stock Holding Company. Pursuant to the OTS Order approving
the Reorganization, any issuance of securities by the Stock Holding Company will
be subject to the OTS regulations governing minority stock issuances by mutual
holding companies. Consequently, the Stock Holding Company must obtain OTS
approval prior to issuing any securities.
PAYMENT OF DIVIDENDS. OTS regulations govern capital distributions by
savings institutions, which include cash dividends, stock redemptions or
repurchases, cash-out mergers, interest payments on certain convertible debt and
other transactions charged to the capital account of a savings institution to
make capital distributions. Generally, the regulation creates a safe harbor for
specified levels of capital distributions from institutions meeting at least
their minimum capital requirements, so long as such institutions notify the OTS
and receive no objection to the distribution from the OTS. Institutions and
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distributions that do not qualify for the safe harbor are required to obtain
prior OTS approval before making any capital distributions.
Generally, a savings institution that before and after the proposed
distribution meets or exceeds its regulatory capital requirements (a "Tier 1
institution") may make capital distributions during any calendar year up to the
higher of (a) 100% of net income for the calendar year-to-date plus 50% of its
"surplus capital ratio" at the beginning of the calendar year or (b) 75% of net
income over the most recent four-quarter period. The "surplus capital ratio" is
defined to mean the percentage by which the institution's ratio of total capital
to assets exceeds the ratio of its capital requirements to assets. An
institution satisfies its regulatory capital requirements if it maintains
tangible capital of not less than 1.5%, core capital of not less than 3.0% of
total adjusted assets and risk-based capital no less than 8.0%. Failure to meet
regulatory capital requirements will result in further restrictions on capital
distributions, including possible prohibition of capital distributions without
specific OTS approval. The Bank is a Tier 1 institution under the OTS capital
distribution regulation.
In order to make distributions under these safe harbors, a Tier 1
institution must submit 30 days written notice to the OTS prior to making the
distribution. The OTS may object to the distribution during that 30-day period
based on safety and soundness concerns. In addition, a Tier 1 institution
deemed to be in need of more than normal supervision by the OTS may have
additional limitations imposed by the OTS on its ability to make a capital
distribution.
The ability of the Bank to pay dividends on its Bank Common Stock is
restricted by tax considerations related to thrift institutions and by federal
regulations applicable to savings associations. Income appropriated to bad debt
reserves and deducted for federal income tax purposes may not be used to pay
cash dividends without the payment of federal income taxes by the Bank on the
amount of such income removed from reserves for such purpose at the then current
income tax rate. Additionally, the Bank is precluded from paying dividends on
its Bank Common Stock if its regulatory capital would thereby be reduced below
the regulatory capital requirements prescribed for savings associations. The
Bank currently satisfies its applicable regulatory capital requirements.
Under the Delaware General Corporation Law, dividends may be paid either
out of surplus or, if there is no surplus, out of net profits for the fiscal
year in which the dividend is declared and/or the preceding fiscal year. After
the Reorganization, the Stock Holding Company's principal source of income will
initially consist of its equity in the earnings, if any, of the Bank. Although
the Stock Holding Company will not be subject to the above dividend restrictions
regarding dividend payments to its stockholders, the restrictions on the Bank's
ability to pay dividends to the Stock Holding Company will continue in effect.
The payment of future cash dividends by the Bank, and thus by the Stock
Holding Company, will continue to depend upon the Bank's earnings, financial
condition and capital requirements, as well as the tax and regulatory
considerations discussed herein. The Bank's Board of Directors considers many
factors including the Bank's profitability, maintenance of adequate capital, the
Bank's current and anticipated future income, outstanding loan commitments,
adequacy of loan loss reserves, cash flow requirements and economic conditions
prior to declaring a dividend. Moreover, before declaring a dividend, the Board
of Directors must determine that the Bank will exceed its regulatory capital
requirements after the payment of the dividend. While it is the current intent
of the Mutual Holding Company to continue to waive its receipt of dividends, it
may determine to accept such dividends in the future.
SPECIAL MEETINGS OF STOCKHOLDERS. For a period of five years following
completion of its mutual holding company reorganization (until January 1999),
special meetings of the holders of the Bank's Common Stock may be called only by
the chairman of the board, the president or a majority of the Board
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of Directors. The Certificate of Incorporation of the Stock Holding Company
provides that special meetings of the stockholders of the Stock Holding Company
may be called only by the Board of Directors pursuant to a resolution adopted by
a majority of the total number of directors which the Stock Holding Company
would have if there were no vacancy on the Board. This provision will make it
more difficult for stockholders to call for a special meeting of stockholders.
CUMULATIVE VOTING. For a period of five years following completion of its
mutual holding company reorganization, (until January 1999), holders of the Bank
Common Stock are not permitted to cumulate their votes with respect to the
election of directors. Cumulative voting entitles each stockholder to cast a
number of votes in the election of directors equal to the number of such
stockholders' shares of Bank Common Stock multiplied by the number of directors
to be elected, and to distribute such votes among one or more of the nominees to
be elected. The Certificate of Incorporation of the Stock Holding Company does
not provide for cumulative voting. The absence of cumulative voting rights
means that the holders of a majority of the shares voted at a meeting of
stockholders may elect all directors of the Stock Holding Company thereby
precluding minority stockholder representation on the Stock Holding Company's
Board of Directors.
RIGHTS OF STOCKHOLDERS TO DISSENT. Stockholders of the Bank have
dissenters' appraisal rights in connection with a plan of merger or
consolidation to which the Bank is a party under certain circumstances.
Stockholders of the Stock Holding Company similarly will have dissenters'
appraisal rights in connection with a plan of merger or consolidation to which
the Stock Holding Company is a party. Stockholders of the Stock Holding Company
will have no dissenters' rights with respect to, among other things, a merger or
consolidation to which the Stock Holding Company is a party if the class of
shares of the company acquiring the Stock Holding Company has its stock listed
on a national securities exchange or the Nasdaq Stock Market.
VACANCIES ON THE BOARD OF DIRECTORS. Any vacancy on the Board of Directors
of the Bank may be filled by the affirmative vote of a majority of the remaining
directors, and any director so appointed is to serve the remainder of the
unexpired term of the director whose vacancy has been filled. Additionally, any
directorship of the Bank to be filled by reason of an increase in the number of
directors may be filled by election by the Board of Directors for a term of
office only until the next election of directors by the stockholders. The
Certificate of Incorporation of the Stock Holding Company provides that
vacancies on the board and newly created directorships may be filled by a
majority vote of the directors then in office. Directors appointed to fill a
vacancy may serve until the annual meeting of stockholders at which the term of
office of the class of directors to which they have been chosen expires.
NUMBER AND TERM OF DIRECTORS. The Bank's federal stock charter provides
that its Board of Directors shall consist of not less than five nor more than 15
members, as set forth in the Bylaws. The Stock Holding Company's Certificate of
Incorporation provides that its Board of Directors shall be fixed from time to
time exclusively pursuant to a resolution adopted by a majority of the Whole
Board (as defined). The Bylaws of the Stock Holding Company provide that the
Board of Directors shall consist of such numbers as the Board shall designate,
except that in the absence of such designation, the number of directorships
shall be seven. The Board of Directors of the Stock Holding Company has set the
number of directors at seven persons. Although the Stock Holding Company has no
present intention of reducing its number of directors below its present seven
members, the Board of Directors believes that the ability to reduce the number
of directors will result in greater flexibility in the event of vacancies on the
current Board.
The Bank's Federal Stock Charter provide for a classified board of
directors, consisting of three substantially equal classes of directors, each
serving for a three year term, with the term of each class of directors ending
in successive years. The Stock Holding Company's Certificate of Incorporation
also
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provides for a classified board of directors, consisting of three substantially
equal classes of directors, each serving for a three-year term.
PRESENTATION OF NEW BUSINESS AT MEETINGS OF STOCKHOLDERS. The Bank's
Bylaws generally provide that any stockholder desiring to make a nomination for
the election of directors or a proposal for new business at a meeting of
stockholders must submit written notice to the Bank at least five days in
advance of the meeting. Failure to comply with these advance notice
requirements will preclude such nominations or new business from being
considered at the meeting.
The Stock Holding Company's Bylaws provide that a stockholder wishing to
make nominations or proposals must give written notice to the Secretary of the
Stock Holding Company not less than 90 days before the meeting; provided,
however, that in the event that less than 100 days prior public disclosure of
the annual or special meeting is given to stockholders, notice by the
stockholder must be given to the Stock Holding Company no later than 10 business
days following the date on which notice of the meeting is mailed or public
disclosure of the meeting is made, together with certain information relating to
the nomination or proposed new business.
MUTUAL HOLDING COMPANY OWNERSHIP. So long the Mutual Holding Company is in
existence, the Mutual Holding Company must own at least a majority of the
outstanding voting stock of the Stock Holding Company, and will be able to elect
the Stock Holding Company's directors and direct the affairs and business
operations of the Stock Holding Company.
RESTRICTIONS IN THE STOCK HOLDING COMPANY'S CERTIFICATE OF INCORPORATION
AND BYLAWS. A number of provisions of the Stock Holding Company's Certificate
of Incorporation and Bylaws deal with matters of corporate governance and
certain rights of stockholders. The following discussion is a general summary
of certain provisions of the Stock Holding Company's Certificate of
Incorporation and Bylaws and certain other statutory and regulatory provisions
relating to stock ownership and transfers, and business combinations, which
might be deemed to have potential anti-takeover effects. These provisions may
have the effect of discouraging a future takeover attempt or change of control
which is not approved by the Board of Directors but which a majority of
individual Stock Holding Company stockholders may deem to be in their best
interests or in which stockholders may receive a substantial premium for their
shares over then current market prices. As a result, stockholders who desire to
participate in such a transaction may not have an opportunity to do so. Such
provisions will also render the removal of the current Board of Directors or
management of the Stock Holding Company more difficult. The OTS Order provides
that the Stock Holding Company must receive OTS' non-objection to any proposed
amendment to the Stock Holding Company's Certificate of Incorporation and
Bylaws. The following description of the material provisions of the Certificate
of Incorporation and Bylaws of the Stock Holding Company is necessarily general
and reference should be made in each case to such Certificate of Incorporation
and Bylaws, which are incorporated herein by reference.
LIMITATION ON VOTING RIGHTS. The Certificate of Incorporation of the Stock
Holding Company provides that in no event shall any person, other than the
Mutual Holding Company, who directly or indirectly beneficially owns in excess
of 10% of the then outstanding shares of Holding Company Common Stock (the
"Limit") be permitted to vote any shares of Holding Company Common Stock in
excess of the Limit. The Bank's Charter includes a provision prohibiting the
vote of shares in excess of the Limit for a period of five years from January 7,
1994. Beneficial ownership is determined pursuant to Rule 13d-3 of the rules
and regulations promulgated pursuant to the Exchange Act, and includes shares
beneficially owned by such person or any of his affiliates (as defined in the
Certificate of Incorporation), shares which such person or his affiliates have
the right to acquire upon the exercise of conversion rights or options and
shares as to which such person and his affiliates have or share investment or
voting power, but shall not include shares beneficially owned by the ESOP or
directors, officers and employees of the Bank or the Stock Holding Company or
shares that are subject to a revocable proxy and that are not
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otherwise beneficially owned, or deemed by the Stock Holding Company to be
beneficially owned, by such person and his affiliates. The Certificate of
Incorporation of the Stock Holding Company further provides that the provision
limiting voting rights may only be amended upon the vote of 80% of the
outstanding shares of voting stock. Under the Bank's Charter the provision
limiting voting rights may only be amended after receiving the preliminary
approval of the OTS and thereafter upon the vote of a majority of the total
votes outstanding and eligible to be cast at a stockholders' meeting.
STOCKHOLDER VOTE REQUIRED TO APPROVE BUSINESS COMBINATIONS WITH PRINCIPAL
STOCKHOLDERS. The Certificate of Incorporation requires the approval of the
holders of at least 80% of the Stock Holding Company's outstanding shares of
voting stock to approve certain "Business Combinations," as defined therein, and
related transactions. Under Delaware General Corporation Law, absent this
provision, Business Combinations, including mergers, consolidations and sales of
all or substantially all of the assets of a corporation must, subject to
exceptions, be approved by the vote of the holders of only a majority of the
outstanding shares of Common Stock of the Stock Holding Company and any other
affected class of stock.
Under the Certificate of Incorporation, at least 80% approval of
shareholders is required in connection with any transaction involving an
Interested Stockholder (as defined below) except (i) in cases where the proposed
transaction has been approved in advance by a majority of those members of the
Stock Holding Company's Board of Directors who are unaffiliated with the
Interested Stockholder and were directors prior to the time when the Interested
Stockholder became an Interested Stockholder, or (ii) if the proposed
transaction met certain conditions set forth therein which are designed to
afford the stockholders a fair price in consideration for their shares, in which
cases approval of only a majority of the outstanding shares of voting stock is
required. The term "Interested Stockholder" is defined to include any
individual, corporation, partnership or other entity (other than the Stock
Holding Company or its subsidiaries) which owns beneficially or controls,
directly or indirectly, 10% or more of the outstanding shares of voting stock of
the Stock Holding Company. This provision of the Certificate of Incorporation
applies to any "Business Combination," which is defined to include (i) any
merger or consolidation of the Stock Holding Company or any of its subsidiaries
with or into any Interested Stockholder or Affiliate (as defined in the
Certificate of Incorporation) of an Interested Stockholder; (ii) any sale,
lease, exchange, mortgage, transfer, or other disposition to or with any
Interested Stockholder or Affiliate of 25% or more of the assets of the Stock
Holding Company or combined assets of the Stock Holding Company and its
subsidiary; (iii) the issuance or transfer to any Interested Stockholder or its
Affiliate by the Company (or any subsidiary) of any securities of the Stock
Holding Company in exchange for any assets, cash or securities the value of
which equals or exceeds 25% of the fair market value of the Common Stock of the
Stock Holding Company; (iv) the adoption of any plan for the liquidation or
dissolution of the Stock Holding Company proposed by or on behalf of any
Interested Stockholder or Affiliate thereof; and (v) any reclassification of
securities, recapitalization, merger or consolidation of the Stock Holding
Company which has the effect of increasing the proportionate share of Common
Stock or any class of equity or convertible securities of the Stock Holding
Company owned directly or indirectly, by an Interested Stockholder or Affiliate
thereof. The Bank's Charter does not include a similar supermajority vote
requirement. However, pursuant to OTS regulations a merger transaction must be
approved by a vote of 66% of the outstanding shares entitled to vote.
EVALUATION OF OFFERS. The Certificate of Incorporation of the Stock
Holding Company further provides that the Board of Directors of the Stock
Holding Company, when evaluating any offer of another "Person" (as defined
therein), to (i) make a tender or exchange offer for any equity security of the
Stock Holding Company, (ii) merge or consolidate the Stock Holding Company with
another corporation or entity or (iii) purchase or otherwise acquire all or
substantially all of the properties and assets of the Stock Holding Company,
may, in connection with the exercise of its judgment in determining what is in
the best interest of the Stock Holding Company, the Bank and the stockholders of
the Stock Holding Company, give due consideration to all relevant factors,
including, without limitation, the social and
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economic effects of acceptance of such offer on the Stock Holding Company's
customers and the Bank's present and future account holders, borrowers and
employees; on the communities in which the Stock Holding Company and the Bank
operate or are located; and on the ability of the Stock Holding Company to
fulfill its corporate objectives as a savings and loan holding company and on
the ability of the Bank to fulfill the objectives of a federally chartered stock
savings bank under applicable statutes and regulations. By having these
standards in the Certificate of Incorporation of the Stock Holding Company, the
Board of Directors may be in a stronger position to oppose such a transaction if
the Board concludes that the transaction would not be in the best interest of
the Stock Holding Company, even if the price offered is significantly greater
than the then market price of any equity security of the Stock Holding Company.
The Bank's Charter does not contain a similar provision.
AMENDMENT OF CERTIFICATE OF INCORPORATION AND BYLAWS. Amendments to the
Stock Holding Company's Certificate of Incorporation must be approved by a
majority vote of its Board of Directors and also by a majority of the
outstanding shares of its voting stock, provided, however, that an affirmative
vote of at least 80% of the outstanding voting stock entitled to vote (after
giving effect to the provision limiting voting rights) is required to amend or
repeal certain provisions of the Certificate of Incorporation, including the
provision limiting voting rights, the provisions relating to approval of certain
business combinations, calling special meetings, the number and classification
of directors, and director and officer indemnification by the Stock Holding
Company. The Stock Holding Company's Bylaws may be amended by its Board of
Directors, or by a vote of 80% of the total votes eligible to be voted at a duly
constituted meeting of stockholders. The Bank's Charter may be amended following
receipt of OTS approval and thereafter upon the vote of a majority of the total
votes outstanding and eligible to be cast at a stockholders' meeting. The Bank's
bylaws may be amended by a majority vote of the entire Board of Directors or by
a majority of votes cast by stockholders at a stockholders' meeting.
DELAWARE CORPORATE LAW
In 1988 Delaware enacted a statute designed to provide Delaware
corporations with additional protection against hostile takeovers. The takeover
statute, which is codified in Section 203 of the Delaware General Corporation
Law ("Section 203"), is intended to discourage certain takeover practices by
impeding the ability of a hostile acquiror to engage in transactions with the
target company.
In general, Section 203 provides that a "Person" (as defined therein) who
owns 15% or more of the outstanding voting stock of a Delaware corporation (an
"Interested Stockholder") may not consummate a merger or other business
combination transaction with such corporation at any time during the three-year
period following the date such "Person" became an Interested Stockholder. The
term "business combination" is defined broadly to cover a wide range of
corporate transactions including mergers, sales of assets, issuances of stock,
transactions with subsidiaries and the receipt of disproportionate financial
benefits.
The statute exempts the following transactions from the requirements of
Section 203: (i) any business combination if, prior to the date a person became
an Interested Stockholder, the Board of Directors approved either the business
combination or the transaction which resulted in the stockholder becoming an
Interested Stockholder; (ii) any business combination involving a person who
acquired at least 85% of the outstanding voting stock in the transaction in
which he became an Interested Stockholder, calculated without regard to those
shares owned by the corporation's directors who are also officers or certain
employee stock plans; (iii) any business combination with an Interested
Stockholder that is approved by the Board of Directors and by a two-thirds vote
of the outstanding voting stock not owned by the Interested Stockholder; and
(iv) certain business combinations that are proposed after the corporation had
received other acquisition proposals and which are approved or not opposed by a
majority of certain continuing members of the Board of Directors. A corporation
may exempt itself from the requirements of the statute by adopting an amendment
to its Certificate of Incorporation or Bylaws
20
<PAGE>
electing not to be governed by Section 203. At the present time, the Board of
Directors of the Stock Holding Company does not intend to propose any such
amendment.
REGULATION OF THE STOCK HOLDING COMPANY
Pursuant to the OTS Order approving the Reorganization, the Stock Holding
Company shall be subject to the same restrictions, including but not limited to,
the activities limitations applicable to the Mutual Holding Company under
Section 10(o)5 of HOLA and the regulations promulgated thereunder. So long as
the Stock Holding Company is regulated as a mutual savings and loan holding
company, it generally may only engage in the activities permissible for bank
holding companies under the BHCA as well as activities permissible for the Bank
itself (other than deposit taking). The Stock Holding Company will be
registered with and be subject to OTS examination and supervision as well as
certain reporting requirements. In addition, the operations of the Stock
Holding Company are subject to regulations promulgated by the OTS from time to
time. As a SAIF-insured subsidiary of a savings and loan holding company, the
Bank will be subject to certain restrictions in dealing with the Stock Holding
Company and with other persons affiliated with the Stock Holding Company, and
will continue to be subject to examination and supervision by the OTS and the
FDIC.
Pursuant to OTS regulations governing the acquisition of control of savings
associations, no person may acquire, either directly or indirectly or acting in
concert (as defined in the regulations) with one or more persons, or through one
or more subsidiaries, the voting power of more than 25% of a class of voting
stock of a savings association (or its stockholding company) without the prior
approval of the OTS. Under certain circumstances the acquisition of 10% or more
of the voting stock of a savings association or its stock holding company may
result in such person being deemed to have acquired control of the savings
association, i.e., where the person would: (i) be one of the two largest holders
of a class of voting securities; (ii) hold more than 25% of total stockholders'
equity; (iii) hold more than 35% of the combined debt and stockholders' equity;
(iv) be a party to certain agreements evidencing (a) a material economic stake
in the savings association or (b) the ability of the person to influence
management; (v) have the ability, other than through the holding of revocable
proxies, to direct the vote of more than 25% of a class of voting stock; or (vi)
have the power to direct the sale of 25% of a class of voting stock in a manner
other than a widely dispersed or public offering; (vii) either individually or
through his representative or nominee constitute more than one member of the
savings association's Board of Directors; or (viii) either individually or
through his nominee serve as the Chairman of the Board of Directors, Chairman of
the Executive Committee, Chief Executive Officer, Chief Operating Officer, Chief
Financial Officer or other similar position. Under such circumstances the
person must either reduce his equity holdings to less than 10% of the
outstanding voting stock of the savings association or stock holding company or
file a rebuttal of control submission with the OTS. The OTS has indicated that
as a matter of policy, any rebuttal of control determination that the OTS grants
may be rescinded in connection with a conversion of a mutual holding company to
stock form, if after giving effect to the shares issued in the conversion such
person would own 10% or more of the voting stock of the converted holding
company.
The HOLA prohibits a savings and loan holding company, directly or
indirectly, from (i) acquiring control (as defined) of another insured
institution (or holding company thereof) without prior OTS approval; (ii)
acquiring more than 5% of the voting shares of another insured institution (or
holding company thereof) which is not a subsidiary, subject to certain
exceptions; (iii) acquiring through merger, consolidation or the purchase of
assets, another savings institution (whether or not it is insured by the Savings
Association Insurance Fund ("SAIF")) or holding company thereof, or acquiring
all or substantially all of the assets of such institution (or holding company
thereof) without prior OTS approval; or (iv) acquiring control of a savings
institution not insured by the SAIF (except through a merger with and into the
holding company's savings institution subsidiary that is approved by the OTS).
A savings
21
<PAGE>
and loan holding company may acquire up to 15% of the voting shares of an
undercapitalized savings institution. A savings and loan holding company may
not acquire as a separate subsidiary an insured institution that has principal
offices outside of the state where the principal offices of its subsidiary
institution is located, except: (i) in the case of certain emergency
acquisitions approved by the FDIC, (ii) if the holding company controlled (as
defined) such insured institution as of March 5, 1987, or (iii) if the laws of
the state in which the insured institution to be acquired is located
specifically authorize a savings institution chartered by that state to be
acquired by a savings institution chartered by the state where the acquiring
savings institution or savings and loan holding company is located, or by a
holding company that controls such a state chartered institution. No director
or officer of a savings and loan holding company or person owning or controlling
more than 25% of such holding company's voting shares may, except with the prior
approval of the OTS, acquire control of any SAIF-insured institution that is not
a subsidiary of such holding company. If the OTS approves such an acquisition,
any holding company controlled by such officer, director or person shall be
subject to the activities limitations that apply to multiple savings and loan
holding companies, unless certain supervisory exceptions apply.
RECENT LEGISLATION
On September 30, 1996 the Economic Growth and Regulatory Paperwork
Reduction Act of 1996 was enacted. Among other things, the act (i) imposes a
65.7 basis points special assessment on all SAIF deposits as of March 31, 1995
(which assessment was payable by November 27, 1996); (ii) requires banks insured
by the Bank Insurance Fund ("BIF") to begin paying 1.29 basis on deposits that
will be used towards repayment of Financing Corporation ("FICO") bonds with full
pro rata sharing of the FICO obligation among BIF and SAIF institutions
beginning January 1, 2000; (iii) merges the BIF and SAIF funds on January 1,
1999 if there are no savings associations in existence on that date; and (iv)
provides for regulatory relief in such areas as lender liability, reporting
obligations to the Federal Reserve Board, independent auditor attestation
associated with compliance with safety and soundness, management interlocks,
branch closings, credit reporting, the Real Estate Settlement Procedures Act,
and the definition of "qualified thrift investments". None of these provisions,
other than the expansion of the definition of qualified thrift investments to
include credit card loans, student loans and small business loans, is expected
to have a material impact on the Stock Holding Company or the Bank.
OTS POLICY REGARDING TWO-TIER MUTUAL HOLDING COMPANIES
On November 13, 1996, the OTS issued an advance notice of proposed
rulemaking (the "Notice") requesting comment concerning certain questions
relating to the formation of a stock holding company the majority of whose
voting stock will be owned by a mutual holding company. The questions raised by
the OTS include, among others, the following: whether the stock holding company
should be regulated as a multiple or unitary savings and loan holding company;
whether the restrictions imposed by OTS regulations on mutual holding companies
(e.g., restrictions on pledges of subsidiary savings association stock, waivers
of dividends, and limitations on indemnification and employment contracts)
should also be imposed on mid-tier stock holding companies; whether the mid-
tier stock holding company should be required to obtain the approval of the OTS
prior to issuing securities to persons other than the mutual holding company,
whether and under what conditions the subsidiary savings association may issue
minority voting stock or other classes of securities and how such stock would be
treated in any mutual-to-stock conversion of the mutual holding company;
whether and to what extent the charter and bylaws (and amendments thereto) of
the mid-tier stock holding company should be regulated by the OTS and whether
the OTS should require that the mid-tier stock holding company's charter be
consistent with the federal mutual holding company charter; and whether the OTS
regulations regarding stock issuances of savings association subsidiaries of
mutual holding companies should apply to mid-tier stock holding companies.
22
<PAGE>
Although rules have not yet been issued relating to the two-tier structure,
it is the current OTS policy to review and on a case-by-case basis approve
applications to reorganize into the two-tier structure. On November 18, 1996,
the OTS approved the Stock Holding Company's application to reorganize the Bank
into the two-tier structure, subject to certain conditions including, the
following: The mid-tier stock holding company shall be subject to the
provisions of OTS regulations pertaining to minority stock issuances as if it
were a savings association in a mutual holding company structure; the mid-tier
stock holding company shall be subject to the same restrictions (including, but
not limited to, the activities limitations) to which the parent mutual holding
company is subject under federal law and OTS regulations; the mid-tier stock
holding company must hold all of the issued and outstanding common stock of the
subsidiary savings association, and the subsidiary savings association may not
issue any other class of equity security; the mid-tier stock holding company and
the subsidiary savings association must obtain approval from the OTS prior to
issuing any securities; the mid-tier stock holding company must receive the
OTS's non-objection to any proposed amendments to its charter and bylaws; the
mid-tier stock holding company shall cease any activity, reverse any action, or
amend any provision of its charter or bylaws, to which the OTS objects as being
contrary to the OTS regulations in effect at the time of OTS approval of the
Reorganization, or as subsequently amended; and if the mutual holding company
undertakes a mutual-to-stock conversion, OTS policies regarding purchases of
stock in the conversion will apply to shareholders of the Stock Holding Company.
The Bank's Board of Directors has reviewed the current OTS policy and
intends to complete the Reorganization under such terms.
- --------------------------------------------------------------------------------
DESCRIPTION OF CAPITAL STOCK OF THE STOCK HOLDING COMPANY
- --------------------------------------------------------------------------------
GENERAL
The Stock Holding Company is authorized to issue 8.2 million shares of
Common Stock having a par value of $.10 per share and 2 million shares of serial
preferred stock (the "Preferred Stock"). The Stock Holding Company currently
will issue 6,720,821 shares of Common Stock and no shares of Preferred Stock in
the Reorganization. Each share of the Common Stock will have the same relative
rights as, and will be identical in all respects with, each other share of
Common Stock.
THE COMMON STOCK OF THE STOCK HOLDING COMPANY WILL REPRESENT
NONWITHDRAWABLE CAPITAL, WILL NOT BE AN ACCOUNT OF AN INSURABLE TYPE, AND WILL
NOT BE INSURED BY THE FDIC OR ANY GOVERNMENT AGENCY.
COMMON STOCK
DIVIDENDS. The Stock Holding Company can pay dividends out of statutory
surplus or from certain net profits if, as, and when declared by its Board of
Directors. The payment of dividends by the Stock Holding Company is subject to
limitations which are imposed by law and applicable regulation. The holders of
Holding Company Common Stock will be entitled to receive and share equally in
such dividends as may be declared by the Board of Directors of the Stock Holding
Company out of funds legally available therefor. If the Stock Holding Company
issues preferred stock, the holders thereof may have a priority over the holders
of the Holding Company Common Stock with respect to dividends.
VOTING RIGHTS. The holders of Holding Company Common Stock will possess
exclusive voting rights in the Stock Holding Company. They will elect the Stock
Holding Company's Board of Directors and act on such other matters as are
required to be presented to them under Delaware law or as are otherwise
presented to them by the Board of Directors. If the Stock Holding Company
issues preferred
23
<PAGE>
stock, holders of the Preferred Stock may also possess voting rights. Certain
matters require an 80% stockholder vote.
LIQUIDATION. In the event of any liquidation, dissolution or winding up of
the Bank, the Stock Holding Company, as holder of the Bank's capital stock,
would be entitled to receive, after payment or provision for payment of all
debts and liabilities of the Bank (including all deposit accounts and accrued
interest thereon), all assets of the Bank available for distribution. In the
event of liquidation, dissolution or winding up of the Stock Holding Company,
the holders of its Holding Company Common Stock would be entitled to receive,
after payment or provision for payment of all its debts and liabilities, all of
the assets of the Stock Holding Company available for distribution. If
preferred stock is issued, the holders thereof may have a priority over the
holders of the Holding Company Common Stock in the event of liquidation or
dissolution.
PREEMPTIVE RIGHTS. Holders of the Holding Company Common Stock will not be
entitled to preemptive rights with respect to any shares which may be issued.
The Holding Company Common Stock is not subject to redemption.
PREFERRED STOCK
None of the shares of the Stock Holding Company's authorized preferred
stock will be issued in the Reorganization. Such stock may be issued with such
preferences and designations as the Board of Directors may from time to time
determine. The Board of Directors can, without shareholder approval, issue
Preferred Stock with voting, dividend, liquidation and conversion rights which
could dilute the voting strength of the holders of the Holding Company Common
Stock and may assist management in impeding an unfriendly takeover or attempted
change in control.
ACCOUNTING TREATMENT
The transactions comprising the Reorganization are deemed a reorganization
under common control treated similar to a pooling of interests for accounting
purposes. Therefore, the consolidated capitalization, assets, liabilities,
income and financial statements of the Stock Holding Company immediately
following the Reorganization will be substantially the same as those of the Bank
immediately prior to consummation of the Reorganization, all of which will be
shown on the Stock Holding Company's books at their historical recorded values.
Since the Reorganization will not result in a change in such financial
statements, this document does not include financial statements of the Bank or
the Stock Holding Company.
VOTE REQUIRED
Approval of the Plan of Reorganization requires the affirmative vote of a
majority of the total votes eligible to be cast at the Special Meeting. Failure
to vote or a vote to abstain is equivalent to voting against the Plan of
Reorganization. The Board of Directors recommends a vote "FOR" the approval of
the Plan of Reorganization.
THIS DESCRIPTION OF THE PROPOSED STOCK HOLDING COMPANY DOES NOT PURPORT TO
BE COMPLETE, BUT IS QUALIFIED IN ITS ENTIRETY BY THE PLAN OF REORGANIZATION AND
CERTIFICATE OF INCORPORATION AND BYLAWS OF THE STOCK HOLDING COMPANY ATTACHED AS
EXHIBITS A AND B, RESPECTIVELY, TO THIS PROSPECTUS/PROXY STATEMENT.
24
<PAGE>
- --------------------------------------------------------------------------------
STOCKHOLDER PROPOSALS
- --------------------------------------------------------------------------------
In the event the Reorganization is not completed, in order to be eligible
for inclusion in the Bank's proxy materials for next year's Annual Meeting of
Stockholders, any stockholder proposal to take action at such meeting must have
been received at the Bank's executive office, 218 Datura Street, West Palm
Beach, Florida 33401, no later than October 19, 1996. Any such proposals shall
be subject to the requirements of the proxy rules adopted under the Exchange Act
as administered by the OTS.
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
The Stock Holding Company has filed with the SEC a registration statement
under the Securities Act with respect to the Common Stock offered hereby. As
permitted by the rules and regulations of the SEC, the Prospectus does not
contain all the information set forth in the registration statement. Such
information can be examined without charge at the public reference facilities of
the SEC located at 450 Fifth Street, N.W., Washington, D.C. 20549, and copies of
such material can be obtained from the SEC at prescribed rates. In addition,
the SEC maintains a web site (http://www.sec.gov) that contains reports, proxy
and information statements and other information regarding registrants that file
electronically with the SEC, including the Stock Holding Company. This
Prospectus contains a description of the material terms and features of all
material contracts, reports or exhibits to the Registration Statement required
to be described. The statements contained in this Prospectus as to the contents
of any contract or other document filed as an exhibit to the registration
statement are, of necessity, brief descriptions thereof and are not necessarily
complete; each such statement is qualified by reference to such contract or
document.
In connection with the Plan of Reorganization, the Stock Holding Company
will register its Common Stock with the SEC under the Exchange Act and, upon
such registration, the Stock Holding Company and the holders of its stock will
become subject to the proxy solicitation rules, reporting requirements and
restrictions on stock purchases and sales by directors, officers and greater
than 10% stockholders, the annual and periodic reporting and certain other
requirements of the Exchange Act.
- --------------------------------------------------------------------------------
MISCELLANEOUS
- --------------------------------------------------------------------------------
The Board of Directors is not aware of any business to come before the
Special Meeting other than the matters described above in the Prospectus/Proxy
Statement. However, if any matters should properly come before the Special
Meeting, it is intended that holders of the proxies will act as directed by a
majority of the Board of Directors, except for matters related to the conduct of
the Meeting, as to which they shall act in accordance with their best judgment.
The cost of solicitation of proxies will be borne by the Bank. The Bank
will reimburse brokerage firms and other custodians, nominees and fiduciaries
for reasonable expenses incurred by them in sending proxy materials to the
beneficial owners of Common Stock. In addition to solicitations by mail,
directors, officers and regular employees of the Bank may solicit proxies
personally or by telegraph or telephone without additional compensation.
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
A copy of the Bank's Annual Report for the fiscal year ended December 31,
1995, including audited financial statements has previously been furnished to
the Bank's stockholders. An additional copy the Bank's Annual Report will be
furnished without charge to stockholders as of the record date upon
25
<PAGE>
written request to the Corporate Secretary, Fidelity Federal Savings Bank of
Florida, 218 Datura Street, West Palm Beach, Florida 33401.
BY ORDER OF THE BOARD OF DIRECTORS
Vince A. Elhilow
President and Chief Executive Officer
West Palm Beach, Florida
____________ __, 1996
26
<PAGE>
EXHIBIT A
FIDELITY FEDERAL SAVINGS BANK OF FLORIDA
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION, dated April 25, 1996, is by and
among FIDELITY FEDERAL SAVINGS BANK OF FLORIDA, a Federal stock savings bank
("Fidelity Federal"); Fidelity Bankshares, Inc., a Delaware corporation (the
"Stock Holding Company"), and FIDELITY FEDERAL INTERIM SAVINGS BANK, F.S.B., a
to-be-formed interim federal stock savings bank ("Interim").
The parties hereto desire to enter into an Agreement and Plan of
Reorganization whereby the corporate structure of Fidelity Federal will be
reorganized into the stock holding company form of ownership. The result of
such reorganization will be that immediately after the Effective Date (as
defined in Article V below), all of the issued and outstanding shares of common
stock, par value $1.00 per share, of Fidelity Federal will be held by the Stock
Holding Company, and the holders of the issued and outstanding shares of common
stock of Fidelity Federal will become the holders of the issued and outstanding
shares of common stock of the Stock Holding Company.
The reorganization of Fidelity Federal will be accomplished by the
following steps: (1) the formation by Fidelity Federal of the Stock Holding
Company as a wholly owned subsidiary; (2) the formation of an interim federal
stock savings bank, "Interim," which will be wholly owned by the Stock Holding
Company; and (3) the merger of Interim into Fidelity Federal, with Fidelity
Federal as the surviving corporation. Pursuant to such merger: (i) each of the
issued and outstanding shares of common stock of Fidelity Federal will be
converted by operation of law into an equal number of issued and outstanding
shares of common stock of the Stock Holding Company; and (ii) each of the issued
and outstanding shares of common stock of Interim will automatically be
converted by operation of law into an equal number of issued and outstanding
shares of common stock of Fidelity Federal.
NOW, THEREFORE, in order to consummate this Agreement and Plan of
Reorganization, and in consideration of the mutual covenants herein set forth,
the parties agree as follows:
ARTICLE I
MERGER OF INTERIM INTO
FIDELITY FEDERAL AND RELATED MATTERS
------------------------------------
1.1 On the Effective Date, Interim will be merged with and into Fidelity
Federal (the "Merger") and the separate existence of Interim shall cease, and
all assets and property (real, personal and mixed, tangible and intangible,
choses in action, rights and credits) then owned by Interim, or which would
inure to it, shall immediately and automatically, by operation of law and
without any conveyance, transfer, or further action, become the property of
Fidelity Federal. Fidelity Federal shall be deemed to be a continuation of
Interim, and Fidelity Federal shall succeed to the rights and obligations of
Interim.
1.2 Following the Merger, the existence of Fidelity Federal shall continue
unaffected and unimpaired by the Merger, with all the rights, privileges,
immunities and powers, and subject to all the duties and liabilities, of a
corporation organized under Federal law. The Charter and Bylaws of Fidelity
Federal, as presently in effect, shall continue in full force and effect and
shall not be changed in any manner whatsoever by the Merger.
<PAGE>
1.3 From and after the Effective Date, and subject to the actions of the
Board of Directors of Fidelity Federal, the business presently conducted by
Fidelity Federal (whether directly or through its subsidiaries) will continue to
be conducted by it, as a wholly owned subsidiary of Stock Holding Company, and
the present directors and officers of Fidelity Federal will continue in their
present positions. The home office and branch offices of Fidelity Federal in
existence immediately prior to the Effective Date shall continue to be the home
office and branch offices, respectively, of Fidelity Federal from and after the
Effective Date.
ARTICLE II
CONVERSION OF STOCK
-------------------
2.1 The terms and conditions of the Merger, the mode of carrying the same
into effect, and the manner and basis of converting the common stock of the Bank
into common stock of the Stock Holding Company pursuant to this Agreement shall
be as follows:
A. On the Effective Date, each share of common stock, par value $1.00
per share, of Fidelity Federal issued and outstanding immediately prior to the
Effective Date shall automatically by operation of law be converted into and
shall become one share of Common Stock, par value $0.10 per share, of the Stock
Holding Company (the "Stock Holding Company Common Stock"). Each share of common
stock of Interim issued and outstanding immediately prior to the Effective Date
shall, on the Effective Date, automatically by operation of law be converted
into and become one share of common stock, $1.00 par value per share, of
Fidelity Federal and shall not be further converted into shares of the Stock
Holding Company, so that from and after the Effective Date, all of the issued
and outstanding shares of common stock of Fidelity Federal shall be held by the
Stock Holding Company.
B. On the Effective Date, the current stock option plans and
recognition plans of Fidelity Federal (collectively, the "Benefit Plans") shall
automatically, by operation of law, be continued as Benefit Plans of the Bank
and or the Stock Holding Company. Each option to purchase shares of Fidelity
Federal common stock under the Bank's stock option plan outstanding at that time
will be automatically converted into an identical option, with identical price,
terms and conditions, to purchase an identical number of shares of Stock Holding
Company Common Stock in lieu of shares of Fidelity Federal common stock. The
Stock Holding Company and the Bank may make appropriate amendments to the
Benefit Plans to reflect the adoption of the Benefit Plans as the plans of the
Stock Holding Company, without adverse effect on the Benefit Plans and their
participants.
C. From and after the Effective Date, each holder of an outstanding
certificate or certificates that, prior thereto, represented shares of Fidelity
Federal common stock, shall, upon surrender of the same to the designated agent
of Fidelity Federal, be entitled to receive in exchange therefor a certificate
or certificates representing the number of whole shares of Stock Holding Company
Common Stock into which the shares theretofore represented by the certificate or
certificates so surrendered shall have been converted, as provided in the
foregoing provisions of this Section 2.1. Until so surrendered, each such
outstanding certificate which, prior to the Effective Date, represented shares
of Fidelity Federal common stock shall be automatically deemed for all purposes
to evidence the ownership of the equal number of whole shares of Stock Holding
Company Common Stock. Former holders of shares of Fidelity Federal common stock
will not be required to exchange their Fidelity Federal common stock
2
<PAGE>
certificates for new certificates evidencing the same number of shares of Stock
Holding Company Common Stock. If in the future Stock Holding Company determines
to effect an exchange of stock certificates, instructions will be sent to all
holders of record of Stock Holding Company Common Stock.
D. All shares of Stock Holding Company Common Stock into which shares
of Fidelity Federal common stock shall have been converted pursuant to this
Article II shall be deemed to have been issued in full satisfaction of all
rights pertaining to such converted shares.
E. On the Effective Date, the holders of certificates formerly
representing Fidelity Federal common stock outstanding on the Effective Date
shall cease to have any rights with respect to the stock of Fidelity Federal
common stock, and their sole rights shall be with respect to the Stock Holding
Company Common Stock into which their shares of Fidelity Federal common stock
shall have been converted by the Merger.
ARTICLE III
CONDITIONS
----------
3.1 The obligations of Fidelity Federal, Stock Holding Company and Interim
to effect the Merger and otherwise consummate the transactions which are the
subject matter hereof shall be subject to satisfaction of the following
conditions:
A. To the extent required by applicable law, rules, and regulations,
the holders of the outstanding shares of Fidelity Federal common stock shall, at
a meeting of the stockholders of Fidelity Federal duly called, have approved
this Agreement by the affirmative vote of a majority of the outstanding shares
of Fidelity Federal common stock.
B. Any and all approvals from the OTS, the Securities and Exchange
Commission and any other state or federal governmental agency having
jurisdiction necessary for the lawful consummation of the Merger and the
issuance and delivery of Stock Holding Company Common Stock as contemplated by
this Agreement shall have been obtained.
C. Fidelity Federal shall have received either (i) a ruling from the
Internal Revenue Service or (ii) an opinion from its legal counsel, to the
effect that the Merger will be treated as a non-taxable transaction under
applicable provisions of the Internal Revenue Code of 1986, as amended, and that
no gain or loss will be recognized by the stockholders of Fidelity Federal upon
the exchange of Fidelity Federal common stock held by them solely for Stock
Holding Company Common Stock.
ARTICLE IV
TERMINATION
-----------
4.1 This Agreement may be terminated at the election of any of the parties
hereto if any one or more of the conditions to the obligations of any of them
hereunder shall not have been satisfied and shall have become incapable of
fulfillment and shall not be waived. This Agreement may also be
3
<PAGE>
terminated at any time prior to the Effective Date by the mutual consent of the
respective Boards of Directors of the parties.
4.2 In the event of the termination of this Agreement pursuant to any of
the foregoing provisions, no party shall have any further liability or
obligation of any nature to any other party under this Agreement.
ARTICLE V
EFFECTIVE DATE OF MERGER
------------------------
Upon satisfaction or waiver (in accordance with the provisions of this
Agreement) of each of the conditions set forth in Article III, the parties
hereto shall execute and cause to be filed the Merger Agreement and such
certificates or further documents as shall be required by the OTS and applicable
state law, and with such other federal or state regulatory agencies as may be
required. Upon approval by the OTS and endorsement of such Merger Agreement by
the OTS and, if necessary, applicable state authorities, the Merger and other
transactions contemplated by this Agreement shall become effective. The
Effective Date for all purposes hereunder shall be the date of such endorsement
by the OTS.
ARTICLE VI
MISCELLANEOUS
-------------
6.1 Any of the terms or conditions of this Agreement, which may legally be
waived, may be waived at any time by any party hereto that is entitled to the
benefit thereof, or any of such terms or conditions may be amended or modified
in whole or in part at any time, to the extent authorized by applicable law, by
an agreement in writing, executed in the same manner as this Agreement.
6.2 Any of the terms or conditions of this Agreement may be amended or
modified in whole or in part at any time, to the extent permitted by applicable
law, rules, and regulations, by an amendment in writing, provided that any such
amendment or modification is not materially adverse to Fidelity Federal, Stock
Holding Company or their stockholders. In the event that any governmental
agency requests or requires that the transactions contemplated herein be
modified in any respect as a condition of providing a necessary regulatory
approval or favorable ruling, or that in the opinion of counsel such
modification is necessary to obtain such approval or ruling, this Agreement may
be modified, at any time before or after adoption thereof by the stockholders of
Fidelity Federal, by an instrument in writing, provided that the effect of such
amendment would not be materially adverse to Fidelity Federal, Stock Holding
Company or their stockholders.
6.3 This Agreement shall be governed by and construed under the laws of
the United States, except insofar as state law is deemed to apply.
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
and Plan of Reorganization as of the date first above written.
FIDELITY FEDERAL SAVINGS BANK OF FLORIDA
By: /s/ Vince A. Elhilow
--------------------
Vince A. Elhilow
President and Chief Executive Officer
FIDELITY BANKSHARES, INC.
By: /s/ Vince A. Elhilow
--------------------
Vince A. Elhilow
President and Chief Executive Officer
FIDELITY FEDERAL INTERIM SAVINGS BANK,
F.S.B. (IN FORMATION)
By: /s/ Vince A. Elhilow
---------------------------------------------
Vince A. Elhilow
President and Chief Executive Officer
<PAGE>
Exhibit B
CERTIFICATE OF INCORPORATION
OF
FIDELITY BANKSHARES, INC.
FIRST: The name of the Corporation is Fidelity Bankshares, Inc.
-----
(hereinafter referred to as the "Corporation").
SECOND: The address of the registered office of the Corporation in the
------
State of Delaware is Corporation Trust Center, 1209 Orange Street, in the City
of Wilmington, County of New Castle. The name of the registered agent at that
address is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or
-----
activity for which a corporation may be organized under the General Corporation
Law of Delaware.
FOURTH:
------
A. The total number of shares of all classes of stock which the
Corporation shall have authority to issue is ten million two hundred thousand
(10,200,000) consisting of:
1. two million (2,000,000) shares of Preferred Stock, par value ten
cents ($.10) per share (the "Preferred Stock"); and
2. eight million two hundred thousand (8,200,000) shares of Common
Stock, par value ten cents ($.10) per share (the "Common Stock").
B. The Board of Directors is authorized, subject to any limitations
prescribed by law, to provide for the issuance of the shares of Preferred Stock
in series, and by filing a certificate pursuant to the applicable law of the
State of Delaware (such certificate being hereinafter referred to as a
"Preferred Stock Designation"), to establish from time to time the number of
shares to be included in each such series, and to fix the designation, powers,
preferences, and rights of the shares of each such series and any
qualifications, limitations or restrictions thereof. The number of authorized
shares of Preferred Stock may be increased or decreased (but not below the
number of shares thereof then outstanding) by the affirmative vote of the
holders of a majority of the Common Stock, without a vote of the holders of the
Preferred Stock, or of any series thereof, unless a vote of any such holders is
required pursuant to the terms of any Preferred Stock Designation.
C. 1. Notwithstanding any other provision of this Certificate of
Incorporation, in no event shall any record owner of any outstanding Common
Stock which is beneficially owned, directly or indirectly, by a person who, as
of any record date for the determination of stockholders entitled to vote on any
matter, beneficially owns in excess of 10% of the then-outstanding shares of
Common Stock (the "Limit"), be entitled, or permitted to any vote in respect of
the shares held in excess of the Limit. The Limit shall not be applicable to
shares held by Fidelity Bankshares, M.H.C. The number of votes which may be
cast by any record owner by virtue of the provisions hereof in respect of Common
Stock beneficially owned by such person owning shares in excess of the Limit
shall be a number equal to the total number of votes which a single record
owner of all Common Stock owned by such person would be entitled to cast,
multiplied by a fraction, the numerator of which is the number of shares of such
class or series which are both beneficially owned by such person and owned of
record by such record owner
<PAGE>
and the denominator of which is the total number of shares of Common Stock
beneficially owned by such person owning shares in excess of the Limit.
2. The following definitions shall apply to this Section C of this
Article FOURTH:
(a) "Affiliate" shall have the meaning ascribed to it in Rule
12b-2 of the General Rules and Regulations under the
Securities Act of 1934, as in effect on the date of filing
of this Certificate of Incorporation. However, the term
Affiliate shall not include Fidelity Bankshares, M.H.C.
(b) "Beneficial ownership" shall be determined pursuant to Rule
13d-3 of the General Rules and Regulations under the
Securities Exchange Act of 1934 (or any successor rule or
statutory provision), or, if said Rule 13d-3 shall be
rescinded and there shall be no successor rule or statutory
provision thereto, pursuant to said Rule 13d-3 as in effect
on the date of filing of this Certificate of Incorporation;
provided, however, that a person shall, in any event, also
be deemed the "beneficial owner" of any Common Stock:
(1) which such person or any of its affiliates beneficially
owns, directly or indirectly; or
(2) which such person or any of its affiliates has (i) the
right to acquire (whether such right is exercisable
immediately or only after the passage of time),
pursuant to any agreement, arrangement or understanding
(but shall not be deemed to be the beneficial owner of
any voting shares solely by reason of an agreement,
contract, or other arrangement with this Corporation to
effect any transaction which is described in any one or
more of clauses of Section A of Article EIGHTH) or upon
the exercise of conversion rights, exchange rights,
warrants, or options or otherwise, or (ii) sole or
shared voting or investment power with respect thereto
pursuant to any agreement, arrangement, understanding,
relationship or otherwise (but shall not be deemed to
be the beneficial owner of any voting shares solely by
reason of a revocable proxy granted for a particular
meeting of stockholders, pursuant to a public
solicitation of proxies for such meeting, with respect
to shares of which neither such person nor any such
affiliate is otherwise deemed the beneficial owner); or
(3) which are beneficially owned, directly or indirectly,
by any other person with which such first mentioned
person or any of its affiliates acts as a partnership,
limited partnership, syndicate or other group pursuant
to any agreement, arrangement or understanding for the
purpose of acquiring, holding, voting or disposing of
any shares of capital stock of this Corporation;
and provided further, however, that (1) no Director or
Officer of this Corporation (or any affiliate of any such
Director or Officer) shall, solely by reason of any or all
of such Directors or Officers acting in their capacities as
such, be deemed, for any purposes hereof, to beneficially
own any Common
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<PAGE>
Stock beneficially owned by another such Director or Officer
(or any affiliate thereof), and (2) neither any employee
stock ownership plan or similar plan of this Corporation or
any subsidiary of this Corporation, nor any trustee with
respect thereto or any affiliate of such trustee (solely by
reason of such capacity of such trustee), shall be deemed,
for any purposes hereof, to beneficially own any Common
Stock held under any such plan. For purposes of computing
the percentage beneficial ownership of Common Stock of a
person the outstanding Common Stock shall include shares
deemed owned by such person through application of this
subsection but shall not include any other Common Stock
which may be issuable by this Corporation pursuant to any
agreement, or upon exercise of conversion rights, warrants
or options, or otherwise. For all other purposes, the
outstanding Common Stock shall include only Common Stock
then outstanding and shall not include any Common Stock
which may be issuable by this Corporation pursuant to any
agreement, or upon the exercise of conversion rights,
warrants or options, or otherwise.
(c) A "person" shall mean any individual, firm, corporation, or
other entity.
3. The Board of Directors shall have the power to construe and apply
the provisions of this section and to make all determinations necessary or
desirable to implement such provisions, including but not limited to matters
with respect to (i) the number of shares of Common Stock beneficially owned by
any person, (ii) whether a person is an affiliate of another, (iii) whether a
person has an agreement, arrangement, or understanding with another as to the
matters referred to in the definition of beneficial ownership, (iv) the
application of any other definition or operative provision of the section to the
given facts, or (v) any other matter relating to the applicability or effect of
this section.
4. The Board of Directors shall have the right to demand that any
person who is reasonably believed to beneficially own Common Stock in excess of
the Limit (or holds of record Common Stock beneficially owned by any person in
excess of the Limit) supply the Corporation with complete information as to (i)
the record owner(s) of all shares beneficially owned by such person who is
reasonably believed to own shares in excess of the Limit, (ii) any other factual
matter relating to the applicability or effect of this section as may reasonably
be requested of such person.
5. Except as otherwise provided by law or expressly provided in this
section, the presence, in person or by proxy, of the holders of record of shares
of capital stock of the Corporation entitling the holders thereof to cast a
majority of the votes (after giving effect, if required, to the provisions of
this section) entitled to be cast by the holders of shares of capital stock of
the Corporation entitled to vote shall constitute a quorum at all meetings of
the stockholders, and every reference in this Certificate of Incorporation to a
majority or other proportion of capital stock (or the holders thereof) for
purposes of determining any quorum requirement or any requirement for
stockholder consent or approval shall be deemed to refer to such majority or
other proportion of the votes (or the holders thereof) then entitled to be cast
in respect of such capital stock.
6. Any constructions, applications, or determinations made by the
Board of Directors pursuant to this section in good faith and on the basis of
such information and assistance as was then reasonably available for such
purpose shall be conclusive and binding upon the Corporation and its
stockholders.
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<PAGE>
7. In the event any provision (or portion thereof) of this section
shall be found to be invalid, prohibited or unenforceable for any reason, the
remaining provisions (or portions thereof) of this section shall remain in full
force and effect, and shall be construed as if such invalid, prohibited or
unenforceable provision had been stricken herefrom or otherwise rendered
inapplicable, it being the intent of this Corporation and its stockholders that
such remaining provision (or portion thereof) of this section remain, to the
fullest extent permitted by law, applicable and enforceable as to all
stockholders, including stockholders owning an amount of stock over the Limit,
notwithstanding any such finding.
FIFTH: The following provisions are inserted for the management of the
-----
business and the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation and of
its Directors and stockholders:
A. The business and affairs of the Corporation shall be managed
by or under the direction of the Board of Directors. In addition to the
powers and authority expressly conferred upon them by statute or by this
Certificate of Incorporation or the Bylaws of the Corporation, the
Directors are hereby empowered to exercise all such powers and do all such
acts and things as may be exercised or done by the Corporation.
B. The Directors of the Corporation need not be elected by
written ballot unless the Bylaws so provide.
C. Any action required or permitted to be taken by the
stockholders of the Corporation must be effected at a duly called annual or
special meeting of stockholders of the Corporation and may not be effected
by any consent in writing by such stockholders.
D. Special meetings of stockholders of the Corporation may be
called only by the Board of Directors pursuant to a resolution adopted by a
majority of the total number of authorized directorships (whether or not
there exist any vacancies in previously authorized directorships at the
time any such resolution is presented to the Board for adoption) (the
"Whole Board") or as otherwise provided in the Bylaws.
SIXTH:
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A. The number of Directors shall be fixed from time to time exclusively
by the Board of Directors pursuant to a resolution adopted by a majority of the
Whole Board. The Directors shall be divided into three classes, as nearly equal
in number as reasonably possible, with the term of office of the first class to
expire at the first annual meeting of stockholders, the term of office of the
second class to expire at the annual meeting of stockholders one year thereafter
and the term of office of the third class to expire at the annual meeting of
stockholders two years thereafter. At each annual meeting of stockholders
following such initial classification and election, Directors elected to succeed
those Directors whose terms expire shall be elected for a term of office to
expire at the third succeeding annual meeting of stockholders after their
election.
B. Subject to the rights of the holders of any series of Preferred Stock
then outstanding, newly created directorships resulting from any increase in the
authorized number of Directors or any vacancies in the Board of Directors
resulting from death, resignation, retirement, disqualification, removal from
office or other cause may be filled only by a majority vote of the Directors
then in office, though less than a quorum, and Directors so chosen shall hold
office for a term expiring at the annual meeting
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<PAGE>
of stockholders at which the term of office of the class to which they have been
chosen expires. No decrease in the number of Directors constituting the Board
of Directors shall shorten the term of any incumbent Director.
C. Advance notice of stockholder nominations for the election of
Directors and of business to be brought by stockholders before any meeting of
the stockholders of the Corporation shall be given in the manner provided in the
Bylaws of the Corporation.
D. Subject to the rights of the holders of any series of Preferred Stock
then outstanding, any Director, or the entire Board of Directors, may be removed
from office at any time, but only for cause and only by the affirmative vote of
the holders of at least 80 percent of the voting power of all of the then-
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of Directors (after giving effect to the provisions of
Article FOURTH of this Certificate of Incorporation ("Article FOURTH")), voting
together as a single class.
SEVENTH: The Board of Directors is expressly empowered to adopt, amend or
-------
repeal the Bylaws of the Corporation. Any adoption, amendment or repeal of the
Bylaws of the Corporation by the Board of Directors shall require the approval
of two-thirds of the Whole Board. The stockholders shall also have power to
adopt, amend or repeal the Bylaws of the Corporation; provided, however, that,
in addition to any vote of the holders of any class or series of stock of the
Corporation required by law or by this Certificate of Incorporation, the
affirmative vote of the holders of at least 80 percent of the voting power of
all of the then-outstanding shares of the capital stock of the Corporation
entitled to vote generally in the election of Directors (after giving effect to
the provisions of Article FOURTH), voting together as a single class, shall be
required to adopt, amend or repeal any provisions of the Bylaws of the
Corporation.
EIGHTH:
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A. In addition to any affirmative vote required by law or this
Certificate of Incorporation, and except as otherwise expressly provided in this
section:
1. any merger or consolidation of the Corporation or any Subsidiary
(as hereinafter defined) with (i) any Interested Stockholder (as
hereinafter defined) or (ii) any other corporation (whether or not itself
an Interested Stockholder) which is, or after such merger or consolidation
would be, an Affiliate (as hereinafter defined) of an Interested
Stockholder; or
2. any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of transactions) to or with any
Interested Stockholder, or any Affiliate of any Interested Stockholder, of
any assets of the Corporation or any Subsidiary having an aggregate Fair
Market Value (as hereinafter defined) equaling or exceeding 25% or more of
the combined assets of the Corporation and its Subsidiaries; or
3. the issuance or transfer by the Corporation or any Subsidiary
(in one transaction or a series of transactions) of any securities of the
Corporation or any Subsidiary to any Interested Stockholder or any
Affiliate of any Interested Stockholder in exchange for cash, securities or
other property (or a combination thereof) having an aggregate Fair Market
Value (as hereinafter defined) equaling or exceeding 25% of the combined
Fair Market Value of the then-outstanding
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<PAGE>
common stock of the Corporation and its Subsidiaries, except pursuant to an
employee benefit plan of the Corporation or any Subsidiary thereof; or
4. the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation proposed by or on behalf of an Interested
Stockholder or any Affiliate of an Interested Stockholder; or
5. any reclassification of securities (including any reverse stock
split), or recapitalization of the Corporation, or any merger or
consolidation of the Corporation with any of its Subsidiaries or any other
transaction (whether or not with or into or otherwise involving an
Interested Stockholder) which has the effect, directly or indirectly, of
increasing the proportional share of the outstanding shares of any class of
equity or convertible securities of the Corporation or any Subsidiary which
is directly or indirectly owned by an Interested Stockholder or any
Affiliate of an Interested Stockholder;
shall require the affirmative vote of the holders of at least 80% of the voting
power of the then-outstanding shares of stock of the Corporation entitled to
vote in the election of Directors (the "Voting Stock") (after giving effect to
the provision of Article FOURTH), voting together as a single class. Such
affirmative vote shall be required notwithstanding the fact that no vote may be
required, or that a lesser percentage may be specified, by law or by any other
provisions of this Certificate of Incorporation or any Preferred Stock
Designation or in any agreement with any national securities exchange or
otherwise.
The term "Business Combination" as used in this Article EIGHTH shall mean
any transaction which is referred to in any one or more of paragraphs 1 through
5 of Section A of this Article EIGHTH.
B. The provisions of Section A of this Article EIGHTH shall not be
applicable to any particular Business Combination, and such Business Combination
shall require only the affirmative vote of the majority of the outstanding
shares of capital stock entitled to vote, or such vote as is required by law or
by this Certificate of Incorporation, if, in the case of any Business
Combination that does not involve any cash or other consideration being received
by the stockholders of the Corporation solely in their capacity as stockholders
of the Corporation, the condition specified in the following paragraph 1 is met
or, in the case of any other Business Combination, all of the conditions
specified in either of the following paragraphs 1 or 2 are met:
1. The Business Combination shall have been approved by two-thirds
of the Disinterested Directors (as hereinafter defined).
2. All of the following conditions shall have been met:
(a) The aggregate amount of the cash and the Fair Market Value
as of the date of the consummation of the Business
Combination of consideration other than cash to be received
per share by the holders of Common Stock in such Business
Combination shall at least be equal to the higher of the
following:
(1) (if applicable) the Highest Per Share Price (as
hereinafter defined), including any brokerage
commissions, transfer taxes and soliciting dealers'
fees, paid by the Interested Stockholder or any of its
Affiliates for any shares of
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<PAGE>
Common Stock acquired by it (i) within the two-year
period immediately prior to the first public
announcement of the proposal of the Business Combination
(the "Announcement Date"), or (ii) in the transaction in
which it became an Interested Stockholder, whichever is
higher.
(2) the Fair Market Value per share of Common Stock on the
Announcement Date or on the date on which the Interested
Stockholder became an Interested Stockholder (such
latter date is referred to in this Article EIGHTH as the
"Determination Date"), whichever is higher.
(b) The aggregate amount of the cash and the Fair Market Value
as of the date of the consummation of the Business
Combination of consideration other than cash to be received
per share by holders of shares of any class of outstanding
Voting Stock other than Common Stock shall be at least equal
to the highest of the following (it being intended that the
requirements of this subparagraph (b) shall be required to
be met with respect to every such class of outstanding
Voting Stock, whether or not the Interested Stockholder has
previously acquired any shares of a particular class of
Voting Stock):
(1) (if applicable) the Highest Per Share Price (as
hereinafter defined), including any brokerage
commissions, transfer taxes and soliciting dealers'
fees, paid by the Interested Stockholder for any shares
of such class of Voting Stock acquired by it (i) within
the two-year period immediately prior to the
Announcement Date, or (ii) in the transaction in which
it became an Interested Stockholder, whichever is
higher;
(2) (if applicable) the highest preferential amount per
share to which the holders of shares of such class of
Voting Stock are entitled in the event of any voluntary
or involuntary liquidation, dissolution or winding up
of the Corporation; and
(3) the Fair Market Value per share of such class of Voting
Stock on the Announcement Date or on the Determination
Date, whichever is higher.
(c) The consideration to be received by holders of a particular
class of outstanding Voting Stock (including Common Stock)
shall be in cash or in the same form as the Interested
Stockholder has paid for shares of such class of Voting
Stock. If the Interested Stockholder has previously paid
for shares of any class of Voting Stock with varying forms
of consideration, the form of consideration to be received
per share by holders of shares of such class of Voting Stock
shall be either cash or the form used to acquire the largest
number of shares of such class of Voting Stock previously
acquired by the Interested Stockholder. The price
determined in accordance with subparagraph B.2 of this
Article EIGHTH shall be subject to appropriate adjustment in
the event of any stock dividend, stock split, combination of
shares or similar event.
(d) After such Interested Stockholder has become an Interested
Stockholder and prior to the consummation of such Business
Combination: (1) except as approved by
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<PAGE>
a majority of the Disinterested Directors, there shall have
been no failure to declare and pay at the regular date
therefor any full quarterly dividends (whether or not
cumulative) on any outstanding stock having preference over
the Common Stock as to dividends or liquidation; (2) there
shall have been (i) no reduction in the annual rate of
dividends paid on the Common Stock (except as necessary to
reflect any subdivision of the Common Stock), except as
approved by a majority of the Disinterested Directors, and
(ii) an increase in such annual rate of dividends as
necessary to reflect any reclassification (including any
reverse stock split), recapitalization, reorganization or
any similar transaction which has the effect of reducing the
number of outstanding shares of the Common Stock, unless the
failure to so increase such annual rate is approved by a
majority of the Disinterested Directors; and (3) neither
such Interested Stockholder or any of its Affiliates shall
have become the beneficial owner of any additional shares of
Voting Stock except as part of the transaction which results
in such Interested Stockholder becoming an Interested
Stockholder.
(e) After such Interested Stockholder has become an
Interested Stockholder, such Interested Stockholder shall
not have received the benefit, directly or indirectly
(except proportionately as a stockholder), of any loans,
advances, guarantees, pledges or other financial assistance
or any tax credits or other tax advantages provided by the
Corporation, whether in anticipation of or in connection
with such Business Combination or otherwise.
(f) A proxy or information statement describing the proposed
Business Combination and complying with the requirements of
the Securities Exchange Act of 1934 and the rules and
regulations thereunder (or any subsequent provisions
replacing such Act, rules or regulations) shall be mailed to
stockholders of the Corporation at least 30 days prior to
the consummation of such Business Combination (whether or
not such proxy or information statement is required to be
mailed pursuant to such Act or subsequent provisions).
C. For the purposes of this Article EIGHTH:
1. A "Person" shall include an individual, a group acting in concert,
a corporation, a partnership, an association, a joint venture, a pool, a
joint stock company, a trust, an unincorporated organization or similar
company, a syndicate or any other group formed for the purpose of
acquiring, holding or disposing of securities.
2. "Interested Stockholder" shall mean any person (other than the
Corporation or any holding company or Subsidiary thereof) who or which:
(a) is the beneficial owner, directly or indirectly, of more than
10% of the voting power of the outstanding Voting Stock; or
(b) is an Affiliate of the Corporation and at any time within the
two-year period immediately prior to the date in question was the
beneficial owner, directly or indirectly, of 10% or more of the voting
power of the then-outstanding Voting Stock; or
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<PAGE>
(c) is an assignee of or has otherwise succeeded to any shares of
Voting Stock which were at any time within the two-year period
immediately prior to the date in question beneficially owned by an
Interested Stockholder, if such assignment or succession shall have
occurred in the course of a transaction or series of transactions not
involving a public offering within the meaning of the Securities Act
of 1933.
3. For purposes of this Article EIGHTH, "beneficial ownership" shall
be determined in the manner provided in Section C of Article FOURTH hereof.
4. "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as in effect on the date of
filing of this Certificate of Incorporation.
5. "Subsidiary" means any corporation of which a majority of any
class of equity security is owned, directly or indirectly, by the
Corporation; provided, however, that for the purposes of the definition of
Interested Stockholder set forth in paragraph 2 of this section, the term
"Subsidiary" shall mean only a corporation of which a majority of each
class of equity security is owned, directly or indirectly, by the
Corporation.
6. "Disinterested Director" means any member of the Board of
Directors who is unaffiliated with the Interested Stockholder and was a
member of the Board of Directors prior to the time that the Interested
Stockholder became an Interested Stockholder, and any Director who is
thereafter chosen to fill any vacancy of the Board of Directors or who is
elected and who, in either event, is unaffiliated with the Interested
Stockholder and in connection with his or her initial assumption of office
is recommended for appointment or election by a majority of Disinterested
Directors then on the Board of Directors.
7. "Fair Market Value" means: (a) in the case of stock, the
highest closing sales price of the stock during the 30-day period
immediately preceding the date in question of a share of such stock on the
National Association of Securities Dealers Automated Quotation System or
any system then in use, or, if such stock is admitted to trading on a
principal United States securities exchange registered under the Securities
Exchange Act of 1934, Fair Market Value shall be the highest sales price
reported during the 30-day period preceding the date in question, or, if no
such quotations are available, the Fair Market Value on the date in
question of a share of such stock as determined by the Board of Directors
in good faith, in each case with respect to any class of stock,
appropriately adjusted for any dividend or distribution in shares of such
stock or any stock split or reclassification of outstanding shares of such
stock into a greater number of shares of such stock or any combination or
reclassification of outstanding shares of such stock into a smaller number
of shares of such stock, and (b) in the case of property other than cash or
stock, the Fair Market Value of such property on the date in question as
determined by the Board of Directors in good faith.
8. Reference to "Highest Per Share Price" shall in each case with
respect to any class of stock reflect an appropriate adjustment for any
dividend or distribution in shares of such stock or any stock split or
reclassification of outstanding shares of such stock into a greater number
of shares of such stock or any combination or reclassification of
outstanding shares of such stock into a smaller number of shares of such
stock.
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<PAGE>
9. In the event of any Business Combination in which the Corporation
survives, the phrase "consideration other than cash to be received" as used
in subparagraphs (a) and (b) of paragraph 2 of Section B of this Article
EIGHTH shall include the shares of Common Stock and/or the shares of any
other class of outstanding Voting Stock retained by the holders of such
shares.
D. A majority of the Directors of the Corporation shall have the power
and duty to determine for the purposes of this Article EIGHTH, on the basis of
information known to them after reasonable inquiry (a) whether a person is an
Interested Stockholder; (b) the number of shares of Voting Stock beneficially
owned by any person; (c) whether a person is an Affiliate or Associate of
another; and (d) whether the assets which are the subject of any Business
Combination have, or the consideration to be received for the issuance or
transfer of securities by the Corporation or any Subsidiary in any Business
Combination has an aggregate Fair Market Value equaling or exceeding 25% of the
combined Fair Market Value of the common stock of the Corporation and its
Subsidiaries. A majority of the Directors shall have the further power to
interpret all of the terms and provisions of this Article EIGHTH.
E. Nothing contained in this Article EIGHTH shall be construed to relieve
any Interested Stockholder from any fiduciary obligation imposed by law.
F. Notwithstanding any other provisions of this Certificate of
Incorporation or any provision of law which might otherwise permit a lesser vote
or no vote, but in addition to any affirmative vote of the holders of any
particular class or series of the Voting Stock required by law, this Certificate
of Incorporation or any Preferred Stock Designation, the affirmative vote of the
holders of at least 80 percent of the voting power of all of the then-
outstanding shares of the Voting Stock, voting together as a single class, shall
be required to alter, amend or repeal this Article EIGHTH.
NINTH: The Board of Directors of the Corporation, when evaluating any offer
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of another Person (as defined in Article EIGHTH hereof) to (A) make a tender or
exchange offer for any equity security of the Corporation, (B) merge or
consolidate the Corporation with another corporation or entity or (C) purchase
or otherwise acquire all or substantially all of the properties and assets of
the Corporation, may, in connection with the exercise of its judgment in
determining what is in the best interest of the Corporation and its
stockholders, give due consideration to all relevant factors, including, without
limitation, the social and economic effect of acceptance of such offer on the
Corporation's present and future customers and employees and those of its
Subsidiaries (as defined in Article EIGHTH hereof); on the communities in which
the Corporation and its Subsidiaries operate or are located; on the ability of
the Corporation to fulfill its corporate objectives as a savings bank holding
company and on the ability of its subsidiary savings bank to fulfill the
objectives of a stock savings bank under applicable statutes and regulations.
TENTH:
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A. Each person who was or is made a party or is threatened to be made a
party to or is otherwise involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (hereinafter a "proceeding"),
by reason of the fact that he or she is or was a Director or an Officer of the
Corporation or is or was serving at the request of the Corporation as a
Director, Officer, employee or agent of another corporation or of a partnership,
joint venture, trust or other enterprise, including service with respect to an
employee benefit plan (hereinafter an "indemnitee"), whether the basis of such
proceeding is alleged action in an official capacity as a Director, Officer,
employee or agent
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<PAGE>
or in any other capacity while serving as a Director, Officer, employee or
agent, shall be indemnified and held harmless by the Corporation to the fullest
extent authorized by the Delaware General Corporation Law, as the same exists or
may hereafter be amended (but, in the case of any such amendment, only to the
extent that such amendment permits the Corporation to provide broader
indemnification rights than such law permitted the Corporation to provide prior
to such amendment), against all expense, liability and loss (including
attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts
paid in settlement) reasonably incurred or suffered by such indemnitee in
connection therewith; provided, however, that, except as provided in Section C
hereof with respect to proceedings to enforce rights to indemnification, the
Corporation shall indemnify any such indemnitee in connection with a proceeding
(or part thereof) initiated by such indemnitee only if such proceeding (or part
thereof) was authorized by the Board of Directors of the Corporation.
B. The right to indemnification conferred in Section A of this Article
TENTH shall include the right to be paid by the Corporation the expenses
incurred in defending any such proceeding in advance of its final disposition
(hereinafter an "advancement of expenses"); provided, however, that, if the
Delaware General Corporation Law requires, an advancement of expenses incurred
by an indemnitee in his or her capacity as a Director of Officer (and not in any
other capacity in which service was or is rendered by such indemnitee,
including, without limitation, service to an employee benefit plan) shall be
made only upon delivery to the Corporation of an undertaking (hereinafter an
"undertaking"), by or on behalf of such indemnitee, to repay all amounts so
advanced if it shall ultimately be determined by final judicial decision from
which there is no further right to appeal (hereinafter a "final adjudication")
that such indemnitee is not entitled to be indemnified for such expenses under
this Section or otherwise. The rights to indemnification and to the advancement
of expenses conferred in Sections A and B of this Article TENTH shall be
contract rights and such rights shall continue as to an indemnitee who has
ceased to be a Director, Officer, employee or agent and shall inure to the
benefit of the indemnitee's heirs, executors and administrators.
C. If a claim under Section A or B of this Article TENTH is not paid in
full by the Corporation within sixty days after a written claim has been
received by the Corporation, except in the case of a claim for an advancement of
expenses, in which case the applicable period shall be twenty days, the
indemnitee may at any time thereafter bring suit against the Corporation to
recover the unpaid amount of the claim. If successful in whole or in part in any
such suit, or in a suit brought by the Corporation to recover an advancement of
expenses pursuant to the terms of an undertaking, the indemnitee shall be
entitled to be paid also the expense of prosecuting or defending such suit. In
(i) any suit brought by the indemnitee to enforce a right to indemnification
hereunder (but not in a suit brought by the indemnitee to enforce a right to an
advancement of expenses) it shall be a defense that, and (ii) in any suit by the
Corporation to recover an advancement of expenses pursuant to the terms of an
undertaking the Corporation shall be entitled to recover such expenses upon a
final adjudication that, the indemnitee has not met any applicable standard for
indemnification set forth in the Delaware General Corporation Law. Neither the
failure of the Corporation (including its Board of Directors, independent legal
counsel, or its stockholders) to have made a determination prior to the
commencement of such suit that indemnification of the indemnitee is proper in
the circumstances because the indemnitee has met the applicable standard of
conduct set forth in the Delaware General Corporation Law, nor an actual
determination by the Corporation (including its Board of Directors, independent
legal counsel, or its stockholders) that the indemnitee has not met such
applicable standard of conduct, shall create a presumption that the indemnitee
has not met the applicable standard of conduct or, in the case of such a suit
brought by the indemnitee, be a defense to such suit. In any suit brought by the
indemnitee to enforce a right to indemnification or to an advancement of
expenses hereunder, or by the Corporation
-11-
<PAGE>
to recover an advancement of expenses pursuant to the terms of an undertaking,
the burden of proving that the indemnitee is not entitled to be indemnified, or
to such advancement of expenses, under this Article TENTH or otherwise shall be
on the Corporation.
D. The rights to indemnification and to the advancement of expenses
conferred in this Article TENTH shall not be exclusive of any other right which
any person may have or hereafter acquire under any statute, the Corporation's
Certificate of Incorporation, Bylaws, agreement, vote of stockholders or
disinterested Directors or otherwise.
E. The Corporation may maintain insurance, at its expense, to protect
itself and any Director, Officer, employee or agent of the Corporation or
another corporation, partnership, joint venture, trust or other enterprise
against any expense, liability or loss, whether or not the Corporation would
have the power to indemnify such person against such expense, liability or loss
under the Delaware General Corporation Law.
F. The Corporation may, to the extent authorized from time to time by the
Board of Directors, grant rights to indemnification and to the advancement of
expenses to any employee or agent of the Corporation to the fullest extent of
the provisions of this Article TENTH with respect to the indemnification and
advancement of expenses of Directors and Officers of the Corporation.
ELEVENTH: A Director of this Corporation shall not be personally
--------
liable to the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a Director, except for liability (i) for any breach of the
Director's duty of loyalty to the Corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the Delaware General
Corporation Law, or (iv) for any transaction from which the Director derived an
improper personal benefit. If the Delaware General Corporation Law is amended
to authorize corporate action further eliminating or limiting the personal
liability of Directors, then the liability of a Director of the Corporation
shall be eliminated or limited to the fullest extent permitted by the Delaware
General Corporation Law, as so amended.
Any repeal or modification of the foregoing paragraph by the stockholders
of the Corporation shall not adversely affect any right or protection of a
Director of the Corporation existing at the time of such repeal or modification.
TWELFTH: The Corporation reserves the right to amend or repeal any
-------
provision contained in this Certificate of Incorporation in the manner
prescribed by the laws of the State of Delaware and all rights conferred upon
stockholders are granted subject to this reservation; provided, however, that,
notwithstanding any other provision of this Certificate of Incorporation or any
provision of law which might otherwise permit a lesser vote or no vote, but in
addition to any vote of the holders of any class or series of the stock of the
Corporation required by law or by this Certificate of Incorporation, the
affirmative vote of the holders of at least 80 percent of the voting power of
all of the then-outstanding shares of the capital stock of the Corporation
entitled to vote generally in the election of Directors (after giving effect to
the provisions of Article FOURTH), voting together as a single class, shall be
required to amend or repeal this Article TWELFTH, Section C of Article FOURTH,
Sections C or D of Article FIFTH, Article SIXTH, Article SEVENTH, Article EIGHTH
or Article TENTH.
-12-
<PAGE>
I, THE UNDERSIGNED, being the President of this Corporation, do make, file
and record this Certificate of Incorporation, do certify that the facts herein
stated are true, and accordingly, have hereto set my hand this 27th day of
April, 1996.
/s/ Vince A. Elhilow
----------------------------------------
Vince A. Elhilow
ATTEST: President and Chief Executive Officer
/s/ Patricia C. Clager
- -----------------------------------
Patricia C. Clager
Secretary
-13-
<PAGE>
FIDELITY BANKSHARES, INC.
BY-LAWS
ARTICLE I - STOCKHOLDERS
------------------------
Section 1. Annual Meeting.
--------- --------------
An annual meeting of the stockholders, for the election of Directors to
succeed those whose terms expire and for the transaction of such other business
as may properly come before the meeting, shall be held at such place, on such
date, and at such time as the Board of Directors shall each year fix, which date
shall be within thirteen (13) months subsequent to the later of the date of
incorporation or the last annual meeting of stockholders.
Section 2. Special Meetings.
--------- ----------------
Subject to the rights of the holders of any class or series of preferred
stock of the Corporation, special meetings of stockholders of the Corporation
may be called by the Board of Directors pursuant to a resolution adopted by a
majority of the total number of Directors which the Corporation would have if
there were no vacancies on the Board of Directors (hereinafter the "Whole
Board").
Section 3. Notice of Meetings.
--------- ------------------
Written notice of the place, date, and time of all meetings of the
stockholders shall be given, not less than ten (10) nor more than sixty (60)
days before the date on which the meeting is to be held, to each stockholder
entitled to vote at such meeting, except as otherwise provided herein or
required by law (meaning, here and hereinafter, as required from time to time by
the Delaware General Corporation Law or the Certificate of Incorporation of the
Corporation).
When a meeting is adjourned to another place, date or time, written notice
need not be given of the adjourned meeting if the place, date and time thereof
are announced at the meeting at which the adjournment is taken; provided,
however, that if the date of any adjourned meeting is more than thirty (30) days
after the date for which the meeting was originally noticed, or if a new record
date is fixed for the adjourned meeting, written notice of the place, date, and
time of the adjourned meeting shall be given in conformity herewith. At any
adjourned meeting, any business may be transacted which might have been
transacted at the original meeting.
Section 4. Quorum.
--------- ------
At any meeting of the stockholders, the holders of a majority of all of the
shares of the stock entitled to vote at the meeting, present in person or by
proxy (after giving effect to the Article FOURTH of the Corporation's
Certificate of Incorporation), shall constitute a quorum for all purposes,
unless or except to the extent that the presence of a larger number may be
required by law. Where a separate vote by a class or classes is required, a
majority of the shares of such class or classes present in person or represented
by proxy shall constitute a quorum entitled to take action with respect to that
vote on that matter.
<PAGE>
If a quorum shall fail to attend any meeting, the chairman of the meeting
or the holders of a majority of the shares of stock entitled to vote who are
present, in person or by proxy, may adjourn the meeting to another place, date,
or time.
If a notice of any adjourned special meeting of stockholders is sent to all
stockholders entitled to vote thereat, stating that it will be held with those
present constituting a quorum, then except as otherwise required by law, those
present at such adjourned meeting shall constitute a quorum, and all matters
shall be determined by a majority of the votes cast at such meeting.
Section 5. Organization.
--------- ------------
Such person as the Board of Directors may have designated or, in the
absence of such a person, the Chairman of the Board of the Corporation or, in
his or her absence, the Chief Executive Officer or, in his or her absence, such
person as may be chosen by the holders of a majority of the shares entitled to
vote who are present, in person or by proxy, shall call to order any meeting of
the stockholders and act as chairman of the meeting. In the absence of the
Secretary of the Corporation, the secretary of the meeting shall be such person
as the chairman appoints.
Section 6. Conduct of Business.
--------- -------------------
(a) The chairman of any meeting of stockholders shall determine
the order of business and the procedure at the meeting, including such
regulation of the manner of voting and the conduct of discussion as seem to him
or her in order. The date and time of the opening and closing of the polls for
each matter upon which the stockholders will vote at the meeting shall be
announced at the meeting.
(b) At any annual meeting of the stockholders, only such
business shall be conducted as shall have been brought before the meeting: (i)
by or at the direction of the Board of Directors or: (ii) by any stockholder of
the Corporation who is entitled to vote with respect thereto and who complies
with the notice procedures set forth in this Section 6(b). For business to be
properly brought before an annual meeting by a stockholder, the business must
relate to a proper subject matter for stockholder action and the stockholder
must have given timely notice thereof in writing to the Secretary of the
Corporation. To be timely, a stockholder's notice must be delivered or mailed to
and received at the principal executive offices of the Corporation not less than
ninety (90) days prior to the date of the annual meeting; provided, however,
that in the event that less than one hundred (100) days' notice or prior public
disclosure of the date of the meeting is given or made to stockholders, notice
by the stockholder to be timely must be received not later than the close of
business on the 10th day following the day on which such notice of the date of
the annual meeting was mailed or such public disclosure was made. A
stockholder's notice to the Secretary shall set forth as to each matter such
stockholder proposes to bring before the annual meeting: (i) a brief description
of the business desired to be brought before the annual meeting and the reasons
for conducting such business at the annual meeting; (ii) the name and address,
as they appear on the Corporation's books, of the stockholder proposing such
business; (iii) the class and number of shares of the Corporation's capital
stock that are beneficially owned by such stockholder and (iv) any material
interest of such stockholder in such business. Notwithstanding anything in these
By-laws to the contrary, no business shall be brought before or conducted at an
annual meeting except in accordance with the provisions of this Section 6(b).
The Officer of the Corporation or other person presiding over the annual meeting
shall, if the facts so warrant, determine and declare to the meeting that
business was not properly brought before the meeting in accordance with the
provisions of this Section 6(b) and, if he or
-2-
<PAGE>
she should so determine, he or she shall so declare to the meeting and any such
business so determined to be not properly brought before the meeting shall not
be transacted.
At any special meeting of the stockholders, only such business shall be
conducted as shall have been brought before the meeting by or at the direction
of the Board of Directors.
(c) Only persons who are nominated in accordance with the
procedures set forth in these By-laws shall be eligible for election as
Directors. Nominations of persons for election to the Board of Directors of the
Corporation may be made at a meeting of stockholders at which Directors are to
be elected only: (i) by or at the direction of the Board of Directors or; (ii)
by any stockholder of the Corporation entitled to vote for the election of
Directors at the meeting who complies with the notice procedures set forth in
this Section 6(c). Such nominations, other than those made by or at the
direction of the Board of Directors, shall be made by timely notice in writing
to the Secretary of the Corporation. To be timely, a stockholder's notice shall
be delivered or mailed to and received at the principal executive offices of the
Corporation not less than ninety (90) days prior to the date of the meeting;
provided, however, that in the event that less than one hundred (100) days'
notice or prior disclosure of the date of the meeting is given or made to
stockholders, notice by the stockholder to be timely must be so received not
later than the close of business on the 10th day following the day on which such
notice of the date of the meeting was mailed or such public disclosure was made.
Such stockholder's notice shall set forth: (i) as to each person whom such
stockholder proposes to nominate for election or re-election as a Director, all
information relating to such person that is required to be disclosed in
solicitations of proxies for the election of Directors, or is otherwise
required, in each case pursuant to Regulation 14A under the Securities Exchange
Act of 1934 (including such person's written consent to being named in the proxy
statement as a nominee and to serving as a Director if elected); and (ii) as to
the stockholder giving notice (x) the name and address, as they appear on the
Corporation's books, of such stockholder and (y) the class and number of shares
of the Corporation's capital stock that are beneficially owned by such
stockholder. At the request of the Board of Directors any person nominated by
the Board of Directors for election as a Director shall furnish to the Secretary
of the Corporation that information required to be set forth in a stockholder's
notice of nomination which pertains to the nominee. No person shall be eligible
for election as a Director of the Corporation unless nominated in accordance
with the provisions of this Section 6(c). The Officer of the Corporation or
other person presiding at the meeting shall, if the facts so warrant, determine
that a nomination was not made in accordance with such provisions and, if he or
she should so determine, he or she shall declare to the meeting and the
defective nomination shall be disregarded.
Section 7. Proxies and Voting.
--------- ------------------
At any meeting of the stockholders, every stockholder entitled to vote may
vote in person or by proxy authorized by an instrument in writing or by a
transmission permitted by law filed in accordance with the procedure established
for the meeting. Any copy, facsimile telecommunication or other reliable
reproduction of the writing or transmission created pursuant to this paragraph
may be substituted or used in lieu of the original writing or transmission for
any and all purposes for which the original writing or transmission could be
used, provided that such copy, facsimile telecommunication or other reproduction
shall be a complete reproduction of the entire original writing or transmission.
All voting, including on the election of Directors but excepting where
otherwise required by law or by the governing documents of the Corporation, may
be by a voice vote; provided, however, that upon demand therefor by a
stockholder entitled to vote or by his or her proxy, a stock vote shall be
taken.
-3-
<PAGE>
Every stock vote shall be taken by ballots, each of which shall state the name
of the stockholder or proxy voting and such other information as may be required
under the procedure established for the meeting. The Corporation shall, in
advance of any meeting of stockholders, appoint one or more inspectors to act at
the meeting and make a written report thereof. The Corporation may designate one
or more persons as alternate inspectors to replace any inspector who fails to
act. If no inspector or alternate is able to act at a meeting of stockholders,
the person presiding at the meeting shall appoint one or more inspectors to act
at the meeting. Each inspector, before entering upon the discharge of his or her
duties, shall take and sign an oath faithfully to execute the duties of
inspector with strict impartiality and according to the best of his or her
ability.
All elections shall be determined by a plurality of the votes cast, and
except as otherwise required by the Certificate of Incorporation or by law, all
other matters shall be determined by a majority of the votes present and cast at
a properly called meeting of stockholders.
Section 8. Stock List.
--------- ----------
A complete list of stockholders entitled to vote at any meeting of
stockholders, arranged in alphabetical order for each class of stock and showing
the address of each such stockholder and the number of shares registered in his
or her name, shall be open to the examination of any such stockholder, for any
purpose germane to the meeting, during ordinary business hours for a period of
at least ten (10) days prior to the meeting, either at a place within the city
where the meeting is to be held, which place shall be specified in the notice of
the meeting, or if not so specified, at the place where the meeting is to be
held.
The stock list shall also be kept at the place of the meeting during the
whole time thereof and shall be open to the examination of any such stockholder
who is present. This list shall presumptively determine the identity of the
stockholders entitled to vote at the meeting and the number of shares held by
each of them.
Section 9. Consent of Stockholders in Lieu of Meeting.
--------- ------------------------------------------
Subject to the rights of the holders of any class or series of preferred
stock of the Corporation, any action required or permitted to be taken by the
stockholders of the Corporation must be effected at an annual or special meeting
of stockholders of the Corporation and may not be effected by any consent in
writing by such stockholders.
ARTICLE II - BOARD OF DIRECTORS
---------- ------------------
Section 1. General Powers, Number and Term of Office.
--------- -----------------------------------------
The business and affairs of the Corporation shall be under the direction of
its Board of Directors. The number of Directors who shall constitute the Whole
Board shall be such number as the Board of Directors shall from time to time
have designated by resolution. The Board of Directors shall annually elect a
Chairman of the Board from among its members who shall, when present, preside at
its meetings.
-4-
<PAGE>
The Directors, other than those who may be elected by the holders of any
class or series of Preferred Stock, shall be divided, with respect to the time
for which they severally hold office, into three classes, with the term of
office of the first class to expire at the first annual meeting of stockholders,
the term of office of the second class to expire at the annual meeting of
stockholders one year thereafter and the term of office of the third class to
expire at the annual meeting of stockholders two years thereafter, with each
Director to hold office until his or her successor shall have been duly elected
and qualified. At each annual meeting of stockholders, commencing with the first
annual meeting, Directors elected to succeed those Directors whose terms then
expire shall be elected for a term of office to expire at the third succeeding
annual meeting of stockholders after their election, with each Director to hold
office until his or her successor shall have been duly elected and qualified.
Section 2. Vacancies and Newly Created Directorships.
--------- -----------------------------------------
Subject to the rights of the holders of any class or series of preferred
stock, and unless the Board of Directors otherwise determines, newly created
Directorships resulting from any increase in the authorized number of Directors
or any vacancies in the Board of Directors resulting from death, resignation,
retirement, disqualification, removal from office or other cause may be filled
only by a majority vote of the Directors then in office, though less than a
quorum, and Directors so chosen shall hold office for a term expiring at the
annual meeting of stockholders at which the term of office of the class to which
they have been elected expires and until such Director's successor shall have
been duly elected and qualified. No decrease in the number of authorized
Directors constituting the Board shall shorten the term of any incumbent
Director.
Section 3. Regular Meetings.
--------- ----------------
Regular meetings of the Board of Directors shall be held at such place or
places, on such date or dates, and at such time or times as shall have been
established by the Board of Directors and publicized among all Directors. A
notice of each regular meeting shall not be required.
Section 4. Special Meetings.
--------- ----------------
Special meetings of the Board of Directors may be called by one-third (1/3)
of the Directors then in office (rounded up to the nearest whole number) or by
the Chairman of the Board and shall be held at such place, on such date, and at
such time as they or he or she shall fix. Notice of the place, date, and time
of each such special meeting shall be given to each Director by whom it is not
waived by mailing written notice not less than five (5) days before the meeting
or be telegraphing or telexing or by facsimile transmission of the same not less
than twenty-four (24) hours before the meeting. Unless otherwise indicated in
the notice thereof, any and all business may be transacted at a special meeting.
Section 5. Quorum.
--------- ------
At any meeting of the Board of Directors, a majority of the Whole Board
shall constitute a quorum for all purposes. If a quorum shall fail to attend
any meeting, a majority of those present may adjourn the meeting to another
place, date, or time, without further notice or waiver thereof.
-5-
<PAGE>
Section 6. Participation in Meetings By Conference Telephone
--------- -------------------------------------------------
Members of the Board of Directors, or of any committee thereof, may
participate in a meeting of such Board or committee by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other and such participation shall
constitute presence in person at such meeting.
Section 7. Conduct of Business.
--------- -------------------
At any meeting of the Board of Directors, business shall be transacted in
such order and manner as the Board may from time to time determine, and all
matters shall be determined by the vote of a majority of the Directors present,
except as otherwise provided herein or required by law. Action may be taken by
the Board of Directors without a meeting if all members thereof consent thereto
in writing, and the writing or writings are filed with the minutes of
proceedings of the Board of Directors.
Section 8. Powers.
--------- ------
The Board of Directors may, except as otherwise required by law, exercise
all such powers and do all such acts and things as may be exercised or done by
the Corporation, including, without limiting the generality of the foregoing,
the unqualified power:
(1) To declare dividends from time to time in accordance with law;
(2) To purchase or otherwise acquire any property, rights or
privileges on such terms as it shall determine;
(3) To authorize the creation, making and issuance, in such form as
it may determine, of written obligations of every kind, negotiable or non-
negotiable, secured or unsecured, and to do all things necessary in connection
therewith;
(4) To remove any Officer of the Corporation with or without cause,
and from time to time to devolve the powers and duties of any Officer upon any
other person for the time being;
(5) To confer upon any Officer of the Corporation the power to
appoint, remove and suspend subordinate Officers, employees and agents;
(6) To adopt from time to time such stock, option, stock purchase,
bonus or other compensation plans for Directors, Officers, employees and agents
of the Corporation and its subsidiaries as it may determine;
(7) To adopt from time to time such insurance, retirement, and
other benefit plans for Directors, Officers, employees and agents of the
Corporation and its subsidiaries as it may determine; and
(8) To adopt from time to time regulations, not inconsistent with
these By-laws, for the management of the Corporation's business and affairs.
-6-
<PAGE>
Section 9. Compensation of Directors.
--------- -------------------------
Directors, as such, may receive, pursuant to resolution of the Board of
Directors, fixed fees and other compensation for their services as Directors,
including, without limitation, their services as members of committees of the
Board of Directors.
ARTICLE III - COMMITTEES
------------------------
Section 1. Committee of the Board of Directors.
--------- -----------------------------------
The Board of Directors, by a vote of a majority of the Whole Board, may
from time to time designate committees of the Board, with such lawfully
delegable powers and duties as it thereby confers, to serve at the pleasure of
the Board and shall, for those committees and any others provided for herein,
elect a Director or Directors to serve as the member or members, designating, if
it desires, other Directors as alternate members who may replace any absent or
disqualified member at any meeting of the committee. Any committee so designated
may exercise the power and authority of the Board of Directors to declare a
dividend, to authorize the issuance of stock or to adopt a certificate of
ownership and merger pursuant to Section 253 of the Delaware General Corporation
Law if the resolution which designates the committee or a supplemental
resolution of the Board of Directors shall so provide. In the absence or
disqualification of any member of any committee and any alternate member in his
or her place, the member or members of the committee present at the meeting and
not disqualified from voting, whether or not he or she or they constitute a
quorum, may by unanimous vote appoint another member of the Board of Directors
to act at the meeting in the place of the absent or disqualified member.
Section 2. Conduct of Business.
--------- -------------------
Each committee may determine the procedural rules for meeting and
conducting its business and shall act in accordance therewith, except as
otherwise provided herein or required by law. Adequate provision shall be made
for notice to members of all meetings; one-third (1/3) of the members shall
constitute a quorum unless the committee shall consist of one (1) or two (2)
members, in which event one (1) member shall constitute a quorum; and all
matters shall be determined by a majority vote of the members present. Action
may be taken by any committee without a meeting if all members thereof consent
thereto in writing, and the writing or writings are filled with the minutes of
the proceedings of such committee.
Section 3. Nominating Committee.
--------- --------------------
The Board of Directors shall appoint a Nominating Committee of the Board,
consisting of not less than three (3) members, one of which shall be the
Chairman of the Board. The Nominating Committee shall have authority (a) to
review any nominations for election to the Board of Directors made by a
stockholder of the Corporation pursuant to Section 6(c) (ii) of Article I of
these By-laws in order to determine compliance with such By-law provision and
(b) to recommend to the Whole Board nominees for election to the Board of
Directors to replace those Directors whose terms expire at the annual meeting of
stockholders next ensuing.
-7-
<PAGE>
ARTICLE IV - OFFICERS
---------- --------
Section 1. Generally.
--------- ---------
(a) The Board of Directors as soon as may be practicable after the
annual meeting of stockholders shall choose a Chairman of the Board, a
President and Chief Executive Officer, one or more Vice Presidents, and a
Secretary and from time to time may choose such other Officers as it may deem
proper. The Chairman of the Board shall be chosen from among the Directors.
Any number of offices may be held by the same person.
(b) The term of office of all Officers shall be until the next annual
election of Officers and until their respective successors are chosen, but any
Officer may be removed from office at any time by the affirmative vote of two-
thirds of the authorized number of Directors then constituting the Board of
Directors.
(c) All Officers chosen by the Board of Directors shall each have
such powers and duties as generally pertain to their respective offices, subject
to the specific provisions of this Article IV. Such Officers shall also have
such powers and duties as from time to time may be conferred by the Board of
Directors or by any committee thereof.
Section 2. Chairman of the Board.
--------- ---------------------
The Chairman of the Board shall, subject to the provisions of these By-laws
and to the direction of the Board of Directors, serve in a general executive
capacity and, when present, shall preside at all meetings of the Board of
Directors. The Chairman of the Board shall perform all duties and have all
powers which are commonly incident to the office of Chairman of the Board or
which are delegated to him or her by the Board of Directors. He or she shall
have power to sign all stock certificates, contracts and other instruments of
the Corporation which are authorized.
Section 3. President and Chief Executive Officer.
--------- -------------------------------------
The President and Chief Executive Officer (the "President") shall have
general responsibility for the management and control of the business and
affairs of the Corporation and shall perform all duties and have all powers
which are commonly incident to the offices of President and Chief Executive
Officer or which are delegated to him or her by the Board of Directors. Subject
to the direction of the Board of Directors, the President shall have power to
sign all stock certificates, contracts and other instruments of the Corporation
which are authorized and shall have general supervision of all of the other
Officers (other than the Chairman of the Board), employees and agents of the
Corporation.
Section 4. Vice President.
--------- --------------
The Vice President or Vice Presidents shall perform the duties of the
President in his or her absence or during his disability to act. In addition,
the Vice Presidents shall perform the duties and exercise the powers usually
incident to their respective offices and/or such other duties and powers as may
be properly assigned to them by the Board of Directors, the Chairman of the
Board or the President. A Vice President or Vice Presidents may be designated as
Executive Vice President or Senior Vice President or any such designation as the
Board of Directors, Chairman of the Board or President deems appropriate.
-8-
<PAGE>
Section 5. Secretary.
--------- ---------
The Secretary or an Assistant Secretary shall issue notices of meetings,
shall keep their minutes, shall have charge of the seal and the corporate books,
shall perform such other duties and exercise such other powers as are usually
incident to such offices and/or such other duties and powers as are properly
assigned thereto by the Board of Directors, the Chairman of the Board or the
President.
Section 6. Assistant Secretaries and Other Officers.
--------- ----------------------------------------
The Board of Directors may appoint one or more Assistant Secretaries and
such other Officers who shall have such powers and shall perform such duties as
are provided in these By-laws or as may be assigned to them by the Board of
Directors, the Chairman of the Board or the President.
Section 7. Action with Respect to Securities of Other Corporations.
--------- -------------------------------------------------------
Unless otherwise directed by the Board of Directors, the President or any
Officer of the Corporation authorized by the President shall have power to vote
and otherwise act on behalf of the Corporation, in person or by proxy, at any
meeting of stockholders of or with respect to any action of stockholders of any
other corporation in which the Corporation may hold securities and otherwise to
exercise any and all rights and powers which the Corporation may possess by
reason of its ownership of securities in such other corporation.
ARTICLE V - STOCK
--------- -----
Section 1. Certificates of Stock.
--------- ---------------------
Each stockholder shall be entitled to a certificate signed by, or in the
name of the Corporation by, the Chairman of the Board or the President, and by
the Secretary or an Assistant Secretary, or any Treasurer or Assistant
Treasurer, certifying the number of shares owned by him or her. Any or all of
the signatures on the certificate may be by facsimile.
Section 2. Transfers of Stock.
--------- ------------------
Transfers of stock shall be made only upon the transfer books of the
Corporation kept at an office of the Corporation or by transfer agents
designated to transfer shares of the stock of the Corporation. Except where a
certificate is issued in accordance with Section 4 of Article V of these By-
laws, an outstanding certificate for the number of shares involved shall be
surrendered for cancellation before a new certificate is issued therefor.
Section 3. Record Date.
--------- -----------
In order that the Corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders, or to receive payment of
any dividend or other distribution or allotment of any rights or to exercise any
rights in respect of any change, conversion or exchange of stock or for the
purpose of any other lawful action, the Board of Directors may fix a record
date, which record date shall not precede the date on which the resolution
fixing the record date is adopted and which record date shall not be more than
sixty (60) nor less than ten (10) days before the date of any meeting of
stockholders,
-9-
<PAGE>
nor more than sixty (60) days prior to the time for such other action as
hereinbefore described; provided, however, that if no record date is fixed by
the Board of Directors, the record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given or, if
notice is waived, at the close of business on the day next preceding the day on
which the meeting is held, and, for determining stockholders entitled to receive
payment of any dividend or other distribution or allotment of rights or to
exercise any rights of change, conversion or exchange of stock or for any other
purpose, the record date shall be at the close of business on the day on which
the Board of Directors adopts a resolution relating thereto.
A determination of stockholders of record entitled to notice of or to vote
at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
Section 4. Lost, Stolen or Destroyed Certificates.
--------- --------------------------------------
In the event of the loss, theft or destruction of any certificate of stock,
another may be issued in its place pursuant to such regulations as the Board of
Directors may establish concerning proof of such loss, theft or destruction and
concerning the giving of a satisfactory bond or bonds of indemnity.
Section 5. Regulations.
--------- -----------
The issue, transfer, conversion and registration of certificates of stock
shall be governed by such other regulations as the Board of Directors may
establish.
ARTICLE VI - NOTICES
---------- -------
Section 1. Notices.
--------- -------
Except as otherwise specifically provided herein or required by law, all
notices required to be given to any stockholder, Director, Officer, employee or
agent shall be in writing and may in every instance be effectively given by hand
delivery to the recipient thereof, by depositing such notice in the mails,
postage paid, or by sending such notice by prepaid telegram or mailgram or other
courier. Any such notice shall be addressed to such stockholder, Director,
Officer, employee or agent at his or her last known address as the same appears
on the books of the Corporation. The time when such notice is received, if hand
delivered, or dispatched, if delivered through the mails or by telegram or
mailgram or other courier, shall be the time of the giving of the notice.
-10-
<PAGE>
Section 2. Waivers.
--------- -------
A written waiver of any notice, signed by a stockholder, Director, Officer,
employee or agent, whether before or after the time of the event for which
notice is to be given, shall be deemed equivalent to the notice required to be
given to such stockholder, Director, Officer, employee or agent. Neither the
business nor the purpose of any meeting need be specified in such a waiver.
ARTICLE VII - MISCELLANEOUS
----------- -------------
Section 1. Facsimile Signatures.
--------- --------------------
In addition to the provisions for use of facsimile signatures elsewhere
specifically authorized in these By-laws, facsimile signatures of any Officer or
Officers of the Corporation may be used whenever and as authorized by the Board
of Directors or a committee thereof.
Section 2. Corporate Seal.
--------- --------------
The Board of Directors may provide a suitable seal, containing the name of
the Corporation, which seal shall be in the charge of the Secretary. If and
when so directed by the Board of Directors or a committee thereof, duplicates of
the seal may be kept and used by the Comptroller or by an Assistant Secretary or
an assistant to the Comptroller.
Section 3. Reliance upon Books, Reports and Records.
--------- ----------------------------------------
Each Director, each member of any committee designated by the Board of
Directors, and each Officer of the Corporation shall, in the performance of his
or her duties, be fully protected in relying in good faith upon the books of
account or other records of the Corporation and upon such information, opinions,
reports or statements presented to the Corporation by any of its Officers or
employees, or committees of the Board of Directors so designated, or by any
other person as to matters which such Director or committee member reasonably
believes are within such other person's professional or expert competence and
who has been selected with reasonable care by or on behalf of the Corporation.
Section 4. Fiscal Year.
--------- -----------
The fiscal year of the Corporation shall be as fixed by the Board of
Directors.
Section 5. Time Periods.
--------- ------------
In applying any provision of these By-laws which requires that an act be
done or not be done a specified number of days prior to an event or that an act
be done during a period of a specified number of days prior to an event,
calendar days shall be used, the day of the doing of the act shall be excluded,
and the day of the event shall be included.
-11-
<PAGE>
ARTICLE VIII - AMENDMENT
------------ ---------
The Board of Directors may by a two-thirds vote amend, alter or repeal
these By-laws at any meeting of the Board, provided notice of the proposed
change is given not less than two days prior to the meeting. The stockholders
shall also have power to amend, alter or repeal these By-laws at any meeting of
stockholders, provided notice of the proposed change was given in the Notice of
the Meeting; provided, however, that, notwithstanding any other provisions of
these By-laws or any provision of law which might otherwise permit a lesser vote
or no vote, but in addition to any affirmative vote of the holders of any
particular class or series of the Voting Stock Designation or these By-laws, the
affirmative votes of the holders of at least 80% of the voting power of all the
then-outstanding shares of the Voting Stock, voting together as a single class,
shall be required to alter, amend or repeal any provisions of these By-laws.
-12-
<PAGE>
================================================================================
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Summary Information on Proposed
Formation of Stock Holding Company..................................... (ii)
Introduction............................................................ 1
Revocability of Proxies................................................. 1
Voting Securities and Principal
Holders Thereof........................................................ 1
Market Information...................................................... 3
Dividend Policy......................................................... 4
Management of the Bank.................................................. 5
Proposed Formation of Stock
Holding Company........................................................ 7
Description of Capital Stock
of Stock Holding Company.............................................. 23
Stockholders Proposals.................................................. 24
Additional Information.................................................. 25
Miscellaneous........................................................... 25
</TABLE>
________ SHARES
COMMON STOCK
FIDELITY BANKSHARES, INC.
____________
PROSPECTUS AND
PROXY STATEMENT
____________
DATED JANUARY __, 1997
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article TENTH of the Registrant's Certificate of Incorporation
provides for the following indemnification for Directors and Officers.
A. Each person who was or is made a party-or is threatened to be
made a party to or is otherwise involved in any action, suit or proceeding,
whether civil, criminal, administrative or investigative (hereinafter a
"proceeding"), by reason of the fact that he or she is or was a Director or an
Officer of the Corporation or is or was serving at the request of the
Corporation as a Director, Officer, employee or agent of another corporation or
of a partnership, joint venture, trust or other enterprise, including service
with respect to an employee benefit plan (hereinafter an "indemnitee"), whether
the basis of such proceeding is alleged action in an official capacity as a
Director, Officer, employee or agent or in any other capacity while serving as a
Director, Officer, employee or agent, shall be indemnified and held harmless by
the Corporation to the fullest extent authorized by the Delaware General
Corporation Law, as the same exists or may hereafter be amended (but, in the
case of any such amendment, only to the extent that such amendment permits the
Corporation to provide broader indemnification rights than such law permitted
the Corporation to provide prior such amendment), against all expense, liability
and loss (including attorneys' fees, judgments, fines, ERISA excise taxes or
penalties and amounts paid in settlement) reasonably incurred or suffered by
such indemnitee in connection therewith; provided, however, that, except as
provided in Section C hereof with respect to proceedings to enforce rights to
indemnification, the Corporation shall indemnify any such indemnitee in
connection with a proceeding (or part thereof) initiated by such indemnitee only
if such proceeding (or part thereof) was authorized by the Board of Directors of
the Corporation.
B. The right to indemnification conferred Section A of this
Article TENTH shall include the right to be paid by the Corporation the expenses
incurred in defending any such proceeding in advance of its final disposition
(hereinafter an "advancement of expenses"); provided, however, that, if the
Delaware General Corporation Law requires, an advancement of expenses incurred
by an indemnitee in his or her capacity as a Director or Officer (and not in any
other capacity in which service was or is rendered by such indemnitee,
including, without limitation, services to an employee benefit plan) shall be
made only upon delivery to the Corporation of an undertaking (hereinafter an
"undertaking"), by or on behalf of such indemnitee, to repay all amounts so
advanced if it shall ultimately be determined by final judicial decision from
which there is no further right to appeal (hereinafter a "final adjudication")
that such indemnitee is not entitled to be indemnified for such expenses under
this Section or otherwise. The rights to indemnification and to the advancement
of expenses conferred in Sections A and B of this Article TENTH shall be
contract rights and such rights shall continue as to an indemnitee who has
ceased to be a Director, Officer, employee or agent and shall inure to the
benefit of the indemnitee's heirs, executors and administrators.
C. If a claim under Section A or B of this Article TENTH is not
paid in full by the Corporation within sixty days after a written claim for an
advancement of expenses, in which case the applicable period shall be twenty
days, the indemnitee may at any time thereafter bring suit against the
Corporation to recover the unpaid amount of the claim. If successful in whole or
in part in any such suit, or in a suit brought by the Corporation to recover an
advancement of expenses pursuant to the terms of an undertaking, the indemnitee
shall be entitled to be paid also the expenses of prosecuting or defending such
suit. In (i) any suit brought by the indemnitee to enforce a right to
indemnification hereunder (but not in a suit brought by the indemnitee to
enforce a right to an advancement of expenses)
<PAGE>
it shall be a defense that, and (ii) in any suit by the Corporation to recover
an advancement of expenses pursuant to the terms of an undertaking the
Corporation shall be entitled to recover such expenses upon a final adjudication
that, the indemnitee has not met any applicable standard for indemnification set
forth in the Delaware General Corporation Law. Neither the failure of the
Corporation (including its Board of Directors, independent legal counsel, or its
stockholders) to have made a determination prior to the commencement of such
suit that indemnification of the indemnitee is proper in the circumstances
because the indemnitee has met the applicable standard of conduct set forth in
the Delaware General Corporation Law, nor an actual determination by the
Corporation (including its Board of Directors, independent legal counsel, or its
stockholders) that the indemnitee has not met such applicable standard of
conduct, shall create a presumption that the indemnitee has not met the
applicable standard of conduct or, in the case of such a suit brought by the
indemnitee, be a defense to such suit. In any suit brought by the indemnitee to
enforce a right to indemnification or to an advancement of expenses hereunder,
or by the Corporation to recover an advancement of expenses pursuant to the
terms of an undertaking, the burden of proving that the indemnitee is not
entitled to be indemnified, or to such advancement of expenses, under this
Article TENTH or otherwise shall be on the Corporation.
D. The rights to indemnification and to the advancement of
expenses conferred in this Article TENTH shall not be exclusive of any other
right which any person may have or hereafter acquire under any statute, the
Corporation's Certificate of Incorporation, By-laws, agreement, vote of
stockholders or Disinterested Directors or otherwise.
E. The Corporation may maintain insurance, at its expense, to
protect itself and any Director, Officer, employee or agent of the Corporation
or another corporation, partnership, joint venture, trust or other enterprise
against any expense, liability or loss, whether or not the Corporation would
have the power to indemnify such person against such expense, liability or loss
under the Delaware General Corporation Law.
F. The Corporation may, to the extent authorized from time to
time by the Board of Directors, grant rights to indemnification and to the
advancement of expenses to any employee or agent of the Corporation to the
fullest extent of the provisions of this Article TENTH with respect to the
indemnification and advancement of expenses of Directors and Officers of the
Corporation.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
The exhibits and financial statements filed as part of this
Registration Statement are as follows:
(a) Exhibits
The Index of Exhibits immediately precedes the attached Exhibits.
(b) Financial Statements
Not applicable.
(c) Report or Appraisal
Not applicable.
ITEM 22. UNDERTAKINGS
(A) THE UNDERSIGNED REGISTRANT HEREBY UNDERTAKES:
<PAGE>
(1) to file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement; (i) to include
any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii)
to reflect in the prospectus any facts or events arising after the effective
date of the registration statement (or most recent post effective amendment
thereof) which individually or in the aggregate, represent a fundamental change
in the information set forth in the registration statement; (iii) to include any
material information with respect to the plan of distribution not previously
disclosed in the registration statement or any material change to such
information in the registration statement.
(2) That, for purposes of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be a bona fide
offering thereof.
(b)(1) The undersigned registrant hereby undertakes as follows: that
prior to any public reoffering of the securities registered hereunder through
use of a prospectus which is a part of this registration statement, by any
person or party who is deemed to be an underwriter within the meaning of Rule
145(c), the issuer undertakes that such reoffering prospectus will contain the
information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other items of the applicable form.
(2) The registrant undertakes that every prospectus (i) that is filed
pursuant to paragraph (1) immediately preceding, or (ii) that purports to meet
the requirements of section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(c) The undersigned registrant hereby undertakes to supply by means of
a post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of, and
included in the registration statement when it became effective.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in West Palm Beach,
Florida, on December 10, 1996.
FIDELITY BANKSHARES, INC.
Date: December 10, 1996 By: /s/ Vince A. Elhilow
-------------------------------------
Vince A. Elhilow
President and Chief Executive Officer
POWER OF ATTORNEY
We, the undersigned Directors of Fidelity Bankshares, Inc. severally
constitute and appoint Vince A. Elhilow with full power of substitution, our
true and lawful attorney and agent, to do any and all things and acts in our
names in the capacities indicated below which said Vince A. Elhilow may deem
necessary or advisable to enable Fidelity Bankshares, Inc. to comply with the
Securities Act of 1933, and any rules, regulations and requirements of the
Securities and Exchange Commission, in connection with the Registration
Statement on Form S-4 relating to the offering of Fidelity Bankshares, Inc.
Common Stock, including specifically, but not limited to, power and authority to
sign for us or any of us in our names in the capacities indicated below the
Registration Statement and any and all amendments (including post-effective
amendments) thereto; and we hereby ratify and confirm all that said Vince A.
Elhilow shall do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C>
By: /s/ Vince A. Elhilow President and December 10, 1996
----------------------------
Vince A. Elhilow Chief Executive Officer
By: /s/ Richard D. Aldred Executive Vice President December 10, 1996
----------------------------
Richard D. Aldred (Chief Financial Officer
and Chief Accounting Officer)
By: /s/ Joseph B. Shearouse, Jr. Chairman of the Board December 10, 1996
----------------------------
Joseph B. Shearouse, Jr.
By: /s/ Keith D. Beaty Director December 10, 1996
----------------------------
Keith D. Beaty
By: /s/ F. Ted Brown, Jr. Director December 10, 1996
----------------------------
F. Ted Brown, Jr.
By: /s/ Christopher H. Cook Director December 10, 1996
----------------------------
Christopher H. Cook
By: /s/ Frederic T. De Hon Director December 10, 1996
----------------------------
Frederic T. De Hon
</TABLE>
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description of Document
- ------ -----------------------
2 Agreement and Plan of Reorganization (Exhibit A to Proxy
Statement)
3.1 Certificate of Incorporation of Fidelity Bankshares, Inc.
(Exhibit B to Proxy Statement)
3.2 Bylaws of Fidelity Bankshares, Inc. (Exhibit B to Proxy
Statement)
4 Stock Certificate of Fidelity Bankshares, Inc.
5.1 Opinion of Luse Lehman Gorman Pomerenk & Schick, A
Professional Corporation regarding legality of securities.
5.2 Tax Opinion of Luse Lehman Gorman Pomerenk & Schick, A
Professional Corporation
10.1 Employment Agreement with Vince A. Elhilow
10.2 Severance Agreement with Richard D. Aldred
10.3 Severance Agreement with Robert Fugate
10.4 Severance Agreement with Joseph Bova
10.5 1994 Stock Option Plans for Outside Directors
10.6 1994 Incentive Stock Option Plan
10.7 Recognition and Retention Plan for Employees
10.8 Recognition Plan for Outside Directors
24.1 Consent of Luse Lehman Gorman Pomerenk & Schick, A
Professional Corporation (contained in its opinion filed as
Exhibit 5.1).
99 Form of proxy to be mailed to shareholders of Fidelity
Federal Savings Bank of Florida.
<PAGE>
EXHIBIT 4
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
FIDELITY BANKSHARES, FLORIDA
WEST PALM BEACH, FLORIDA
$.10 par value common stock-- fully paid and non assesable
This certifies that _______________ is the owner of _____________shares of the
common stock of FIDELITY BANKSHARES, INC. (the "Corporation"), a Delaware
corporation.
The shares evidenced by this certificate are transferable only on the stock
transfer books of the Corporation by the holder of record hereof, in person or
by his duly authorized attorney or legal representative, upon surrender of this
certificate properly endorsed. This Certificate IS NOT valid until countersigned
and registered by the Corporation's transfer agent and registrar. THIS SECURITY
IS NOT A DEPOSIT OR ACCOUNT AND IS NOT FEDERALLY INSURED OR GUARANTEED.
IN WITNESS WHEREOF, the Corporation has caused this certificate to be executed
by the facsimile signatures of its duly authorized officers and has caused its
seal to be affixed hereto.
DATE:
-------------------------------
- ------------------------------------ ------------------------------------
Secretary President
(SEAL)
<PAGE>
FIDELITY BANKSHARES, INC.
The shares evidenced by this Certificate are subject to a limitation
contained in the Certificate of Incorporation to the effect that in no event
shall any record owner of any outstanding Common Stock which is beneficially
owned, directly or indirectly, by a person who beneficially owns in excess of
10% of the outstanding shares of Common Stock (the "Limit") be entitled or
permitted to any vote in respect of shares held in excess of the Limit. The
Limit shall not be applicable to shares held by Fidelity Bankshares, M.H.C.
The Board of Directors of the Corporation is authorized by resolution or
resolutions, from time to time adopted, to provide for the issuance of serial
preferred stock in series and to fix and state the voting powers, designations,
preferences, limitations and restrictions thereof. The Corporation will furnish
to any shareholder upon request and without charge a full description of each
class of stock and any series thereof.
The shares represented by this Certificate may not be cumulatively voted on
any matter. The Certificate of Incorporation requires the affirmative vote of
the holders of at least 80% of the voting stock of the Corporation, voting
together as a single class, to approve certain business combinations and other
transactions and to amend certain provisions of the Certificate of
Incorporation.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT________ CUSTODIAN______
(CUST) (MINOR)
TEN ENT - as tenants by the entireties
Under Uniform Gifts to Minors Act
JR TEN - as joint tenants with right
of survivorship and not as ________________________________
tenants in common (State)
Addition abbreviations may also be used though not in the above list
For value received, ________________ hereby sell, assign and transfer unto
_________________________________________
_________________________________________
PLEASE INSERT SOCIAL SECURITY NUMBER OR OTHER IDENTIFYING NUMBER
________________________________________________________________________________
(please print or typewrite name and address including postal zip code of
assignee)
________________________________________________________________________________
_____________________________________________________ Shares of the Common Stock
represented by the within Certificate, and do hereby irrevocably constitute and
appoint ______________________________________ Attorney to transfer the said
shares on the books of the within named corporation with full power of
substitution in the premises.
Dated: ___________________________________
In the presence of Signature:
________________________________ ______________________________________
NOTE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME OF THE
STOCKHOLDER(S) AS WRITTEN UPON THE FACE OF THE CERTIFICATE, IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT, OR ANY CHANGE WHATEVER.
<PAGE>
EXHIBIT 5.1
[LETTERHEAD OF LUSE LEHMAN GORMAN POMERENK & SCHICK APPEARS HERE]
December 11, 1996
Board of Directors
Fidelity Bankshares, Inc.
218 Datuna
West Palm Beach, Florida
RE: FIDELITY BANKSHARES, INC.
REGISTRATION STATEMENT ON FORM S-4
Gentlemen:
We have served as special counsel for Fidelity Bankshares, Inc., a Delaware
corporation, in connection with the registration under the Securities Act of
1933, of 3,425,222 shares of Common Stock, par value $0.10 per share of which
3,202,689 shares will be issued immediately and 222,533 shares underly options.
Based upon the foregoing and having regard for such legal considerations as
we have deemed relevant, it is our opinion that:
(1) the shares of Common Stock have been duly authorized;
(2) upon issuance, sale and delivery of the shares as contemplated in the
Registration Statement, the shares will be legally issued, fully paid
and non-assessable.
We hereby consent to the reference to our firm under the heading "Proposed
Formation of Stock Holding Company--Legal Opinion" in the Prospectus and Proxy
Statement in the Registration Statement (and all amendments thereto) and to the
filing of this opinion as Exhibit 5.1 thereto.
Very truly yours,
/s/ Luse Lehman Gorman Pomerenk & Schick
--------------------------------------------------
LUSE LEHMAN GORMAN POMERENK & SCHICK
A Professional Corporation
<PAGE>
EXHIBIT 5.2
(202) 274-2000
________, 1996
Board of Directors
Fidelity Federal Savings Bank of Florida
218 Datura Street
West Palm Beach, Florida 33401
Re: Federal Income Tax Opinion Relating to the Exchange of the Common
Stock of Fidelity Federal Savings Bank of Florida, for All the Common
Stock of a Newly Created Savings and Loan Holding Company under
Internal Revenue Code Sections 368(a)(1)(A) and 368(a)(2)(E)/1/
---------------------------------------------------------------
Gentlemen:
We are rendering this opinion to you in our capacity as special counsel to
Fidelity Federal Savings Bank of Florida (the "Bank") in connection with its
proposed reorganization into a two-tier holding company structure (the
"Reorganization") by creating Fidelity Bankshares, Inc., a Delaware corporation
(the "Holding Company") which will be the stock holding company of the Bank and
will be the majority owned subsidiary of Fidelity Bankshares, M.H.C. (the
"Mutual Holding Company").
For purposes of this opinion, we have examined such documents and questions
of law as we have considered necessary or appropriate, including, but not
limited to the Agreement and Plan of Reorganization adopted by the Bank's Boards
of Directors on April 25, 1996 (the "Plan of Reorganization"); the Application
H-(e)1 ("Application") together with exhibits filed by the Holding Company with
the Office of Thrift Supervision ("OTS") on April 30, 1996, in connection with
the Reorganization; the charter and Bylaws of the Mutual Holding Company; the
Charter and Bylaws of the Bank; the Certificate of Incorporation and Bylaws of
the Holding Company; the Affidavit of Representations dated ______________,
1996, provided to us by the Bank in connection with this opinion (the
"Affidavit"). In such examination, we have assumed, and have not independently
verified, the genuineness of all signatures on original documents where due
execution and delivery are requirements to the effectiveness thereof. Terms
used but not defined herein, whether capitalized or not, shall have the same
meaning as defined in the Plan.
_______________________
/1/ All Section references herein are to the Internal Revenue Code of 1986,
as amended (the "Code").
<PAGE>
Board of Directors
Fidelity Federal Savings Bank of Florida
___________, 1996
Page 2
BACKGROUND
The Bank is a Federally chartered stock savings bank with savings
deposits insured by the Federal Deposit Insurance Corporation ("FDIC"). The Bank
was chartered originally as a federal mutual savings and loan association in
1952, and in 1983, amended its charter to become a federally chartered mutual
savings bank. The authorized capital stock of the Bank consists of 20,000,000
shares of common stock ("Bank Common Stock") with a par value of $1.00 per
share, and 10,000,000 shares of serial preferred stock. On January 7, 1994, the
Bank reorganized from a mutual savings bank to become the majority-owned stock
subsidiary of the Mutual Holding Company. As of March 31, 1996, the Bank had
approximately 6,720,821 shares of Bank Common Stock issued and outstanding of
which 4,007,852 shares are held by the Mutual Holding Company. At such date,
the Bank had no serial preferred stock issued and outstanding. The Bank Common
Stock is listed on the Nasdaq National Market under the symbol "FFFL". As of
March 31, 1996, the Bank had total assets of approximately $791.9 million, total
deposits of $611.3 million and stockholders' equity of approximately $81.1
million.
The Bank Common Stock possesses voting rights, dividend rights, and
the residual equity of the Bank in the event of liquidation. Savings depositors
receive a fixed rate of return; in the event of liquidation they are only
entitled to receive the face amount of their accounts plus accrued interest. The
savings accounts do not possess voting rights. The Bank employs either the
experience or the percentage of income method of providing for bad debt
deductions as computed under Section 593.
The business of the Bank consists primarily of attracting savings
deposits from the general public in the Bank's market area and originating
mortgage loans for the purpose of constructing, financing, or refinancing one-
to-four family dwellings and other improved residential and commercial
properties located in the State of Florida.
PROPOSED TRANSACTION
The Board of Directors of the Bank adopted the Plan of Reorganization
on April 25, 1996, pursuant to which the Bank will reorganize to form a two-
tier holding company structure with the Bank becoming the wholly-owned
subsidiary of the Holding Company, which will be a majority owned subsidiary of
the Mutual Holding Company. Under the terms of the proposed reorganization, each
outstanding share of Bank Common Stock, par value $1.00 per share, will be
converted into one share of common stock of the Holding Company, par value $.10
per share ("Common Stock"), and the holders of Bank Common Stock will become
the holders of all of the outstanding Common Stock of the Holding Company (the
"Reorganization"). The Holding Company was incorporated in April 1996, solely
for the purpose of becoming a savings and loan
<PAGE>
Board of Directors
Fidelity Federal Savings Bank of Florida
___________, 1996
Page 3
holding company and has no prior operating history. Following the
Reorganization, the Bank will continue its operations at the same locations,
with the same management, and subject to all the rights, obligations and
liabilities of the Bank existing immediately prior to the Reorganization.
REASONS FOR THE HOLDING COMPANY REORGANIZATION
- ----------------------------------------------
The Board of Directors of the Bank believes that a stock holding
company structure will provide the Bank with greater operating flexibility than
is currently available under the existing mutual holding company structure.
Federal regulations applicable to savings associations limit both the types of
businesses in which Fidelity may engage and the amount which may be invested by
Fidelity in subsidiaries. Establishing the Holding Company will provide greater
flexibility in structuring and completing the acquisition of other financial
institutions as well as the acquisition and formation of companies engaged in
lines of business which complement the Bank's business. Currently, if the
Mutual Holding Company wishes to acquire another financial institution and hold
it as a separate entity from the Bank, it would be difficult to do so in a way
that benefits minority stockholders and the Mutual Holding Company in proportion
to their respective ownership interests. In addition, the Reorganization will
enable the Holding Company to repurchase its outstanding Common Stock as market
conditions permit with causing a recapture into income of all or a portion of
the Bank's existing tax bad debt reserves.
The Reorganization will be structured as follows:
(i) The Bank will organize the Stock Holding Company which
will issue to the Bank 1,000 shares of Common Stock,
consisting of all the issued and outstanding stock of
the Holding Company for $100.00 per share. The Holding
Company will thereby become a wholly-owned subsidiary
of the Bank. The Holding Company will form Interim
Savings Bank, F.S.B. ("Interim"), an interim federal
savings bank, as a wholly-owned subsidiary of the
Holding Company solely to facilitate the
Reorganization.
(ii) Pursuant to the Plan of Reorganization and in
accordance with applicable federal law, Interim will be
merged with and into the Bank, with the Bank as the
surviving entity. As a result, the Bank will acquire
all of the assets and assume all of the liabilities of
Interim. Upon completion of the merger, the separate
corporate existence of Interim will cease.
<PAGE>
Board of Directors
Fidelity Federal Savings Bank of Florida
___________, 1996
Page 4
(iii) As part of the merger, each share of the Bank Common
Stock held immediately prior to the effective date of
the merger by stockholders of the Bank shall
automatically be converted by operation of law into one
share of Common Stock of the Holding Company.
(iv) Upon the effective date of the merger, all of the
previously issued and outstanding shares of common
stock of Holding Company owned by the Bank will be
cancelled. All of the issued and outstanding shares of
common stock of Interim will automatically be converted
by operation of law into an equal number of issued and
outstanding shares of Bank Common Stock, which will be
all of the issued and outstanding stock of the Bank.
(v) All unexercised stock options to acquire the Bank
Common Stock existing prior to the merger shall upon
the consummation of the merger be and become stock
options to acquire shares of Common Stock of Holding
Company. Further, the stock option plan of the Bank
shall become the stock option plan of the Holding
Company. Lastly, any stock option agreement of the Bank
shall become the stock option agreement of the Holding
Company.
(vi) As a result of the proposed transaction, all
stockholders of the Bank will become the stockholders
of Holding Company, and the Bank will become a wholly-
owned subsidiary of Holding Company.
(vii) After the Reorganization is consummated, the Bank and
Interim will constitute a single corporation and the
separate existence of Interim will cease by operation
of law. All assets and liabilities of Interim will be
transferred to and assumed by the Bank as of the date
of the Reorganization. The Bank will continue to
operate as a savings bank and retain its present name
and Federal charter. Directors of the Bank will
continue as Directors of the Bank after the
Reorganization is consummated.
Consummation of the Reorganization requires that the Plan of
Reorganization receive the approval of at least a majority of the issued and
outstanding shares of Bank Common Stock and the approval of the OTS upon
appropriate application for approval.
<PAGE>
Board of Directors
Fidelity Federal Savings Bank of Florida
___________, 1996
Page 5
REPRESENTATIONS
The following statements and representations have been made by
management of the Bank regarding the treatment of the Reorganization as a merger
under Sections 368(a)(1)(A) and 368(a)(2)(E):
(a) The fair market value of Holding Company Common Stock to be
received by each Bank shareholder will be approximately equal to
the fair market value of the Bank Common Stock surrendered in the
exchange.
(b) The management of the Bank has no knowledge of any plan or
intention on the part of its shareholders who own 5% or more of
Bank Common Stock, and to the best of the knowledge of management
of the Bank, there is no plan or intention on the part of the
remaining shareholders of the Bank to sell, exchange, or
otherwise dispose of a number of shares of Holding Company Stock
received in the Reorganization that would reduce the Bank
shareholders' ownership of Holding Company Common Stock to a
number of shares having a value, as of the date of the
Reorganization, of less than 50% of the value of all of the
formerly outstanding Bank Common Stock as of the same date. For
purposes of this representation, shares of Bank Common Stock
exchanged for cash or other property or exchanged for cash in
lieu of fractional shares of Holding Company Common Stock will be
treated as outstanding Bank Common Stock on the date of the
transaction. Moreover, shares of Bank Common Stock and shares of
Holding Company Common Stock held by Bank shareholders and
otherwise sold, redeemed, or disposed of prior or subsequent to
the transaction as part of the Agreement will be considered in
making this representation.
(c) Following the Reorganization, the Bank will hold at least 90% of
the fair market value of its net assets and at least 70% of the
fair market value of its gross assets and at least 90% of the
fair market value of Interim's net assets and at least 70 percent
of the fair market value of Interim's gross assets held
immediately prior to the Reorganization. For purposes of this
representation, amounts paid by the Bank or Interim to
shareholders who receive cash or other property, amounts used by
the Bank or Interim to pay reorganization expenses, and all
redemptions and distributions (except for regular, normal
dividends) made by the Bank will be included as assets of the
Bank or Interim, respectively, immediately prior to the
Reorganization.
(d) Prior to the transaction, Holding Company will be in control of
Interim within the meaning of Section 368(c).
<PAGE>
Board of Directors
Fidelity Federal Savings Bank of Florida
___________, 1996
Page 6
(e) As of the date of the execution of the Agreement, the Bank has no
plan or intention to issue additional shares of its stock that
would result in Holding Company losing control of the Bank within
the meaning of Section 368(c) .
(f) As of the date of the Agreement, Holding Company has no plan or
intention to reacquire any of its stock issued in the
transaction.
(g) Holding Company has no plan or intention to liquidate the Bank;
to merge the Bank with or into another corporation; to sell or
otherwise dispose of the stock of the Bank except for transfers
of stock to corporations controlled by Holding Company; or to
cause the Bank to sell or otherwise dispose of any of its assets
or of any of the assets acquired from Interim, except for
dispositions made in the ordinary course of business or transfers
of assets to a corporation controlled by the Bank.
(h) The liabilities of Interim, if any, assumed by the Bank and the
liabilities to which the transferred assets of Interim are
subject were incurred by Interim in the ordinary course of its
business.
(i) Following the transaction, the Bank will continue its historic
business or use a significant portion of its historic business
assets in a business.
(j) Holding Company, Interim, the Bank, and the shareholders of the
Bank will pay their respective expenses, if any, incurred in
connection with the Reorganization. The Bank will pay or assume
only those expenses of Interim, if any, that are solely and
directly related to the transaction in accordance with the
guidelines established in Rev. Rul. 73-54, 1973-1 C.B. 187.
(k) There is no intercorporate indebtedness existing between Holding
Company and the Bank or between Interim and the Bank that was
issued, acquired, or will be settled at a discount.
(l) In the Reorganization, shares of Bank stock representing control
of the Bank, as defined in Section 368(c), will be exchanged
solely for voting stock of Holding Company. For purposes of this
representation, shares of Bank stock exchanged for cash or other
property originating with Holding Company will be treated as
outstanding Bank Common Stock on the date of the Reorganization.
(m) At the time of the Reorganization, the Bank will not have
outstanding any warrants, options, convertible securities or any
other type of right pursuant to
<PAGE>
Board of Directors
Fidelity Federal Savings Bank of Florida
___________, 1996
Page 7
which any person could acquire stock in the Bank that, if
exercised or converted, would affect Holding Company's
acquisition or retention of control of the Bank, as defined in
Section 368(c).
(n) Holding Company does not own, nor has it owned during the past
five years, any shares of the stock of the Bank, nor will Holding
Company acquire any such stock prior to the proposed transaction.
(o) No two parties to the transaction are investment companies as
defined in Section 368(a)(2)(F)(iii) and (iv).
(p) On the date of the Reorganization, the fair market value of the
assets of the Bank on a going concern basis will exceed the sum
of its liabilities, plus the amount of liabilities, if any, to
which the assets are subject.
(q) The Bank is not under the jurisdiction of a court in a Title 11
or similar case within the meaning of Section 368(a)(3)(A).
(r) None of the compensation received by any of the shareholder-
employees of the Bank will be separate consideration for, or
allocable to, any of their shares of Bank Common Stock; none of
the shares of Holding Company Common Stock received by any
shareholder-employees will be separate consideration for, or
allocable to, any employment agreement; and the compensation paid
to any shareholder-employees will be for services actually
rendered and will be commensurate with amounts paid to third
parties bargaining at arm's-length for similar services.
OPINION
Based solely upon the terms of the proposed transaction described
herein and the representations set forth, it is our opinion that the following
federal income tax consequences will result from the Reorganization.
(1) Provided that the merger of Interim with and into the Bank
qualifies as a statutory merger under applicable law, and after
the Reorganization the Bank will hold substantially all of the
assets of Interim, and in the Reorganization, Bank shareholders
exchange solely for voting Holding Company Common Stock an amount
of Bank Common Stock constituting "control" of the Bank within
the meaning of Section 368(c), the Reorganization will constitute
a reorganization
<PAGE>
Board of Directors
Fidelity Federal Savings Bank of Florida
___________, 1996
Page 8
within the meaning of Section 368(a)(1)(A)./2/ The
Reorganization will not be disqualified by reason of the fact
that Common Stock of Holding Company is used in the transaction
(Section 368(a)(2)(E)). The Bank, Holding Company and Interim
will each be a party to the Reorganization within the meaning of
Section 368(b).
(2) Interim will not recognize any gain or loss on the transfer of
its assets to the Bank in exchange for Bank Common Stock and the
assumption by the Bank of the liabilities, if any, of Interim
(Sections 361(a) and 357(a)).
(3) The Bank will not recognize any gain or loss on the receipt of
the assets of Interim in exchange for Bank Common Stock (Section
1032(a)).
(4) The Bank's basis in the assets received from Interim in the
exchange will, in each case, be the same as the basis of such
assets in the hands of Interim immediately prior to the
Reorganization (Section 362(b)).
(5) Holding Company will not recognize any gain or loss upon its
receipt of Bank Common Stock solely in exchange for Interim stock
(Section 354(a)).
(6) The Bank's holding period for the assets received from Interim in
the exchange will, in each instance, include the period during
which such assets were held by Interim (Section 1223(2)).
(7) Bank shareholders will not recognize any gain or loss upon their
exchange of Bank Common Stock solely for shares of Holding
Company Common Stock (Section 354(a)).
(8) A Bank shareholder's basis in his or her Holding Company Common
Stock received in the exchange will be the same as the basis of
the Bank Common Stock surrendered in the exchange therefor
(Section 358(a)).
(9) A Bank shareholder's holding period in his or her Holding Company
Common Stock received in the exchange will include the period
during which the Bank Common Stock surrendered was held, provided
that the Bank Common Stock
___________________
/2/ For purposes of this opinion, "substantially all" means at least 90
percent of the fair market value of the net assets and at least 70 percent of
the fair market value of the gross assets of the Bank and Interim.
<PAGE>
Board of Directors
Fidelity Federal Savings Bank of Florida
___________, 1996
Page 9
surrendered is a capital asset in the hands of the Bank
shareholder on the date of the exchange (Section 1223(1)).
(10) Bank shareholders will not recognize any gain or loss as a result
of the conversion of their Bank stock options into options to
purchase stock of the Holding Company (Treasury Regulation
Section 1.83-8(b)(6)).
SCOPE OF OPINION
Our opinion is limited to the federal income tax matters described
above and does not address any other federal income tax considerations or any
federal, state, local, foreign or other tax considerations. If any of the
information upon which we have relied is incorrect, or if changes in the
relevant facts occur after the date hereof, our opinion could be affected
thereby. Moreover, our opinion is based on the case law, Code, Treasury
Regulations thereunder and Internal Revenue Service rulings as they now exist.
These authorities are all subject to change, and such change may be made with
retroactive effect. We can give no assurance that, after such change, our
opinion would not be different. We undertake no responsibility to update or
supplement our opinion. This opinion is not binding on the Internal Revenue
Service and there can be no assurance, and none is hereby given, that the
Internal Revenue Service will not take a position contrary to one or more of the
positions reflected in the foregoing opinion, or that our opinion will be upheld
by the courts if challenged by the Internal Revenue Service.
CONSENT
We hereby consent to the filing of this opinion as an exhibit to the
Application H-(e)1 filed on behalf of the Bank with the Office of Thrift
Supervision, and to the references to us under the heading "Proposal I -Proposed
Formation of Stock Holding Company - Tax Consequences" in the Proxy Statement
constituting a part of such Application.
<PAGE>
Board of Directors
Fidelity Federal Savings Bank of Florida
___________, 1996
Page 10
USE OF OPINION
This opinion is rendered solely for the benefit of Fidelity Federal
Savings Bank of Florida, in connection with the proposed transaction and is not
to be relied upon or used for any other purpose without our prior written
consent.
Very truly yours,
LUSE LEHMAN GORMAN POMERENK & SCHICK
A Professional Corporation
By: _____________________________________
Beverly J. White
<PAGE>
EXHIBIT 10.1
FIDELITY FEDERAL SAVINGS BANK OF FLORIDA
EMPLOYMENT AGREEMENT
This Agreement is made effective as of January 7, 1994 by and between
Fidelity Federal Savings Bank of Florida (the "Bank"), a federally-chartered
savings institution, with its principal administrative office at 218 Datura
Street, West Palm Beach, Florida 33402-0989 and Vince A. Elhilow (the
"Executive"). Any reference to "Company" herein shall mean Fidelity Bankshares,
MHC or any successor thereto.
WHEREAS, the Bank wishes to assure itself of the services of Executive for
the period provided in this Agreement; and
WHEREAS, Executive is willing to serve in the employ of the Bank on a full-
time basis for said period.
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
and upon the other terms and conditions hereinafter provided, the parties hereby
agree as follows:
1. POSITION AND RESPONSIBILITIES
During the period of his employment hereunder, Executive agrees to serve as
President and Chief Executive Officer of the Bank. During said period,
Executive also agrees to serve, if elected, as an officer and director of any
subsidiary or affiliate of the Bank. Failure to reelect Executive as President
and Chief Executive Officer without the consent of the Executive during the term
of this Agreement shall constitute a breach of this Agreement.
2. TERMS AND DUTIES
(a) The period of Executive's employment under this Agreement shall begin
as of the date first above written and shall continue for a period of thirty-six
(36) full calendar months thereafter. Commencing on the first anniversary date
of this Agreement, and continuing at each anniversary date thereafter, the
Agreement shall renew for an additional year such that the remaining term shall
be three (3) years unless written notice is provided to Executive at least ten
(10) days and not more than thirty (30) days prior to any such anniversary date,
that his employment shall cease at the end of twenty-four (24) months following
such anniversary date. Prior to each notice period for non-renewal, the
disinterested members of the Board of Directors of the Bank ("Board") will
conduct a comprehensive performance evaluation and review of the Executive for
purposes of determining whether to extend the Agreement, and the results thereof
shall be included in the minutes of the Board's meeting.
(b) During the period of his employment hereunder, except for periods of
absence occasioned by illness, reasonable vacation periods, and reasonable
leaves of absence, Executive shall devote substantially all his business time,
attention, skill, and efforts to the faithful performance of his duties
hereunder including activities and services related to the organization,
operation and management of the Bank; provided, however, that, with the approval
of the Board, as evidenced by a resolution of such Board, from time to time,
Executive may serve, or continue to serve, on the boards of directors of, and
hold any other offices or positions in, companies or organizations, which, in
such Board's judgment, will not present any conflict of interest with the Bank,
or materially affect the performance of Executive's duties pursuant to this
Agreement.
<PAGE>
3. COMPENSATION AND REIMBURSEMENT
(a) The compensation specified under this Agreement shall constitute the
salary and benefits paid for the duties described in Section 2(b). The Bank
shall pay Executive as compensation a salary of not less than $218,000 per year
("Base Salary"). Such Base Salary shall be payable monthly. During the period
of this Agreement, Executive's Base Salary shall be reviewed at least annually;
the first such review will be made no later than December 31, 1994. Such
review shall be conducted by a Committee designated by the Board, and the Board
may increase Executive's Base Salary. In addition to the Base Salary provided
in this Section 3(a), the Bank shall provide Executive at no cost to Executive
with all such other benefits as are provided uniformly to permanent full-time
employees of the Bank.
(b) The Bank will provide Executive with employee benefit plans,
arrangements and perquisites substantially equivalent to those in which
Executive was participating or otherwise deriving benefit from immediately prior
to the beginning of the term of this Agreement, and the Bank will not, without
Executive's prior written consent, make any changes in such plans, arrangements
or perquisites which would adversely affect Executive's rights or benefits
thereunder. Without limiting the generality of the foregoing provisions of this
Subsection (b), Executive will be entitled to participate in or receive benefits
under any employee benefit plans including but not limited to, retirement plans,
supplemental retirement plans, pension plans, profit-sharing plans, health-and-
accident plans, medical coverage or any other employee benefit plan or
arrangement made available by the Bank in the future to its senior executives
and key management employees, subject to and on a basis consistent with the
terms, conditions and overall administration of such plans and arrangements.
Executive will be entitled to incentive compensation and bonuses as provided in
any plan of the Bank in which Executive is eligible to participate. Nothing
paid to the Executive under any such plan or arrangement will be deemed to be
in lieu of other compensation to which the Executive is entitled under this
Agreement.
(c) In addition to the Base Salary provided for by paragraph (a) of this
Section 3, the Bank shall pay or reimburse Executive for all reasonable travel
and other reasonable expenses incurred by Executive performing his obligations
under this Agreement and may provide such additional compensation in such form
and such amounts as the Board may from time to time determine.
(d) Compensation and reimbursement to be paid pursuant to paragraphs (a),
(b) and (c) of this Section 3 shall be paid by the Bank and the Company,
respectively on a pro rata basis based upon the amount of service the Executive
devotes to the Bank and Company, respectively.
4. PAYMENTS TO EXECUTIVE UPON AN EVENT OF TERMINATION
The provisions of this Section shall in all respects be subject to the
terms and conditions stated in Sections 8 and 15.
(a) The provisions of this Section shall apply upon the occurrence of an
Event of Termination (as herein defined) during the Executive's term of
employment under this Agreement. As used in this Agreement, an "Event of
Termination" shall mean and include any one or more of the following: (i) the
termination by the Bank or the Company of Executive's full-time employment
hereunder for any reason other than, (A) Disability or Retirement as defined in
Section 6 below, (B) a Change in Control, as defined in Section 5(a) hereof, or
(C) Termination for Cause as defined in Section 7 hereof; or (ii) Executive's
resignation from the Bank's employ, upon any (A) failure to elect or reelect or
to appoint or reappoint Executive as President and Chief Executive Officer, (B)
material change in Executive's function, duties, or responsibilities, which
change would cause Executive's position to become one of
<PAGE>
lesser responsibility, importance, or scope from the position and attributes
thereof described in Section 1, above, (C) a relocation of Executive's principal
place of employment by more than 30 miles from its location at the effective
date of this Agreement, or a material reduction in the benefits and perquisites
to the Executive from those being provided as of the effective date of this
Agreement, (D) liquidation or dissolution of the Bank or Company other than
liquidations or dissolutions that are caused by reorganizations that do not
affect the status of Executive, or (E) breach of this Agreement by the Bank.
Upon the occurrence of any event described in clauses (ii)(A), (B), (C), (D) or
(E), above, Executive shall have the right to elect to terminate his employment
under this Agreement by resignation upon sixty (60) days prior written notice
given within a reasonable period of time not to exceed four calendar months
after the initial event giving rise to said right to elect. Notwithstanding the
preceding sentence, in the event of a continuing breach of this Agreement by the
Bank, the Executive, after giving due notice within the prescribed time frame of
an initial event specified above, shall not waive any of his rights solely under
this Agreement and this Section 4 by virtue of the fact that Executive has
submitted his resignation but has remained in the employment of the Bank and is
engaged in good faith discussions to resolve any occurrence of an event
described in clauses (A), (B), (C), (D) and (E) above.
(b) Upon the occurrence of an Event of Termination, on the Date of
Termination, as defined in Section 8, the Bank shall pay Executive, or, in the
event of his subsequent death, his beneficiary or beneficiaries, or his estate,
as the case may be, as severance pay or liquidated damages, or both, a sum
equal to the greater of the payments due for the remaining term of the Agreement
or three (3) times the average of the three preceding years' Base Salary,
including bonuses and any other cash compensation paid to the Executive during
such years, and the amount of any benefits received pursuant to any employee
benefit plans on behalf of the Executive, maintained by the Bank during such
years; provided, however, that if the Bank is not in compliance with its minimum
capital requirements or if such payments would cause the Bank's capital to be
reduced below its minimum capital requirements, such payments shall be deferred
until such time as the Bank is in capital compliance, and provided further, that
in no event shall total severance compensation from all sources exceed three
times the Executive's Base Salary for the immediately preceding year. At the
election of the Executive, which election is to be made within thirty (30) days
of an Event of Termination, such payments shall be made in a lump sum or paid
monthly during the remaining term of the agreement following the Executive's
termination. In the event that no election is made, payment to the Executive
will be made on a monthly basis during the remaining term of the agreement.
Such payments shall not be reduced in the event the Executive obtains other
employment following termination of employment.
(c) Notwithstanding the provisions of Sections 4(a) and (b), and in the
event that there has not been a change in control as defined in Section 5(a),
upon the Voluntary Termination by the Executive upon giving sixty days notice to
the Bank (which shall not be deemed to constitute an "Event of Termination" as
defined herein), the Bank, at the discretion of the Board of Directors, shall
pay Executive, or in the event of his subsequent death, his beneficiary or
beneficiaries, or his estate, as the case may be, a severance payment in an
amount to be determined by the Board of Directors at the time of such Voluntary
Termination by the Executive. Such severance payment shall not exceed three (3)
times the average of the three preceding years' Base Salary, including bonuses
and any other cash compensation paid to the Executive during such years, and the
amount of any benefits received pursuant to any employee benefit plans, on
behalf of the Executive, maintained by the Bank during such years; provided,
however, that if the Bank is not in compliance with its minimum capital
requirements or if such payments would cause the Bank's capital to be reduced
below its minimum capital requirements, such payments shall be deferred until
such time as the Bank is in capital compliance, and provided further, that in no
event shall total severance compensation from all sources exceed three times the
Executive's Base Salary for the immediately preceding year. At the election of
the Executive, which election is to be made
<PAGE>
within thirty (30) days of Executive's Voluntary Termination, any payments shall
be made in a lump sum or paid monthly during the remaining term of the agreement
following the Executive's termination. In the event that no election is made,
any payment to the Executive will be made on a monthly basis during the
remaining term of the agreement. Such payments shall not be reduced in the
event the Executive obtains other employment following termination of
employment.
(d) Upon the occurrence of an Event of Termination, the Bank will cause to
be continued life, medical, dental and disability coverage substantially
identical to the coverage maintained by the Bank for Executive prior to his
termination, provided that such benefits shall not be provided in the event they
should constitute an unsafe or unsound banking practice relating to executive
compensation and employment contracts pursuant to 12 C.F.R. (S)(S) 63.39 and
563.161, as is now or hereafter in effect. Such coverage shall cease upon the
expiration of the remaining term of this Agreement.
(e) In the event that the Executive is receiving monthly payments pursuant
to Section 4(b) or (c) hereof, on an annual basis, thereafter, between the dates
of January 1 and January 31 of each year, Executive shall elect whether the
balance of the amount payable under the Agreement at that time shall be paid in
a lump sum or on a pro rata basis. Such election shall be irrevocable for the
year for which such election is made.
5. CHANGE IN CONTROL
(a) No benefit shall be payable under this Section 5 unless there shall
have been a Change in Control of the Bank or Company, as set forth below. For
purposes of this Agreement, a "Change in Control" of the Bank or Company shall
mean:
(1) a reorganization, merger, merger conversion, consolidation or
sale of all or substantially all of the assets of the Bank or the Company or a
similar transaction occurs in which the Bank or the Company is not the resulting
entity;
(2) individuals who constitute the board of directors of the Bank or
the board of directors of the Company on the date hereof (the "Incumbent Board")
cease for any reason to constitute a majority thereof; provided that any person
becoming a director subsequent to the date hereof whose election was approved by
a vote of at least three-quarters of the directors comprising the Incumbent
Board, or whose nomination for election by the Company's stockholders was
approved by the same nominating committee serving under an Incumbent Board,
shall be, for purposes of this clause (ii), considered as though he were a
member of the Incumbent Board; or
(3) a change in control within the meaning of 12 C.F.R. (S) 574.4
occurs, as determined by the board of directors of the Bank or the Company;
provided, however, that a change in control shall not be deemed to occur under
paragraphs (1) or (3) of this Section 5 if the transaction(s) constituting a
change in control is approved by a majority of the board of directors of the
Bank or the Company, as the case may be.
(4) In the event that the Company converts from the mutual form of
organization to the stock form of organization on a stand-alone basis at any
time subsequent to the effective date of this Agreement ("Stock Holding
Company"), a "change in control" of the Bank or the Stock Holding Company for
purposes of this Agreement shall mean an event of a nature that : (I) would be
required to be reported in response to Item 1 of the current report on Form 8-K,
as in effect on the date hereof; pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 (the "Exchange Act"); or (II)
<PAGE>
results in a Change in Control of the Bank or the Stock Holding Company within
the meaning of the Home Owners' Loan Act of 1933 and the Rules and Regulations
promulgated by the Office of Thrift Supervision (or its predecessor agency), as
in effect on the date hereof; or (III) without limitation, such a change in
control shall be deemed to have occurred at such time as (a) any "person" (as
the term is used in Section 13(d) and 14(d) of the Exchange Act) other than the
Stock Holding Company is or becomes a "beneficial owner" (as defined in Rule 13-
d under the Exchange Act) directly or indirectly, of securities of the Bank
representing 25% or more of the Bank's outstanding securities ordinarily having
the right to vote at the election of directors except for any securities of the
Bank purchased by the Stock Holding Company in connection with the
Reorganization and any securities purchased by the Bank's employee stock
ownership plan and trust shall not be counted in determining whether such plan
is the beneficial owner of more than 25% of the Bank's securities; or (b)
individuals who constitute the Incumbent Board cease for any reason to
constitute at least a majority thereof; provided that any person becoming a
director subsequent to the date hereof whose election was approved by a vote of
at least three-quarters of the directors comprising the Incumbent Board, or
whose nomination for election by the Stock Holding Company's stockholders was
approved by the same Nominating Committee serving under an Incumbent Board,
shall be, for purposes of this clause (a), considered as though he were a member
of the Incumbent Board; or (c) a reorganization, merger, consolidation, sale of
all or substantially all the assets of the Bank or the Stock Holding Company or
similar transaction occurs in which the Bank or the Stock Holding Company is not
the resulting entity and to which the Incumbent Board does not consent; (d) a
proxy statement soliciting proxies from stockholders of the Bank or Stock
Holding Company, by someone other than the current management of the Bank,
seeking stockholder approval of a plan of reorganization, merger or
consolidation of the Stock Holding Company or the Bank or similar transaction
with one or more corporations as a result of which the outstanding shares of the
class of securities then subject to the plan or transaction are exchanged or
converted into cash or property or securities not issued by the Bank or the
Stock Holding Company; or (e) a tender offer is made for 25% or more of the
voting securities of the Bank and the shareholders owning beneficially or of
record 25% or more of the outstanding securities of the Bank or the Stock
Holding Company have tendered or offered to sell their shares pursuant to such
tender offer and such tendered shares have been accepted by the tender offerors.
Notwithstanding, the foregoing, a "Change in Control" of the Bank or the
Company shall not be deemed to have occurred if the Company ceases to own at
least 51% of all outstanding shares of stock of the Bank in connection with a
conversion of the Company from mutual to stock form.
(b) If any of the events described in Section 5(a) hereof constituting a
Change in Control have occurred, Executive shall be entitled to the benefits
provided in paragraphs (c), (d), (e), (f), (g) and (h) of this Section 5 upon
his subsequent termination of employment at any time during the term of this
Agreement, regardless of whether such termination results from (i) his
resignation or (ii) his dismissal upon the Change in Control.
(c) Upon the occurrence of a Change in Control followed by the Executive's
termination of employment, the Bank shall pay Executive, or in the event of his
subsequent death, his beneficiary or beneficiaries, or his estate, as the case
may be, as severance pay or liquidated damages, or both, a sum equal to the
greater of the payments due for the remaining term of the Agreement or 2.99
times the average of the five preceding years' Base Salary, including bonuses
and any other cash compensation paid to the Executive during such years, and the
amount of any contributions made to any employee benefit plans, on behalf of the
Executive, maintained by the Bank during such years. Such payment shall be made
by the Bank on the Date of Termination. At the election of the Executive, which
election shall be made no later than the Date of Termination following a Change
in Control, such payment may be made in a lump sum or paid in equal monthly
installments during the thirty-six (36) months following the
<PAGE>
Executive's termination. In the event that no election is made, payment to the
Executive will be made on a monthly basis during the remaining term of the
Agreement.
(d) Upon the occurrence of a Change in Control followed by the Executive's
termination of employment, the Bank will cause to be continued life, medical,
dental and disability coverage substantially identical to the coverage
maintained by the Bank for Executive prior to his severance. Such coverage and
payments shall cease upon the expiration of thirty-six (36) months.
(e) Upon the occurrence of a Change in Control, Executive will be entitled
to any benefits granted to him pursuant to any Stock Option Plan of the Bank or
Holding Company.
(f) Upon the occurrence of a Change in Control the Executive will be
entitled to any benefits awarded to him under the Bank's Recognition and
Retention Plan or any restricted stock plan in effect.
(g) In the event that the Executive is receiving monthly payments pursuant
to Section 5(c) hereof, on an annual basis, thereafter, between the dates of
January 1 and January 31 of each year, Executive shall elect whether the balance
of the amount payable under the Agreement at that time shall be paid in a lump
sum or on a pro rata basis. Such election shall be irrevocable for the year for
which such election is made.
(h) Notwithstanding the preceding paragraphs of this Section 5, in the
event that:
(i) the aggregate payments or benefits to be made or afforded to
Executive under said paragraphs (the "Termination Benefits")
would be deemed to include an "excess parachute payment" under
Section 280G of the Code or any successor thereto, and
(ii) if such Termination Benefits were reduced to an amount (the "Non-
Triggering Amount"), the value of which is one dollar ($1.00)
less than an amount equal to the total amount of payments
permissible under Section 280G of the Code or any successor
thereto,
then the Termination Benefits to be paid to Executive shall be so
reduced so as to be a Non-Triggering Amount.
(i) Notwithstanding the foregoing, there will be no reduction in the
compensation otherwise payable to Executive during any period during which
Executive is incapable of performing his duties hereunder by reason of temporary
disability.
(j) Any payments made to Executive pursuant to this Agreement or
otherwise, are subject to and conditioned upon their compliance with 12 U.S.C.
(S) 1818(k) and any regulations promulgated thereunder.
(k) The Executive shall not be entitled to any payments pursuant to this
Section 5 if the Bank is not in compliance with its minimum capital requirements
or if such payments would cause the Bank's capital to be reduced below its
minimum capital requirements, such payments shall be deferred until such times
as the Bank is in capital compliance and provided further, that in no event
shall total severance compensation from all sources exceed three times the
Executive's Base Salary for the immediately preceding year.
<PAGE>
6. TERMINATION UPON RETIREMENT OR DISABILITY
Termination by the Bank of the Executive based on "Retirement" shall mean
termination in accordance with the Bank's retirement policy or in accordance
with any retirement arrangement established with Executive's consent with
respect to him. Upon termination of Executive upon Retirement, Executive shall
be entitled to all benefits under any retirement plan of the Bank and other
plans to which Executive is a party.
Termination by the Bank of Executive's employment based on "Disability"
shall mean termination because of any physical or mental impairment which
qualifies the Executive for disability benefits under the applicable long-term
disability plan maintained by the Bank or, if no such plan applies, which would
qualify the Executive for disability benefits under the federal social security
system.
7. TERMINATION FOR CAUSE
The term "Termination for Cause" shall mean termination because of the
Executive's personal dishonesty, incompetence, willful misconduct, any breach of
fiduciary duty involving personal profit, intentional failure to perform stated
duties, willful violation of any law, rule, or regulation (other than traffic
violations or similar offenses) or final cease-and-desist order, or material
breach of any provision of this Agreement. In determining incompetence, the
acts or omissions shall be measured against standards generally prevailing in
the savings institution industry. For purposes of this paragraph, no act or
failure to act on the part of Executive shall be considered "willful" unless
done, or omitted to be done, by the Executive not in good faith and without
reasonable belief that the Executive's action or omission was in the best
interest of the Bank. Notwithstanding the foregoing, Executive shall not be
deemed to have been Terminated for Cause unless and until there shall have been
delivered to him a copy of a resolution duly adopted by the affirmative vote of
not less than three-fourths of the members of the Board at a meeting of the
Board called and held for that purpose (after reasonable notice to Executive and
an opportunity for him, together with counsel, to be heard before the Board),
finding that in the good faith opinion of the Board, Executive was guilty of
conduct justifying Termination for Cause and specifying the particulars thereof
in detail. The Executive shall not have the right to receive compensation or
other benefits for any period after Termination for Cause. Any stock options
granted to Executive under any stock option plan of the Bank, the Company or any
subsidiary or affiliate thereof, shall become null and void effective upon
Executive's receipt of Notice of Termination for Cause pursuant to Section 8
hereof, and shall not be exercisable by Executive at any time subsequent to such
Termination for Cause.
8. NOTICE
(a) Any purported termination by the Bank or by Executive shall be
communicated by Notice of Termination to the other party hereto. For purposes
of this Agreement, a "Notice of Termination" shall mean a written notice which
shall indicate the specific termination provision in this Agreement relied upon
and shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of Executive's employment under the provision so
indicated.
(b) "Date of Termination" shall mean the date specified in the Notice of
Termination (which, in the case of a Termination for Cause, shall not be less
than thirty (30) days from the date such Notice of Termination is given).
(c) If, within thirty (30) days after any Notice of Termination is given,
the party receiving such Notice of Termination notifies the other party that a
dispute exists concerning the termination, except
<PAGE>
upon the occurrence of a Change in Control and voluntary termination by the
Executive in which case the Date of Termination shall be the date specified in
the Notice, the Date of Termination shall be the date on which the dispute is
finally determined, either by mutual written agreement of the parties, by a
binding arbitration award, or by a final judgment, order or decree of a court of
competent jurisdiction (the time for appeal having expired and no appeal having
been perfected) and provided further that the Date of Termination shall be
extended by a notice of dispute only if such notice is given in good faith and
the party giving such notice pursues the resolution of such dispute with
reasonable diligence. Notwithstanding the pendency of any such dispute, the
Bank will continue to pay Executive his full compensation in effect when the
notice giving rise to the dispute was given (including, but not limited to, Base
Salary) and continue Executive as a participant in all compensation, benefit and
insurance plans in which he was participating when the notice of dispute was
given, until the dispute is finally resolved in accordance with this Agreement,
provided such dispute is resolved within nine months after the Date of
Termination specified in the Notice or Termination; notwithstanding the
foregoing no compensation or benefits shall be paid to Executive in the event
the Executive is Terminated for Cause. In the event that such Termination for
Cause is found to have been wrongful or such dispute is otherwise decided in
Executive's favor, the Executive shall be entitled to receive all compensation
and benefits which accrued for up to a period of nine months after the
Termination for Cause. If such dispute is not resolved within such nine- month
period, the Bank shall not be obligated, upon final resolution of such dispute,
to pay Executive compensation and other payments accruing more than nine months
from the Date of the Termination specified in the Notice of Termination.
Amounts paid under this Section are in addition to all other amounts due under
this Agreement and shall not be offset against or reduce any other amounts due
under this Agreement.
9. POST-TERMINATION OBLIGATIONS
(a) All payments and benefits to Executive under this Agreement shall be
subject to Executive's compliance with paragraph (b) of this Section 9 during
the term of this Agreement and for one (1) full year after the expiration or
termination hereof.
(b) Executive shall, upon reasonable notice, furnish such information and
assistance to the Bank as may reasonably be required by the Bank in connection
with any litigation in which it or any of its subsidiaries or affiliates is, or
may become, a party.
10. NON-COMPETITION
(a) Upon any termination of Executive's employment hereunder pursuant to
Section 4(c) hereof, Executive agrees not to compete with the Bank and/or the
Company for a period of one (1) year following such termination in any city,
town or county in which the Bank and/or the Company has an office or has filed
an application for regulatory approval to establish an office, determined as of
the effective date of such termination, except as agreed to pursuant to a
resolution duly adopted by the Board. Executive agrees that during such period
and within said cities, towns and counties, Executive shall not work for or
advise, consult or otherwise serve with, directly or indirectly, any entity
whose business materially competes with the depository, lending or other
business activities of the Bank and/or the Company. The parties hereto,
recognizing that irreparable injury will result to the Bank and/or the Company,
its business and property in the event of Executive's breach of this Subsection
10(a) agree that in the event of any such breach by Executive, the Bank and/or
the Company will be entitled, in addition to any other remedies and damages
available, to an injunction to restrain the violation hereof by Executive,
Executive's partners, agents, servants, employers, employees and all persons
acting for or with Executive. Nothing herein will be construed as prohibiting
the Bank and/or the Company from
<PAGE>
pursuing any other remedies available to the Bank and/or the Company for such
breach or threatened breach, including the recovery of damages from Executive.
(b) Executive recognizes and acknowledges that the knowledge of the
business activities and plans for business activities of the Bank and affiliates
thereof, as it may exist from time to time, is a valuable, special and unique
asset of the business of the Bank. Executive will not, during or after the term
of his employment, disclose any knowledge of the past, present, planned or
considered business activities of the Bank or affiliates thereof to any person,
firm, corporation, or other entity for any reason or purpose whatsoever.
Notwithstanding the foregoing, Executive may disclose any knowledge of banking,
financial and/or economic principles, concepts or ideas which are not solely and
exclusively derived from the business plans and activities of the Bank, and
Executive may disclose any information regarding the Bank or the Company which
is otherwise publicly available. In the event of a breach or threatened breach
by the Executive of the Provisions of this Section 10, the Bank will be entitled
to an injunction restraining Executive from disclosing, in whole or in part, the
knowledge of the past, present, planned or considered business activities of the
Bank or affiliates thereof, or from rendering any services to any person, firm,
corporation, other entity to whom such knowledge, in whole or in part, has been
disclosed or is threatened to be disclosed. Nothing herein will be construed as
prohibiting the Bank from pursuing any other remedies available to the Bank for
such breach or threatened breach, including the recovery of damages from
Executive.
11. SOURCE OF PAYMENTS
All payments provided in this Agreement shall be timely paid in cash or
check from the general funds of the Bank. The Company, however, guarantees
payment and provision of all amounts and benefits due hereunder to Executive
and, if such amounts and benefits due from the Bank are not timely paid or
provided by the Bank, such amounts and benefits shall be paid or provided by the
Company.
12. EFFECT ON PRIOR AGREEMENTS AND EXISTING BENEFITS PLANS
This Agreement contains the entire understanding between the parties hereto
and supersedes any prior employment agreement between the Bank or any
predecessor of the Bank and Executive, except that this Agreement shall not
affect or operate to reduce any benefit or compensation inuring to the Executive
of a kind elsewhere provided. No provision of this Agreement shall be
interpreted to mean that Executive is subject to receiving fewer benefits than
those available to him without reference to this Agreement.
13. NO ATTACHMENT
(a) Except as required by law, no right to receive payments under this
Agreement shall be subject to anticipation, commutation, alienation, sale,
assignment, encumbrance, charge, pledge, or hypothecation, or to execution,
attachment, levy, or similar process or assignment by operation of law, and any
attempt, voluntary or involuntary, to affect any such action shall be null,
void, and of no effect.
(b) This Agreement shall be binding upon, and inure to the benefit of,
Executive and the Bank and their respective successors and assigns.
14. MODIFICATION AND WAIVER
(a) This Agreement may not be modified or amended except by an instrument
in writing signed by the parties hereto.
<PAGE>
(b) No term or condition of this Agreement shall be deemed to have been
waived, nor shall there be any estoppel against the enforcement of any provision
of this Agreement, except by written instrument of the party charged with such
waiver or estoppel. No such written waiver shall be deemed a continuing waiver
unless specifically stated therein, and each such waiver shall operate only as
to the specific term or condition waived and shall not constitute a waiver of
such term or condition for the future as to any act other than that specifically
waived.
15. REQUIRED PROVISIONS
(a) The Bank may terminate the Executive's employment at any time, but any
termination by the Bank, other than Termination for Cause, shall not prejudice
Executive's right to compensation or other benefits under this Agreement.
Executive shall not have the right to receive compensation or other benefits for
any period after Termination for Cause as defined in Section 7 hereinabove.
(b) If the Executive is suspended from office and/or temporarily
prohibited from participating in the conduct of the Bank's affairs by a notice
served under Section 8(e)(3) (12 U.S.C. (S)(S) 1818(e)(3)) or 8(g) (12 U.S.C.
(S) 1818(g)) of the Federal Deposit Insurance Act, as amended by the Financial
Institutions Reform, Recovery and Enforcement Act of 1989, the Bank's
obligations under this contract shall be suspended as of the date of service,
unless stayed by appropriate proceedings. If the charges in the notice are
dismissed, the Bank may in its discretion (i) pay the Executive all or part of
the compensation withheld while their contract obligations were suspended and
(ii) reinstate (in whole or in part) any of the obligations which were
suspended.
(c) If the Executive is removed and/or permanently prohibited from
participating in the conduct of the Bank's affairs by an order issued under
Section 8(e) (12 U.S.C. (S)(S) 1818(e)) or 8(g) (12 U.S.C. (S) 1818(g)) of the
Federal Deposit Insurance Act, as amended by the Financial Institutions Reform,
Recovery and Enforcement Act of 1989, all obligations of the Bank under this
contract shall terminate as of the effective date of the order, but vested
rights of the contracting parties shall not be affected.
(d) If the Bank is in default as defined in Section 3(x) (12 U.S.C. (S)
1813(x)(1)) of the Federal Deposit Insurance Act, as amended by the Financial
Institutions Reform, Recovery and Enforcement Act of 1989, all obligations of
the Bank under this contract shall terminate as of the date of default, but this
paragraph shall not affect any vested rights of the contracting parties.
(e) All obligations of the Bank under this contract shall be terminated,
except to the extent determined that continuation of the contract is necessary
for the continued operation of the institution, (i) by the Federal Deposit
Insurance Corporation ("FDIC"), at the time FDIC enters into an agreement to
provide assistance to or on behalf of the Bank under the authority contained in
Section 13(c) (12 U.S.C. (S) 1823(c)) of the Federal Deposit Insurance Act, as
amended by the Financial Institutions Reform, Recovery and Enforcement Act of
1982; or (ii) by the Office of Thrift Supervision ("OTS") at the time the OTS or
its District Director approves a supervisory merger to resolve problems related
to the operations of the Bank or when the Bank is determined by the OTS or FDIC
to be in an unsafe or unsound condition. Any rights of the parties that have
already vested, however, shall not be affected by such action.
<PAGE>
16. SEVERABILITY
If, for any reason, any provision of this Agreement, or any part of any
provision, is held invalid, such invalidity shall not affect any other provision
of this Agreement or any part of such provision not held so invalid, and each
such other provision and part thereof shall to the full extent consistent with
law continue in full force and effect.
17. HEADINGS FOR REFERENCE ONLY
The headings of sections and paragraphs herein are included solely for
convenience of reference and shall not control the meaning or interpretation of
any of the provisions of this Agreement.
18. GOVERNING LAW
This Agreement shall be governed by the laws of the State of Florida but
only to the extent not superseded by federal law.
19. ARBITRATION
Any dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration in accordance with the
rules of the American Arbitration Association then in effect. Judgment may be
entered on the arbitrator's award in any court having jurisdiction; provided,
however, that Executive shall be entitled to seek specific performance of his
right to be paid until the Date of Termination during the pendency of any
dispute or controversy arising under or in connection with this Agreement.
20. PAYMENT OF LEGAL FEES
All reasonable legal fees paid or incurred by Executive pursuant to any
dispute or question of interpretation relating to this Agreement shall be paid
or reimbursed by the Bank, provided that the dispute or interpretation has been
settled by Executive and the Bank or resolved in the Executive's favor.
21. INDEMNIFICATION
The Bank shall provide Executive (including his heirs, executors and
administrators) with coverage under a standard directors' and officers'
liability insurance policy at its expense, or in lieu thereof, shall indemnify
Executive (and his heirs, executors and administrators) to the fullest extent
permitted under federal law against all expenses and liabilities reasonably
incurred by him in connection with or arising out of any action, suit or
proceeding in which he may be involved by reason of his having been a director
or officer of the Bank (whether or not he continues to be a director or officer
at the time of incurring such expenses or liabilities), such expenses and
liabilities to include, but not be limited to, judgments, court costs and
attorneys' fees and the cost of reasonable settlements (such settlements must be
approved by the Board of Directors of the Bank). If such action, suit or
proceeding is brought against Executive in his capacity as an officer or
director of the Bank, however, such indemnification shall not extend to matters
as to which Executive is finally adjudged to be liable for willful misconduct in
the performance of his duties. No Indemnification shall be paid that would
violate 12 U.S.C. 1828(K) or any regulations promulgated thereunder, or 12
C.F.R. 544.122.
<PAGE>
22. SUCCESSOR TO THE BANK
The Bank shall require any successor or assignee, whether direct or
indirect, by purchase, merger, consolidation or otherwise, to all or
substantially all the business or assets of the Bank or the Company, expressly
and unconditionally to assume and agree to perform the Bank's obligations under
this Agreement, in the same manner and to the same extent that the Bank would be
required to perform if no such succession or assignment had taken place.
SIGNATURES
IN WITNESS WHEREOF, the Bank has caused this Agreement to be executed and
their seals to be affixed hereunto by its duly authorized officer, and Executive
has signed this Agreement, on the 7th day of January, 1994.
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ATTEST: FIDELITY FEDERAL SAVINGS BANK OF FLORIDA
_________________________ By: _____________________________
[SEAL]
WITNESS:
_________________________ By: _____________________________
EXECUTIVE
<PAGE>
Exhibit 10.2
FIDELITY FEDERAL SAVINGS BANK OF FLORIDA
SEVERANCE AGREEMENT
This AGREEMENT is made effective as of the 7th of January, 1994, by and
-------
between Fidelity Federal Savings Bank of Florida, a federally chartered stock
savings bank (the "Bank"), and Richard D. Aldred ("Executive"). Any reference
to "Company" herein shall mean Fidelity Bankshares, MHC or any successor
thereto.
WHEREAS, the Bank recognizes the substantial contribution Executive has
made to the Bank and wishes to protect his position therewith for the period
provided in this Agreement; and
WHEREAS, Executive has been elected to, and has agreed to serve in the
position of Chief Financial Officer and Senior Vice President for the Bank, a
position of substantial responsibility;
NOW, THEREFORE, in consideration of the contribution and of Executive, and
upon the other terms and conditions hereinafter provided, the parties hereto
agree as follows:
1. TERM OF AGREEMENT
The term of this Agreement shall be deemed to have commenced as of the date
first above written and shall continue for a period of thirty six (36) full
calendar months thereafter. Commencing on the first anniversary date of this
Agreement and continuing at each anniversary date thereafter, the Board of
Directors of the Bank ("Board") may extend the Agreement for an additional year.
The Board will conduct a performance evaluation of the Executive for purposes of
determining whether to extend the Agreement, and the results thereof shall be
included in the minutes of the Board's meeting. If Executive is also a director
then he or she shall abstain from any and all voting with respect to the
extension of the term of such Executive's Agreement.
2. PAYMENTS TO EXECUTIVE UPON CHANGE IN CONTROL
(a) Upon the occurrence of a Change in Control of the Bank (as herein
defined) followed at any time during the term of this Agreement by the voluntary
or involuntary termination of Executive's employment, other than for Cause, as
defined in Section 2(c) hereof, the provisions of Section 3 shall apply. Upon
the occurrence of a Change in Control, Executive shall have the right to elect
to voluntarily terminate his employment at any time during the term of this
Agreement following any demotion, loss of title, office or significant
authority, reduction in his annual compensation or benefits, or relocation of
his principal place of employment by more than 30 miles from its location
immediately prior to the Change in Control.
(b) A "Change in Control" of the Bank shall mean:
(1) a reorganization, merger, merger conversion, consolidation or sale
of all or substantially all of the assets of the Bank or the Company or a
similar transaction occurs in which the Bank or the Company is not the resulting
entity;
(2) individuals who constitute the board of directors of the Bank or
the board of directors of the Company on the date hereof (the "Incumbent Board")
cease for any reason to constitute a majority thereof; provided that any person
becoming a director subsequent to the date hereof whose election was approved by
a vote of at least three-quarters of the directors comprising the Incumbent
Board, or whose nomination for election by the Company's stockholders was
approved by the same
<PAGE>
nominating committee serving under an Incumbent Board, shall be, for purposes of
this clause (ii), considered as though he were a member of the Incumbent Board;
or
(3) a change in control within the meaning of 12 C.F.R. (S) 574.4
occurs, as determined by the board of directors of the Bank or the Company;
provided, however, that a change in control shall not be deemed to occur under
paragraphs (1) or (3) of this Section 2 if the transaction(s) constituting a
change in control is approved by a majority of the board of directors of the
Bank or the Company, as the case may be.
(4) In the event that the Company converts from the mutual form of
organization to the stock form of organization on a stand-alone basis at any
time subsequent to the effective date of this Agreement ("Stock Holding
Company"), a "change in control" of the Bank or the Stock Holding Company for
purposes of this Agreement shall mean an event of a nature that : (I) would be
required to be reported in response to Item 1 of the current report on Form 8-K,
as in effect on the date hereof; pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 (the "Exchange Act"); or (II) results in a
Change in Control of the Bank or the Stock Holding Company within the meaning of
the Home Owners' Loan Act of 1933 and the Rules and Regulations promulgated by
the Office of Thrift Supervision (or its predecessor agency), as in effect on
the date hereof; or (III) without limitation, such a change in control shall be
deemed to have occurred at such time as (a) any "person" (as the term is used in
Section 13(d) and 14(d) of the Exchange Act) other than the Stock Holding
Company is or becomes a "beneficial owner" (as defined in Rule 13-d under the
Exchange Act) directly or indirectly, of securities of the Bank representing 25%
or more of the Bank's outstanding securities ordinarily having the right to vote
at the election of directors except for any securities of the Bank purchased by
the Stock Holding Company in connection with the Reorganization and any
securities purchased by the Bank's employee stock ownership plan and trust shall
not be counted in determining whether such plan is the beneficial owner of more
than 25% of the Bank's securities; or (b) individuals who constitute the
Incumbent Board cease for any reason to constitute at least a majority thereof;
provided that any person becoming a director subsequent to the date hereof whose
election was approved by a vote of at least three-quarters of the directors
comprising the Incumbent Board, or whose nomination for election by the Stock
Holding Company's stockholders was approved by the same Nominating Committee
serving under an Incumbent Board, shall be, for purposes of this clause (a),
considered as though he were a member of the Incumbent Board; or (c) a
reorganization, merger, consolidation, sale of all or substantially all the
assets of the Bank or the Stock Holding Company or similar transaction occurs in
which the Bank or the Stock Holding Company is not the resulting entity and to
which the Incumbent Board does not consent; (d) a proxy statement soliciting
proxies from stockholders of the Bank, by someone other than the current
management of the Bank, seeking stockholder approval of a plan of
reorganization, merger or consolidation of the Stock Holding Company of the Bank
or similar transaction with one or more corporations as a result of which the
outstanding shares of the class of securities then subject to the plan or
transaction are exchanged or converted into cash or property or securities not
issued by the Bank or the Stock Holding Company; or (e) a tender offer is made
for 25% or more of the voting securities of the Bank and the shareholders owning
beneficially or of record 25% or more of the outstanding securities of the Bank
have tendered or offered to sell their shares pursuant to such tender offer and
such tendered shares have been accepted by the tender offeror.
Notwithstanding, the foregoing, a "Change in Control" of the Bank or the
Company shall not be deemed to have occurred if the Company ceases to own at
least 51% of all outstanding shares of stock of the Bank in connection with a
conversion of the Holding Company from mutual to stock form.
<PAGE>
(c) Executive shall not have the right to receive termination benefits
pursuant to Section 3 hereof upon Termination for Cause. The term "Termination
for Cause" shall mean termination because of the Executive's intentional failure
to perform stated duties, personal dishonesty, incompetence, willful misconduct,
any breach of fiduciary duty involving personal profit, willful violation of any
law, rule, regulation (other than traffic violations or similar offenses) or
final cease and desist order, or any material breach of any material provision
of this Agreement. In determining incompetence, the acts or omissions shall be
measured against standards generally prevailing in the savings institution
industry. Notwithstanding the foregoing, Executive shall not be deemed to have
been terminated for Cause unless and until there shall have been delivered to
him a copy of a resolution duly adopted by the affirmative vote of not less than
three-fourths of the members of the Board at a meeting of the Board called and
held for that purpose (after reasonable notice to Executive and an opportunity
for him, together with counsel, to be heard before the Board), finding that in
the good faith opinion of the Board, Executive was guilty of conduct justifying
Termination for Cause and specifying the particulars thereof in detail. The
Executive shall not have the right to receive compensation or other benefits for
any period after Termination for Cause.
3. TERMINATION
(a) Upon the occurrence of a Change in Control, followed at any time
during the term of this Agreement by the voluntary or involuntary termination of
the Executive's employment other than for Termination for Cause, the Bank shall
be obligated to pay the Executive, or in the event of his subsequent death, his
beneficiary or beneficiaries, or his estate, as the case may be, as severance
pay, a sum equal to three times the average of the three preceding years' annual
base salary, including bonuses and any other cash compensation paid or accrued
by the executive during such years, and the amount of any benefits received
pursuant to any employee benefit plans on behalf of the Executive maintained by
the Bank during such years, excluding benefits continued pursuant to (b) below.
If the Executive has been employed by the Bank for less than one year, then the
severance pay shall be a sum equal to thirty-six times the average monthly
salary, including bonuses and any other cash compensation paid or accrued by the
Executive during such period, and the amount of any benefits received pursuant
to any employee benefit plans on behalf of the Executive maintained by the Bank
during such period, excluding benefits continued pursuant to (b) below, for the
period over which the Executive has been employed by the Bank. At the election
of the Executive, or his estate, as the case may be, which election is to be
made within thirty (30) days of the Date of Termination (as defined in Section
4(b)), such payment may be made in a lump sum or paid in equal monthly
installments during the thirty-six (36) months following the Executive's
termination. In the event that no election is made, payment to the Executive
will be made on a monthly basis during the remaining term of this Agreement.
(b) Upon the occurrence of a Change in Control of the Bank followed at any
time during the term of this Agreement by the Executive's voluntary or
involuntary termination of employment, other than for Termination for Cause, the
Bank shall cause to be continued life, medical, dental and disability coverage
substantially identical to the coverage maintained by the Bank for the Executive
prior to his severance. Such coverage and payments shall cease upon expiration
of thirty-six (36) months.
(c) Upon the occurrence of a Change in Control, the Executive will have
such rights as specified in the Bank's 1993 Incentive Stock Option Plan or any
other employee benefit plan with respect to options and such other rights as may
have been granted to the Executive under such plans.
(d) Upon a Change in Control, the Executive will be entitled to the
benefits under the Bank's Recognition and Retention Plans or any other such
plan.
<PAGE>
(e) In the event that the Executive is receiving monthly payments pursuant
to Section 3(a) hereof, on an annual basis, thereafter, the Executive shall
elect whether the balance of the amount payable under the Agreement at that time
shall be paid in a lump sum or on a pro rata basis. Such election shall be
irrevocable for the year for which such election is made.
(f) Notwithstanding the preceding paragraphs of this Section 3: (i) in no
event shall the aggregate payments or benefits to be made or afforded to
Executive under said paragraphs (the "Termination Benefits") constitute an
"excess parachute payment" under Section 280G of the Code or any successor
thereto, and in order to avoid such a result Termination Benefits will be
reduced, if necessary, to an amount (the "Non-Triggering Amount"), the value of
which is one dollar ($1.00) less than an amount equal to three (3) times
Executive's "base amount", as determined in accordance with said Section 280G;
and (ii) in no event shall the aggregate compensation to Executive under this
agreement or any other severance or employment contract exceed three times the
Executive's annual salary within the meaning of RB 27-a. The allocation of the
reduction required hereby among Termination Benefits provided by the preceding
paragraphs of this Section 3 shall be determined by the Executive.
4. NOTICE OF TERMINATION AFTER CHANGE IN CONTROL
(a) Any purported termination by the Bank or by Executive shall be
communicated by Notice of Termination to the other party hereto. For purposes
of this Agreement, a "Notice of Termination" shall mean a written notice which
shall indicate the specific termination provision in this Agreement relied upon
and shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of Executive's employment under the provision so
indicated.
(b) "Date of Termination" shall mean (A) if Executive's employment is
terminated for Disability, thirty (30) days after a Notice of Termination is
given (provided that he shall not have returned to the performance of his duties
on a full-time basis during such thirty (30) day period), and (B) if his
employment is terminated for any other reason, the date specified in the Notice
of Termination (which, in the case of a Termination for Cause, shall be
immediate). Except as set forth below in paragraph (c), in no event shall the
Date of Termination exceed 30 days from the date Notice of Termination is given.
(c) If, within thirty (30) days after any Notice of Termination is given,
the party receiving such Notice of Termination notifies the other party that a
dispute exists concerning the termination, except upon the occurrence of a
Change in Control and voluntary termination by the Executive in which case the
date of termination shall be the date specified in the Notice, the Date of
Termination shall be the date on which the dispute is finally determined, either
by mutual written agreement of the parties, by a binding arbitration award, or
by a final judgment, order or decree of a court of competent jurisdiction (the
time for appeal there from having expired and no appeal having been perfected)
and provided further that the Date of Termination shall be extended by a notice
of dispute only if such notice is given in good faith and the party giving such
notice pursues the resolution of such dispute with reasonable diligence.
Notwithstanding the pendency of any such dispute, the Bank will continue to pay
Executive his full compensation in effect when the notice giving rise to the
dispute was given (including, but not limited to, Base Salary) and continue him
as a participant in all compensation, benefit and insurance plans in which he
was participating when the notice of dispute was given, until the earlier of 120
days from the date of the Notice of Termination or the date upon which the
dispute is finally resolved in accordance with this Agreement. Amounts paid
under this Section are in addition to all other amounts due under this Agreement
and shall not be offset against or reduce any other amounts due under this
Agreement. Notwithstanding the foregoing, no compensation or benefits shall be
paid to the Executive in the event
<PAGE>
the Executive is Terminated for Cause. In the event that such Termination for
Cause is found to have been wrongful or such dispute is otherwise decided in the
Executive's favor, the Executive shall be entitled to receive all compensation
and benefits which accrued for up to a period of nine months after the
Termination for Cause.
5. SOURCE OF PAYMENTS
It is intended by the parties hereto that all payments provided in this
Agreement shall be paid in cash or check from the general funds of the Bank.
6. EFFECT ON PRIOR AGREEMENTS AND EXISTING BENEFIT PLANS
This Agreement contains the entire understanding between the parties hereto
and supersedes any prior agreement between the Bank and Executive, except that
this Agreement shall not affect or operate to reduce any benefit or compensation
inuring to Executive of a kind elsewhere provided. No provision of this
Agreement shall be interpreted to mean that Executive is subject to receiving
fewer benefits than those available to him without reference to this Agreement.
7. NO ATTACHMENT
(a) Except as required by law, no right to receive payments under this
Agreement shall be subject to anticipation, commutation, alienation, sale,
assignment, encumbrance, charge, pledge, or hypothecation, or to execution,
attachment, levy, or similar process or assignment by operation of law, and any
attempt, voluntary or involuntary, to affect any such action shall be null,
void, and of no effect.
(b) This Agreement shall be binding upon, and inure to the benefit of,
Executive, the Bank and their respective successors and assigns.
8. MODIFICATION AND WAIVER
(a) This Agreement may not be modified or amended except by an instrument
in writing signed by the parties hereto.
(b) No term or condition of this Agreement shall be deemed to have been
waived, nor shall there be any estoppel against the enforcement of any provision
of this Agreement, except by written instrument of the party charged with such
waiver or estoppel. No such written waiver shall be deemed a continuing waiver
unless specifically stated therein, and each such waiver shall operate only as
to the specific term or condition waived and shall not constitute a waiver of
such term or condition for the future or as to any act other than that
specifically waived.
9. REQUIRED PROVISIONS
(a) The Bank may terminate the Executive's employment at any time.
Executive shall not have the right to receive compensation or other benefits for
any period after Termination for Cause as defined in Section 2(c) hereinabove.
(b) If the Executive is suspended from office and/or temporarily
prohibited from participating in the conduct of the Bank's affairs by a notice
served under Section 8(e)(3) (12 USC 1818(e)(3)) or 8(g) (12 USC 1818(g)) of the
Federal Deposit Insurance Act, as amended by the Financial Institutions Reform,
<PAGE>
Recovery and Enforcement Act of 1989, the Bank's obligations under this contract
shall be suspended as of the date of service, unless stayed by appropriate
proceedings. If the charges in the notice are dismissed, the Bank may in its
discretion (i) pay the Executive all or part of the compensation withheld while
their contract obligations were suspended and (ii) reinstate (in whole or in
part) any of the obligations which were suspended.
(c) If the Executive is removed and/or permanently prohibited from
participating in the conduct of the Bank's affairs by an order issued under
Section 8(e) (12 USC (S)1818(e)) or 8(g) (12 USC (S)1818(g)) of the Federal
Deposit Insurance Act, as amended by the Financial Institutions Reform, Recovery
and Enforcement Act of 1989, all obligations of the Bank under this contract
shall terminate as of the effective date of the order, but vested rights of the
contracting parties shall not be affected.
(d) If the Bank is in default as defined in Section 3(x) (12 USC
1813(x)(1)) of the Federal Deposit Insurance Act, as amended by the Financial
Institutions Reform, Recovery and Enforcement Act of 1989, all obligations of
the Bank under this contract shall terminate as of the date of default, but this
paragraph shall not affect any vested rights of the contracting parties.
(e) All obligations of the Bank under this contract shall be terminated,
except to the extent determined that continuation of the contract is necessary
for the continued operation of the Bank, (i) by the Federal Deposit Insurance
Corporation, at the time the Resolution Trust Corporation or FDIC enters into an
agreement to provide assistance to or on behalf of the Bank under the authority
contained in Section 13(c) (12 USC (S)1823(c)) of the Federal Deposit Insurance
Act, as amended by the Financial Institutions Reform, Recovery and Enforcement
Act of 1982; or (ii) by the Office of Thrift Supervision ("OTS") at the time the
OTS or its District Director approves a supervisory merger to resolve problems
related to the operations of the Bank or when the Bank is determined by the OTS
or FDIC to be in an unsafe or unsound condition. Any rights of the parties that
have already vested, however, shall not be affected by such action.
10. SEVERABILITY
If, for any reason, any provision of this Agreement, or any part of any
provision, is held invalid, such invalidity shall not affect any other provision
of this Agreement or any part of such provision not held so invalid, and each
such other provision and part thereof shall to the full extent consistent with
law continue in full force and effect.
11. HEADINGS FOR REFERENCE ONLY
The headings of sections and paragraphs herein are included solely for
convenience of reference and shall not control the meaning or interpretation of
any of the provisions of this Agreement.
12. GOVERNING LAW
The validity, interpretation, performance, and enforcement of this
Agreement shall be governed by the laws of the State of Florida, unless
preempted by Federal law as now or hereafter in effect.
Any dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration, conducted before a panel
of three arbitrators sitting in a location selected by the employee within fifty
(50) miles from the location of the Bank, in accordance with the rules of the
American Arbitration Association then in effect. Judgment may be entered on the
arbitrator's award in
<PAGE>
any court having jurisdiction; provided, however, that subject to Section 3(c)
hereof, Executive shall be entitled to seek specific performance of his right to
be paid until the Date of Termination during the pendency of any dispute or
controversy arising under or in connection with this Agreement.
13. PAYMENT OF LEGAL FEES
All reasonable legal fees paid or incurred by Executive pursuant to any
dispute or question of interpretation relating to this Agreement shall be paid
or reimbursed by the Bank if Executive is successful on the merits pursuant to a
legal judgment, arbitration or settlement.
14. INDEMNIFICATION
The Bank shall provide the Executive (including his heirs, executors and
administrators) with coverage under a standard directors' and officers'
liability insurance policy at its expense, or in lieu thereof, shall indemnify
the Executive (and his heirs, executors and administrators) to the fullest
extent permitted under federal law and as provided in the Bank's Charter and
Bylaws against all expenses and liabilities reasonably incurred by him in
connection with or arising out of any action, suit or proceeding in which he may
be involved by reason of his having been a director or officer of the Bank
(whether or not he continues to be a director or officer at the time of
incurring such expenses or liabilities), such expenses and liabilities to
include, but not be limited to, judgments, court costs and attorneys' fees and
the cost of reasonable settlements.
15. SUCCESSOR TO THE BANK
The Bank shall require any successor or assignee, whether direct or
indirect, by purchase, merger, consolidation or otherwise, to all or
substantially all the business or assets of the Bank, expressly and
unconditionally to assume and agree to perform the Bank's obligations under this
Agreement, in the same manner and to the same extent that the Bank would be
required to perform if no such succession or assignment had taken place.
16. SIGNATURES
IN WITNESS WHEREOF, Fidelity Federal Savings Bank of Florida has caused
this Agreement to be executed by its duly authorized officer, and Executive has
signed this Agreement on the day and date first above written.
ATTEST: FIDELITY FEDERAL SAVINGS BANK OF FLORIDA
____________________ By: __________________________________________
Vince A. Elhilow, President
and Chief Executive Officer
WITNESS:
_____________________ By: __________________________________________
Richard D. Aldred, Executive
<PAGE>
EXHIBIT 10.3
FIDELITY FEDERAL SAVINGS BANK OF FLORIDA
SEVERANCE AGREEMENT
This AGREEMENT is made effective as of the 7th of January, 1994, by and
-------
between Fidelity Federal Savings Bank of Florida, a federally chartered stock
savings bank (the "Bank"), and Robert L. Fugate ("Executive"). Any reference to
"Company" herein shall mean Fidelity Bankshares, MHC or any successor thereto.
WHEREAS, the Bank recognizes the substantial contribution Executive has
made to the Bank and wishes to protect his position therewith for the period
provided in this Agreement; and
WHEREAS, Executive has been elected to, and has agreed to serve in the
position of Chief Financial Officer and Senior Vice President for the Bank, a
position of substantial responsibility;
NOW, THEREFORE, in consideration of the contribution and of Executive, and
upon the other terms and conditions hereinafter provided, the parties hereto
agree as follows:
1. TERM OF AGREEMENT
The term of this Agreement shall be deemed to have commenced as of the date
first above written and shall continue for a period of thirty six (36) full
calendar months thereafter. Commencing on the first anniversary date of this
Agreement and continuing at each anniversary date thereafter, the Board of
Directors of the Bank ("Board") may extend the Agreement for an additional year.
The Board will conduct a performance evaluation of the Executive for purposes of
determining whether to extend the Agreement, and the results thereof shall be
included in the minutes of the Board's meeting. If Executive is also a director
then he or she shall abstain from any and all voting with respect to the
extension of the term of such Executive's Agreement.
2. PAYMENTS TO EXECUTIVE UPON CHANGE IN CONTROL
(a) Upon the occurrence of a Change in Control of the Bank (as herein
defined) followed at any time during the term of this Agreement by the voluntary
or involuntary termination of Executive's employment, other than for Cause, as
defined in Section 2(c) hereof, the provisions of Section 3 shall apply. Upon
the occurrence of a Change in Control, Executive shall have the right to elect
to voluntarily terminate his employment at any time during the term of this
Agreement following any demotion, loss of title, office or significant
authority, reduction in his annual compensation or benefits, or relocation of
his principal place of employment by more than 30 miles from its location
immediately prior to the Change in Control.
(b) A "Change in Control" of the Bank shall mean:
(1) a reorganization, merger, merger conversion, consolidation or sale
of all or substantially all of the assets of the Bank or the Company or a
similar transaction occurs in which the Bank or the Company is not the resulting
entity;
(2) individuals who constitute the board of directors of the Bank or
the board of directors of the Company on the date hereof (the "Incumbent Board")
cease for any reason to constitute a majority thereof; provided that any person
becoming a director subsequent to the date hereof whose election was approved by
a vote of at least three-quarters of the directors comprising the Incumbent
Board, or whose nomination for election by the Company's stockholders was
approved by the same
<PAGE>
nominating committee serving under an Incumbent Board, shall be, for purposes of
this clause (ii), considered as though he were a member of the Incumbent Board;
or
(3) a change in control within the meaning of 12 C.F.R. (S) 574.4
occurs, as determined by the board of directors of the Bank or the Company;
provided, however, that a change in control shall not be deemed to occur under
paragraphs (1) or (3) of this Section 2 if the transaction(s) constituting a
change in control is approved by a majority of the board of directors of the
Bank or the Company, as the case may be.
(4) In the event that the Company converts from the mutual form of
organization to the stock form of organization on a stand-alone basis at any
time subsequent to the effective date of this Agreement ("Stock Holding
Company"), a "change in control" of the Bank or the Stock Holding Company for
purposes of this Agreement shall mean an event of a nature that : (I) would be
required to be reported in response to Item 1 of the current report on Form 8-K,
as in effect on the date hereof; pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 (the "Exchange Act"); or (II) results in a
Change in Control of the Bank or the Stock Holding Company within the meaning of
the Home Owners' Loan Act of 1933 and the Rules and Regulations promulgated by
the Office of Thrift Supervision (or its predecessor agency), as in effect on
the date hereof; or (III) without limitation, such a change in control shall be
deemed to have occurred at such time as (a) any "person" (as the term is used in
Section 13(d) and 14(d) of the Exchange Act) other than the Stock Holding
Company is or becomes a "beneficial owner" (as defined in Rule 13-d under the
Exchange Act) directly or indirectly, of securities of the Bank representing 25%
or more of the Bank's outstanding securities ordinarily having the right to vote
at the election of directors except for any securities of the Bank purchased by
the Stock Holding Company in connection with the Reorganization and any
securities purchased by the Bank's employee stock ownership plan and trust shall
not be counted in determining whether such plan is the beneficial owner of more
than 25% of the Bank's securities; or (b) individuals who constitute the
Incumbent Board cease for any reason to constitute at least a majority thereof;
provided that any person becoming a director subsequent to the date hereof whose
election was approved by a vote of at least three-quarters of the directors
comprising the Incumbent Board, or whose nomination for election by the Stock
Holding Company's stockholders was approved by the same Nominating Committee
serving under an Incumbent Board, shall be, for purposes of this clause (a),
considered as though he were a member of the Incumbent Board; or (c) a
reorganization, merger, consolidation, sale of all or substantially all the
assets of the Bank or the Stock Holding Company or similar transaction occurs in
which the Bank or the Stock Holding Company is not the resulting entity and to
which the Incumbent Board does not consent; (d) a proxy statement soliciting
proxies from stockholders of the Bank, by someone other than the current
management of the Bank, seeking stockholder approval of a plan of
reorganization, merger or consolidation of the Stock Holding Company of the Bank
or similar transaction with one or more corporations as a result of which the
outstanding shares of the class of securities then subject to the plan or
transaction are exchanged or converted into cash or property or securities not
issued by the Bank or the Stock Holding Company; or (e) a tender offer is made
for 25% or more of the voting securities of the Bank and the shareholders owning
beneficially or of record 25% or more of the outstanding securities of the Bank
have tendered or offered to sell their shares pursuant to such tender offer and
such tendered shares have been accepted by the tender offeror.
Notwithstanding, the foregoing, a "Change in Control" of the Bank or the
Company shall not be deemed to have occurred if the Company ceases to own at
least 51% of all outstanding shares of stock of the Bank in connection with a
conversion of the Holding Company from mutual to stock form.
<PAGE>
(c) Executive shall not have the right to receive termination benefits
pursuant to Section 3 hereof upon Termination for Cause. The term "Termination
for Cause" shall mean termination because of the Executive's intentional failure
to perform stated duties, personal dishonesty, incompetence, willful misconduct,
any breach of fiduciary duty involving personal profit, willful violation of any
law, rule, regulation (other than traffic violations or similar offenses) or
final cease and desist order, or any material breach of any material provision
of this Agreement. In determining incompetence, the acts or omissions shall be
measured against standards generally prevailing in the savings institution
industry. Notwithstanding the foregoing, Executive shall not be deemed to have
been terminated for Cause unless and until there shall have been delivered to
him a copy of a resolution duly adopted by the affirmative vote of not less than
three-fourths of the members of the Board at a meeting of the Board called and
held for that purpose (after reasonable notice to Executive and an opportunity
for him, together with counsel, to be heard before the Board), finding that in
the good faith opinion of the Board, Executive was guilty of conduct justifying
Termination for Cause and specifying the particulars thereof in detail. The
Executive shall not have the right to receive compensation or other benefits for
any period after Termination for Cause.
3. TERMINATION
(a) Upon the occurrence of a Change in Control, followed at any time during
the term of this Agreement by the voluntary or involuntary termination of the
Executive's employment other than for Termination for Cause, the Bank shall be
obligated to pay the Executive, or in the event of his subsequent death, his
beneficiary or beneficiaries, or his estate, as the case may be, as severance
pay, a sum equal to three times the average of the three preceding years' annual
base salary, including bonuses and any other cash compensation paid or accrued
by the executive during such years, and the amount of any benefits received
pursuant to any employee benefit plans on behalf of the Executive maintained by
the Bank during such years, excluding benefits continued pursuant to (b) below.
If the Executive has been employed by the Bank for less than one year, then the
severance pay shall be a sum equal to thirty-six times the average monthly
salary, including bonuses and any other cash compensation paid or accrued by the
Executive during such period, and the amount of any benefits received pursuant
to any employee benefit plans on behalf of the Executive maintained by the Bank
during such period, excluding benefits continued pursuant to (b) below, for the
period over which the Executive has been employed by the Bank. At the election
of the Executive, or his estate, as the case may be, which election is to be
made within thirty (30) days of the Date of Termination (as defined in Section
4(b)), such payment may be made in a lump sum or paid in equal monthly
installments during the thirty-six (36) months following the Executive's
termination. In the event that no election is made, payment to the Executive
will be made on a monthly basis during the remaining term of this Agreement.
(b) Upon the occurrence of a Change in Control of the Bank followed at any
time during the term of this Agreement by the Executive's voluntary or
involuntary termination of employment, other than for Termination for Cause, the
Bank shall cause to be continued life, medical, dental and disability coverage
substantially identical to the coverage maintained by the Bank for the Executive
prior to his severance. Such coverage and payments shall cease upon expiration
of thirty-six (36) months.
(c) Upon the occurrence of a Change in Control, the Executive will have
such rights as specified in the Bank's 1993 Incentive Stock Option Plan or any
other employee benefit plan with respect to options and such other rights as may
have been granted to the Executive under such plans.
(d) Upon a Change in Control, the Executive will be entitled to the
benefits under the Bank's Recognition and Retention Plans or any other such
plan.
<PAGE>
(e) In the event that the Executive is receiving monthly payments pursuant
to Section 3(a) hereof, on an annual basis, thereafter, the Executive shall
elect whether the balance of the amount payable under the Agreement at that time
shall be paid in a lump sum or on a pro rata basis. Such election shall be
irrevocable for the year for which such election is made.
(f) Notwithstanding the preceding paragraphs of this Section 3: (i) in no
event shall the aggregate payments or benefits to be made or afforded to
Executive under said paragraphs (the "Termination Benefits") constitute an
"excess parachute payment" under Section 280G of the Code or any successor
thereto, and in order to avoid such a result Termination Benefits will be
reduced, if necessary, to an amount (the "Non-Triggering Amount"), the value of
which is one dollar ($1.00) less than an amount equal to three (3) times
Executive's "base amount", as determined in accordance with said Section 280G;
and (ii) in no event shall the aggregate compensation to Executive under this
agreement or any other severance or employment contract exceed three times the
Executive's annual salary within the meaning of RB 27-a. The allocation of the
reduction required hereby among Termination Benefits provided by the preceding
paragraphs of this Section 3 shall be determined by the Executive.
4. NOTICE OF TERMINATION AFTER CHANGE IN CONTROL
(a) Any purported termination by the Bank or by Executive shall be
communicated by Notice of Termination to the other party hereto. For purposes
of this Agreement, a "Notice of Termination" shall mean a written notice which
shall indicate the specific termination provision in this Agreement relied upon
and shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of Executive's employment under the provision so
indicated.
(b) "Date of Termination" shall mean (A) if Executive's employment is
terminated for Disability, thirty (30) days after a Notice of Termination is
given (provided that he shall not have returned to the performance of his duties
on a full-time basis during such thirty (30) day period), and (B) if his
employment is terminated for any other reason, the date specified in the Notice
of Termination (which, in the case of a Termination for Cause, shall be
immediate). Except as set forth below in paragraph (c), in no event shall the
Date of Termination exceed 30 days from the date Notice of Termination is given.
(c) If, within thirty (30) days after any Notice of Termination is given,
the party receiving such Notice of Termination notifies the other party that a
dispute exists concerning the termination, except upon the occurrence of a
Change in Control and voluntary termination by the Executive in which case the
date of termination shall be the date specified in the Notice, the Date of
Termination shall be the date on which the dispute is finally determined, either
by mutual written agreement of the parties, by a binding arbitration award, or
by a final judgment, order or decree of a court of competent jurisdiction (the
time for appeal there from having expired and no appeal having been perfected)
and provided further that the Date of Termination shall be extended by a notice
of dispute only if such notice is given in good faith and the party giving such
notice pursues the resolution of such dispute with reasonable diligence.
Notwithstanding the pendency of any such dispute, the Bank will continue to pay
Executive his full compensation in effect when the notice giving rise to the
dispute was given (including, but not limited to, Base Salary) and continue him
as a participant in all compensation, benefit and insurance plans in which he
was participating when the notice of dispute was given, until the earlier of 120
days from the date of the Notice of Termination or the date upon which the
dispute is finally resolved in accordance with this Agreement. Amounts paid
under this Section are in addition to all other amounts due under this Agreement
and shall not be offset against or reduce any other amounts due under this
Agreement. Notwithstanding the foregoing, no compensation or benefits shall be
paid to the Executive in the event
<PAGE>
the Executive is Terminated for Cause. In the event that such Termination for
Cause is found to have been wrongful or such dispute is otherwise decided in the
Executive's favor, the Executive shall be entitled to receive all compensation
and benefits which accrued for up to a period of nine months after the
Termination for Cause.
5. SOURCE OF PAYMENTS
It is intended by the parties hereto that all payments provided in this
Agreement shall be paid in cash or check from the general funds of the Bank.
6. EFFECT ON PRIOR AGREEMENTS AND EXISTING BENEFIT PLANS
This Agreement contains the entire understanding between the parties hereto
and supersedes any prior agreement between the Bank and Executive, except that
this Agreement shall not affect or operate to reduce any benefit or compensation
inuring to Executive of a kind elsewhere provided. No provision of this
Agreement shall be interpreted to mean that Executive is subject to receiving
fewer benefits than those available to him without reference to this Agreement.
7. NO ATTACHMENT
(a) Except as required by law, no right to receive payments under this
Agreement shall be subject to anticipation, commutation, alienation, sale,
assignment, encumbrance, charge, pledge, or hypothecation, or to execution,
attachment, levy, or similar process or assignment by operation of law, and any
attempt, voluntary or involuntary, to affect any such action shall be null,
void, and of no effect.
(b) This Agreement shall be binding upon, and inure to the benefit of,
Executive, the Bank and their respective successors and assigns.
8. MODIFICATION AND WAIVER
(a) This Agreement may not be modified or amended except by an instrument
in writing signed by the parties hereto.
(b) No term or condition of this Agreement shall be deemed to have been
waived, nor shall there be any estoppel against the enforcement of any provision
of this Agreement, except by written instrument of the party charged with such
waiver or estoppel. No such written waiver shall be deemed a continuing waiver
unless specifically stated therein, and each such waiver shall operate only as
to the specific term or condition waived and shall not constitute a waiver of
such term or condition for the future or as to any act other than that
specifically waived.
9. REQUIRED PROVISIONS
(a) The Bank may terminate the Executive's employment at any time.
Executive shall not have the right to receive compensation or other benefits for
any period after Termination for Cause as defined in Section 2(c) hereinabove.
(b) If the Executive is suspended from office and/or temporarily prohibited
from participating in the conduct of the Bank's affairs by a notice served under
Section 8(e)(3) (12 USC 1818(e)(3)) or 8(g) (12 USC 1818(g)) of the Federal
Deposit Insurance Act, as amended by the Financial Institutions Reform,
<PAGE>
Recovery and Enforcement Act of 1989, the Bank's obligations under this contract
shall be suspended as of the date of service, unless stayed by appropriate
proceedings. If the charges in the notice are dismissed, the Bank may in its
discretion (i) pay the Executive all or part of the compensation withheld while
their contract obligations were suspended and (ii) reinstate (in whole or in
part) any of the obligations which were suspended.
(c) If the Executive is removed and/or permanently prohibited from
participating in the conduct of the Bank's affairs by an order issued under
Section 8(e) (12 USC (S)1818(e)) or 8(g) (12 USC (S)1818(g)) of the Federal
Deposit Insurance Act, as amended by the Financial Institutions Reform, Recovery
and Enforcement Act of 1989, all obligations of the Bank under this contract
shall terminate as of the effective date of the order, but vested rights of the
contracting parties shall not be affected.
(d) If the Bank is in default as defined in Section 3(x) (12 USC
1813(x)(1)) of the Federal Deposit Insurance Act, as amended by the Financial
Institutions Reform, Recovery and Enforcement Act of 1989, all obligations of
the Bank under this contract shall terminate as of the date of default, but this
paragraph shall not affect any vested rights of the contracting parties.
(e) All obligations of the Bank under this contract shall be terminated,
except to the extent determined that continuation of the contract is necessary
for the continued operation of the Bank, (i) by the Federal Deposit Insurance
Corporation, at the time the Resolution Trust Corporation or FDIC enters into an
agreement to provide assistance to or on behalf of the Bank under the authority
contained in Section 13(c) (12 USC (S)1823(c)) of the Federal Deposit Insurance
Act, as amended by the Financial Institutions Reform, Recovery and Enforcement
Act of 1982; or (ii) by the Office of Thrift Supervision ("OTS") at the time the
OTS or its District Director approves a supervisory merger to resolve problems
related to the operations of the Bank or when the Bank is determined by the OTS
or FDIC to be in an unsafe or unsound condition. Any rights of the parties that
have already vested, however, shall not be affected by such action.
10. SEVERABILITY
If, for any reason, any provision of this Agreement, or any part of any
provision, is held invalid, such invalidity shall not affect any other provision
of this Agreement or any part of such provision not held so invalid, and each
such other provision and part thereof shall to the full extent consistent with
law continue in full force and effect.
11. HEADINGS FOR REFERENCE ONLY
The headings of sections and paragraphs herein are included solely for
convenience of reference and shall not control the meaning or interpretation of
any of the provisions of this Agreement.
12. GOVERNING LAW
The validity, interpretation, performance, and enforcement of this
Agreement shall be governed by the laws of the State of Florida, unless
preempted by Federal law as now or hereafter in effect.
Any dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration, conducted before a panel
of three arbitrators sitting in a location selected by the employee within fifty
(50) miles from the location of the Bank, in accordance with the rules of the
American Arbitration Association then in effect. Judgment may be entered on the
arbitrator's award in
<PAGE>
any court having jurisdiction; provided, however, that subject to Section 3(c)
hereof, Executive shall be entitled to seek specific performance of his right to
be paid until the Date of Termination during the pendency of any dispute or
controversy arising under or in connection with this Agreement.
13. PAYMENT OF LEGAL FEES
All reasonable legal fees paid or incurred by Executive pursuant to any
dispute or question of interpretation relating to this Agreement shall be paid
or reimbursed by the Bank if Executive is successful on the merits pursuant to a
legal judgment, arbitration or settlement.
14. INDEMNIFICATION
The Bank shall provide the Executive (including his heirs, executors and
administrators) with coverage under a standard directors' and officers'
liability insurance policy at its expense, or in lieu thereof, shall indemnify
the Executive (and his heirs, executors and administrators) to the fullest
extent permitted under federal law and as provided in the Bank's Charter and
Bylaws against all expenses and liabilities reasonably incurred by him in
connection with or arising out of any action, suit or proceeding in which he may
be involved by reason of his having been a director or officer of the Bank
(whether or not he continues to be a director or officer at the time of
incurring such expenses or liabilities), such expenses and liabilities to
include, but not be limited to, judgments, court costs and attorneys' fees and
the cost of reasonable settlements.
15. SUCCESSOR TO THE BANK
The Bank shall require any successor or assignee, whether direct or
indirect, by purchase, merger, consolidation or otherwise, to all or
substantially all the business or assets of the Bank, expressly and
unconditionally to assume and agree to perform the Bank's obligations under this
Agreement, in the same manner and to the same extent that the Bank would be
required to perform if no such succession or assignment had taken place.
16. SIGNATURES
IN WITNESS WHEREOF, Fidelity Federal Savings Bank of Florida has caused
this Agreement to be executed by its duly authorized officer, and Executive has
signed this Agreement on the day and date first above written.
ATTEST: FIDELITY FEDERAL SAVINGS BANK OF FLORIDA
_____________________ By: ______________________________________
Vince A. Elhilow, President
and Chief Executive Officer
WITNESS:
_____________________ By: ______________________________________
Richard D. Aldred, Executive
<PAGE>
EXHIBIT 10.4
FIDELITY FEDERAL SAVINGS BANK OF FLORIDA
SEVERANCE AGREEMENT
This AGREEMENT is made effective as of the 7th of January, 1994, by and
-------
between Fidelity Federal Savings Bank of Florida, a federally chartered stock
savings bank (the "Bank"), and Joseph C. Bova ("Executive"). Any reference to
"Company" herein shall mean Fidelity Bankshares, MHC or any successor thereto.
WHEREAS, the Bank recognizes the substantial contribution Executive has
made to the Bank and wishes to protect his position therewith for the period
provided in this Agreement; and
WHEREAS, Executive has been elected to, and has agreed to serve in the
position of Chief Financial Officer and Senior Vice President for the Bank, a
position of substantial responsibility;
NOW, THEREFORE, in consideration of the contribution and of Executive, and
upon the other terms and conditions hereinafter provided, the parties hereto
agree as follows:
1. TERM OF AGREEMENT
The term of this Agreement shall be deemed to have commenced as of the date
first above written and shall continue for a period of thirty six (36) full
calendar months thereafter. Commencing on the first anniversary date of this
Agreement and continuing at each anniversary date thereafter, the Board of
Directors of the Bank ("Board") may extend the Agreement for an additional year.
The Board will conduct a performance evaluation of the Executive for purposes of
determining whether to extend the Agreement, and the results thereof shall be
included in the minutes of the Board's meeting. If Executive is also a director
then he or she shall abstain from any and all voting with respect to the
extension of the term of such Executive's Agreement.
2. PAYMENTS TO EXECUTIVE UPON CHANGE IN CONTROL
(a) Upon the occurrence of a Change in Control of the Bank (as herein
defined) followed at any time during the term of this Agreement by the voluntary
or involuntary termination of Executive's employment, other than for Cause, as
defined in Section 2(c) hereof, the provisions of Section 3 shall apply. Upon
the occurrence of a Change in Control, Executive shall have the right to elect
to voluntarily terminate his employment at any time during the term of this
Agreement following any demotion, loss of title, office or significant
authority, reduction in his annual compensation or benefits, or relocation of
his principal place of employment by more than 30 miles from its location
immediately prior to the Change in Control.
(b) A "Change in Control" of the Bank shall mean:
(1) a reorganization, merger, merger conversion, consolidation or
sale of all or substantially all of the assets of the Bank or the Company or a
similar transaction occurs in which the Bank or the Company is not the resulting
entity;
(2) individuals who constitute the board of directors of the Bank or
the board of directors of the Company on the date hereof (the "Incumbent Board")
cease for any reason to constitute a majority thereof; provided that any person
becoming a director subsequent to the date hereof whose election was approved by
a vote of at least three-quarters of the directors comprising the Incumbent
Board, or whose nomination for election by the Company's stockholders was
approved by the same
<PAGE>
nominating committee serving under an Incumbent Board, shall be, for purposes of
this clause (ii), considered as though he were a member of the Incumbent Board;
or
(3) a change in control within the meaning of 12 C.F.R. (S) 574.4
occurs, as determined by the board of directors of the Bank or the Company;
provided, however, that a change in control shall not be deemed to occur under
paragraphs (1) or (3) of this Section 2 if the transaction(s) constituting a
change in control is approved by a majority of the board of directors of the
Bank or the Company, as the case may be.
(4) In the event that the Company converts from the mutual form of
organization to the stock form of organization on a stand-alone basis at any
time subsequent to the effective date of this Agreement ("Stock Holding
Company"), a "change in control" of the Bank or the Stock Holding Company for
purposes of this Agreement shall mean an event of a nature that : (I) would be
required to be reported in response to Item 1 of the current report on Form 8-K,
as in effect on the date hereof; pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 (the "Exchange Act"); or (II) results in a
Change in Control of the Bank or the Stock Holding Company within the meaning of
the Home Owners' Loan Act of 1933 and the Rules and Regulations promulgated by
the Office of Thrift Supervision (or its predecessor agency), as in effect on
the date hereof; or (III) without limitation, such a change in control shall be
deemed to have occurred at such time as (a) any "person" (as the term is used in
Section 13(d) and 14(d) of the Exchange Act) other than the Stock Holding
Company is or becomes a "beneficial owner" (as defined in Rule 13-d under the
Exchange Act) directly or indirectly, of securities of the Bank representing 25%
or more of the Bank's outstanding securities ordinarily having the right to vote
at the election of directors except for any securities of the Bank purchased by
the Stock Holding Company in connection with the Reorganization and any
securities purchased by the Bank's employee stock ownership plan and trust shall
not be counted in determining whether such plan is the beneficial owner of more
than 25% of the Bank's securities; or (b) individuals who constitute the
Incumbent Board cease for any reason to constitute at least a majority thereof;
provided that any person becoming a director subsequent to the date hereof whose
election was approved by a vote of at least three-quarters of the directors
comprising the Incumbent Board, or whose nomination for election by the Stock
Holding Company's stockholders was approved by the same Nominating Committee
serving under an Incumbent Board, shall be, for purposes of this clause (a),
considered as though he were a member of the Incumbent Board; or (c) a
reorganization, merger, consolidation, sale of all or substantially all the
assets of the Bank or the Stock Holding Company or similar transaction occurs in
which the Bank or the Stock Holding Company is not the resulting entity and to
which the Incumbent Board does not consent; (d) a proxy statement soliciting
proxies from stockholders of the Bank, by someone other than the current
management of the Bank, seeking stockholder approval of a plan of
reorganization, merger or consolidation of the Stock Holding Company of the Bank
or similar transaction with one or more corporations as a result of which the
outstanding shares of the class of securities then subject to the plan or
transaction are exchanged or converted into cash or property or securities not
issued by the Bank or the Stock Holding Company; or (e) a tender offer is made
for 25% or more of the voting securities of the Bank and the shareholders owning
beneficially or of record 25% or more of the outstanding securities of the Bank
have tendered or offered to sell their shares pursuant to such tender offer and
such tendered shares have been accepted by the tender offeror.
Notwithstanding, the foregoing, a "Change in Control" of the Bank or the
Company shall not be deemed to have occurred if the Company ceases to own at
least 51% of all outstanding shares of stock of the Bank in connection with a
conversion of the Holding Company from mutual to stock form.
<PAGE>
(c) Executive shall not have the right to receive termination benefits
pursuant to Section 3 hereof upon Termination for Cause. The term "Termination
for Cause" shall mean termination because of the Executive's intentional failure
to perform stated duties, personal dishonesty, incompetence, willful misconduct,
any breach of fiduciary duty involving personal profit, willful violation of any
law, rule, regulation (other than traffic violations or similar offenses) or
final cease and desist order, or any material breach of any material provision
of this Agreement. In determining incompetence, the acts or omissions shall be
measured against standards generally prevailing in the savings institution
industry. Notwithstanding the foregoing, Executive shall not be deemed to have
been terminated for Cause unless and until there shall have been delivered to
him a copy of a resolution duly adopted by the affirmative vote of not less than
three-fourths of the members of the Board at a meeting of the Board called and
held for that purpose (after reasonable notice to Executive and an opportunity
for him, together with counsel, to be heard before the Board), finding that in
the good faith opinion of the Board, Executive was guilty of conduct justifying
Termination for Cause and specifying the particulars thereof in detail. The
Executive shall not have the right to receive compensation or other benefits for
any period after Termination for Cause.
3. TERMINATION
(a) Upon the occurrence of a Change in Control, followed at any time
during the term of this Agreement by the voluntary or involuntary termination of
the Executive's employment other than for Termination for Cause, the Bank shall
be obligated to pay the Executive, or in the event of his subsequent death, his
beneficiary or beneficiaries, or his estate, as the case may be, as severance
pay, a sum equal to three times the average of the three preceding years' annual
base salary, including bonuses and any other cash compensation paid or accrued
by the executive during such years, and the amount of any benefits received
pursuant to any employee benefit plans on behalf of the Executive maintained by
the Bank during such years, excluding benefits continued pursuant to (b) below.
If the Executive has been employed by the Bank for less than one year, then the
severance pay shall be a sum equal to thirty-six times the average monthly
salary, including bonuses and any other cash compensation paid or accrued by the
Executive during such period, and the amount of any benefits received pursuant
to any employee benefit plans on behalf of the Executive maintained by the Bank
during such period, excluding benefits continued pursuant to (b) below, for the
period over which the Executive has been employed by the Bank. At the election
of the Executive, or his estate, as the case may be, which election is to be
made within thirty (30) days of the Date of Termination (as defined in Section
4(b)), such payment may be made in a lump sum or paid in equal monthly
installments during the thirty-six (36) months following the Executive's
termination. In the event that no election is made, payment to the Executive
will be made on a monthly basis during the remaining term of this Agreement.
(b) Upon the occurrence of a Change in Control of the Bank followed at any
time during the term of this Agreement by the Executive's voluntary or
involuntary termination of employment, other than for Termination for Cause, the
Bank shall cause to be continued life, medical, dental and disability coverage
substantially identical to the coverage maintained by the Bank for the Executive
prior to his severance. Such coverage and payments shall cease upon expiration
of thirty-six (36) months.
(c) Upon the occurrence of a Change in Control, the Executive will have
such rights as specified in the Bank's 1993 Incentive Stock Option Plan or any
other employee benefit plan with respect to options and such other rights as may
have been granted to the Executive under such plans.
(d) Upon a Change in Control, the Executive will be entitled to the
benefits under the Bank's Recognition and Retention Plans or any other such
plan.
<PAGE>
(e) In the event that the Executive is receiving monthly payments pursuant
to Section 3(a) hereof, on an annual basis, thereafter, the Executive shall
elect whether the balance of the amount payable under the Agreement at that time
shall be paid in a lump sum or on a pro rata basis. Such election shall be
irrevocable for the year for which such election is made.
(f) Notwithstanding the preceding paragraphs of this Section 3: (i) in no
event shall the aggregate payments or benefits to be made or afforded to
Executive under said paragraphs (the "Termination Benefits") constitute an
"excess parachute payment" under Section 280G of the Code or any successor
thereto, and in order to avoid such a result Termination Benefits will be
reduced, if necessary, to an amount (the "Non-Triggering Amount"), the value of
which is one dollar ($1.00) less than an amount equal to three (3) times
Executive's "base amount", as determined in accordance with said Section 280G;
and (ii) in no event shall the aggregate compensation to Executive under this
agreement or any other severance or employment contract exceed three times the
Executive's annual salary within the meaning of RB 27-a. The allocation of the
reduction required hereby among Termination Benefits provided by the preceding
paragraphs of this Section 3 shall be determined by the Executive.
4. NOTICE OF TERMINATION AFTER CHANGE IN CONTROL
(a) Any purported termination by the Bank or by Executive shall be
communicated by Notice of Termination to the other party hereto. For purposes
of this Agreement, a "Notice of Termination" shall mean a written notice which
shall indicate the specific termination provision in this Agreement relied upon
and shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of Executive's employment under the provision so
indicated.
(b) "Date of Termination" shall mean (A) if Executive's employment is
terminated for Disability, thirty (30) days after a Notice of Termination is
given (provided that he shall not have returned to the performance of his duties
on a full-time basis during such thirty (30) day period), and (B) if his
employment is terminated for any other reason, the date specified in the Notice
of Termination (which, in the case of a Termination for Cause, shall be
immediate). Except as set forth below in paragraph (c), in no event shall the
Date of Termination exceed 30 days from the date Notice of Termination is given.
(c) If, within thirty (30) days after any Notice of Termination is given,
the party receiving such Notice of Termination notifies the other party that a
dispute exists concerning the termination, except upon the occurrence of a
Change in Control and voluntary termination by the Executive in which case the
date of termination shall be the date specified in the Notice, the Date of
Termination shall be the date on which the dispute is finally determined, either
by mutual written agreement of the parties, by a binding arbitration award, or
by a final judgment, order or decree of a court of competent jurisdiction (the
time for appeal there from having expired and no appeal having been perfected)
and provided further that the Date of Termination shall be extended by a notice
of dispute only if such notice is given in good faith and the party giving such
notice pursues the resolution of such dispute with reasonable diligence.
Notwithstanding the pendency of any such dispute, the Bank will continue to pay
Executive his full compensation in effect when the notice giving rise to the
dispute was given (including, but not limited to, Base Salary) and continue him
as a participant in all compensation, benefit and insurance plans in which he
was participating when the notice of dispute was given, until the earlier of 120
days from the date of the Notice of Termination or the date upon which the
dispute is finally resolved in accordance with this Agreement. Amounts paid
under this Section are in addition to all other amounts due under this Agreement
and shall not be offset against or reduce any other amounts due under this
Agreement. Notwithstanding the foregoing, no compensation or benefits shall be
paid to the Executive in the event
<PAGE>
the Executive is Terminated for Cause. In the event that such Termination for
Cause is found to have been wrongful or such dispute is otherwise decided in the
Executive's favor, the Executive shall be entitled to receive all compensation
and benefits which accrued for up to a period of nine months after the
Termination for Cause.
5. SOURCE OF PAYMENTS
It is intended by the parties hereto that all payments provided in this
Agreement shall be paid in cash or check from the general funds of the Bank.
6. EFFECT ON PRIOR AGREEMENTS AND EXISTING BENEFIT PLANS
This Agreement contains the entire understanding between the parties hereto
and supersedes any prior agreement between the Bank and Executive, except that
this Agreement shall not affect or operate to reduce any benefit or compensation
inuring to Executive of a kind elsewhere provided. No provision of this
Agreement shall be interpreted to mean that Executive is subject to receiving
fewer benefits than those available to him without reference to this Agreement.
7. NO ATTACHMENT
(a) Except as required by law, no right to receive payments under this
Agreement shall be subject to anticipation, commutation, alienation, sale,
assignment, encumbrance, charge, pledge, or hypothecation, or to execution,
attachment, levy, or similar process or assignment by operation of law, and any
attempt, voluntary or involuntary, to affect any such action shall be null,
void, and of no effect.
(b) This Agreement shall be binding upon, and inure to the benefit of,
Executive, the Bank and their respective successors and assigns.
8. MODIFICATION AND WAIVER
(a) This Agreement may not be modified or amended except by an instrument
in writing signed by the parties hereto.
(b) No term or condition of this Agreement shall be deemed to have been
waived, nor shall there be any estoppel against the enforcement of any provision
of this Agreement, except by written instrument of the party charged with such
waiver or estoppel. No such written waiver shall be deemed a continuing waiver
unless specifically stated therein, and each such waiver shall operate only as
to the specific term or condition waived and shall not constitute a waiver of
such term or condition for the future or as to any act other than that
specifically waived.
9. REQUIRED PROVISIONS
(a) The Bank may terminate the Executive's employment at any time.
Executive shall not have the right to receive compensation or other benefits for
any period after Termination for Cause as defined in Section 2(c) hereinabove.
(b) If the Executive is suspended from office and/or temporarily
prohibited from participating in the conduct of the Bank's affairs by a notice
served under Section 8(e)(3) (12 USC 1818(e)(3)) or 8(g) (12 USC 1818(g)) of the
Federal Deposit Insurance Act, as amended by the Financial Institutions Reform,
<PAGE>
Recovery and Enforcement Act of 1989, the Bank's obligations under this contract
shall be suspended as of the date of service, unless stayed by appropriate
proceedings. If the charges in the notice are dismissed, the Bank may in its
discretion (i) pay the Executive all or part of the compensation withheld while
their contract obligations were suspended and (ii) reinstate (in whole or in
part) any of the obligations which were suspended.
(c) If the Executive is removed and/or permanently prohibited from
participating in the conduct of the Bank's affairs by an order issued under
Section 8(e) (12 USC (S)1818(e)) or 8(g) (12 USC (S)1818(g)) of the Federal
Deposit Insurance Act, as amended by the Financial Institutions Reform, Recovery
and Enforcement Act of 1989, all obligations of the Bank under this contract
shall terminate as of the effective date of the order, but vested rights of the
contracting parties shall not be affected.
(d) If the Bank is in default as defined in Section 3(x) (12 USC
1813(x)(1)) of the Federal Deposit Insurance Act, as amended by the Financial
Institutions Reform, Recovery and Enforcement Act of 1989, all obligations of
the Bank under this contract shall terminate as of the date of default, but this
paragraph shall not affect any vested rights of the contracting parties.
(e) All obligations of the Bank under this contract shall be terminated,
except to the extent determined that continuation of the contract is necessary
for the continued operation of the Bank, (i) by the Federal Deposit Insurance
Corporation, at the time the Resolution Trust Corporation or FDIC enters into an
agreement to provide assistance to or on behalf of the Bank under the authority
contained in Section 13(c) (12 USC (S)1823(c)) of the Federal Deposit Insurance
Act, as amended by the Financial Institutions Reform, Recovery and Enforcement
Act of 1982; or (ii) by the Office of Thrift Supervision ("OTS") at the time the
OTS or its District Director approves a supervisory merger to resolve problems
related to the operations of the Bank or when the Bank is determined by the OTS
or FDIC to be in an unsafe or unsound condition. Any rights of the parties that
have already vested, however, shall not be affected by such action.
10. SEVERABILITY
If, for any reason, any provision of this Agreement, or any part of any
provision, is held invalid, such invalidity shall not affect any other provision
of this Agreement or any part of such provision not held so invalid, and each
such other provision and part thereof shall to the full extent consistent with
law continue in full force and effect.
11. HEADINGS FOR REFERENCE ONLY
The headings of sections and paragraphs herein are included solely for
convenience of reference and shall not control the meaning or interpretation of
any of the provisions of this Agreement.
12. GOVERNING LAW
The validity, interpretation, performance, and enforcement of this
Agreement shall be governed by the laws of the State of Florida, unless
preempted by Federal law as now or hereafter in effect.
Any dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration, conducted before a panel
of three arbitrators sitting in a location selected by the employee within fifty
(50) miles from the location of the Bank, in accordance with the rules of the
American Arbitration Association then in effect. Judgment may be entered on the
arbitrator's award in
<PAGE>
any court having jurisdiction; provided, however, that subject to Section 3(c)
hereof, Executive shall be entitled to seek specific performance of his right to
be paid until the Date of Termination during the pendency of any dispute or
controversy arising under or in connection with this Agreement.
13. PAYMENT OF LEGAL FEES
All reasonable legal fees paid or incurred by Executive pursuant to any
dispute or question of interpretation relating to this Agreement shall be paid
or reimbursed by the Bank if Executive is successful on the merits pursuant to a
legal judgment, arbitration or settlement.
14. INDEMNIFICATION
The Bank shall provide the Executive (including his heirs, executors and
administrators) with coverage under a standard directors' and officers'
liability insurance policy at its expense, or in lieu thereof, shall indemnify
the Executive (and his heirs, executors and administrators) to the fullest
extent permitted under federal law and as provided in the Bank's Charter and
Bylaws against all expenses and liabilities reasonably incurred by him in
connection with or arising out of any action, suit or proceeding in which he may
be involved by reason of his having been a director or officer of the Bank
(whether or not he continues to be a director or officer at the time of
incurring such expenses or liabilities), such expenses and liabilities to
include, but not be limited to, judgments, court costs and attorneys' fees and
the cost of reasonable settlements.
15. SUCCESSOR TO THE BANK
The Bank shall require any successor or assignee, whether direct or
indirect, by purchase, merger, consolidation or otherwise, to all or
substantially all the business or assets of the Bank, expressly and
unconditionally to assume and agree to perform the Bank's obligations under this
Agreement, in the same manner and to the same extent that the Bank would be
required to perform if no such succession or assignment had taken place.
16. SIGNATURES
IN WITNESS WHEREOF, Fidelity Federal Savings Bank of Florida has caused
this Agreement to be executed by its duly authorized officer, and Executive has
signed this Agreement on the day and date first above written.
ATTEST: FIDELITY FEDERAL SAVINGS BANK OF FLORIDA
______________________ By: ___________________________________
Vince A. Elhilow, President
and Chief Executive Officer
WITNESS:
______________________ By: ___________________________________
Richard D. Aldred, Executive
<PAGE>
EXHIBIT 10.5
FIDELITY FEDERAL SAVINGS BANK OF FLORIDA
1994 STOCK OPTION PLAN FOR OUTSIDE DIRECTORS
1. PURPOSE
The purpose of the Fidelity Federal Savings Bank of Florida 1994 Stock
Option Plan for Outside Directors (the "Directors' Option Plan") is to promote
the growth and profitability of Fidelity Federal Savings Bank of Florida (the
"Bank"), and to provide outside directors of the Bank with an incentive to
achieve long-term objectives of the Bank, attract and retain non-employee
directors of outstanding competence and to provide such outside directors with
an opportunity to acquire an equity interest in the Bank.
2. ADMINISTRATION
(a) The Directors' Option Plan shall be administered by a committee
consisting of at least three non-employee directors of the Bank (the
"Committee") of the Board of Directors of the Bank. The Committee is
authorized, subject to the provisions of the Plan, to establish such rules and
regulations as it deems necessary for the proper administration of the
Directors' Option Plan and to make whatever determinations and interpretations
in connection with the Directors' Option Plan it deems necessary or advisable.
All determinations and interpretations made by the Committee shall be binding
and conclusive on all participants in the Directors' Option Plan, and on their
legal representatives and beneficiaries.
(b) The Directors' Option Plan is intended to comply with Rule 16b-3 under
the Securities Exchange Act of 1934. Notwithstanding any term to the contrary
appearing herein, unless permitted by Rule 16b-3(c)(2)(ii), subsequent to the
establishment of the Directors' Option Plan neither the Committee nor the Board
of Directors shall have the authority to determine the amount and price of
securities to be awarded and/or timing of awards to designated directors or
categories of directors, which terms shall be set forth herein. To the extent
any provision of the Plan or action by Plan administrators fails to comply with
this subsection 2(b), such provision or action shall be deemed null and void to
the extent permitted by law and deemed advisable by the Board of Directors.
3. GRANT OF OPTIONS
(a) Initial Grant. Each outside director (for purposes of this Directors'
-------------
Option Plan, the term "Outside Director" shall mean a member of the Board of
Directors of the Bank not also serving as an employee of the Bank), who is
serving in such capacity on the date of the Bank's initial public offering and
at the effective date of this Directors' Option Plan, shall be granted a single
non-qualified stock option to purchase shares of the Common Stock of the Bank
("Common Stock"), subject to adjustment pursuant to Section 5, in the following
amounts:
<TABLE>
<CAPTION>
Director Amount of Grant
-------- ---------------
<S> <C>
Frederic T. DeHon 13,800
Donald E. Warren, M.D. 13,800
F. Ted Brown, Jr. 13,800
Keith D. Beaty 13,800
Christopher H. Cook 13,800
</TABLE>
<PAGE>
The purchase price per share of the Common Stock deliverable upon the
exercise of each non-qualified stock option shall be the initial public offering
price of the Common Stock of the Bank in connection with the reorganization of
Fidelity Federal Savings Bank of Florida as a mutual holding company to be named
Fidelity Bankshares, MHC (the "Company") and the establishment of the Bank as
its majority-owned subsidiary (the "Reorganization").
(b) Subsequent Grant. Each person who becomes an Outside Director
----------------
subsequent to the effective date of the Directors Option Plan shall be entitled
to receive, upon becoming a director, options for 100 shares of Common Stock to
the extent options are available. The option exercise price shall be the Fair
Market Value of the Common Stock on the date the option is granted. The
purchase price for shares of Common Stock is deliverable upon exercise of each
such option.
(c) Fair Market Value. For purposes of the Directors' Option Plan,
-----------------
when used in connection with Common Stock on a certain date, "Fair Market Value"
means the reported closing price of the Common Stock as reported by the National
Association of Securities Dealers Automated Quotation ("NASDAQ") System (as
published by the Wall Street Journal, if published) on the day prior to such
date, or if the Common Stock was not traded on such date, on the next preceding
day on which the Common Stock was traded thereon; provided, however, that if the
Common Stock is not reported on the NASDAQ System, Fair Market Value shall mean
the average sale price of all shares of Common Stock sold during the 30-day
period immediately preceding the date on which such stock option was granted,
and if no shares of stock have been sold within such 30-day period, the average
sale price of the last three sales of Common Stock sold during the 90-day period
immediately preceding the date on which such stock option was granted. In the
event Fair Market Value cannot be determined in the manner described above, then
Fair Market Value shall be determined by the Committee. The Committee shall be
authorized to obtain an independent appraisal to determine the Fair Market Value
of the Common Stock. For purposes of the grant of options in the
Reorganization, Fair Market Value shall mean the initial public offering price
of the Common Stock.
4. TERMS AND CONDITIONS
(a) Option Agreement. Each option shall be evidenced by a written
----------------
option agreement between the Bank and the outside director specifying the number
of shares of Common Stock that may be acquired through its exercise and
containing such other terms and conditions that are not inconsistent with the
terms of this grant.
(b) Termination of Option. Each option shall expire upon the earlier
---------------------
of (i) one hundred and twenty (120) months following the date of grant, or (ii)
one (1) year following the date on which the outside director ceases to serve in
such capacity for any reason other than Cause. "Cause" is defined as personal
dishonesty, willful misconduct, any breach of fiduciary duty involving personal
profit, intentional failure to perform stated duties, or the willful violation
of any law, rule or regulation (other than traffic violations or similar
offenses) that results in a material loss to the Bank or an affiliate of the
Bank, or a final cease-and-desist order. If the Outside Director dies before
fully exercising any portion of an option then exercisable, such option may be
exercised by such Outside Director's personal representative(s), heir(s) or
devisee(s) at any time within the one (1) year period following his or her
death; provided, however, that in no event shall the option be exercisable more
-------- -------
than one hundred and
-2-
<PAGE>
twenty (120) months after the date of its grant. If the Outside Director is
terminated for Cause all options awarded to him or her shall expire upon such
termination.
(c) Manner of Exercise. The option may be exercised from time to
------------------
time, in whole or in part, by delivering a written notice of exercise to the
President or Chief Executive Officer of the Bank. Such notice is irrevocable
and must be accompanied by full payment of the purchase price in cash or shares
of previously acquired Common Stock of the Bank at the Fair Market Value of such
shares determined on the exercise date by the manner described in Section 3(c)
hereof. If previously acquired shares of Common Stock are tendered in payment
of all or part of the exercise price, the value of such shares shall be
determined as of the date of such exercise.
(d) Surrender Option. In the event of an Outside Director's
----------------
termination of service as a result of death, Disability or retirement, the
Outside Director (or his or her personal representative(s), heir(s), or
devisee(s)) may, in a form acceptable to the Committee, make application to
surrender all or part of options held by such Outside Director in exchange for a
cash payment from the Bank of an amount equal to the difference between the Fair
Market Value of the Common Stock on the date of termination of employment and
the exercise price per share of the option on the Date of Grant. Whether the
Bank accepts such application or determines to make payment, in whole or part,
is within its absolute and sole discretion, it being expressly understood that
the Bank is under no obligation to any Outside Director whatsoever to make such
payments. In the event that the Bank accepts such application and determines to
make payment, such payment shall be in lieu of the exercise of the underlying
option and such option shall cease to be exercisable. As used herein,
"Disability" shall mean the permanent and total inability by reason of mental or
physical infirmity, or both, of an Outside Director to perform the duties
customarily performed by him or her. Additionally, a medical doctor selected or
approved by the Board of Directors of the Bank must determine that it is either
not possible to determine when such Disability will terminate or that it appears
probable that such Disability will be permanent during such Outside Director's
lifetime.
(e) Transferability. Each option granted hereby may be exercised only
---------------
by the Outside Director to whom it is issued or in the event of the Outside
Director's death, his or her personal representative(s), heir(s) or devisee(s)
pursuant to the terms of Section 4(b) hereof.
(f) Limitations Upon Exercise of Options. Notwithstanding any other
------------------------------------
provision of this Director's Option Plan, so long as the Company remains in the
mutual form of organization, an option granted under this Plan may not be
exercised if the exercise of such an option would result in the Company owning
less than a majority of the Common Stock of the Bank. Nothing herein shall
preclude the Bank from issuing additional authorized but unissued shares of
Common Stock to the Company to allow for the exercise of options which would
otherwise have resulted in the Company owning less than a majority of the Common
Stock of the Bank.
5. COMMON STOCK SUBJECT TO THE PLAN
The shares that shall be issued and delivered upon exercise of options
granted under the Directors' Option Plan may be either authorized and unissued
shares of Common Stock or authorized and issued shares of Common Stock held by
the Bank as treasury stock. The maximum number of shares of Common Stock
reserved for issuance under the Directors' Option Plan shall, subject to
adjustments pursuant to this Section 5, not exceed two and one-half (2.5%) of
(i) the shares of Common Stock of the
-3-
<PAGE>
Bank sold in connection with initial public offering of the Common Stock of the
Bank (the "Stock Offering") (or 69,000 shares assuming the sale of 2,760,000
shares) and in any subsequent minority stock offering of the Bank, and (ii)
assuming the Company converts (a "Conversion Transaction") from the mutual to
stock form of organization ("Stock Holding Company") either on a stand alone
basis or in the context of a merger conversion, the shares of common stock
issued by the Stock Holding Company in the event of a Conversion Transaction;
provided however, that the maximum number of options reserved for issuance under
the Plan in future stock offerings may be increased by amendment but shall not
exceed ten percent (10%) of the shares issued in such stock offering less any
options awarded or reserved for employees of the Bank under one or more option
plans; provided further, that in determining the number of options issued in a
Conversion Transaction and the number of shares that may be awarded under this
Plan in the event of a Conversion Transaction, any Options for Common Stock of
the Bank exchaned for options of common stock of the Stock Holding Company shall
not be included. These shares of Common Stock represented by such options may be
either authorized but unissued shares or shares previously issued and reacquired
by the Bank. To the extent that options or rights granted under the Plan are
exercised, the shares covered will be unavailable for future grants under the
Plan; to the extent that options together with any related rights granted under
the Plan terminate, expire or are cancelled without having been exercised or, in
the case of Limited Rights exercised for cash, new Awards may be made with
respect to these shares.
In the event of any change or changes in the outstanding Common Stock
of the Bank by reason of any stock dividend or split, recapitalization,
reorganization, merger, consolidation, split-off, combination or any similar
corporate change, or other increase or decrease in such shares effected without
receipt or payment of consideration by the Bank, the number of shares of Common
Stock that may be issued under this Directors' Option Plan, the number of shares
of Common Stock subject to options granted under the Directors' Option Plan, and
the option price of such options, shall be automatically adjusted to prevent
dilution or enlargement of the rights granted to an Outside Director under the
Directors' Option Plan.
6. TREATMENT OF OPTIONS IN THE EVENT OF A CONVERSION TRANSACTION
In the event that the Company converts (a "Conversion Transaction")
from the mutual to stock form of organization ("Stock Holding Company") either
on a stand-alone basis or in the context of a merger conversion, any options
outstanding shall, at the option of the holder, (i) be convertible into options
for Common Stock of the Stock Holding Company, or (ii) be exercised by the
holder prior to the effective date of the Conversion Transaction and the holder
shall be entitled to exchange, in the same manner as other minority stockholders
of the Bank, the shares of Common Stock of the Bank received upon such exercise
for shares of Common Stock of the Stock Holding Company. Provided, however, that
if for any reason such options are not to be converted or such shares are not
exchanged, the holders of options under this plan shall receive cash payment for
the shares of stock represented by the options in an amount equal to the initial
offering price of the Common Stock of the Stock Holding Company at the closing
of the Conversion Transaction, less the original exercise price of such options
and, with respect to options that have been exercised, the Stock Holding Company
shall redeem such shares for cash in the same manner as such redemption would
occur for other minority stockholders of the Bank. Any exchange, conversion of
options, or cash payment for shares shall be subject to applicable federal and
state regulations and, if necessary, subject to the approval of the appropriate
Regulatory Authorities.
7. EFFECTIVE DATE OF THE PLAN; SHAREHOLDER RATIFICATION AND APPROVAL
-4-
<PAGE>
The Directors' Option Plan has been adopted by the Board of Directors
of the Bank and shall become effective upon the Reorganization. Following the
Reorganization, the Directors' Option Plan shall be presented to shareholders of
the Bank for ratification and approval for purposes of (i) obtaining favorable
treatment under Section 16(b) of the Securities Exchange Act of 1934; and (ii)
maintaining listing on the NASDAQ System. No options granted pursuant to the
Plan shall be exercisable prior to such shareholder approval.
8. TERMINATION OF THE PLAN
The right to exercise options under the Directors' Option Plan will
terminate upon the earlier of ten years after the Effective Date or the issuance
of the Common Stock or exercise of options equal to the maximum number of shares
of Common Stock reserved for issuance under the Directors' Option Plan. A
majority of the shareholders of the Bank represented in person or proxy at a
meeting of the shareholders may terminate the Directors' Option Plan; provided,
however, no such termination shall, without the consent of the affected
individual, affect such individual's rights under a previously granted option.
9. COMPLIANCE WITH RULE 16B-3 UNDER THE SECURITIES EXCHANGE ACT OF 1934.
(a) Notwithstanding any contrary provisions herein, unless permitted
by Rule 16b-3(c)(2)(ii)(B) terms stating the amount and price of securities to
be awarded and/or timing of awards to designated directors or categories of
directors shall not be amended more than once every six months other than to
comport with changes in the Internal Revenue Code, the Employee Retirement
Income Security Act, or rules thereunder.
(b) Transactions under this Plan are intended to comply with all
applicable conditions of Rule 16b-3 or its successors under the 1934 Act, and
the Plan is intended to be administered in the manner specified in Rule 16b-
3(c)(2)(ii). To the extent any provision of the Plan or action by the plan
administrators fails to so comply, it shall be deemed null and void to the
extent permitted by law and deemed advisable by the Plan administrators.
10. APPLICABLE LAW
The Plan will be administered in accordance with the laws of the State
of Florida.
-5-
<PAGE>
IN WITNESS WHEREOF, the Bank has caused this Plan to be executed by
its duly authorized officers and the corporate seal to be affixed and duly
attested, as of the 7th day of January, 1994.
-----
FIDELITY FEDERAL SAVINGS BANK OF FLORIDA
/s/ Vince A. Elhilow
---------------------------------------
Vince A. Elhilow, President and
Chief Executive Officer
______________________
/s/ Patricia Clager
--------------------------------------------
Date Approved by Patricia Clager, Secretary
Stockholders
-6-
<PAGE>
Exhibit 10.6
FIDELITY FEDERAL SAVINGS BANK OF FLORIDA
1994 INCENTIVE STOCK OPTION PLAN
1. PURPOSE
The purpose of Fidelity Federal Savings Bank of Florida 1994 Incentive
Stock Option Plan (the "Plan") is to advance the interests of Fidelity Federal
Savings Bank of Florida (the "Bank") and its shareholders by providing officers
and key employees of the Bank and its affiliates, including Fidelity Bankshares,
MHC, the mutual holding company of the Bank (the "Company"), upon whose
judgment, initiative and efforts the successful conduct of the business of the
Bank and its affiliates largely depends, with an additional incentive to perform
in a superior manner as well as to attract people of experience and ability.
2. DEFINITIONS
(a) "AFFILIATE" means (i) a member of a controlled group of corporations of
which the Bank is a member or (ii) an unincorporated trade or business that is
under common control with the Bank as determined in accordance with Section
414(c) of the Internal Revenue Code of 1986, as amended (the "Code"), and the
regulations issued thereunder. For purposes hereof, a "controlled group of
corporations" shall mean a controlled group of corporations as defined in
Section 1563(a) of the Code determined without regard to Section 1563(a)(4) and
(e)(3)(C) thereof.
(b) "AWARD" means an Award of Non-statutory Stock Options, Incentive Stock
Options, and/or Limited Rights granted under the provisions of the Plan.
(c) "BOARD OF DIRECTORS" means the Board of Directors of the Bank.
(d) "CHANGE IN CONTROL" of the Bank or the Company shall mean (I) a
reorganization, merger, merger conversion, consolidation or sale of all or
substantially all of the assets of the Bank or the Company or a similar
transaction in which the Bank or the Company is not the resulting entity; (II)
individuals who constitute the board of directors of the Bank or the board of
directors of the Company on the date hereof (the "Incumbent Board") cease for
any reason to constitute a majority thereof provided that any person becoming a
director subsequent to the date hereof whose election was approved by a vote of
at least three-quarters of the directors comprising the Incumbent Board, or
whose nomination for election by the Company's stockholders was approved by the
same nominating committee serving under the Incumbent Board, shall be, for
purposes of this clause (II), considered as though he were a member of the
Incumbent Board; or (III) a Change in Control within the meaning of 12 C.F.R.
(S) 574.4 occurs, as determined by the board of directors of the Bank or the
Company, provided, however, that a change in control shall not be deemed under
2(d)(I) or 2(d)(III) of this section if the transac-
<PAGE>
tion(s) constituting a change in control is approved by a majority of the Board
of Directors of the Bank or the Company, as the case may be.
In the event the Company converts from the mutual form of organization to
the stock form of organization on a stand-alone basis at any time subsequent to
the effective date of this Agreement ("Stock Holding Company"), a "change in
control" of the Bank or the Stock Holding Company shall mean an event of a
nature that: (i) would be required to be reported in response to Item 1 of the
current report on Form 8-K, as in effect on the date hereof, pursuant to Section
13 or 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act"); or (ii)
results in a change in control of the Bank or the Stock Holding Company within
the meaning of the Home Owners' Loan Act of 1933 and the Rules and Regulations
promulgated by the Office of Thrift Supervision (the "OTS") (or its predecessor
agency), as in effect on the effective date of this Plan; or (iii) without
limitation, such a Change in Control shall be deemed to have occurred at such
time as (a) any "person" (as the term is used in Sections 13(d) and 14(d) of the
Exchange Act) other than the Company is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Bank representing 25% or more of the Bank's outstanding
securities ordinarily having the right to vote at the election of directors
except for any securities of the Bank purchased by the Stock Holding Company in
connection with the Reorganization and any securities purchased by the Bank's
employee stock ownership plan and trust shall not be counted in determining
whether such plan is the beneficial owner of more than 25% of the Bank's
securities; or (b) individuals who constitute the Incumbent Board cease for any
reason to constitute at least a majority thereof, provided that any person
becoming a director subsequent to the date hereof whose election was approved by
a vote of at least three-quarters of the directors comprising the Incumbent
Board, or whose nomination for election by the Bank's shareholders was approved
by the same nominating committee serving under an Incumbent Board, shall be
considered, for purposes of this clause (b), as though he were a member of the
Incumbent Board; or (c) a reorganization, a merger, consolidation, sale of all
or substantially all the assets of the Bank or the Stock Holding Company or
similar transaction in which the Bank or Stock Holding Company is not the
surviving institution occurs and which the Incumbent Board does not approve or
consent to; or (d) a proxy statement soliciting proxies from stockholders of the
Bank, by someone other than the current management of the Bank, seeking
stockholder approval of a plan of reorganization, merger or consolidation of the
Stock Holding Company or the Bank or similar transaction with one or more
corporations as a result of which the outstanding shares of the class of
securities then subject to the plan or transaction are exchanged for or
converted into cash or property or securities not issued by the Bank or the
Stock Holding Company; or (e) a tender offer is made for 25% or more of the
voting securities of the Bank and shareholders owning beneficially or of record
25% or more of the outstanding securities of the Bank have tendered or offered
to sell their shares pursuant to such tender offer. Notwithstanding the
foregoing, a "Change in Control" of the Bank or the Company shall not be deemed
to have occured if the Company ceases to own at least 51% of all outstanding
shares of stock of the Bank in connection with a conversion of the Company from
mutual to stock form and such tendered shares have been accepted by the tender
offeror.
2
<PAGE>
(e) "COMMITTEE" means a Committee of the Board of Directors consisting of
all non-employee (i.e., "outside") directors.
(f) "COMMON STOCK" means the Common Stock of the Bank.
(g) "CONVERSION TRANSACTION" means the conversion of the Company from the
mutual to stock form of organization either on a stand-alone basis or in the
context of a merger conversion, as contemplated by regulations of the OTS or any
successor thereof.
(h) "DATE OF GRANT" means the actual date on which an Award is granted by
the Committee.
(i) "DISABILITY" means the permanent and total inability by reason of
mental or physical infirmity, or both, of an employee to perform the work
customarily assigned to him. Additionally, a medical doctor selected or
approved by the Board of Directors must advise the Committee that it is either
not possible to determine when such Disability will terminate or that it appears
probable that such Disability will be permanent during the remainder of such
employee's lifetime.
(j) "FAIR MARKET VALUE" means, when used in connection with the Common
Stock on a certain date, the reported closing price of the Common Stock as
reported by the National Bank of Securities Dealers Automated Quotation
("NASDAQ") System (as published by the Wall Street Journal, if published) on the
day prior to such date, or if the Common Stock was not traded on such date, on
the next preceding day on which the Common Stock was traded thereon; provided,
however, that if the Common Stock is not reported on the NASDAQ System, Fair
Market Value shall mean the average sale price of all shares of Common Stock
sold during the 30-day period immediately preceding the date on which such stock
option was granted, and if no shares of stock have been sold within such 30-day
period, the average sale price of the last three sales of Common Stock sold
during the 90-day period immediately preceding the date on which such stock
option was granted. In the event Fair Market Value cannot be determined in the
manner described above, then Fair Market Value shall be determined by the
Committee. The Committee shall be authorized to obtain an independent appraisal
to determine the Fair Market Value of the Common Stock. For purposes of the
grant of options in the Reorganization, Fair Market Value shall mean the initial
public offering price of the Common Stock.
(k) "INCENTIVE STOCK OPTION" means an Option granted by the Committee to a
Participant, which Option is designated as an Incentive Stock Option pursuant to
Section 8.
(l) "LIMITED RIGHT" means the right to receive an amount of cash based upon
the terms set forth in Section 9.
(m) "NON-STATUTORY STOCK OPTION" means an Option granted by the Committee
to a participant and which is not designated by the Committee as an Incentive
Stock Option.
3
<PAGE>
(n) "NORMAL RETIREMENT" means retirement at the normal or early retirement
date as set forth in the Retirement Plan for Employees of Fidelity Federal
Savings Bank of Florida, or any successor plan.
(p) "OPTION" means Award granted under Section 7 or Section 8.
(q) "PARTICIPANT" means an employee of the Bank or its affiliates chosen by
the Committee to participate in the Plan.
(r) "PLAN YEAR OR YEARS" means a calendar year or years commencing on or
after January 1, 1994.
(s) "REORGANIZATION" means the reorganization of Fidelity Federal Savings
Bank of Florida as a mutual holding company and the establishment of the Bank as
its majority-owned subsidiary.
(t) "STOCK OFFERING" means the initial public offering of the Bank's Common
Stock.
(u) "TERMINATION FOR CAUSE" means the termination upon an intentional
failure to perform stated duties, or breach of a fiduciary duty involving
personal dishonesty, or willful violation of any law, rule or regulation (other
than traffic violations or similar offenses) or final cease-and-desist order,
any of which results in material loss to the Bank, the Company, or one of its
affiliates.
3. ADMINISTRATION
The Plan shall be administered by the Committee. The Committee is
authorized, subject to the provisions of the Plan, to establish such rules and
regulations as it deems necessary for the proper administration of the Plan and
to make whatever determinations and interpretations in connection with the Plan
it deems necessary or advisable. All determinations and interpretations made by
the Committee shall be binding and conclusive on all Participants in the Plan
and on their legal representatives and beneficiaries.
4. TYPES OF AWARDS
Awards under the Plan may be granted in any one or a combination of (a)
Incentive Stock Options; (b) Non-Statutory Stock Options; and (c) Limited Rights
as defined herein in Sections 7-9.
5. STOCK SUBJECT TO THE PLAN
Subject to adjustment as provided in Section 14, the maximum number of
shares reserved for issuance under the Plan is seven and one-half percent (7.5%)
of (i) the shares of Common Stock of the Bank sold in connection with the Stock
Offering (or 180,000 shares assuming the
4
<PAGE>
sale of 2,400,00 shares) and in any subsequent minority stock offering of the
Bank, and (ii) the shares of common stock issued by the Stock Holding Company in
the event of a Conversion Transaction; provided however, that the maximum number
of options reserved for issuance under the Plan in future stock offerings may be
increased by amendment but shall not exceed ten percent (10%) of the shares
issued in such stock offering less any options awarded or reserved for directors
of the Bank under one or more non-statutory stock option plans; provided
further, that in determining the number of options issued in a Conversion
Transaction and the number of shares that may be awarded under this Plan in the
event of a Conversion Transaction, any Options for Common Stock of the Bank
exchanged for options of common stock of the Stock Holding Company shall not be
included. These shares of Common Stock represented by such options may be
either authorized but unissued shares or shares previously issued and reacquired
by the Bank. To the extent that options or rights granted under the Plan are
exercised, the shares covered will be unavailable for future grants under the
Plan; to the extent that options together with any related rights granted under
the Plan terminate, expire or are cancelled without having been exercised or, in
the case of Limited Rights exercised for cash, new Awards may be made with
respect to these shares.
6. ELIGIBILITY
Officers and other employees of the Bank or its affiliates shall be
eligible to receive Incentive Stock Options, Non-Statutory Stock Options and/or
Limited Rights under the Plan. Directors who are not employees or officers of
the Bank or its affiliates shall not be eligible to receive Awards under the
Plan.
7. NON-STATUTORY STOCK OPTIONS
7.1 GRANT OF NON-STATUTORY STOCK OPTIONS
The Committee may, from time to time, grant Non-Statutory Stock Options to
eligible employees and, upon such terms and conditions as the Committee may
determine, grant Non-Statutory Stock Options in exchange for and upon surrender
of previously granted Awards under this Plan. Non-Statutory Stock Options
granted under this Plan are subject to the following terms and conditions:
(a) Price. The purchase price per share of Common Stock deliverable upon
-----
the exercise of each Non-Statutory Stock Option shall be determined by the
Committee on the date the option is granted. Except as provided below, such
purchase price shall not be less than 100% of the Fair Market Value of the
Bank's Common Stock on the date the option is granted. The purchase price per
share of Common Stock deliverable upon the exercise of each Non-Statutory Stock
Option granted in exchange for and upon surrender of previously granted awards
shall be not less than 85% of the Fair Market Value of the Bank's Common Stock
on the date the option is granted, but in no event may the purchase price of any
Non-Statutory Stock Option be less than the par value of the Common Stock.
Shares may be purchased only upon full payment of the purchase price. Payment of
the purchase price may be made, in whole or
5
<PAGE>
in part, through the surrender of shares of the Common Stock of the Bank at the
Fair Market Value of such shares determined in the manner described in Section
2(j).
(b) Terms of Options. The term during which each Non-Statutory Stock
----------------
Option may be exercised shall be determined by the Committee, but in no event
shall a Non-Statutory Stock Option be exercisable in whole or in part more than
10 years and one day from the Date of Grant. The Committee shall determine the
date on which each Non-Statutory Stock Option shall become exercisable in
installments. The shares comprising each installment may be purchased in whole
or in part at any time after such installment becomes purchasable. The
Committee, in its sole discretion, may accelerate the time at which any Non-
statutory Stock Option may be exercised in whole or in part. Notwithstanding
the above, in the event of a Change in Control of the Bank, all Non-Statutory
Stock Options shall become immediately exercisable.
(c) Termination of Employment. Upon the termination of an employee's
-------------------------
service for any reason other than Disability, Normal Retirement, death or
Termination for Cause, the employee's Non-Statutory Stock Options shall be
exercisable only as to those shares that were immediately purchasable by the
employee at the date of termination and only for a period of one year following
termination. In the event of Termination for Cause, all rights under his Non-
Statutory Stock Options shall expire upon termination. In the event of the
death, Disability or Normal Retirement of any employee, all Non-Statutory Stock
Options held by such employee, whether or not exercisable at such time, shall be
exercisable by such employee or his legal representatives or beneficiaries for
one year following the date of his death, Normal Retirement or cessation of
employment due to Disability, provided that in no event shall the period extend
--------
beyond the expiration of the Non-Statutory Stock Option term.
8. INCENTIVE STOCK OPTIONS
8.1 GRANT OF INCENTIVE STOCK OPTIONS
The Committee, from time to time, may grant Incentive Stock Options to
eligible employees. Incentive Stock Options granted pursuant to the Plan shall
be subject to the following terms and conditions:
(a) Price. The purchase price per share of Common Stock deliverable upon
-----
the exercise of each Incentive Stock Option shall be not less than 100% of the
Fair Market Value of the Bank's Common Stock on the date the Incentive Stock
Option is granted. However, if an employee owns stock possessing more than 10%
of the total combined voting power of all classes of Common Stock of the Bank
(or under Section 424(d) of the Code, is deemed to own stock representing more
than 10% of the total combined voting power of all classses of stock of the Bank
or its affiliates by reason of the ownership of such classes of stock directly
or indirectly, by or for any brother, sister, spouse, ancestor or lineal
descendant of such employee or by or for any corporation, partnership, estate or
trust of which such employee is a shareholder, partner or beneficiary), the
purchase price per share of Common Stock deliverable upon the exercise of each
Incentive Stock Option shall not be less than 110% of the Fair Market
6
<PAGE>
Value of the Bank's Common Stock on the date the Incentive Stock Option is
granted. Shares may be purchased only upon payment of the full purchase price.
Payment of the purchase price may be made, in whole or in part, through the
surrender of shares of the Common Stock of the Bank at the Fair Market Value of
such shares determined in the manner described in Section 2.
(b) Amount of Options. Incentive Stock Options may be granted to any
-----------------
eligible employee in such amounts as determined by the Committee; provided that
the amount granted is consistent with the terms of Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"). In granting Incentive Stock
Options the Committee shall consider the position and responsibilities of the
eligible employee, the length and value of his or her service to the Bank, the
compensation paid to the employee and the Committee's evaluation of the
performance of the Bank according to measurements that include, among others,
key financial ratios, levels of classified assets, and independent audit
findings. In the case of an option intended to qualify as an Incentive Stock
Option, the aggregate Fair Market Value (determined as of the time the option is
granted) of the Common Stock with respect to which Incentive Stock Options
granted are exercisable for the first time by the Participant during any
calendar year (under all plans of the Participant's employer corporation and its
parent and subsidiary corporations) shall not exceed $100,000. The provisions
of this Section 8.1(b) shall be construed and applied in accordance with Section
422(d) of the Code and the regulations, if any, promulgated thereunder.
(c) Term of Options. The term during which each Incentive Stock Option may
---------------
be exercised shall be determined by the Committee, but in no event shall an
Incentive Stock Option be exercisable in whole or in part more than 10 years
from the Date of Grant. If any employee, at the time an Incentive Stock Option
is granted to him, owns Common Stock representing more than 10% of the total
combined voting power of the Bank (or, under Section 424(d) of the Code, is
deemed to own Common Stock representing more than 10% of the total combined
voting power of all such classes of Common Stock, by reason of the ownership of
such classes of Common Stock, directly or indirectly, by or for any brother,
sister, spouse, ancestor or lineal descendent of such employee, or by or for any
corporation, partnership, estate or trust of which such employee is a
shareholder, partner or beneficiary), the Incentive Stock Option granted to him
shall not be exercisable after the expiration of five years from the Date of
Grant. No Incentive Stock Option granted under this Plan is transferable except
by will or the laws of descent and distribution and is exercisable only by the
employee to which it is granted.
The Committee shall determine the date on which each Incentive Stock Option
shall become exercisable and may provide that an Incentive Stock Option shall
become exercisable in installments. The shares comprising each installment may
be purchased in whole or in part at any time after such installment becomes
purchasable, provided that the amount able to be first exercised in a given year
is consistent with the terms of Section 422 of the Code. The Committee, in its
sole discretion, may accelerate the time at which any Incentive Stock Option may
be exercised in whole or in part; provided that it is consistent with the terms
of Section 422 of the Code. Notwithstanding the above, in the event of a Change
in Control of the Bank, all Incentive Stock Options shall become immediately
exercisable.
7
<PAGE>
(d) Termination of Employment. Upon the termination of an employee's
-------------------------
service for any reason other than Disability, Normal Retirement, Change in
Control, death or Termination for Cause, his Incentive Stock Options shall be
exercisable only as to those shares which were immediately purchasable by him at
the date of termination and only for a period of three months following
termination. In the event of Termination for Cause all rights under his
Incentive Stock Options shall expire upon termination.
In the event of death or Disability of any employee, all Incentive Stock
Options held by such employee, whether or not exercisable at such time, shall be
exercisable by such employee or his legal representatives or beneficiaries for
one year following the date of his death or cessation of employment due to
Disability. Upon termination of an employee's service due to Normal Retirement,
or a Change in Control, all Incentive Stock Options held by such employee,
whether or not exercisable at such time, shall be exercisable for a period of
one year following the date of his cessation of employment; provided, however,
that such option shall not be eligible for treatment as an Incentive Stock
Option in the event such option is exercised more than three months following
the date of his Normal Retirement or the Change in Control. In no event shall
the exercise period extend beyond the expiration of the Incentive Stock Option
term.
(e) Compliance with Code. The options granted under this Section 8 of the
--------------------
Plan are intended to qualify as incentive stock options within the meaning of
Section 422 of the Code, but the Bank makes no warranty as to the qualification
of any option as an incentive stock option within the meaning of Section 422 of
the Code. If an Option granted hereunder fails for whatever reason to comply
with the provisions of Section 422 of the Code and such failure cannot be cured,
such Option shall be a Non-Statutory Stock Option.
9. LIMITED RIGHTS
9.1 GRANT OF LIMITED RIGHTS
The Committee may grant a Limited Right simultaneously with the grant of
any option, with respect to all or some of the shares covered by such option.
Limited Rights granted under this Plan are subject to the following terms and
conditions:
(a) Terms of Rights. In no event shall a Limited Right be exercisable in
---------------
whole or in part before the expiration of six months from the date of grant of
the Limited Right. A Limited Right may be exercised only in the event of a
Change in Control of the Bank.
The Limited Right may be exercised only when the underlying option is
eligible to be exercised, provided that the Fair Market Value of the underlying
shares on the day of exercise is greater than the exercise price of the related
option.
Upon exercise of a Limited Right, the related option shall cease to be
exercisable. Upon exercise or termination of an Option, any related Limited
Rights shall terminate. The Limited Rights may be for no more than 100% of the
difference between the exercise price and the Fair
8
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Market Value of the Common Stock subject to the underlying Option. The Limited
Right is transferable only when the underlying Option is transferable and under
the same conditions.
(b) Payment. Upon exercise of a Limited Right, the holder shall promptly
-------
receive from the Bank an amount of cash equal to the difference between the Fair
Market Value on the Date of Grant of the related Option and the Fair Market
Value of the underlying shares on the date the Limited Right is exercised,
multiplied by the number of shares with respect to which such Limited Right is
being exercised.
(c) Stock to be Optioned. The maximum number of shares of Common Stock that
--------------------
may be optioned or sold under the Plan is 180,000 shares. Such shares may be
treasury, or authorized but unissued, shares of Common Stock of the Bank. Any
shares subject to an Option under the Plan which Option for any reason expires
or is terminated unexercised as to such shares, may again be subject to an
Option under the Plan.
10. SURRENDER OF OPTION
In the event of a Participant's termination of employment as a result of
death, Disability or Retirement, the Participant (or his personal
representative(s), heir(s), or devisee(s)) may, in a form acceptable to the
Committee, make application to surrender all or part of the Options held by such
Participant in exchange for a cash payment from the Bank of an amount equal to
the difference between the Fair Market Value of the Common Stock on the date of
termination of employment and the exercise price per share of the Option on the
Date of Grant. Whether the Bank accepts such application or determines to make
payment, in whole or part, is within its absolute and sole discretion, it being
expressly understood that the Bank is under no obligation to any Participant
whatsoever to make such payments. In the event that the Bank accepts such
application and determines to make payment, such payment shall be in lieu of the
exercise of the underlying Option and such Option shall cease to be exercisable.
11. RIGHTS OF A SHAREHOLDER; NON-TRANSFERABILITY
An optionee shall have no rights as a shareholder with respect to any
shares covered by a Non-Statutory and/or Incentive Stock Option until the date
of issuance of a stock certificate for such shares. Nothing in this Plan or in
any Award granted confers on any person any right to continue in the employ of
the Bank or its affiliates or to continue to perform services for the Bank or
its affiliates or interferes in any way with the right of the Bank or its
affiliates to terminate his services as an officer or other employee at any
time.
No Award under the Plan shall be transferable by the optionee other than by
will or the laws of descent and distribution and may only be exercised during
his lifetime by the optionee, or by a guardian or legal representative.
12. AGREEMENT WITH GRANTEES
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Each Award of Options, and/or Limited Rights will be evidenced by a written
agreement, executed by the Participant and the Bank or its affiliates that
describes the conditions for receiving the Awards including the date of Award,
the purchase price if any, applicable periods, and any other terms and
conditions as may be required by the Board of Directors or applicable securities
law.
13. DESIGNATION OF BENEFICIARY
A Participant, with the consent of the Committee, may designate a person or
persons to receive, in the event of death, any stock option or Limited Rights
Award to which he would then be entitled. Such designation will be made upon
forms supplied by and delivered to the Bank and may be revoked in writing. If a
Participant fails effectively to designate a beneficiary, then his estate will
be deemed to be the beneficiary.
14. DILUTION AND OTHER ADJUSTMENTS
In the event of any change in the outstanding shares of Common Stock of the
Bank by reason of any stock dividend or split, recapitalization, merger,
consolidation, spin-off, reorganization, combination or exchange of shares, or
other similar corporate change, or other increase or decrease in such shares
without receipt or payment of consideration by the Bank, the Committee will make
such adjustments to previously granted Awards, to prevent dilution or
enlargement of the rights of the Participant, including any or all of the
following:
(a) adjustments in the aggregate number or kind of shares of Common Stock
which may be awarded under the Plan;
(b) adjustments in the aggregate number or kind of shares of Common Stock
covered by Awards already made under the Plan;
(c) subject to Section 8.1(a) hereof, adjustments in the purchase price of
outstanding Incentive and/or Non-Statutory Stock Options, or any Limited
Rights attached to such options.
No such adjustments, however, may change materially the value of benefits
available to a Participant under a previously granted Award.
15. LIMITATIONS UPON EXERCISE OF OPTIONS
Notwithstanding any other provision of the Plan, so long as the Company
remains in the mutual form of organization, an Option granted under this Plan
may not be exercised if the exercise of such an Option would result in the
Holding Company owning less than a majority of the Common Stock of the Bank.
Nothing herein shall preclude the Bank from issuing additional authorized but
unissued shares of Common Stock to the Company to allow for the exercise of
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options which would otherwise have resulted in the Company owning less than a
majority of the Common Stock of the Bank.
16. TREATMENT OF OPTIONS IN THE EVENT OF A CONVERSION TRANSACTION
In the event that the Company converts to stock form in a Conversion
Transaction ("Stock Holding Company"), any options outstanding shall, at the
option of the holder, (i) be convertible into options for Common Stock of the
Stock Holding Company, or (ii) be exercised by the holder prior to the effective
date of the Conversion Transaction and the holder shall be entitled to exchange,
in the same manner as other minority stockholders of the Bank, the shares of
Common Stock of the Bank received upon such exercise for shares of Common Stock
of the Stock Holding Company. Provided, however, that if for any reason such
options are not to be converted or such shares are not exchanged, the holders of
options under this plan shall receive cash payment for the shares of stock
represented by the options in an amount equal to the initial offering price of
the Common Stock of the Stock Holding Company at the closing of the Conversion
Transaction, less the original exercise price of such options and, with respect
to options that have been exercised, the Stock Holding Company shall redeem such
shares for cash in the same manner as such redemption would occur for other
minority stockholders of the Bank. Any exchange, conversion of options, or cash
payment for shares shall be subject to applicable federal and state regulations
and, if necessary, subject to the approval of the appropriate regulatory
authorities.
17. WITHHOLDING
There may be deducted from each distribution of cash and/or Common Stock
under the Plan the amount of tax required by any governmental authority to be
withheld.
18. AMENDMENT OF THE PLAN
The Board of Directors may at any time, and from time to time, modify or
amend the Plan in any respect; provided, however, that if necessary to continue
to qualify the Plan under the Securities and Exchange Commission Rule 16b-3,
shareholder approval shall be required for any such modification or amendment
that:
(a) increases the maximum number of shares for which options may be
granted under the Plan (subject, however, to the provisions of Section
14 hereof);
(b) reduces the exercise price at which Awards may be granted (subject,
however, to the provisions of Sections 8.1(a) and 14 hereof):
(c) extends the period during which options may be granted or exercised
beyond the times originally prescribed (subject, however, to the
provisions of Section 8.1(a) hereof); or
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<PAGE>
(d) changes the persons eligible to participate in the Plan.
Failure to ratify or approve amendments or modifications to subsections (a)
through (d) of this Section 18 by shareholders shall be effective only as to the
specific amendment or modification requiring such ratification. Other
provisions, sections, and subsections of this Plan will remain in full force and
effect.
No such termination, modification or amendment may affect the rights of a
Participant under an outstanding Award.
19. EFFECTIVE DATE OF PLAN
The Plan shall become effective upon the consummation of the Reorganization
(the "Effective Date"). The Plan shall be presented to shareholders for
ratification for purposes of: (i) obtaining favorable treatment under Section
16(b) of the Exchange Act; (ii) obtaining preferential tax treatment for
Incentive Stock Options; and (iii) maintaining listing on the NASDAQ System.
The failure to obtain shareholder ratification will not affect the validity of
the Plan and the options thereunder; provided, however, that if the Plan is not
ratified, the Plan shall remain in full force and effect, and any Incentive
Stock Options granted under the Plan shall be deemed to be Non-Statutory Stock
Options.
20. TERMINATION OF THE PLAN
The right to grant Awards under the Plan will terminate upon the earlier of
ten (10) years after the Effective Date of the issuance of Common Stock or the
exercise of options or related rights equaling the maximum number of shares
reserved under the Plan as set forth in Section 5 hereof. The Board of Directors
has the right to suspend or terminate the Plan at any time; provided that no
such action will, without the consent of a Participant, affect adversely his
rights under a previously granted Award.
21. APPLICABLE LAW
The Plan will be administered in accordance with the laws of the State of
Florida.
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IN WITNESS WHEREOF, the Bank has caused this Plan to be executed by its
duly authorized officers and the corporate seal to be affixed and duly attested,
as of the 7th day of January, 1994.
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FIDELITY FEDERAL SAVINGS BANK OF FLORIDA
/s/ Vince A. Elhilow
-------------------------------------------
Vince A. Elhilow, President and
Chief Executive Officer
ATTEST:
/s/ Patricia Clager
_______________________________ ------------------------------------
Date Approved by Stockholders Patricia Clager, Secretary
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EXHIBIT 10.7
FIDELITY FEDERAL SAVINGS BANK OF FLORIDA
RECOGNITION AND RETENTION PLAN FOR EMPLOYEES
1. ESTABLISHMENT OF THE PLAN; CREATION OF SEPARATE TRUST
1.01 Fidelity Federal Savings Bank of Florida hereby establishes the Bank
Recognition Plan for Employees (the "Plan") upon the terms and conditions
hereinafter stated in this Recognition Plan.
1.02 A separate trust or trusts has been established to purchase the
shares of the Bank's Common Stock that will be awarded hereunder (the "Trust").
If a Recipient hereunder fails to satisfy the conditions of the Plan and
forfeits all or any portion of the Bank's Comon Stock awarded to him, such
forfeited shares will be returned to said Trust.
2. PURPOSE OF THE PLAN
The purpose of the Plan is to retain employees and officers of experience
and ability by providing such persons with a proprietary interest in the Bank as
compensation for their contributions to the Bank and its Affiliates and as an
incentive to make such contributions and to promote the Bank's growth and
profitability in the future.
3. DEFINITIONS
The following words and phrases when used in this Plan with an initial
capital letter, unless the context clearly indicates otherwise, shall have the
meanings set forth below. Wherever appropriate, the masculine pronoun shall
include the feminine pronoun and the singular shall include the plural:
"AWARD" means the grant by the Committee of Restricted Stock, as provided
in the Plan.
"AFFILIATE" means any "parent corporation" or "subsidiary corporation" of
the Bank, as such terms are defined in Section 424(e) and (f), respectively, of
the Code.
"BANK" means Fidelity Federal Savings Bank of Florida.
"BENEFICIARY" means the person or persons designated by a Recipient to
receive any benefits payable under the Plan in the event of such Recipient's
death. Such person or persons shall be designated in writing on forms provided
for this purpose by the Committee and may be changed from time to time by
similar written notice to the Committee. In the absence of a written
designation, the Beneficiary shall be the Recipient's surviving spouse, if any,
or if none, his estate.
<PAGE>
"BOARD" means the Board of Directors of the Bank.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMITTEE" means a Committee of the Board consisting of all non-employee
Directors of the Bank.
"COMPANY" means Fidelity Bankshares, MHC, the mutual holding company of
the Bank.
"COMMON STOCK" means shares of the common stock of the Bank.
"CONTINUOUS SERVICE" means the absence of any interruption or termination
of service as an Employee of the Bank. Service shall not be considered
interrupted in the case of sick leave, military leave or any other leave of
absence approved by the Bank or in the case of transfers between payroll
locations of the Bank or between the Bank, its parent, its subsidiaries or its
successor.
"CONVERSION TRANSACTION" means the conversion of the Company from the
mutual to stock form of organization either on a stand-alone basis or in the
context of a merger conversion, as provided by regulations of the Office of
Thrift Supervision ("OTS").
"DIRECTOR" means any director of the Bank or an Affiliate.
"DISABILITY" means the permanent and total inability by reason of mental
or physical infirmity, or both, of an employee to perform the work customarily
assigned to him. Additionally, a medical doctor selected or approved by the
Board must advise the Committee that it is either not possible to determine when
such Disability will terminate or that it appears probable that such Disability
will be permanent during the remainder of said Participant's lifetime.
"EFFECTIVE DATE" shall be the date of execution of this Plan.
"EMPLOYEE" means any person who is currently employed by the Bank or an
Affiliate, including officers.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"OFFERING" means the initial public offering by the Bank of up to 49.9% of
the number of shares of Common Stock that will be outstanding, after such
Offering.
"NORMAL RETIREMENT" means retirement at the normal or early retirement date
set forth in the Retirement Plan for Employees of Fidelity Federal Savings Bank
of Florida, or any successor plan.
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"PLAN" means the Recognition and Retention Plan for Employees of the Bank.
"RECIPIENT" means an Employee or Director of the Bank who receives a
Restricted Stock Award under this Plan.
"REORGANIZATION" means the reorganization of Fidelity Federal Savings Bank
of Florida as a mutual holding company and the establishment of the Bank as its
majority-owned subsidiary.
"RESTRICTED PERIOD" means the period of time selected by the Committee for
the purpose of determining when restrictions are in effect under Section 5
hereof with respect to Restricted Stock awarded under the Plan.
"RESTRICTED STOCK" means shares which have been contingently awarded to a
Recipient by the Committee subject to the restrictions referred to in Section 5
hereof, so long as such restrictions are in effect.
"STOCK HOLDING COMPANY" means the holding company resulting from a stock
conversion of the Company in a Conversion Transaction.
4. ADMINISTRATION OF THE PLAN.
4.01 ROLE OF THE COMMITTEE. The Plan shall be administered and interpreted
by the Committee, which shall have all of the powers allocated to it in this and
other Sections of the Plan. The interpretation and construction by the Committee
of any provisions of the Plan or of any Restricted Stock Award granted hereunder
shall be final and binding. The Committee shall act by vote or written consent
of a majority of its members. Subject to the express provisions and limitations
of the Plan, the Committee may adopt such rules, regulations and procedures as
it deems appropriate for the conduct of its affairs. The Committee shall report
its actions and decisions with respect to the Plan to the Board at appropriate
times, but in no event less than one time per calendar year.
4.02 ROLE OF THE BOARD. The members of the Committee shall be appointed or
approved by, and will serve at the pleasure of, the Board. The Board may in its
discretion from time to time remove members from, or add members to, the
Committee. The Board shall have all of the powers allocated to it in this and
other Sections of the Plan, may take any action under or with respect to the
Plan which the Committee is authorized to take, and may reverse or override any
action taken or decision made by the Committee under or with respect to the
Plan, provided, however, that except as provided in Section 6.05, the Board may
not revoke any Restricted Stock Award except in the event of Revocation for
Cause, or with respect to unearned Restricted Stock Awards in the event a
Recipient of a Restricted Stock Award voluntarily terminates employment with the
Bank prior to Normal Retirement.
4.03 LIMITATION ON LIABILITY. No member of the Board or the Committee
shall be liable for any determination made in good faith with respect to the
Plan or any Restricted Stock
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<PAGE>
Awards granted under it. If a member of the Board or the Committee is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of anything done or not done by him in such capacity
under or with respect to the Plan, the Bank shall indemnify such member against
expense (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in the best interests of the Bank and its Affiliates
and, with respect to any criminal action or proceeding, had no reasonable cause
to believe his conduct was unlawful.
5. ELIGIBILITY; AWARDS
5.01 ELIGIBILITY. Employees of the Bank and its Affiliates are eligible to
receive Restricted Stock Awards.
5.02 AWARDS TO EMPLOYEES The Committee may determine which of the
Employees referenced in Section 5.01 will be granted Restricted Stock Awards and
the number of Shares covered by each Award; provided, however, that in no event
shall any Awards be made that will violate the Plan, the Charter, Bylaws or Plan
of Reorganization from Mutual Savings Bank to Mutual Holding Company and Stock
Issuance Plan of the Bank or any applicable federal or state law or regulation.
Shares of Restricted Stock which are awarded by the Committee shall, on the date
of the Award, be registered in the name of the Recipient and transferred from
Trust to the Recipient, in accordance with the terms and conditions established
under this Plan. The total number of shares that will be awarded under this
Plan in connection with the Offering shall be two and nine-tenths (2.9%) of the
shares issued in the Offering. The total number of shares that may be awarded
under this Plan shall be no less than four percent (4%) of (i) the shares of
Common Stock of the Bank issued in the Offering and in any subsequent minority
stock offering of the Bank, and (ii) the shares of common stock issued by the
---
Stock Holding Company in the event of a Conversion Transaction, less any common
stock awarded or reserved for award to directors of the Bank under one or more
stock recognition plans; provided, however, that the total number of shares that
may be awarded in connection with any single stock offering by the Bank or the
Stock Holding Company may not exceed four percent (4%) of the shares issued in
such stock offering less any shares awarded or reserved for award to directors
of the Bank under one or more recognition plans; provided further, that in
determining the number of shares issued in a Conversion Transaction and the
number of shares that may be awarded under this Plan in the event of a
Conversion Transaction, any shares of Common Stock of the Bank exchanged for
shares of common stock of the Holding Company shall not be included.
In the event Restricted Stock is forfeited for any reason, the Committee,
from time to time, may determine which of the Employees referenced in Section
5.01 will be granted additional Restricted Stock Awards to be awarded from
forfeited Restricted Stock. In selecting those Employees to whom Restricted
Stock Awards will be granted and the number of Restricted Stock covered by such
Awards, the Committee shall consider the position and responsibilities of the
eligible Employees, the length and value of their services to the Bank and its
Affiliates,
4
<PAGE>
the compensation paid to the Employees and any other factors the Committee may
deem relevant, and the Committee may request the written recommendation of the
Chief Executive Officer and other senior executive officers of the Bank and its
Affiliates. All allocations by the Committee shall be subject to review, and
approval or rejection, by the Board.
No Restricted Stock shall be earned unless the Recipient maintains
Continuous Service with the Bank or any Affiliate until the restrictions lapse.
5.03 MANNER OF AWARD. As promptly as practicable after a determination is
made pursuant to Section 5.02 that a Restricted Stock Award has been granted,
the Committee shall notify the Recipient in writing of the grant of the Award,
the number of shares of Restricted Stock covered by the Award, and the terms
upon which the Restricted Stock subject to the Award may be earned. Upon
notification of an Award of Restricted Stock, the Recipient shall execute and
return to the Bank a restricted stock agreement setting forth the terms and
conditions under which the Recipient shall earn the Restricted Stock (the
"Restricted Stock Agreement), together with a stock power endorsed in blank.
Thereafter, the Recipient's Restricted Stock and stock power shall be deposited
with an escrow agent specified by the Bank (the "Escrow Agent") who shall hold
such Restricted Stock under the terms and conditions set forth in the Restricted
Stock Agreement. Each certificate in respect of shares of Restricted Stock
Awarded under the Plan shall be registered in the name of the Recipient.
5.04 TREATMENT OF FORFEITED SHARES In the event shares of Restricted Stock
are forfeited by a Recipient hereunder, such shares shall be returned to Trust
and shall be held and accounted for by such Trust pursuant to the terms of the
trust agreement until such time as the Committee re-awards such shares to
another Recipient, in accordance with the terms of this Plan and the applicable
state and federal laws, rules and regulations.
6. TERMS AND CONDITIONS OF RESTRICTED STOCK
The Committee shall have full and complete authority, subject to the
limitations of the Plan, to grant awards of Restricted Stock and, in addition to
the terms and conditions contained in paragraphs 6.01 through 6.09 of this
Section 6, to provide such other terms and conditions (which need not be
identical among Recipients) in respect of such Awards, and the vesting thereof,
as the Committee shall determine.
6.01 GENERAL RULES. Unless the Committee shall specifically state to the
contrary at the time a Restricted Stock Award is granted, Restricted Stock shall
be earned by a Recipient at the rate of thirty-three and one-third percent (33-
1/3%) of the aggregate number of shares covered by the Award at the end of each
full twelve months of consecutive employment with the Bank or an Affiliate after
the date of grant of the Award; provided, however, that the Committee may
provide for a less or more rapid earnings rate than set forth herein for any or
all Awards awarded subsequent to the date of this Plan and provided further,
that no shares shall be earned for any year in which the Bank is not meeting all
of its fully phased-in capital requirements. Subject to any such other terms
and conditions as the Committee shall provide, shares of
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<PAGE>
Restricted Stock may not be sold, assigned, transferred, pledged or otherwise
encumbered by the Recipient, except as hereinafter provided, during the
Restricted Period. The Committee shall have the authority, in its discretion,
to accelerate the time at which any or all of the restrictions shall lapse with
respect thereto, or to remove any or all of such restrictions, whenever it may
determine that such action is appropriate by reason of changes in applicable tax
or other laws or other changes in circumstances occurring after the commencement
of such Restricted Period.
6.02 CONTINUOUS SERVICE; FORFEITURE. Except as provided in Section 6.04
hereof, if a Recipient ceases to maintain Continuous Service for any reason
(other than death, Disability or Normal Retirement as provided in Section 6.03),
unless the Committee shall otherwise determine, all shares of Restricted Stock
theretofore awarded to such Recipient and which at the time of such termination
of Continuous Service are subject to the restrictions imposed by Section 6.01
shall upon such termination of Continuous Service be forfeited and returned to
Trust.
6.03 EXCEPTION FOR TERMINATION DUE TO DEATH DISABILITY OR NORMAL
RETIREMENT. Notwithstanding the general rule contained in 6.01, Restricted
Shares awarded to a Recipient whose employment with the Bank or an Affiliate
terminates due to death or Disability or Normal Retirement, or any part thereof
that has not theretofore been earned, shall be deemed earned as of the
Recipient's last day of employment with the Bank or an Affiliate.
6.04 EXCEPTION FOR TERMINATIONS AFTER A CHANGE IN CONTROL. Notwithstanding
the general rule contained in Section 6.01, all Restricted Stocks subject to a
Restricted Stock Award held by a Recipient whose service as an Employee of the
Bank or an Affiliate terminates following a Change in Control of the Bank or the
Company shall be deemed earned as of the Recipient's last day of service with
the Bank or an Affiliate. A "Change in Control" of the Bank shall mean:
(1) a reorganization, merger, merger conversion, consolidation or
sale of all or substantially all of the assets of the Bank or the Company or a
similar transaction occurs in which the Bank or the Company is not the resulting
entity;
(2) individuals who constitute the board of directors of the Bank or
the board of directors of the Company on the date hereof (the "Incumbent Board")
cease for any reason to constitute a majority thereof; provided that any person
becoming a director subsequent to the date hereof whose election was approved by
a vote of at least three-quarters of the directors comprising the Incumbent
Board, or whose nomination for election by the Company's stockholders was
approved by the same nominating committee serving under an Incumbent Board,
shall be, for purposes of this clause (ii), considered as though he were a
member of the Incumbent Board; or
(3) a change in control within the meaning of 12 C.F.R. (S) 574.4
occurs, as determined by the board of directors of the Bank or the Company;
provided, however, that a change in control shall not be deemed to occur under
paragraphs (1) or (3) of this Section 6.04
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<PAGE>
if the transaction(s) constituting a change in control is approved by a majority
of the board of directors of the Bank or the Company, as the case may be.
(4) In the event that the Company converts from the mutual form of
organization to the stock form of organization on a stand-alone basis at any
time subsequent to the effective date of this Agreement ("Stock Holding
Company"), a "change in control" of the Bank or the Stock Holding Company for
purposes of this Agreement shall mean an event of a nature that : (I) would be
required to be reported in response to Item 1 of the current report on Form 8-K,
as in effect on the date hereof; pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 (the "Exchange Act"); or (II) results in a
Change in Control of the Bank or the Stock Holding Company within the meaning of
the Home Owners' Loan Act of 1933 and the Rules and Regulations promulgated by
the Office of Thrift Supervision (or its predecessor agency), as in effect on
the date hereof; or (III) without limitation, such a change in control shall be
deemed to have occurred at such time as (a) any "person" (as the term is used in
Section 13(d) and 14(d) of the Exchange Act) other than the Stock Holding
Company is or becomes a "beneficial owner" (as defined in Rule 13-d under the
Exchange Act) directly or indirectly, of securities of the Bank representing 25%
or more of the Bank's outstanding securities ordinarily having the right to vote
at the election of directors except for any securities of the Bank purchased by
the Stock Holding Company in connection with the Reorganization and any
securities purchased by the Bank's employee stock ownership plan and trust shall
not be counted in determining whether such plan is the beneficial owner of more
than 25% of the Bank's securities; or (b) individuals who constitute the
Incumbent Board cease for any reason to constitute at least a majority thereof;
provided that any person becoming a director subsequent to the date hereof whose
election was approved by a vote of at least three-quarters of the directors
comprising the Incumbent Board, or whose nomination for election by the Stock
Holding Company's stockholders was approved by the same Nominating Committee
serving under an Incumbent Board, shall be, for purposes of this clause (a),
considered as though he were a member of the Incumbent Board; or (c) a
reorganization, merger, consolidation, sale of all or substantially all the
assets of the Bank or the Stock Holding Company or similar transaction occurs in
which the Bank or the Stock Holding Company is not the resulting entity and to
which the Incumbent Board does not consent; (d) a proxy statement soliciting
proxies from stockholders of the Bank, by someone other than the current
management of the Bank, seeking stockholder approval of a plan of
reorganization, merger or consolidation of the Stock Holding Company of the Bank
or similar transaction with one or more corporations as a result of which the
outstanding shares of the class of securities then subject to the plan or
transaction are exchanged or converted into cash or property or securities not
issued by the Bank or the Stock Holding Company; or (e) a tender offer is made
for 25% or more of the voting securities of the Bank and the shareholders owning
beneficially or of record 25% or more of the outstanding securities of the Bank
have tendered or offered to sell their shares pursuant to such tender offer and
such tendered shares have been accepted by the tender offeror.
Notwithstanding, the foregoing, a "Change in Control" of the Bank or the
Company shall not be deemed to have occurred if the Company ceases to own at
least 51% of all outstanding
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<PAGE>
shares of stock of the Bank in connection with a conversion of the Holding
Company from mutual to stock form.
6.05 REVOCATION FOR CAUSE. Notwithstanding anything hereinafter to the
contrary, the Board may by resolution immediately revoke, rescind and terminate
any Restricted Stock Award, or portion thereof, previously awarded under this
Plan, to the extent Restricted Stock has not been redelivered by the Escrow
Agent to the Recipient, whether or not yet earned, in the case of an Employee
whose employment is terminated by the Bank or an Affiliate for cause (as
hereinafter defined), or who is discovered after termination of employment to
have engaged in conduct that would have justified termination for Cause.
"Cause" is defined as personal dishonesty, willful misconduct, any breach of
fiduciary duty involving personal profit, intentional failure to perform stated
duties, or the willful violation of any law, rule or regulation (other than
traffic violations or similar offenses) or a final cease-and-desist order, any
of which results in a material loss to the Bank or an Affiliate.
6.06 RESTRICTED STOCK LEGEND. Each certificate in respect of shares of
Restricted Stock awarded under the Plan shall be registered in the name of the
Recipient and deposited by the Recipient, together with a stock power endorsed
in blank, with the Escrow Agent and shall bear the following (or a similar)
legend:
"The transferability of this certificate and the shares of stock
represented hereby are subject to the terms and conditions (including
forfeiture) contained in the Fidelity Federal Savings Bank of Florida
Recognition and Retention Plan for Employees. Copies of such Plan are
on file in the offices of the Secretary of Fidelity Federal Savings
Bank of Florida, 218 Datura Street, West Palm Beach, Florida 33402-
0989."
6.07 PAYMENT OF DIVIDENDS. After a Restricted Stock Award has been granted
but before such Award has been earned, the Recipient shall receive any cash
dividends or stock dividends paid with respect to such shares. Unless the
Recipient has made an election under Section 83(b) of the Internal Revenue Code,
any dividends so paid on shares which have not yet been earned by the Recipient
shall be treated as compensation income to the Recipient when paid.
6.08 VOTING OF RESTRICTED SHARES. After a Restricted Stock Award has been
granted, the Recipient as owner of such shares shall have the right to vote such
shares.
6.09 DELIVERY OF EARNED SHARES. At the expiration of the restrictions
imposed by Section 6.01, the Escrow Agent shall redeliver to the Recipient (or
where the relevant provision of Section 6.02 applies in the case of a deceased
Recipient, to his Beneficiary, the certificate(s) and stock power deposited with
it pursuant to Section 6.04 and the shares represented by such certificate(s)
shall be free of the restrictions referred to Section 6.01.
7. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION
8
<PAGE>
In the event of any change in the outstanding shares subsequent to the
effective date of the Plan by reason of any reorganization (other than the
Reorganization), recapitalization, stock split, stock dividend, combination or
exchange of shares, merger, consolidation or any change in the corporate
structure or shares of the Bank, the maximum aggregate number and class of
shares as to which Awards may be granted under the Plan shall be appropriately
adjusted by the Committee, whose determination shall be conclusive. Any shares
of stock or other securities received, as a result of any of the foregoing, by a
Recipient with respect to Restricted Stock shall be subject to the same
restrictions and the certificate(s) or other instruments representing or
evidencing such shares or securities shall be legended and deposited with the
Bank in the manner provided in Section 6.06 hereof.
8. ASSIGNMENTS AND TRANSFERS
No Award nor any right or interest of a Recipient under the Plan in any
instrument evidencing any Award under the Plan may be assigned, encumbered or
transferred except, in the event of the death of a Recipient, by will or the
laws of descent and distribution.
9. EMPLOYEE RIGHTS UNDER THE PLAN
No Employee shall have a right to be selected as a Recipient nor, having
been so selected, to be selected again as a Recipient and no Employee or other
person shall have any claim or right to be granted an Award under the Plan or
under any other incentive or similar plan of the Bank or any Affiliate. Neither
the Plan nor any action taken thereunder shall be construed as giving any
Employee any right to be retained in the employ of the Bank or any Affiliate.
10. WITHHOLDING TAX
Upon the termination of the Restricted Period with respect to any shares of
Restricted Stock (or at any such earlier time, if any, that an election is made
by the Recipient under Section 83(b) of the Code, or any successor provision
thereto, to include the value of such shares in taxable income), the Bank shall
have the right to require the Recipient or other person receiving such shares to
pay the Bank the amount of any taxes which the Bank is required to withhold with
respect to such shares, or, in lieu thereof, to retain or sell without notice, a
sufficient number of shares held by it to cover the amount required to be
withheld. The Bank shall have the right to deduct from all dividends paid with
respect to shares of Restricted Stock the amount of any taxes which the Bank is
required to withhold with respect to such dividend payments.
11. TREATMENT OF RESTRICTED STOCK IN THE EVENT OF CONVERSION TRANSACTION
In the event that the Company converts to stock form in a Conversion
Transaction, any Restricted Stock shall be exchanged into shares of Common Stock
of the Stock Holding Company, provided, however, that if for any reason such
shares are not to be exchanged, the Stock Holding Company shall, simultaneously
with the closing of the Conversion Transaction,
9
<PAGE>
purchase Restricted Stock for cash equal to the fair market value of such
Restricted Stock or Shares. Any exchange of shares or cash payment for shares
shall be subject to applicable federal and state regulations and, if necessary,
subject to the approval of the appropriate Regulatory authorities.
12. AMENDMENT OR TERMINATION
The Board of Directors of the Bank may amend, suspend or terminate the Plan
or any portion thereof at any time, but (except as provided in Section 6 hereof)
no amendment shall be made without approval of the stockholders of the Bank
which shall (i) materially increase the aggregate number of shares with respect
to which Awards may be made under the plan, (ii) materially increase the
aggregate number of shares which may be subject to Awards to Recipients who are
not Employees or (iii) change the class of persons eligible to participate in
the Plan; provided, however, that no such amendment, suspension or termination
shall impair the rights of any Recipient, without his consent, in any Award
theretofore made pursuant to the Plan.
13. GOVERNING LAW
The Plan shall be governed by the laws of the State of Florida.
14. TERM OF PLAN
The Plan shall become effective upon its adoption by the Board of Directors
of the Bank, subject to the Bank's completion of the Reorganization and the
approval of the Plan by stockholders. It shall continue in effect for a term of
fifteen years unless sooner terminated under Section 12 hereof.
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<PAGE>
IN WITNESS WHEREOF, the Bank has caused this Plan to be executed by its
duly authorized officers and the corporate seal to be affixed and duly attested,
as of the 7th day of January, 1994.
-------
ATTEST: FIDELITY FEDERAL SAVINGS BANK
OF FLORIDA
/s/ Patricia Clager /s/ Vince A. Elhilow
- --------------------------------- -------------------------------------------
Patricia Clager, Secretary Vince A. Elhilow, President
and Chief Executive Officer
11
<PAGE>
EXHIBIT 10.8
FIDELITY FEDERAL SAVINGS BANK OF FLORIDA
RECOGNITION AND RETENTION PLAN
FOR OUTSIDE DIRECTORS
1. ESTABLISHMENT OF THE PLAN; CREATION OF SEPARATE TRUST
1.01 Fidelity Federal Savings Bank of Florida hereby establishes the Bank
Recognition Plan for Outside Directors (the "Plan") upon the terms and
conditions hereinafter stated in this Recognition Plan.
1.02 A separate trust or trusts has been established to purchase the shares
of the Bank's Common Stock that will be awarded hereunder (the "Trust"). If a
Recipient hereunder fails to satisfy the conditions of the Plan and forfeits all
or any portion of the Bank's Common Stock awarded to him, such forfeited shares
will be returned to said Trust.
2. PURPOSE OF THE PLAN
The purpose of the Recognition and Retention Plan ("Plan") is to promote
the long-term interests of Fidelity Federal Savings Bank of Florida (the "Bank")
and its stockholders by providing a means for attracting and retaining directors
of the Bank.
3. DEFINITIONS
The following words and phrases when used in this Plan with an initial
capital letter, unless the context clearly indicates otherwise, shall have the
meanings set forth below. Wherever appropriate, the masculine pronoun shall
include the feminine pronoun and the singular shall include the plural:
"AWARD" means the grant by the Committee of Restricted Stock, as provided
in the Plan.
"AFFILIATE" means any "parent corporation" or "subsidiary corporation" of
the Bank, as such terms are defined in Section 424(e) and (f), respectively, of
the Code.
"BANK" means Fidelity Federal Savings Bank of Florida.
"BENEFICIARY" means the person or persons designated by a Recipient to
receive any benefits payable under the Plan in the event of such Recipient's
death. Such person or persons shall be designated in writing on forms provided
for this purpose by the Committee and may be changed from time to time by
similar written notice to the Committee. In the absence of a written
designation, the Beneficiary shall be the Recipient's surviving spouse, if any,
or if none, his estate.
"BOARD" means the Board of Directors of the Bank.
<PAGE>
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMITTEE" means a Committee of the Board consisting of all non-employee
Directors of the Bank.
"COMPANY" means Fidelity Bankshares, MHC.
"COMMON STOCK" means shares of the common stock of the Bank.
"CONTINUOUS SERVICE" means the absence of any interruption or termination
of service as a Director of the Bank.
"CONVERSION TRANSACTION" means the conversion of the Company from the
mutual to stock form of organization either on a stand-alone basis or in the
context of a merger conversion, as provided by regulations of the Office of
Thrift Supervision ("OTS").
"DIRECTOR" means any director of the Bank or an Affiliate.
"DISABILITY" means the permanent and total inability by reason of mental
or physical infirmity, or both, of a Director to carry out the responsibilities
of a Director of the Bank, as required by applicable state and federal law.
"EFFECTIVE DATE" shall be the date of execution of this Plan.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"OFFERING" means the initial public offering by the Bank of up to 49.9% of
the number of shares of Common Stock that will be outstanding, after such
Offering.
"PLAN" means the Recognition and Retention Plan for Outside Directors of
the Bank.
"RECIPIENT" means a Director of the Bank who receives a Restricted Stock
Award under this Plan.
"REORGANIZATION" means the reorganization of Fidelity Federal Savings Bank
of Florida as a mutual holding company and the establishment of the Bank as its
majority-owned subsidiary.
"RESTRICTED PERIOD" means the period of time selected by the Committee for
the purpose of determining when restrictions are in effect under Section 5
hereof with respect to Restricted Stock awarded under the Plan.
"RESTRICTED STOCK" means shares which have been contingently awarded to a
Recipient by the Committee subject to the restrictions referred to in Section 5
hereof, so long as such restrictions are in effect.
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<PAGE>
"STOCK HOLDING COMPANY" means the holding company resulting from a stock
conversion of the Company in a Conversion Transaction.
4. ADMINISTRATION OF THE PLAN
4.01 ROLE OF THE COMMITTEE. The Plan shall be administered and interpreted
by the Committee, which shall have all of the powers allocated to it in this and
other Sections of the Plan. The interpretation and construction by the
Committee of any provisions of the Plan or of any Restricted Stock Award granted
hereunder shall be final and binding. The Committee shall act by vote or
written consent of a majority of its members. Subject to the express provisions
and limitations of the Plan, the Committee may adopt such rules, regulations and
procedures as it deems appropriate for the conduct of its affairs. The
Committee shall report its actions and decisions with respect to the Plan to the
Board at appropriate times, but in no event less than one time per calendar
year.
4.02 ROLE OF THE BOARD. The members of the Committee shall be appointed or
approved by, and will serve at the pleasure of, the Board. The Board may in its
discretion from time to time remove members from, or add members to, the
Committee. The Board shall have all of the powers allocated to it in this and
other Sections of the Plan, may take any action under or with respect to the
Plan which the Committee is authorized to take, and may reverse or override any
action taken or decision made by the Committee under or with respect to the
Plan, provided, however, that except as provided in Section 6.05, the Board may
not revoke any Restricted Stock Award except in the event of Revocation for
Cause, or with respect to unearned Restricted Stock Awards in the event a
Recipient of a Restricted Stock Award is no longer a Director.
4.03 PLAN ADMINISTRATION RESTRICTIONS. This Plan is intended to comply
with Rule 16b-3 under the Securities Exchange Act of 1934. Notwithstanding any
term to the contrary appearing in this Plan, unless permitted by Rule 16b-
3(c)(2)(ii), subsequent to the establishment of the Plan the Trustee, the
Committee, and the Board of Directors shall not have the authority to determine
the amount and price of securities to be awarded and/or timing of awards to
designated Directors or categories of Directors, which terms shall be set forth
in the Plan. To the extent any provision of the Plan or action by Plan
administrators fails to comply with this Section, such provision or action shall
be deemed null and void to the extent permitted by law and deemed advisable by
the Board of Directors.
4.04 LIMITATION ON LIABILITY. No member of the Board or the Committee
shall be liable for any determination made in good faith with respect to the
Plan or any Restricted Stock Awards granted under it. If a member of the Board
or the Committee is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of anything done or not
done by him in such capacity under or with respect to the Plan, the Bank shall
indemnify such member against expense (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if
3
<PAGE>
he acted in good faith and in a manner he reasonably believed to be in the best
interests of the Bank and its Affiliates and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his conduct was
unlawful.
5. ELIGIBILITY; AWARDS
5.01 ELIGIBILITY. Directors of the Bank and its Affiliates are eligible to
receive Restricted Stock Awards.
5.02 OUTSIDE DIRECTORS AWARDS Subject to approval of the Plan by the
stockholders, each member of the Board of Directors of the Bank who is not a
full-time employee of the Bank shall be issued a Restricted Stock Award in this
Offering and each subseqeunt minority offering or in a Conversion Transaction,
in the amount set forth below:
<TABLE>
<CAPTION>
DIRECTOR AWARD
------------- -----
<S> <C>
Frederic T. DeHon 8,300
Donald E. Warren, M.D. 8,300
F. Ted Brown, Jr. 7,000
Keith D. Beaty 4,100
Christopher H. Cook 4,100
</TABLE>
The total number of shares that will be awarded under this Plan in
connection with the Offering shall be one and fifteen-hundredths percent (1.15%)
of the shares issued in the Offering. The total number of shares that may be
awarded or available for award under this Plan shall be no less than four
percent (4%) of (i) the shares of Common Stock of the Bank issued in the
Offering and in any subsequent minority stock offering of the Bank, and (ii) the
---
shares of common stock issued by the Stock Holding Company in the event of a
Conversion Transaction; provided, however, that the total number of shares that
may be awarded in connection with any single stock offering by the Bank or the
Stock Holding Company may not exceed four percent (4%) of the shares issued in
such stock offering less any shares awarded or reserved for award to employees
of the Bank under one or more recognition plans; provided further, that in
determining the number of shares issued in a Conversion Transaction and the
number of shares that may be awarded under this Plan in the event of a
Conversion Transaction, any shares of Common Stock of the Bank exchanged for
shares of common stock of the Stock Holding Company shall not be included.
Any person who becomes a Director of the Bank subsequent to the
Offering shall receive Restricted Stock equal to 100 shares, subject to
availability.
5.03 MANNER OF AWARD. As promptly as practicable after a Restricted Stock
Award has been granted, the Committee shall notify the Recipient in writing of
the grant of the Award, the number of shares of Restricted Stock covered by the
Award, and the terms upon which the Restricted Stock subject to the Award may be
earned. Upon receipt of notification of an Award
4
<PAGE>
of Restricted Stock, the Recipient shall execute and return to the Bank a
restricted stock agreement setting forth the terms and conditions under which
the Recipient shall earn the Restricted Stock (the "Restricted Stock Agreement),
together with a stock power endorsed in blank. Thereafter, the Recipient's
Restricted Stock and stock power shall be deposited with an escrow agent
specified by the Bank (the "Escrow Agent") who shall hold such Restricted Stock
under the terms and conditions set forth in the Restricted Stock Agreement.
Each certificate in respect of shares of Restricted Stock Awarded under the Plan
shall be registered in the name of the Recipient.
5.04 TREATMENT OF FORFEITED SHARES In the event shares of Restricted Stock
are forfeited by a Recipient hereunder, such shares shall be returned to Trust
and shall be held and accounted for by such Trust pursuant to the terms of the
trust agreement until such time as such shares are awarded to another Recipient,
in accordance with the terms of this Plan and the applicable state and federal
laws, rules and regulations.
6. TERMS AND CONDITIONS OF RESTRICTED STOCK
The Committee shall have full and complete authority, subject to the
limitations of the Plan, to grant awards of Restricted Stock and, in addition to
the terms and conditions contained in paragraphs 6.01 to 6.09 of this Section 6,
to provide such other terms and conditions (which need not be identical among
Recipients) in respect of such Awards, and the vesting thereof, as the Committee
shall determine.
6.01 GENERAL RULES. Unless the Committee shall specifically state to the
contrary at the time a Restricted Stock Award is granted, Restricted Stock shall
be earned by a Recipient at the rate of thirty-three and one-third percent (33-
1/3%) of the aggregate number of shares covered by the Award at the end of each
full twelve months of consecutive service with the Bank or an Affiliate after
the date of grant of the Award; provided, however, that no shares shall be
earned for any year in which the Bank is not meeting all of its fully phased-in
capital requirements. Subject to any such other terms and conditions as the
Committee shall provide, shares of Restricted Stock may not be sold, assigned,
transferred, pledged or otherwise encumbered by the Recipient, except as
hereinafter provided, during the Restricted Period. The Committee shall have
the authority, in its discretion, to accelerate the time at which any or all of
the restrictions shall lapse with respect thereto, or to remove any or all of
such restrictions, whenever it may determine that such action is appropriate by
reason of changes in applicable tax or other laws or other changes in
circumstances occurring after the commencement of such Restricted Period.
6.02 CONTINUOUS SERVICE; FORFEITURE. Except as provided in Section 6.04
hereof, if a Recipient ceases to maintain Continuous Service for any reason
(other than death or Disability as provided in Section 6.02), unless the
Committee shall otherwise determine, all shares of Restricted Stock theretofore
awarded to such Recipient and which at the time of such termination of
Continuous Service are subject to the restrictions imposed by Section 6.01 shall
upon such termination of Continuous Service be forfeited and returned to Trust.
5
<PAGE>
6.03 EXCEPTION FOR TERMINATION DUE TO DEATH OR DISABILITY. Notwithstanding
the general rule contained in 6.01, Restricted Shares awarded to a Recipient
whose employment with the Bank or an Affiliate terminates due to death or
Disability, or any part thereof that has not theretofore been earned, shall be
deemed earned as of the Recipient's last day of service with the Bank or an
Affiliate.
6.04 EXCEPTION FOR TERMINATIONS AFTER A CHANGE IN CONTROL. Notwithstanding
the general rule contained in Section 6.01, all Restricted Stocks subject to a
Restricted Stock Award held by a Recipient whose service as a Director of the
Bank or an Affiliate terminates following a Change in Control of the Bank or the
Company shall be deemed earned as of the Recipient's last day of service with
the Bank or an Affiliate. A "Change in Control" of the Bank shall mean:
(1) a reorganization, merger, merger conversion, consolidation or sale
of all or substantially all of the assets of the Bank or the Company or a
similar transaction occurs in which the Bank or the Company is not the resulting
entity;
(2) individuals who constitute the board of directors of the Bank or
the board of directors of the Company on the date hereof (the "Incumbent Board")
cease for any reason to constitute a majority thereof; provided that any person
becoming a director subsequent to the date hereof whose election was approved by
a vote of at least three-quarters of the directors comprising the Incumbent
Board, or whose nomination for election by the Company's stockholders was
approved by the same nominating committee serving under an Incumbent Board,
shall be, for purposes of this clause (ii), considered as though he were a
member of the Incumbent Board; or
(3) a change in control within the meaning of 12 C.F.R. (S) 574.4
occurs, as determined by the board of directors of the Bank or the Company;
provided, however, that a change in control shall not be deemed to occur under
paragraphs (1) or (3) of this Section 6.04 if the transaction(s) constituting a
change in control is approved by a majority of the board of directors of the
Bank or the Company, as the case may be.
(4) In the event that the Company converts from the mutual form of
organization to the stock form of organization on a stand-alone basis at any
time subsequent to the effective date of this Agreement ("Stock Holding
Company"), a "change in control" of the Bank or the Stock Holding Company for
purposes of this Agreement shall mean an event of a nature that : (I) would be
required to be reported in response to Item 1 of the current report on Form 8-K,
as in effect on the date hereof; pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 (the "Exchange Act"); or (II) results in a
Change in Control of the Bank or the Stock Holding Company within the meaning of
the Home Owners' Loan Act of 1933 and the Rules and Regulations promulgated by
the Office of Thrift Supervision (or its predecessor agency), as in effect on
the date hereof; or (III) without limitation, such a change in control shall be
deemed to have occurred at such time as (a) any "person" (as the term is used in
Section 13(d) and 14(d) of the Exchange Act) other than the Stock Holding
Company is or becomes a
6
<PAGE>
"beneficial owner" (as defined in Rule 13-d under the Exchange Act) directly or
indirectly, of securities of the Bank representing 25% or more of the Bank's
outstanding securities ordinarily having the right to vote at the election of
directors except for any securities of the Bank purchased by the Stock Holding
Company in connection with the Reorganization and any securities purchased by
the Bank's employee stock ownership plan and trust shall not be counted in
determining whether such plan is the beneficial owner of more than 25% of the
Bank's securities; or (b) individuals who constitute the Incumbent Board cease
for any reason to constitute at least a majority thereof; provided that any
person becoming a director subsequent to the date hereof whose election was
approved by a vote of at least three-quarters of the directors comprising the
Incumbent Board, or whose nomination for election by the Stock Holding Company's
stockholders was approved by the same Nominating Committee serving under an
Incumbent Board, shall be, for purposes of this clause (a), considered as though
he were a member of the Incumbent Board; or (c) a reorganization, merger,
consolidation, sale of all or substantially all the assets of the Bank or the
Stock Holding Company or similar transaction occurs in which the Bank or the
Stock Holding Company is not the resulting entity and to which the Incumbent
Board does not consent; (d) a proxy statement soliciting proxies from
stockholders of the Bank, by someone other than the current management of the
Bank, seeking stockholder approval of a plan of reorganization, merger or
consolidation of the Stock Holding Company of the Bank or similar transaction
with one or more corporations as a result of which the outstanding shares of the
class of securities then subject to the plan or transaction are exchanged or
converted into cash or property or securities not issued by the Bank or the
Stock Holding Company; or (e) a tender offer is made for 25% or more of the
voting securities of the Bank and the shareholders owning beneficially or of
record 25% or more of the outstanding securities of the Bank have tendered or
offered to sell their shares pursuant to such tender offer and such tendered
shares have been accepted by the tender offeror.
Notwithstanding, the foregoing, a "Change in Control" of the Bank or the
Company shall not be deemed to have occurred if the Company ceases to own at
least 51% of all outstanding shares of stock of the Bank in connection with a
conversion of the Holding Company from mutual to stock form.
6.05 REVOCATION FOR CAUSE. Notwithstanding anything hereinafter to the
contrary, the Board may by resolution immediately revoke, rescind and terminate
any Restricted Stock Award, or portion thereof, previously awarded under this
Plan, to the extent Restricted Stock has not been redelivered by the Escrow
Agent to the Recipient, whether or not yet earned, in the case of a Director
whose service is terminated by the Bank or an Affiliate for cause (as
hereinafter defined), or who is discovered after termination of service to have
engaged in conduct that would have justified termination for Cause. "Cause" is
defined as personal dishonesty, willful misconduct, any breach of fiduciary duty
involving personal profit, intentional failure to perform stated duties, or the
willful violation of any law, rule or regulation (other than traffic violations
or similar offenses) or a final cease-and-desist order, any of which results in
a material loss to the Bank or an Affiliate.
7
<PAGE>
6.06 RESTRICTED STOCK LEGEND. Each certificate in respect of shares of
Restricted Stock awarded under the Plan shall be registered in the name of the
Recipient and deposited by the Recipient, together with a stock power endorsed
in blank, with the Escrow Agent and shall bear the following (or a similar)
legend:
"The transferability of this certificate and the shares
of stock represented hereby are subject to the terms and
conditions (including forfeiture) contained in the Fidelity
Federal Savings Bank of Florida Recognition and Retention
Plan for Outside Directors. Copies of such Plan are on file
in the offices of the Secretary of Fidelity Federal Savings
Bank of Florida, 218 Datura Street, West Palm Beach, Florida
33402-0989."
6.07 PAYMENT OF DIVIDENDS. After a Restricted Stock Award has been granted
but before such Award has been earned, the Recipient shall receive any cash
dividends or stock dividends paid with respect to such shares. Unless the
Recipient has made an election under Section 83(b) of the Internal Revenue Code,
any dividends so paid on shares which have not yet been earned by the Recipient
shall be treated as compensation income to the Recipient when paid.
6.08 VOTING OF RESTRICTED SHARES. After a Restricted Stock Award has been
granted, the Recipient as owner of such shares shall have the right to vote such
shares.
6.09 DELIVERY OF EARNED SHARES. At the expiration of the restrictions
imposed by Section 6.01, the Escrow Agent shall redeliver to the Recipient (or
where the relevant provision of Section 6.02 applies in the case of a deceased
Recipient, to his Beneficiary, the certificate(s) and stock power deposited with
it pursuant to Section 6.04 and the shares represented by such certificate(s)
shall be free of the restrictions referred to Section 6.01.
7. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION
In the event of any change in the outstanding shares subsequent to the
effective date of the Plan by reason of any reorganization (other than the
Reorganization), recapitalization, stock split, stock dividend, combination or
exchange of shares, merger, consolidation or any change in the corporate
structure or shares of the Bank, the maximum aggregate number and class of
shares as to which Awards may be granted under the Plan shall be appropriately
adjusted by the Committee, whose determination shall be conclusive. Any shares
of stock or other securities received, as a result of any of the foregoing, by a
Recipient with respect to Restricted Stock shall be subject to the same
restrictions and the certificate(s) or other instruments representing or
evidencing such shares or securities shall be legended and deposited with the
Bank in the manner provided in Section 6.06 hereof.
8
<PAGE>
8. ASSIGNMENTS AND TRANSFERS
No Award nor any right or interest of a Recipient under the Plan in any
instrument evidencing any Award under the Plan may be assigned, encumbered or
transferred except, in the event of the death of a Recipient, by will or the
laws of descent and distribution.
9. DIRECTOR RIGHTS UNDER THE PLAN
No Director shall have a right to be selected as a Recipient nor, having
been so selected, to be selected again as a Recipient and no Director, or other
person shall have any claim or right to be granted an Award under the Plan or
under any other incentive or similar plan of the Bank or any Affiliate. Neither
the Plan nor any action taken thereunder shall be construed as giving any
Director any right to be retained in the service of the Bank or any Affiliate.
10. WITHHOLDING TAX
Upon the termination of the Restricted Period with respect to any shares of
Restricted Stock (or at any such earlier time, if any, that an election is made
by the Recipient under Section 83(b) of the Code, or any successor provision
thereto, to include the value of such shares in taxable income), the Bank shall
have the right to require the Recipient or other person receiving such shares to
pay the Bank the amount of any taxes which the Bank is required to withhold with
respect to such shares, or, in lieu thereof, to retain or sell without notice, a
sufficient number of shares held by it to cover the amount required to be
withheld. The Bank shall have the right to deduct from all dividends paid with
respect to shares of Restricted Stock the amount of any taxes which the Bank is
required to withhold with respect to such dividend payments.
11. TREATMENT OF RESTRICTED STOCK IN THE EVENT OF CONVERSION TRANSACTION
In the event that the Company converts to stock form in a Conversion
Transaction, any Restricted Stock shall be exchanged into shares of Common Stock
of the Stock Holding Company, provided, however, that if for any reason such
shares are not to be exchanged, the Stock Holding Company shall, simultaneously
with the closing of the Conversion Transaction, purchase Restricted Stock for
cash equal to the fair market value of such Restricted Stock or Shares. Any
exchange of shares or cash payment for shares shall be subject to applicable
federal and state regulations and, if necessary, subject to the approval of the
appropriate Regulatory authorities.
12. AMENDMENT OR TERMINATION
The Board of Directors of the Bank may amend, suspend or terminate the Plan
or any portion thereof at any time, but (except as provided in Section 6 hereof)
no amendment shall be made without approval of the stockholders of the Bank
which shall (i) materially increase the aggregate number of shares with respect
to which Awards may be made under the plan, (ii) materially increase the
aggregate number of shares which may be subject to Awards to
9
<PAGE>
Recipients who are not Employees or (iii) change the class of persons eligible
to participate in the Plan; provided, however, that no such amendment,
suspension or termination shall impair the rights of any Recipient, without his
consent, in any Award theretofore made pursuant to the Plan.
Notwithstanding anything in this Plan to the contrary, to the extent that
the Plan provides for formula awards, as defined in Rule 16b-3(c)(2)(ii) under
the Securities Exchange Act of 1934, such provisions may not be amended more
than once every six months, other than to comport with changes in the Code,
ERISA or the rules thereunder.
13. GOVERNING LAW
The Plan shall be governed by the laws of the State of Florida.
14. TERM OF PLAN
The Plan shall become effective upon its adoption by the Board of Directors
of the Bank, subject to the Bank's completion of the Reorganization and the
approval of the Plan by stockholders. It shall continue in effect for a term of
fifteen years unless sooner terminated under Section 12 hereof.
10
<PAGE>
IN WITNESS WHEREOF, the Bank has caused this Plan to be executed by its
duly authorized officers and the corporate seal to be affixed and duly attested,
as of the 7th day of January, 1994.
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ATTEST: FIDELITY FEDERAL SAVINGS BANK OF FLORIDA
/s/ Patricia Clager /s/ Vince A. Elhilow
- -------------------------- -------------------------------------
Patricia Clager, Secretary Vince A. Elhilow, President and Chief Executive
Officer
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EXHIBIT 99
REVOCABLE PROXY
FIDELITY FEDERAL SAVINGS BANK OF FLORIDA
SPECIAL MEETING OF SHAREHOLDERS
_______________, 1997
The undersigned hereby appoints the official proxy committee consisting of
the Board of Directors with full powers of substitution to act as attorneys and
proxies for the undersigned to vote all shares of Common Stock of the Bank which
the undersigned is entitled to vote at the Special Meeting of Shareholders
("Special Meeting") to be held at the __________________________,
__________________, ___________, Florida, on ______________, 1997, at _____
__.m. local time. The official proxy committee is authorized to cast all votes
to which the undersigned is entitled as follows:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
--- ------- -------
<S> <C> <C> <C> <C>
1. The approval of an Agreement and Plan of [_] [_] [_]
Reorganization (the "Plan of Reorganization")
providing for the establishment of Fidelity
Bankshares, Inc. (the "Stock Holding
Company") as a stock holding company
parent of the Bank which stock holding
company will be majority-owned by Fidelity
Bankshares, M.H.C. (the "Mutual Holding
Company"), the Bank's mutual holding
company. Pursuant to the Plan of
Reorganization: (i) the Bank will become a
wholly-owned subsidiary of the Stock Holding
Company which will become a majority-
owned subsidiary of the Mutual Holding
Company, and (ii) each outstanding share of
common stock, par value $1.00 per share, of
the Bank will be converted into one share of
common stock, par value $.10 per share, of
the Stock Holding Company.
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE LISTED PROPOSAL.
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED, THIS
PROXY WILL BE VOTED FOR THE PROPOSITION STATED ABOVE. IF ANY OTHER BUSINESS IS
PRESENTED AT THE SPECIAL MEETING, THIS PROXY WILL BE VOTED AS DIRECTED BY A
MAJORITY OF THE BOARD OF DIRECTORS. AT THE PRESENT TIME, THE BOARD OF DIRECTORS
KNOWS OF NO OTHER BUSINESS TO BE PRESENTED AT THE SPECIAL MEETING.
________________________________________________________________________________
<PAGE>
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
Should the undersigned be present and elect to vote at the Special Meeting or at
any adjournment thereof and after notification to the Secretary of the Bank at
the Special Meeting of the stockholder's decision to terminate this proxy, then
the power of said attorneys and proxies shall be deemed terminated and of no
further force and effect. This proxy may also be revoked by sending written
notice to the Secretary of the Bank at the address set forth on the Notice of
Special Meeting of Stockholders, or by the filing of a later proxy prior to a
vote being taken on a particular proposal at the Special Meeting.
The undersigned acknowledges receipt from the Bank prior to the execution of
this proxy of notice of the Annual Meeting, and a Prospectus/Proxy Statement
dated ___________, 1997.
Dated: _________________, 1997 [_] Check Box if You Plan
to Attend the Special Meeting
__________________________ __________________________________
PRINT NAME OF STOCKHOLDER PRINT NAME OF STOCKHOLDER
__________________________ __________________________________
SIGNATURE OF STOCKHOLDER SIGNATURE OF STOCKHOLDER
Please sign exactly as your name appears on this card. When signing as
attorney, executor, administrator, trustee or guardian, please give your full
title.
________________________________________________________________________________
PLEASE COMPLETE AND DATE THIS PROXY AND RETURN IT PROMPTLY
IN THE ENCLOSED POSTAGE-PREPAID ENVELOPE.
________________________________________________________________________________
