<PAGE>
As filed with the Securities and Exchange Commission on December 20, 1996
Registration No. ______________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________________________
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
______________________________
HARBOR FLORIDA BANCORP, INC.
----------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
Delaware 6712 Applied For
-------- ---- -----------
<S> <C> <C>
(State or other jurisdiction of (Primary Standard Industrial I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.
</TABLE>
100 S. Second Street
Fort Pierce, Florida 34950
(561) 461-2414
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
Michael J. Brown, Sr.
100 S. Second Street
Fort Pierce, Florida 34950
(561) 461-2414
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copies of Communications to:
Raymond J. Gustini, Esq.
Peabody & Brown
1255 23rd St., N.W., Suite 800
Washington, D.C. 20037
(202) 973-7700
<PAGE>
Approximate date of commencement of proposed sale to public:
As soon as practicable after this Registration Statement becomes effective.
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]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------------------
Proposed Proposed
Title of each class of Maximum Maximum
securities to be Amount to be Offering Price Aggregate Amount of
registered Registered/(1)/ Per Unit/(2)/ Offering Price/(2)/ Registration Fee
---------- --------------- ------------- ------------------- ----------------
- - ----------------------------------------------------------------------------------------------------
- - ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock,
$0.01 par 4,937,187 $32.75 $161,692,874.25 $48,998
value per share
- - ---------------------------------------------------------------------------------------------------
</TABLE>
(1) Based on the maximum number of shares to be issued in respect of the same
number of shares of Harbor Federal Savings Bank common stock outstanding upon
the consummation of the Reorganization described herein.
(2) Estimated solely for purposes of determining the registration fee and
based, in accordance with Rule 457(f)(1), upon the average of the prices of
common stock of Harbor Federal Savings Bank as reported by the NASDAQ on
December 18, 1996.
2
<PAGE>
HARBOR FLORIDA BANCORP, INC.
Cross-Reference Sheet
For
Registration Statement on Form S-4 and
Proxy Statement/Prospectus
<TABLE>
<CAPTION>
Item Caption Caption in Prospectus
------- ---------------------
Number
- - ------
<S> <C> <C>
1 Forepart of Facing Page of Registration
Registration Statement; Cross Reference
Statement and Sheet; Proxy
Outside Front Page Statement/Prospectus Cover
of Prospectus Page
2 Inside Front and Available Information;
Outside Back Cover Proxy Statement/Prospect
Pages of Prospectus Cover Page; Outside Back
Cover Pages
3 Risk Factors, Ratio Summary; Election of
of Earnings to Fixed Directors of Harbor
Charges and Other Federal; Formation of
Information Middle Tier Holding Company
4 Terms of the Formation of Middle Tier
Transaction Holding Company --
Description of the
Reorganization
5 Pro Forma Financial Not Applicable
Information
6 Material Contacts Not Applicable
with the Company
Being Acquired
7 Additional Not Applicable
Information Not
Required for
Reoffering by
Persons Deemed to be
Underwriters
8 Interests of Named Not Applicable
Experts and Counsel
</TABLE>
3
<PAGE>
<TABLE>
<S> <C> <C>
9 Disclosure of Commission Formation of Middle
Position on Tier Holding Company
Indemnification for -- Indemnification
Securities Act
Liabilities
10 Information with Respect Not Applicable
to S-3 Registrants
11 Incorporation of Certain Not Applicable
Information by Reference
12 Information with Respect Not Applicable
to S-2 or S-3 Registrants
13 Incorporation of Certain Not Applicable
Information by Reference
14 Information with Respect Summary; Formation of
to Registrants Other Middle Tier Holding
Than S-3 or S-2 Company -- Business of
Registrants Bancorp -- Business of
Harbor Federal
15 Information with Respect Not Applicable
to S-3 Companies
16 Information with Respect Not Applicable
to S-2 or S-3 Companies
17 Information with Respect Summary; Formation of
to Companies Other Than Middle Tier Holding
S-2 or S-3 Companies Company -- Business of
Bancorp -- Business of
Harbor Federal; Legal
Proceedings
18 Information if Proxies, Summary; Information
Consents or Concerning the Annual
Authorizations are to be Meeting of
Solicited Shareholders;Principal
Shareholders;
Solicitation of
Proxies; Revocation of
Proxies; Formation of
Middle Tier Holding
Company; Ratification
of Appointment of
Independent Auditors
19 Information if Proxies, Not Applicable
Consents or
Authorizations are not
to be Solicited or in
an Exchange Offer
</TABLE>
4
<PAGE>
HARBOR FEDERAL SAVINGS BANK
100 S. Second Street
Fort Pierce, FL 34540
(561) 461-2414
January _______, 1997
Dear Shareholder:
You are cordially invited to attend the 1997 Annual Meeting of
Shareholders (the "Annual Meeting") of Harbor Federal Savings Bank ("Harbor
Federal") to be held on January 28, 1997, at 10:00 a.m., Eastern Standard Time,
at the Old City Hall Annex, 315 Avenue A, Fort Pierce, Florida 34950.
The Annual Meeting has been called for the following purposes: (i) to
approve an Agreement and Plan of Reorganization ("Plan of Reorganization")
pursuant to which a proposed new middle tier holding company, Harbor Florida
Bancorp, Inc., a Delaware stock corporation ("Bancorp"), will be formed.
Bancorp will in a one-for-one exchange with Harbor Federal's shareholders
acquire all the issued and outstanding common stock of Harbor Federal and will,
as a result of the exchange, become the middle tier stock holding company for
Harbor Federal. Harbor Financial, M.H.C., Harbor Federal's mutual holding
company (the "Mutual Holding Company") will hold the majority of Bancorp's
common stock issued and outstanding; (ii) to elect three (3) directors of Harbor
Federal for three-year terms; (iii) to ratify the appointment by Harbor
Federal's Board of Directors of the firm of KPMG Peat Marwick LLP, as
independent public accountants of Harbor Federal for the fiscal year ending
September 30, 1997; (iv) to transact such other business as may properly come
before the Annual Meeting or any adjournments thereof.
The Plan of Reorganization was adopted by the Board of Directors of
Harbor Federal on November 27, 1996. Pursuant to the Plan of Reorganization,
which is subject to regulatory and shareholder approval, each outstanding share
of Harbor Federal's common stock will be converted into one share of Bancorp
common stock, and Harbor Federal will become a wholly-owned subsidiary of
Bancorp. The Mutual Holding Company, which currently holds the majority of
Harbor Federal's issued and outstanding common stock, will hold the majority of
Bancorp's common stock and is statutorily required to do so as long as the
Mutual Holding Company remains in existence. The Mutual Holding Company intends
to cast its shares, which represent 53.79% of the issued and outstanding shares
of common stock of Harbor Federal, in favor of the Reorganization.
5
<PAGE>
Harbor Federal will continue operations in the same offices and with
the same directors, officers and other employees. Pursuant to the regulations
of the Office of Thrift Supervision ("OTS") stockholders of Harbor Federal will
not have dissenters' rights in connection with the Plan of Reorganization.
In your Board's opinion, the Plan of Reorganization will, thorough the
establishment of Bancorp, create a corporate structure which will facilitate
growth through potential acquisitions of financial institutions and permit,
through a program of stock repurchases, a reduction in excess capital and
improvement in capital ratios and the returns thereby. The Reorganization is
more fully described in the enclosed Proxy Statement/Prospectus.
Your Board believes that the formation of a middle tier holding
company is in the best interests of Harbor Federal and its shareholders and
therefore unanimously recommends that you vote "FOR" this proposal. Your Board
also recommends that you vote "FOR" the election of its three nominees as
directors of Harbor Federal, and "FOR" ratification of the appointment of KPMG
Peat Marwick, LLP as Harbor Federal's independent public accountants. You are
urged to read the accompanying Proxy Statement/Prospectus, which provides
detailed information concerning each of these matters. Also enclosed is Harbor
Federal's Annual Report to Shareholders, which presents results for the fiscal
year ended September 30, 1996.
It is important that your shares be represented at the Annual Meeting.
Whether or not you plan to attend the Annual Meeting, you are requested to
complete, date, sign and return the enclosed proxy card in the enclosed envelope
for which postage has been paid.
Sincerely yours,
Michael J. Brown, Sr.
President and CEO
2
<PAGE>
HARBOR FEDERAL SAVINGS BANK
100 S. Second Street
Fort Pierce, FL 34950
(561) 461-2414
___________________________
NOTICE OF ANNUAL MEETING
OF SHAREHOLDERS TO BE HELD
JANUARY 28, 1997
___________________________
NOTICE IS HEREBY GIVEN that the 1997 Annual Meeting of Shareholders
(the "Annual Meeting") of Harbor Federal Savings Bank ("Harbor Federal") will be
held on Tuesday, January 28, 1997, at 10:00 a.m., Eastern Standard Time, at the
Old City Hall Annex, 315 Avenue A, Fort Pierce, Florida 34950 for the following
purposes:
1. To elect three (3) directors of Harbor Federal for three-year terms.
2. To approve an Agreement and Plan of Reorganization (the "Plan of
Reorganization") pursuant to which a proposed new middle tier stock holding
company, Harbor Florida Bancorp, Inc., a Delaware stock corporation
("Bancorp") will be formed. Bancorp will in a one-for-one exchange with
Harbor Federal's shareholders acquire all the issued and outstanding common
stock of Harbor Federal.
3. To ratify the appointment by Harbor Federal's Board of Directors of the
firm of KPMG Peat Marwick, LLP, as independent public accountants of Harbor
Federal for the fiscal year ending September 30, 1997.
4. To transact such other business as may properly come before the Annual
Meeting or any adjournments thereof.
Pursuant to Harbor Federal's bylaws, the Board of Directors of Harbor
Federal has fixed the close of business on December 13, 1996, as the record date
for the determination of shareholders entitled to notice of and to vote at the
Annual Meeting. Only holders of common stock of record at the close of business
on that date will be entitled to notice of and to vote at the Annual Meeting or
any adjournments thereof.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE, WHETHER OR NOT
YOU PLAN TO BE PRESENT IN PERSON AT THE ANNUAL MEETING, PLEASE DATE, SIGN AND
COMPLETE THE ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE WHICH
REQUIRES NO POSTAGE IF
1
<PAGE>
MAILED IN THE UNITED STATES. YOU MAY REVOKE YOUR PROXY AND VOTE IN PERSON IF YOU
DO ATTEND THE ANNUAL MEETING.
By Order of the Board of Directors
Michael J. Brown, Sr.
President and CEO
Fort Pierce, Florida
January ______, 1997
2
<PAGE>
HARBOR FEDERAL SAVINGS BANK
HARBOR FLORIDA BANCORP, INC.
PROXY STATEMENT/PROSPECTUS
This Proxy Statement/Prospectus is being furnished in connection with
the solicitation of proxies by the Board of Directors of Harbor Federal Savings
Bank, ("Harbor Federal") for use at its Annual Meeting of Shareholders to be
held on Tuesday, January 28, 1997. It is also the Prospectus of Harbor Florida
Bancorp, Inc. ("Bancorp") and part of an effective Registration Statement filed
under the Securities Act of 1933, as amended (the "Securities Act") with respect
to the issuance of up to 4,934,454 shares of Bancorp's common stock in
connection with the reorganization (the "Reorganization") described herein. The
approximate date of mailing of this Proxy Statement/Prospectus is January _____,
1997.
This Proxy Statement does not cover any resales of Bancorp's common
stock received by Harbor Federal's shareholders upon completion of the
Reorganization described herein. No person is authorized to make any use of
this Proxy Statement/Prospectus in connection with the offer or sale of any
other securities.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION (THE "SEC" OR THE "COMMISSION"), THE FEDERAL DEPOSIT
INCORPORATION ("FDIC") OR THE OFFICE OF THRIFT SUPERVISION ("OTS") NOR
HAS SUCH COMMISSION, CORPORATION OR OFFICE PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
_____________________________
HARBOR FINANCIAL, M.H.C. (THE "MUTUAL HOLDING COMPANY") 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.
_____________________________
1
<PAGE>
THE SHARES OF COMMON STOCK ARE NOT SAVINGS ACCOUNTS OR DEPOSITS
AND ARE NOT INSURED OR GUARANTEED BY THE SAVINGS ASSOCIATION
INSURANCE FUND OR THE BANK INSURANCE FUND OF THE FEDERAL DEPOSIT
INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY AND ARE
NOT GUARANTEED BY BANCORP, HARBOR FEDERAL OR THE MUTUAL
HOLDING COMPANY. THE COMMON STOCK IS SUBJECT TO INVESTMENT RISK
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL INVESTED.
_____________________________
The date of this Proxy Statement/Prospectus is January ________, 1997.
2
<PAGE>
AVAILABLE INFORMATION
Bancorp has filed with the Securities and Exchange Commission (the
"Commission" or the "SEC") a registration statement under the Securities Act of
1933 (the "Securities Act"). As permitted by the rules and regulations of the
Commission, this Proxy Statement/Prospectus does not contain all of 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 Commission at prescribed rates. The statements contained
herein as to the contents of any contract or other documents 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.
Bancorp has filed a holding company application with the Office of
Thrift Supervision (the "OTS") with respect to the Reorganization. Pursuant to
the rules and regulations of the OTS, this Proxy Statement/Prospectus omits
certain information contained in that application. It may be examined at the
principal office of the OTS at 1700 G Street, N.W., Washington, D.C. 20052 and
at the Southeast Regional Office of the OTS at 1475 Peachtree Street, N.E.,
Atlanta, GA 30309 without charge.
Harbor Federal is subject to the information, reporting and proxy
statement requirements of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") and, in accordance therewith and with the rules and regulations
applicable to all savings associations, files reports, proxy statements and
other information with the OTS. Copies of such materials may be obtained at
prescribed rates from the OTS, 1700 G Street, N.W., Washington, D.C. 20552.
Although Bancorp is not presently subject to the requirements of the Exchange
Act, upon completion of the Reorganization Bancorp will become subject to the
same information, reporting and proxy statement requirements under the Exchange
Act as currently apply to Harbor Federal, except that such filings will be
required to be made with the Commission rather than the OTS and will be
available for inspection and copying at the offices of the Commission set forth
above. The common stock of Harbor Federal is quoted on the NASDAQ-NMS. Upon
completion of the Reorganization, such stock will be held solely by Bancorp and,
as a result, will not be quoted on NASDAQ-NMS. Bancorp will apply to and
anticipates that the common stock of Bancorp will be included in the NASDAQ-NMS
upon completion of the Reorganization. However, there is no assurance that
Bancorp common stock will be included in the NASDAQ-NMS, or that a public
trading market will develop in its common stock, although a market has existed
for the common stock of Harbor Federal.
UPON RECEIPT OF A WRITTEN REQUEST, HARBOR FEDERAL WILL FURNISH TO ANY
SHAREHOLDER WITHOUT CHARGE A COPY OF HARBOR FEDERAL'S ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1996, AND A LIST OF THE EXHIBITS
THERETO. THIS REPORT HAS BEEN FILED WITH THE OTS UNDER THE EXCHANGE ACT. SUCH
WRITTEN
3
<PAGE>
REQUEST SHOULD BE DIRECTED TO ANNE W. SATTERLEE, HARBOR FEDERAL SAVINGS BANK,
100 S. SECOND STREET, FORT PIERCE, FL 34950.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS SHOULD NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED. THIS PROXY STATEMENT/PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO PURCHASE, THE
SECURITIES OFFERED BY THIS PROXY STATEMENT/PROSPECTUS, OR THE SOLICITATION OF A
PROXY, TO OR FROM ANY PERSON IN ANY JURISDICTION WHERE IT IS UNLAWFUL TO MAKE
SUCH OFFER OR SOLICITATION OF AN OFFER OR PROXY SOLICITATION. NEITHER THE
DELIVERY OF THIS PROXY STATEMENT/PROSPECTUS NOR ANY DISTRIBUTION OF THE
SECURITIES MADE UNDER THIS PROXY STATEMENT/PROSPECTUS SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF HARBOR FEDERAL OR BANCORP SINCE THE DATE OF THIS PROXY
STATEMENT/PROSPECTUS.
4
<PAGE>
Harbor Federal Savings Bank
PROXY STATEMENT/PROSPECTUS
TABLE OF CONTENTS
<TABLE>
<S> <C>
SUMMARY................................................................... 7
Formation of the Middle Tier Holding Company............................ 7
Reasons for Reorganization............................................ 7
Description of Reorganization......................................... 8
Tax Consequences...................................................... 9
Accounting Treatment.................................................. 9
Comparison of Shareholder Rights...................................... 9
Interest of Directors and Officers.................................... 10
Market for Bancorp Common Stock....................................... 10
Management of Bancorp................................................. 10
Required Shareholder Vote............................................. 11
Regulatory Approvals and Regulation................................... 11
Dividends............................................................. 11
No Dissenters' Rights................................................. 12
Changes in Shareholders' Rights and Takeover.......................... 13
Other Information Concerning Annual Meeting........................... 13
Market for Common Stock................................................. 13
MARKET FOR COMMON STOCK................................................... 13
INFORMATION CONCERNING THE ANNUAL MEETING OF SHAREHOLDERS................. 15
Matters to be Considered at the Meeting................................. 15
SOLICITATION OF PROXIES................................................... 16
REVOCATION OF PROXIES..................................................... 16
VOTING SECURITIES......................................................... 17
VOTING PROCEDURES......................................................... 17
PRINCIPAL HOLDERS OF COMMON STOCK......................................... 18
PROPOSAL I - ELECTION OF DIRECTORS........................................ 21
Board Meetings and Committees........................................... 24
Directors' Fees......................................................... 24
Director Retirement Plan................................................ 24
Directors' Unfunded Deferred Compensation Plan.......................... 25
Executive Compensation.................................................. 25
Option Grants in Last Fiscal Year....................................... 27
Aggregate Option Exercises and Year-End Option Values................... 28
Compensation Committee Interlocks and Insider Participation............. 29
401(k) Profit Sharing Plan.............................................. 29
Pension Plan............................................................ 30
</TABLE>
5
<PAGE>
<TABLE>
<S> <C>
Supplemental Executive Retirement Program.............................. 31
Employment and Change in Control Agreements............................ 32
Certain Transactions................................................... 32
Report of the Compensation Committee................................... 34
Performance Graph...................................................... 36
PROPOSAL II - FORMATION OF MIDDLE TIER HOLDING COMPANY................... 37
Reasons for and Risks of the Reorganization............................ 39
Future Conversion of the Mutual Holding Company........................ 42
Description of the Reorganization...................................... 42
Effective Date......................................................... 44
Business of Bancorp and Harbor Federal................................. 44
Management of Bancorp and Harbor Federal after the Reorganization...... 48
Income Tax Consequences of the Reorganization.......................... 49
No Dissenters' Rights.................................................. 52
Dividend Policy........................................................ 52
Conditions of Plan of Reorganization................................... 53
Amendment or Termination of Plan of Reorganization..................... 54
Stock Certificates Need Not But May Be Exchanged; Transfer Agent....... 54
Effect on Stock Benefit Programs....................................... 54
Approval by Regulatory Authorities Required............................ 55
Regulation of Harbor Federal........................................... 55
Regulation of Bancorp.................................................. 61
Description of Bancorp Capital Stock................................... 64
Anti-Takeover Provisions............................................... 65
Indemnification........................................................ 67
Limitations on Director Liability...................................... 68
Changes in Shareholders' Rights........................................ 69
Federal Securities Laws................................................ 72
Resales of Bancorp Common Stock........................................ 73
LEGAL PROCEEDINGS........................................................ 73
MARKET FOR COMMON STOCK.................................................. 73
PROPOSAL III - RATIFICATION OF APPOINTMENT OF INDEPENDENT
AUDITORS............................................................... 75
SHAREHOLDER PROPOSALS FOR 1998 ANNUAL MEETING............................ 75
FURTHER INFORMATION...................................................... 76
LEGAL OPINION............................................................ 76
FINANCIAL INFORMATION.................................................... 76
OTHER BUSINESS........................................................... 77
</TABLE>
6
<PAGE>
SUMMARY
THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE DETAILED INFORMATION APPEARING
ELSEWHERE HEREIN.
Formation of the Middle Tier Holding Company
Harbor Florida Bancorp, Inc. ("Bancorp") was recently incorporated
under Delaware law by Harbor Federal Savings Bank ("Harbor Federal"). Upon
completion of the reorganization described herein (the "Reorganization"), Harbor
Federal will become the wholly owned subsidiary of Bancorp. Harbor Financial
M.H.C., the mutual holding company of Harbor Federal (the "Mutual Holding
Company") will hold a majority of the shares of Bancorp. Under the terms of the
Reorganization each outstanding share of Harbor Federal common stock, par value
$1.00 per share, will be exchanged for one share of Bancorp common stock (par
value $0.01) per share, and the holders of all of the outstanding shares of
Harbor Federal's common stock will become the owners of all of the outstanding
shares of common stock of Bancorp. See "FORMATION OF MIDDLE TIER HOLDING
COMPANY -- Regulation of Harbor Federal," "--Regulation of Bancorp."
After the Reorganization, Harbor Federal will continue its current
business and operations as a federally chartered stock savings bank under its
current name. Harbor Federal will continue such operations with the same
management, branch structure and subject to all rights, obligations and
liabilities of Harbor existing immediately prior to the Reorganization. The
Mutual Holding Company owns approximately 53.79% of Harbor Federal's common
stock entitled to vote. The balance is held by employees, officers, Directors
and the public (the "Minority Shareholders"). The Mutual Holding Company intends
to vote its shares in favor of the Reorganization. Consequently shareholder
approval of the plan is assured. See "FORMATION OF MIDDLE TIER HOLDING COMPANY
- - -- Description of the Reorganization."
The principal executive offices of Harbor Federal, Bancorp and the
Mutual Holding Company are located at 100 S. Second Street, Fort Pierce, FL
34950 and each of their telephone numbers is (561) 461-2414.
Reasons for Reorganization The Board of Directors of Harbor Federal believes
that the middle tier stock holding company
structure effected through the Reorganization is
in the best long term interests of shareholders in
that it will facilitate the acquisition of other
savings institutions and repurchases of stock. No
specific acquisitions are presently planned but
stock repurchases are contemplated. In connection
with acquisitions, Bancorp would be able to use
stock as well as cash to effect such acquisitions.
At present, because the
7
<PAGE>
Mutual Holding Company must maintain a majority
ownership of Harbor Federal's common stock there is
insufficient common stock available for
acquisition. The Board of Directors of Harbor
Federal also believes repurchases of stock, from
time to time, in the open market, depending upon
market conditions, is in the best interests of
shareholders. A middle tier holding company
structure will permit such stock repurchases
without adverse tax consequences. Historically
Harbor Federal has used the percentage of taxable
income method for establishing its bad debt
reserves for tax purposes. Accordingly, the Board
believes that repurchase of shares without a middle
tier holding company might trigger a recapture all
or part of such bad debt reserves accrued pursuant
to (S) 593 of the Internal Revenue Code. See
"FORMATION OF MIDDLE TIER HOLDING COMPANY --
Reasons for and Risks of the Reorganization" and
"-- Income Tax Consequences of the Reorganization."
Bancorp, however, will be permitted to repurchase
its common stock without causing any recapture of
Harbor Federal's bad debt reserves.
Description of Bancorp will become a middle tier stock holding
Reorganization company of Harbor Federal pursuant to the
Agreement and Plan of Reorganization (the "Plan of
Reorganization") described herein. Under the Plan
of Reorganization: (i) an interim federally
chartered stock savings association, Interim
Harbor Federal Savings Bank ("Interim") will be
organized as a wholly-owned subsidiary of Bancorp;
(ii) Interim will be merged into Harbor Federal
with Harbor Federal being the survivor; and (iii)
upon such merger, all the outstanding shares of
common stock of Harbor Federal will be converted
into common stock of Bancorp on a one share for
one share basis. The shareholders of Harbor
Federal will thus become the sole shareholders of
Bancorp. The Mutual Holding Company will own a
majority of the outstanding common stock of
Bancorp. Bancorp's initial capital will consist
solely of cash invested by Harbor Federal, not
exceeding $12 million. If Bancorp makes
acquisitions of other financial institutions in
the future, it may need to issue additional common
or preferred stock. Bancorp will be required to
obtain the approval of the OTS prior to issuing
any additional stock, common or preferred. No
8
<PAGE>
such acquisitions or other business operations are
currently planned. See "FORMATION OF MIDDLE TIER
HOLDING COMPANY -- Description of the
Reorganization" and "-- Reasons for and Risks of
the Reorganization."
Tax Consequences The Reorganization is conditioned upon receipt of
opinions of counsel and other tax advisers to the
effect, among other things, that no gain or loss
will be recognized by Bancorp or the shareholders
of Harbor Federal, for purposes of Federal and
Florida income taxes, when Harbor Federal shares
are converted into shares of common stock of
Bancorp. Bancorp has received opinions of counsel
to this effect which are not binding on the
Internal Revenue Service ("IRS") or the State of
Florida. See "FORMATION OF MIDDLE TIER HOLDING
COMPANY - Income Tax Consequences of the
Reorganization."
Accounting Treatment Harbor Federal believes the Reorganization will be
characterized and accounted for at historical cost
similar to a "pooling of interest" for financial
reporting and related purposes.
Comparison of Shareholder Upon consummation of the Reorganization, there
Rights will be certain differences in the rights of
shareholders of Bancorp, a Delaware corporation,
and those of shareholders of Harbor Federal, a
federally chartered savings association. The
rights of the shareholders of Harbor Federal are
currently governed by federal law and regulations
or Harbor Federal's Federal Stock Charter and
bylaws. After the Reorganization, these their
rights will be governed by the Delaware General
Corporation Law and the Certificate of
Incorporation and Bylaws of Bancorp. The
Certificate of Incorporation and bylaws of Bancorp
and the Federal Stock Charter and bylaws of Harbor
Federal each contain anti-takeover protections,
indemnification provisions and limitations on
Director liability which differ in certain
important respects. Bancorp's Certificate of
Incorporation contains provisions: limiting the
liability of directors and officers of Bancorp for
certain breaches of fiduciary duty; eliminating
cumulating voting for the election of directors;
indemnifying directors and officers in certain
proceedings against them; providing for staggered
terms of directors;
9
<PAGE>
and providing a supermajority vote requirement in
order to remove a director. Such provisions may
have the effect of protecting the management of
Bancorp against attempts to change or replace it.
Directors and officers of Harbor Federal thus have
a personal interest in the completion of the
Reorganization. See "FORMATION OF MIDDLE TIER
HOLDING COMPANY --Changes in Shareholders' Rights,"
"--Anti-Takeover Provisions," "--Indemnification,"
and "-- Limitations on Director Liability."
Interest of Directors and The Directors and officers of Harbor Federal have
Officers a personal interest in the Reorganization to the
extent that the exemptions from liability provided
for in Bancorp's Certificate of Incorporation and
permitted under Delaware General Corporation Law
may provide greater protection than the protection
afforded under Harbor Federal's Federal Stock
Charter and bylaws indemnifying Harbor Federal's
Directors and officers. The Directors and
officers of Harbor Federal, who will also be the
Directors and officers of Bancorp, also may have a
personal interest in the Reorganization because of
provisions of Bancorp's Certificate of
Incorporation and bylaws and provisions of
Delaware law, which may be considered to provide
increased anti-takeover protection and may tend to
perpetuate management and deter takeovers that
shareholders consider beneficial. See "FORMATION
OF MIDDLE TIER HOLDING COMPANY -- Indemnification"
and "-- Anti-Takeover Provisions."
Market for Bancorp Common Bancorp common stock to be received by Harbor
Stock Federal shareholders in the Reorganization is
expected to trade on the NASDAQ-NMS as Harbor
Federal common stock does currently. There is no
assurance that Bancorp common stock will be
included in NASDAQ-NMS or that a public trading
market will develop in its common stock. See
"FORMATION OF MIDDLE TIER HOLDING COMPANY
-Description of Reorganization."
Management of Bancorp The directors of Bancorp will initially consist of
seven persons, six of whom currently serve as
directors of Harbor Federal and one of whom is a
nominee to serve on the Board of Directors of
Harbor Federal. See "FORMATION
10
<PAGE>
OF MIDDLE TIER HOLDING COMPANY -- Management of
Bancorp and Harbor Federal after the
Reorganization."
Required Shareholder Vote The affirmative vote of a majority of the total
votes present in person or by proxy at the Annual
Meeting, is required to approve the Plan of
Reorganization. The shares held by the Mutual
Holding Company, 2,654,369 or approximately 53.79%
of the outstanding shares of Harbor Federal, will
be cast in favor of the approval of the Plan of
Reorganization. See "VOTING SECURITIES." Harbor
Federal's directors, executive officers and their
affiliates intend to vote in favor of the Plan of
Reorganization.
Regulatory Approvals and Completion of the Reorganization is conditioned
Regulation upon, among other things, obtaining the prior
approval of OTS. An application to obtain this
approval is pending. After the middle tier
holding company formation, Bancorp, as a unitary
savings and loan holding company, will be subject
to OTS regulation. It is also anticipated that
the OTS will impose certain conditions in
connection with its approval of the
Reorganization. One such condition is likely to
require that Bancorp agree to limit its holding
company activities to the same activities
currently authorized by law for the Mutual Holding
Company. Bancorp and Harbor Federal anticipate
that they would accept this condition and limit
Bancorp's activities to those permitted under
federal law and regulations for the Mutual Holding
Company. Bancorp will also be regulated, with
respect to certain matters arising under the
federal securities laws, by the Commission. Prior
to the Reorganization, such federal securities
laws, insofar as they apply to Harbor Federal,
have been administered by the OTS pursuant to the
rules and regulations applicable to all savings
associations. Harbor Federal will continue to be
subject to OTS regulation. See "FORMATION OF
MIDDLE TIER HOLDING COMPANY -- Approval by
Regulatory Authorities Required," "-- Regulation
of Harbor Federal" and "-- Regulation of Bancorp."
Dividends No change in the current dividend policy is
anticipated or planned. Accordingly, it is
expected that Bancorp will pay similar quarterly
cash dividends to shareholders after
11
<PAGE>
completion of the middle tier holding company
formation. Its principal source of income initially
will consist of dividends from Harbor Federal.
Payment of such dividends by Harbor Federal to
Bancorp will depend on a number of factors
including Harbor Federal's results of operations,
financial, regulatory and tax considerations as
well as general economic conditions. The Mutual
Holding Company has waived receipt of all dividends
declared by Harbor Federal since its inception.
Under OTS policy, if the Mutual Holding Company
waives the right to receive cash dividends from
Bancorp, 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 dividends waived by the
Mutual Holding Company. Since the Mutual Holding
Company was formed prior to February 1, 1995,
current OTS policy provides that no dilution of
minority stockholders' ownership interests 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. As a policy of OTS and not a
regulation, the OTS' policy on dividend waivers is
therefore subject to change without the opportunity
for notice and comment which occurs in connection
with regulations of the OTS. The Board of Directors
of the Mutual Holding Company anticipates it will
continue to waive receipt of all dividends paid by
Bancorp. See "FORMATION OF MIDDLE TIER HOLDING
COMPANY -Dividend Policy," "--Income Tax
Consequences of the Reorganization," "-- Regulation
of Harbor Federal," and "--Regulation of Bancorp."
No Dissenters' Rights Shareholders of federal savings bank such as
Harbor Federal generally do not have dissenters
rights. No dissenters rights will be available to
shareholders in connection with the middle tier
holding company formation. See "FORMATION OF
MIDDLE TIER HOLDING COMPANY -- No Dissenters'
Rights."
Changes in Shareholders' Harbor Federal is subject to federal regulations
Rights applicable to federally chartered savings
associations. Bancorp, as a
12
<PAGE>
Delaware corporation, is governed by the corporate
laws of Delaware. The governing instruments of
Bancorp are similar in most material respects to
those of Harbor Federal, except that the Directors
of Bancorp have greater protection against
liability for monetary damages to shareholders
under Bancorp's Certificate of Incorporation than
do the Directors of Harbor Federal under Harbor
Federal's Federal Stock Charter and Bancorp's
Certificate of Incorporation contains different
takeover defense provisions. See "FORMATION OF
MIDDLE TIER HOLDING COMPANY -- Changes in
Shareholders' Rights" and "-- Anti-Takeover
Provisions."
Other Information Concerning Without regard to the proposed Plan of
Annual Meeting Reorganization, shareholders are also being asked:
(i) to elect three (3) directors of Harbor Federal
for three-year terms; and (ii) to ratify the
appointment of Harbor Federal's independent public
accountants. The Mutual Holding Company will vote
its shares of Harbor Federal in favor of these
proposals. See "FORMATION OF MIDDLE TIER HOLDING
COMPANY -- Management of Bancorp and Harbor
Federal after the Reorganization," "ELECTION OF
DIRECTORS," and "RATIFICATION OF APPOINTMENT OF
INDEPENDENT PUBLIC ACCOUNTANTS." If the Plan of
Reorganization is approved at the Annual Meeting,
all stock benefit plans of Harbor Federal will
remain the stock benefit plans of Harbor Federal,
with appropriate amendments to reflect that
Bancorp's common stock will be substituted for
Harbor Federal common stock thereunder. See
"ELECTION OF DIRECTORS OF HARBOR FEDERAL" and
"FORMATION OF MIDDLE TIER HOLDING COMPANY --
Effect on Stock Benefit Programs." The Annual
Meeting of Shareholders will be held at 10:00 a.m.
on Tuesday, January 28, 1997, at the Old City Hall
Annex, 315 Avenue A, Fort Pierce, Florida 34950.
Shareholders of record on December 13, 1996, will
be entitled to vote at the Annual Meeting, in
person or by proxy.
Market for Common Stock
Since January 6, 1994, the date of the reorganization, the common
stock of Harbor Federal has been quoted on the NASDAQ-NMS. The following table
presents quarterly information on the range of high and low prices since that
time.
13
<PAGE>
<TABLE>
<CAPTION>
Quarter Ended High Low Dividends Declared Per Share
------------- ---- --- ----------------------------
<S> <C> <C> <C>
March 31, 1994 $14.50 $12.125 $.1125
June 30, 1994 15.25 11.875 .1125
September 30, 1994 20.25 14.438 .1125
December 31, 1994 18.50 15.00 .2250
March 31, 1995 18.50 16.00 .2250
June 30, 1995 19.75 17.75 .2250
September 30, 1995 23.50 19.50 .2250
December 31, 1995 27.50 22.50 .30
March 31, 1996 28.00 24.75 .30
June 30, 1996 29.25 25.50 .30
September 30, 1996 30.00 23.75 .30
</TABLE>
On ___________, 1996, the closing price for Harbor Federal's common
stock as reported in The Wall Street Journal was _____________. On that date,
-----------------------
there were approximately _______ holders of such common stock.
14
<PAGE>
INFORMATION CONCERNING THE ANNUAL MEETING OF SHAREHOLDERS
On January 6, 1994, Harbor Federal completed its reorganization into
its current structure, with the creation of the Mutual Holding Company as a
mutual holding company for Harbor Federal. Simultaneously, Harbor Federal
conducted a minority public stock issuance. As a result, as of September 30,
1996, the 46.21% of Harbor Federal's common stock is owned by the public and the
remainder is held by the Mutual Holding Company.
Matters to be Considered at the Meeting
The Annual Meeting has been called for the following purposes: (1) to
elect three (3) directors of Harbor Federal for three-year terms; (2) to approve
an Agreement and Plan of Reorganization ("Plan of Reorganization") pursuant to
which a proposed new middle tier holding company, Harbor Florida Bancorp, a
Delaware Corporation ("Bancorp") will be formed. Bancorp will in a one-for-one
exchange with Harbor Federal's shareholders acquire all the issued and
outstanding common stock of Harbor Federal; (3) to ratify the appointment by
Harbor Federal's Board of Directors of the firm of KPMG Peat Marwick LLP as
independent public accountants of Harbor Federal for the fiscal year ending
September 30, 1997; and (4) to transact such other business as may properly come
before the Annual Meeting or any adjournments thereof.
At the Annual Meeting, shareholders of Harbor Federal will be asked to
approve the Plan of Reorganization. Under the Plan of Reorganization Bancorp
will organize Interim Harbor Federal Savings Bank ("Interim"). Interim will be
merged into Harbor Federal. Each share of Harbor Federal common stock will be
converted and exchanged automatically into one share of Bancorp common stock,
and Harbor Federal will become a wholly-owned subsidiary of Bancorp. Harbor
Financial, M.H.C., Harbor Federal's mutual holding company, will own the
majority of issued and outstanding shares of Bancorp and is statutorily required
to do so as long as it remains in existence in mutual form. The Plan of
Reorganization is subject to various regulatory approvals including those of the
OTS. Applications for such approvals are pending with the OTS, but the required
approvals have not yet been granted. Assuming approval by the OTS and the
satisfaction of the other conditions set forth in the Plan of Reorganization,
attached hereto as Exhibit A, the Plan of Reorganization will be implemented and
Harbor Federal's shares will be exchanged for those of Bancorp.
15
<PAGE>
SOLICITATION OF PROXIES
This Proxy Statement/Prospectus is furnished in connection with the
solicitation of proxies by the Board of Directors of Harbor Federal to be used
at the Annual Meeting to be held on Tuesday, January 28, 1997, at 10:00 a.m.,
Eastern Standard Time, at the Old City Hall Annex, 315 Avenue A, Fort Pierce,
Florida 34950 and at any adjournment thereof. This Proxy Statement/Prospectus
is first being mailed to stockholders on or about January _____, 1997.
All costs of the solicitation of proxies will be borne by Harbor
Federal. In addition to solicitation by mail, directors, officers and other
employees of Harbor Federal may solicit proxies personally or by telephone or
other means without additional compensation. Harbor Federal 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
Harbor Federal's common stock.
REVOCATION OF PROXIES
Stockholders who execute proxies retain the right to revoke them. Any
proxy solicited hereby may be revoked by the person giving it at any time before
it is exercised by: (i) delivering written notice of revocation at any time
before the Annual Meeting to Christine Fowler, Corporate Secretary of Harbor
Federal at its headquarters, 100 S. Second Street, Fort Pierce, Florida 34950;
(ii) submitting a duly-executed proxy bearing a later date; or (iii) attending
the Annual Meeting and voting in person. Unless so revoked, the shares
represented by the proxies will be voted according to the stockholders'
instructions on the proxies or, if no instructions are given, in favor of
Proposals I, II, and III described in this Proxy Statement/Prospectus. In
addition, shares represented by proxies will be voted in the discretion of the
Board of Directors on any other matters that may properly come before the Annual
Meeting. Proxies solicited by this Proxy Statement/Prospectus may be exercised
only at the Annual Meeting and any adjournments thereof, and will not be used
for any other meeting. A proxy card is enclosed with this Proxy Statement.
Please sign, date and complete the enclosed proxy card and return it in the
enclosed envelope.
16
<PAGE>
VOTING SECURITIES
Only stockholders of record of the outstanding common stock of Harbor
Federal, par value $1.00 per share, on the record date of December 13, 1996, as
set by the Board of Directors, are entitled to notice of, and to vote at the
Annual Meeting, with each share entitling its owner to one vote on all matters
properly presented at the Annual Meeting. Pursuant to Harbor Federal's Federal
Stock Charter, stockholders are not entitled to cumulate their votes for the
election of directors. Stockholders may vote at the Annual Meeting in person or
by proxy. On September 30, 1996, there were 4,934,454 voting shares of Harbor
Federal's common stock outstanding. HARBOR FINANCIAL, M.H.C. OWNS A MAJORITY OF
THE OUTSTANDING SHARES OF COMMON STOCK OF HARBOR FEDERAL AND INTENDS TO VOTE ITS
SHARES IN FAVOR OF PROPOSALS I, II AND III DESCRIBED IN THIS PROXY
STATEMENT/PROSPECTUS. THE MUTUAL HOLDING COMPANY'S INTENT TO VOTE ITS SHARES IN
FAVOR OF THE REORGANIZATION ASSURES THE PASSAGE OF THIS PROPOSAL. See "FORMATION
OF MIDDLE TIER HOLDING COMPANY." The presence, in person, or by proxy, of the
holders of at least a majority of the total number of outstanding shares of
common stock entitled to vote at the Annual Meeting is necessary to constitute a
quorum.
Harbor Federal's Stock Charter provides that until January 6, 1999, no
person other than Harbor Financial M.H.C. may own more than 10% of any
outstanding class of equity stock in Harbor Federal. Any shares owned in
violation of this provision will not be entitled to vote and will not be counted
as voting shares.
VOTING PROCEDURES
The affirmative vote of a majority of the shares of Common Stock
present or represented by proxy at the Annual Meeting is required to approve the
Proposals described in this Proxy Statement, except that directors can be
elected by a plurality of stockholders. An abstention with respect to a Proposal
by a shareholder present or represented at the Annual Meeting will have the same
effect as a vote against that Proposal. If a broker indicates on the proxy that
it does not have discretionary authority as to certain shares to vote on a
particular Proposal, those shares will not be considered represented and
entitled to vote with respect to that Proposal. Harbor Federal's attorney, the
inspector of election for the Annual Meeting, will tabulate all proxies
submitted to Harbor Federal and all votes cast in person by shareholders at the
Annual Meeting.
Executed but unmarked proxies will be voted: (1) FOR the election of
the three nominees of the Board of Directors as directors of Harbor Federal; (2)
FOR approval of the proposed Plan of Reorganization to form the middle tier
holding company; and (3) FOR ratification of the appointment of the firm of KPMG
Peat Marwick LLP as independent public accountants of Harbor Federal for the
fiscal year ending September 30, 1997.
Except for procedural matters incident to the conduct of the Annual
Meeting, Harbor Federal does not know of any matters other than those described
in the Notice of Annual
17
<PAGE>
Meeting that are to come before the Annual Meeting. If any other matters
properly come before the Annual Meeting, the persons named as proxies will vote
upon such matters as determined by a majority of the Board of Directors.
Enclosed with this Proxy Statement/Prospectus is Harbor Federal's
Annual Report to Shareholders for its fiscal year ended September 30, 1996 (the
"Annual Report"). The Bank has filed with the OTS an Annual Report on Form 10-K
for the fiscal year ended September 30, 1996. Shareholders may obtain, free of
charge, a copy of such Annual Report on Form 10-K by requesting it in writing
from Anne W. Satterlee, Harbor Federal Savings Bank, 100 S. Second Street, Fort
Pierce, FL 34950.
PRINCIPAL HOLDERS OF COMMON STOCK
The following table sets forth information as of September 30, 1996,
with respect to ownership of Harbor Federal's common stock by: (i) Harbor
Financial, M.H.C.; (ii) Harbor Federal's Employee Stock Ownership Plan; (iii)
the executive officers and directors of Harbor Federal; and (iv) all the
directors and executive officers of Harbor Federal as a group. Except for those
listed below, and based on the absence of any filings under Regulation 13D-G
with the Office of Thrift Supervision, Harbor Federal has no knowledge of any
person (including any "group" as that term is used in Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended) who owns beneficially more than 5%
of Harbor Federal's common stock.
<TABLE>
<CAPTION>
Common Stock
Beneficially Owned/(1)/
----------------------------
Name Title Number/(2)/ Percent
---- ----- ----------- -------
<S> <C> <C> <C>
Harbor Financial, N/A 2,654,369 53.79%
M.H.C.
Harbor Federal's
Employee N/A 151,705 3.07%
Stock Ownership
Plan
Bruce R. Abernethy, Vice Chairman of the Board 51,189/(3)(4)(14)/ 1.04%
Sr.
</TABLE>
18
<PAGE>
<TABLE>
<S> <C> <C> <C>
Michael J. Brown, Sr. Director, President
and Chief 75,416/(5)(6)/ 1.53%
Executive Officer
Richard K. Davis Director 44,956/(3)(4)(7)/ *
Edward G. Enns Chairman of the Board 14,034/(4)(8)/ *
Frank H. Fee III Director 52,980/(3)(4)(15)/ 1.07%
Richard B. Hellstrom Director 20,056/(4)(9)/ *
Maltby F. Watkins, M.D. Director 25,356/(4)(10)/ *
Don W. Bebber Senior Vice President 12,867/(5)(11)/ *
Robert W. Bluestone Senior Vice President 40,768/(5)/ *
Albert L. Fort Senior Vice President 15,903/(5)(12)/ *
David C. Hankle Senior Vice President 31,468/(5)(13)/ *
Directors and Executive
Officers as a group (11 N/A 384,993 7.80%
persons)
</TABLE>
/(1)/ Except as otherwise noted, all beneficial ownership is direct and each
beneficial owner exercises sole voting and investment power over the
shares.
/(2)/ Reflects information provided by these persons, filings made by these
persons with the Office of Thrift Supervision, and other information
known to Harbor Federal.
/(3)/ Includes 20,207, 17,900 and 15,172 shares, respectively, held by the
Directors' Deferred Compensation Plan for the benefit of Messrs.
Abernethy, Davis and Fee.
/(4)/ Includes 4,910, 4,090, 5,715, 4,090, 4,090 and 4,090 shares awarded,
respectively, to Messrs. Abernethy, Davis, Enns, Fee, Hellstrom and
Watkins under the Harbor
19
<PAGE>
Federal Savings Bank Outside Directors' Recognition and Retention
Plan. Two thirds of the shares granted under the Plan vested on
January 6, 1995, and January 6, 1996. The other third will vest on
January 6, 1997.
/(5)/ Includes 16,050, 5,291, 5,292, 5,290 and 5,292 shares awarded,
respectively, to Messrs. Brown, Bebber, Bluestone, Fort and Hankle
under the Harbor Federal Savings Bank Recognition and Retention Plan.
Two thirds of the shares granted under the Plan vested on January 6,
1995, and January 6, 1996. The other third will vest on January 6,
1997.
/(6)/ Includes 590 shares held by spouse and currently exercisable options
to purchase 16,000 shares.
/(7)/ Includes 17,500 shares held by Richard K. Davis Construction
Corporation Profit Sharing Fund. Does not include 1,750 shares owned
by Nancy D. Davis, spouse. Richard K. Davis disclaims beneficial
ownership of the 1,750 shares held by Nancy D. Davis.
/(8)/ Includes 4,202 shares held by spouse and currently exercisable options
to purchase 3,817 shares.
/(9)/ Includes 2,000 shares held by spouse.
/(10)/ Includes 1,000 shares held by spouse and currently exercisable options
to purchase 5,466 shares.
/(11)/ Includes 300 shares held by spouse and currently exercisable options
to purchase 788 shares.
/(12)/ Includes 373 shares held by spouse and 50 shares held by son.
/(13)/ Includes 1,400 shares held by spouse, and 3,800 shares held as
custodian for minor children and currently exercisable options to
purchase 3,276 shares.
/(14)/ Includes 506 shares held by spouse and currently exercisable options
to purchase 6,566 shares.
/(15)/ Includes 500 shares held by spouse.
* Represents less than 1% of outstanding shares.
20
<PAGE>
PROPOSAL I - ELECTION OF DIRECTORS
Harbor Federal's Federal Stock Charter and Bylaws provide that the Board of
Directors be composed of seven members and be divided into three approximately
equal classes. The members of each class are elected for a term of three years.
One class is elected annually.
Three directors will be elected at the Annual Meeting. The Board of
Directors has nominated current directors Richard K. Davis and Frank H. Fee, III
for re-election. Dr. Maltby Watkins, a current director of Harbor Federal, is
retiring upon the expiration of his term, i.e. January 28, 1997. Therefore, the
Board has nominated Richard N. Bird to serve on the Board of Directors to
succeed Dr. Watkins. If elected, Messrs. Bird, Davis and Fee will serve as
directors for three year terms expiring at the Annual Meeting to be held in
2000. If the Plan of Reorganization is approved at the Annual Meeting and
completed thereafter, the Board of Directors of Bancorp will be as set forth
herein at "FORMATION OF MIDDLE TIER HOLDING COMPANY -- Management of Bancorp and
Harbor Federal after the Reorganization."
The Nominating Committee of the Board of Directors determines management
nominees for election as directors. The Bylaws also allow stockholders to submit
nominations in writing directly to the Corporate Secretary of Harbor Federal not
fewer than five (5) days prior to the date of the Annual Meeting. There are no
arrangements known to management between the persons named and any other person
pursuant to which such nominees were selected.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE ABOVE
---
NOMINEES FOR DIRECTOR UNDER THIS PROPOSAL I.
The persons named in the enclosed proxy intend to vote for the election of
the named nominees, unless the proxy is marked by the stockholder to the
contrary. If any nominee is unable to serve, all valid proxies will be voted for
the election of such substitute as the Board of Directors may recommend. The
Board of Directors knows of no reason why any nominee might be unable to serve.
The following table sets forth certain information, as of November 30,
1996, with respect to each, and each director continuing in office.
21
<PAGE>
<TABLE>
<CAPTION>
Name Age Director of Harbor Federal Since New or Current Term to Expire/(*)/
---- --- -------------------------------- ----------------------------------
<S> <C> <C> <C>
BOARD NOMINEES
Richard N. Bird 56 Not Applicable 2000
Richard K. Davis 66 1978 2000
Frank H. Fee, III 53 1987 2000
DIRECTORS CONTINUING IN OFFICE
Bruce R. Abernethy, Sr. 61 1983 1999
Michael J. Brown, Sr. 55 1977 1998
Edward G. Enns 63 1977 1999
Richard B. Hellstrom 60 1988 1998
</TABLE>
____________________
/(*)/ All terms expire on the date of the Annual Meeting.
The principal occupation for the last five years for each nominee and
director of Harbor Federal is set forth below.
Bruce R. Abernethy, Sr. Mr. Abernethy was elected to the Board in
1983. He served as Executive Vice President
of the Fort Pierce/St. Lucie County Chamber
of Commerce from May 1991 to May 1993.
Prior to that Mr. Abernethy was operations
manager for the Southern Bell Telephone
Company.
Richard N. Bird Mr. Bird is President and principal broker
of Bird Realty Group, Inc., a real estate
brokerage firm specializing in commercial
real estate in Indian River County. He is
recently retired from elected
22
<PAGE>
office after serving sixteen years on the
Indian River County Commission. Mr. Bird
assisted Harbor Federal in forming the
Indian River County Advisory Board and has
served as a member of that Board for the
past year.
Michael J. Brown, Sr. Mr. Brown has served as President and Chief
Executive Officer of Harbor Federal since
1976. He was elected to the Board in 1977.
Prior to joining Harbor Federal, Mr. Brown
was the Chief Financial Officer at
University Federal Savings in Coral Gables,
Florida and Prudential Savings in Clayton,
Missouri. Mr. Brown has served as president
of the Chamber of Commerce and the Rotary
Club. He has also been a member of the
Federal Home Loan Mortgage Corporation
Advisory Board.
Richard K. Davis Mr. Davis has served on the Board of
Directors since 1978. He is Chairman of
Richard K. Davis Construction Corp.
Edward G. Enns Mr. Enns has served as a Director since
1977. He is the owner of the Enns Agency, a
property and casualty insurance agency. Mr.
Enns is a licensed real estate sales agent.
He is a former County Commission Chairman
of St. Lucie County, Florida, and presently
serves as mayor of the city of Fort Pierce.
Frank H. Fee, III Mr. Fee has served as a Director since
1987. He is an attorney and President of
Fee Koblegard & DeRoss, P.A., a general
practice law firm. Mr. Fee is also
President of Treasure Coast Abstract &
Title Insurance Company, an abstracting and
title insuring agent firm, and in the
business of citrus and cattle production.
Richard B. Hellstrom Mr. Hellstrom has been a Director since
1988. He is shareholder and President of
Lindahl, Browning, Ferrari & Hellstrom,
Inc., a firm specializing in civil,
environmental and agricultural engineering.
23
<PAGE>
Board Meetings and Committees
The Board of Directors meets twice a month and may have additional special
meetings. During the year ended September 30, 1996, the Board met 26 times. All
Directors attended at least 75% of Board meetings in that fiscal year. The
standing committees include the following:
Audit Committee. The Audit Committee met three times during the fiscal
---------------
year ended September 30, 1996. The Audit Committee reviews the internal audit
department of Harbor Federal as well as selecting the independent auditors for
Harbor Federal. It also has oversight of Harbor Federal's internal control
structure and financial reporting as well as review of Harbor Federal's annual
audit plan. This committee currently consists of Messrs. Davis, Fee and
Watkins.
Nominating Committee. The Nominating Committee nominates management
--------------------
candidates for vacancies in the office of director. The Committee met once in
fiscal 1996 and consists of Messrs. Brown, Davis, Fee, Hellstrom and Watkins.
Compensation Committee. The Compensation Committee met four (4) times in
----------------------
fiscal 1996. It reviews and discusses employee performance and prepares
recommendations for annual salary adjustments and bonuses. The Committee also
administers Harbor Federal's stock benefit plans. This committee consists of
Messrs. Abernethy, Enns, and Hellstrom.
Directors' Fees
Directors of Harbor Federal receive a monthly fee of $1,750 for serving on
the Board. Directors Abernethy, Davis and Fee defer their compensation through
Harbor Federal's Directors' Deferred Compensation Plan. In addition, each
Director is covered by a Group Accident and Travel Plan at a cost of $290 per
year per Director. The Chairman of the Board receives an additional $435 per
month and the Vice-Chairman receives an additional $200 per month. President
Brown receives no fees for serving on the Board of Directors.
Director Retirement Plan
Harbor Federal has established a Director Retirement Plan. Under this plan,
non-employee directors who served on the Board of Directors for ten (10) years
and have attained the age of 65 are entitled to receive annually until death a
payment upon retirement equal to 2 1/2% of the average of the annual Board fee
paid such directors for the last three years of service multiplied by his years
of Board services (not to exceed 50% of the three year average fee). This plan
is available only to current directors. It has been discontinued on a
prospective basis. Richard N. Bird, if elected, will not participate in this
plan.
24
<PAGE>
Directors' Unfunded Deferred Compensation Plan
The Unfunded Deferred Compensation Plan for the Directors of Harbor Federal
(the "Directors' Deferred Compensation Plan") provides that a director of Harbor
Federal may elect to defer all or part of his annual director fees to fund the
Directors' Deferred Compensation Plan. The plan also provides that deferred
fees are to earn interest at an annual rate equal to the 30-month certificate of
deposit rate adjusted and compounded quarterly. Amounts deferred under the
Directors' Deferred Compensation Plan are distributed in annual installments
over a ten year period beginning with the first day of the calendar year
immediately following the year in which the director: (i) ceases to be a
director; or (ii) attains the age of 65, and having been a participant in the
Directors' Deferred Compensation Plan for a minimum of five years or terminates
his participation in the plan. The Directors' Deferred Compensation Plan also
provides methods of distribution in the event of the death of the participant as
well as retirement or removal from the Board of Harbor Federal. The Directors'
Deferred Compensation Plan also holds 20,207, 17,900 and 15,172 shares of Harbor
Federal common stock for Messrs. Abernethy, Davis and Fee, respectively. These
shares were acquired by the Plan utilizing deferred annual director fees of
Messrs. Abernethy, Davis and Fee.
Executive Compensation
The following table sets forth the compensation paid to Mr. Michael J.
Brown, Sr., President and Chief Executive Officer, Robert W. Bluestone, Senior
Vice President - Retail Banking, David C. Hankle, Senior Vice President - Credit
Administration/Commercial Lending, Don W. Bebber, Senior Vice President and
Chief Financial Officer, and Albert L. Fort, Senior Vice President -
Marketing/Operations. No other executive officer of Harbor Federal served as
President or earned a total salary and bonus in excess of $100,000 during these
three fiscal years.
25
<PAGE>
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
--------------------------
All Other
Annual Compensation Long Term Compensation Compensation($)/(3)/
------------------- ---------------------- --------------------
Restricted
Name and Stock
Principal Position Year/(1)/ Salary($) Bonus($) Awards($)/(2)/ Options(#)
------------------ --------- --------- -------- -------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Michael J. Brown, 1996 $235,550 $22,260 $ 0 2,000 $98,996
Jr. 1995 220,833 25,440 0 0 55,435
President 1994 212,000 0 160,500 45,800 8,060
Robert W. Bluestone 1996 $121,717 $11,780 $ 0 500 $10,510
Senior Vice President - 1995 116,950 11,270 0 0 10,437
Retail Banking 1994 112,700 0 52,920 11,940 3,089
David C. Hankle 1996 $120,717 $11,680 $ 0 500 $14,194
Senior Vice President - 1995 115,967 11,180 0 0 14,387
Credit Administration/ 1994 111,800 0 52,920 11,940 6,108
Commercial Lending
Don W. Bebber 1996 $102,917 $ 9,500 $ 0 500 $11,033
Senior Vice President- 1995 92,500 16,000 0 0 11,047
Chief Financial Officer 1994 80,000 0 52,910 11,940 4,622
Albert L. Fort 1996 $ 96,392 $ 9,485 $ 0 500 $12,286
Senior Vice President- 1995 94,242 9,120 0 0 13,514
Marketing/Operations 1994 90,150 0 52,900 11,940 5,995
</TABLE>
__________________________
/(1)/ Harbor Federal's fiscal year ends September 30.
/(2)/ Represents stock awards granted by the Compensation Committee pursuant to
the Harbor Federal Savings Bank Recognition and Retention Plan. The awards were
granted on January 6, 1994, the date of the formation of the Mutual Holding
Company and minority stock issuance. Two thirds of the shares granted under the
Plan vested on January 6, 1995, and January 6, 1996. The other third will vest
on January 6, 1997. The value of such shares, when awarded, was determined by
multiplying the number of shares awarded by the price at which the shares were
sold in the Bank's public stock issuance. At September 30, 1996, Messrs. Brown,
Bluestone, Hankle, Bebber and Fort held 5,350, 1,764, 1,764, 1,764 and 1,764
shares of common stock, respectively, that remain subject to the Harbor Federal
Savings Bank Recognition and Retention Plan. The fair market value of such
restricted stock on September 30, 1996, based on the last sale reported on the
NASDAQ National Market on
26
<PAGE>
Monday, September 30, 1996, or $29.625 per share, was approximately $158,494,
$52,259, $52,259, $52,259 and $52,289, respectively.
/(3)/ For fiscal 1996 consists of insurance payments of $6,341, $2,499, $4,592,
$4,543 and $4,520 and contributions to Harbor Federal's Employee Stock Ownership
Plan in the equivalent amount of $9,245, $8,011, $7,943, $6,490 and $6,440 for
Messrs. Brown, Bluestone, Hankle, Bebber and Fort, respectively. Additionally,
Harbor Federal contributed $1,860, $1,659 and $1,326 to Messrs. Brown, Hankle
and Fort, respectively, pursuant to Harbor Federal's 401(k) Profit Sharing Plan
and Trust. Harbor Federal also contributed $81,550 to fund Mr. Brown's
Supplemental Executive Retirement Plan. Other personal benefits provided by
Harbor Federal have not been listed. The aggregate amount of such benefits does
not exceed the lesser of $50,000, or 10% of each named executive officers' cash
compensation.
______________________
Option Grants in Last Fiscal Year
The following table provides information on option grants in fiscal 1996 to
Messrs. Brown, Bluestone, Hankle, Bebber and Fort:
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Annualized Rates of
Stock Price Appreciation
Individual Grants for Option Term/(1)/
---------------------------------------------------------- ------------------------
% of Total
Options
Number of Granted to Exercisable
Date of Options Employees in Price Per Expiration
Name Grant/(2)/ Granted Fiscal Year Share/(3)/ Date 5% 10%
---- ----- ------- ---------- ----- ---- -- ---
<S> <C> <C> <C> <C> <C> <C> <C>
Michael J. Brown, Sr. 1/6/96 2,000 44.44% $27.00 1/7/06 $33,960 $86,060
Don W. Bebber 1/6/96 500 11.11 27.00 1/7/06 8,490 21,515
Robert W. Bluestone 1/6/96 500 11.11 27.00 1/7/06 8,490 21,515
David C. Hankle 1/6/96 500 11.11 27.00 1/7/06 8,490 21,515
Albert L. Fort 1/6/96 500 11.11 27.00 1/7/06 8,490 21,515
</TABLE>
/(1)/ "Potential Realized Value" is disclosed in response to the Securities and
Exchange commission rules which require such disclosure for illustration
purposes and is based
27
<PAGE>
on the difference between the potential market value of shares issuable
upon exercise of such options and the exercise price of such options.
The values disclosed are not intended to be, and should not be
interpreted by stockholders as, representations or projections of future
value of Harbor Federal's common stock or of the stock price. To lend
perspective to the illustrative potential realized value, if Harbor
Federal's stock price increased 5% per year for ten years from its
closing price on Friday, January 5, 1996, $27.00 per share,
(disregarding dividends and assuming for purposes of the calculation a
constant number of shares outstanding) the stock price at the end of ten
years would be $43.98 per share for an increase of $16.98 per share; and
if the stock increased 10% per year over such period, the ending stock
price would be $70.03 per share for an increase of $43.03 per share.
/(2)/ All options granted on January 6, 1996, first become exercisable on
January 6, 2001.
/(3)/ The exercise price is equal to the closing price on Friday, January 5,
1996, or $27.00 per share.
Aggregate Option Exercises and Year-End Option Values
The following table sets forth the number of shares acquired on the
exercise of stock options and the aggregate gains realized on the exercise
during fiscal 1996 by Messrs. Brown, Bebber, Bluestone, Fort and Hankle. The
table also sets forth the number of shares covered by exercisable and
unexercisable options held by the named individuals on September 30, 1996, and
the aggregate gains that would have been realized had these options been
exercised on September 30, 1996, even though these options were not exercised,
and the unexercised options could not have been exercised, on September 30,
1996.
<TABLE>
<CAPTION>
Shares Acquired On
Exercise Number of Shares Value of Unexercised
During Fiscal Value Covered by Unexercised In-The-Money
Name 1996 Realized/(1)/ Options on 9/30/96 Options As Of 9/30/96/(2)/
---- ---- -------- ------------------ ---------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Michael J. Brown, Sr. 4,000 $66,063 18,900 22,900 $370,913 $449,413
Don W. Bebber 3,988 60,811 791 7,164 15,523 140,594
Robert W. Bluestone 2,388 39,999 0 7,164 0 140,594
Albert L. Fort 2,388 42,984 0 7,164 0 140,594
David C. Hankle 1,500 24,750 3,276 7,164 64,292 140,594
</TABLE>
__________________________
28
<PAGE>
/(1)/ Equals the difference between the aggregate exercise price of the options
exercised and the aggregate fair market value of the common stock received upon
exercise computed using the price of the last sale of the common stock on the
exercise date, as quoted on the NASDAQ National Market. All options exercised
had an exercise price of $10.00 per share. Mr. Brown exercised 2,500 options on
January 25, 1996, when the market price of the common stock was $25.625 per
share and 1,500 options on April 25, 1996, when the market price of the common
stock was $28.00 per share. Mr. Bebber exercised 2,388 options on January 19,
1996, when the market price of the common stock was $25.75 per share and 1,600
options on July 24, 1996, when the market price of the common stock was $24.50
per share. Mr. Bluestone exercised 2,388 options on January 9, 1996, when the
market price of the common stock was $26.75 per share. Mr. Fort exercised 2,388
options on April 22, 1996, when the market price of the common stock was $28.00
per share. Mr. Hankle exercised 1,500 options on January 17, 1996, when the
market price of the common stock was $26.50 per share.
/(2)/ Equals the difference between the aggregate exercise price of such
options and the aggregate fair market value of the common stock that will be
received upon exercise, assuming such exercise occurred on Monday, September 30,
1996, at which date the last sale of the common stock as quoted on the NASDAQ
National Market was at $29.625 per share.
____________________
Compensation Committee Interlocks and Insider Participation
The Compensation Committee consists of Directors Abernethy, Enns, and
Hellstrom, none of whom have ever been an officer or employee of Harbor Federal.
None of the above are members of a compensation committee of the Board of
Directors of any company other than Harbor Federal.
401(k) Profit Sharing Plan
In January 1994, Harbor Federal established the Harbor Federal 401(k)
Profit Sharing Plan and Trust (the "401(k) Plan") through the Financial
Institution Thrift Plan of White Plains, NY. Under the 401(k) Plan, eligible
employees 21 or more years old may make pre-tax contributions through salary
deductions of up to 15% of their annual compensation. Harbor Federal currently
matches these contributions up to 25% of the first 6% of each participant's
contributions. Participants are always 100% vested in their compensation
reduction contributions. Participants become vested in Harbor Federal's
contributions after five years of service. Service date is the equivalent of
hire date. In fiscal 1996, Harbor Federal contributed $1,860, $1,326 and $1,659
to Messrs. Brown, Fort and Hankle, respectively.
Participants may direct the investment of their accounts among five
investment options. The common stock of Harbor Federal is not currently an
investment option.
29
<PAGE>
Pension Plan
Harbor Federal provides a noncontributory, defined benefit pension plan
through the Financial Institutions Retirement Fund of White Plains, New York
(the "Pension Plan") which covers all salaried employees who have one year of
service with Harbor Federal and have attained twenty-one years of age. An
employee is 100% vested in the Pension Plan when he/she completes five years of
employment at Harbor Federal. Employees who reach the age of sixty-five (65)
are also 100% vested in the Pension Plan, regardless of completed years of
employment.
The following table illustrates the annual pension benefits at age 65 under
the most advantageous plan provisions available at various levels of average
annual salary and years of service.
30
<PAGE>
<TABLE>
<CAPTION>
Average
Salary 5 10 15 20 25 30 35
------ - -- -- -- -- -- --
<S> <C> <C> <C> <C> <C> <C> <C>
$ 20,000 $ 2,000 $ 4,000 $ 6,000 $ 8,000 $10,000 $12,000 $ 14,000
$ 40,000 $ 4,000 $ 8,000 $12,000 $16,000 $20,000 $24,000 $ 28,000
$ 60,000 $ 6,000 $12,000 $18,000 $24,000 $30,000 $36,000 $ 42,000
$ 80,000 $ 8,000 $16,000 $24,000 $32,000 $40,000 $48,000 $ 56,000
$ 100,000 $10,000 $20,000 $30,000 $40,000 $50,000 $60,000 $ 70,000
$ 125,000 $12,500 $25,000 $37,500 $50,000 $62,500 $75,000 $ 87,500
$ 150,000 $15,000 $30,000 $45,000 $60,000 $75,000 $90,000 $105,000
</TABLE>
Normal retirement benefits under the Pension Plan are based on retirement at
or after age sixty-five (65), with the amount of the benefit dependent on years
of service as well as average annual salary for the five (5) consecutive years
of highest salary during service. However, the maximum annual compensation
which may be taken into account under the Internal Revenue Code of 1986, as
amended, for calculating contributions under qualified defined benefit plans is
currently $150,000.
Messrs. Brown, Bebber, Bluestone, Fort and Hankle have 20, 20, 18, 12 and 10
credited years of service, respectively, under the Pension Plan. All benefits
are computed as a straight-life annuity and are not subject to deduction for
Social Security.
Supplemental Executive Retirement Program
On September 13, 1995, the Board of Directors approved a Supplemental
Executive Retirement Plan ("SERP") for President Brown. The SERP became
effective on that date. The SERP will pay Mr. Brown an annual retirement
benefit at age 65 of 75% of his final five year average earnings, less the
amount payable from the Pension Plan and less the amount expected to be paid as
a Social Security benefit. The SERP benefit will accrue evenly over Mr. Brown's
career so that if Mr. Brown retires or otherwise terminates his employment
before attaining age 65, his benefit will be reduced on a pro rata basis. In
addition, if Mr. Brown receives his benefit before age 65, such benefit will be
subject to a reduction of 3% multiplied by the number of years prior to age 65
that his benefit commences. The SERP is administered by the Compensation
Committee. Payments by Harbor Federal to fund the SERP were $81,550 in fiscal
1996.
31
<PAGE>
Employment Agreement
The Board of Directors entered into a three-year employment agreement with
President Brown effective January 6, 1994. On November 2, 1995, the Board voted
to approve an extension of this agreement effective January 6, 1996, with a new
initial term to continue through January 6, 1999. During the term of the
agreement, Mr. Brown's salary is equal to the initial salary plus any increases
which the Board of Directors may authorize from time to time. The agreement
also provides for reimbursement of reasonable business expenses, participation
in the employee benefit programs of Harbor Federal and in certain other
perquisites.
In the event Harbor Federal terminates President Brown's employment without
cause, he will receive a severance payment equal to his salary, and will
continue to participate in the employee benefit programs of Harbor Federal, for
the balance of the term of the agreement. Mr. Brown's agreement with Harbor
Federal also provides for certain payments in the event of a change of control
under the Bank Change in Control Act of 1978, a merger or consolidation,
voluntary dissolution, or transfer of all of Harbor Federal's assets and
liabilities. Should one of these events occur, Harbor Federal's agreement with
Mr. Brown would be assumed by any acquiring or merging entity. Further, in the
one-year period following one of these events, the agreement provides Mr. Brown
with certain protection against termination other than for cause and against a
material diminution in his duties or reporting responsibilities under the
presumption that such a change would amount to an involuntary termination of
President Brown's employment with Harbor Federal. Should one of the enumerated
events occur, Mr. Brown would be entitled to a severance benefit of three times
his base salary plus the amount of bonuses received during the twelve month
period preceding the involuntary termination plus the cost of all benefits which
Mr. Brown was entitled to in the twelve-month period preceding the involuntary
termination, plus, at his election, the excess of the fair value of shares
subject to options held by him over their exercise price, which would then be
cancelled. Total amounts paid to Mr. Brown under this provision of the
agreement with Harbor Federal will not exceed an amount which is $100 less than
three times the base amount paid to Mr. Brown as the term "base amount" is
defined in Section 280G(b)(3) of the Internal Revenue Code of 1986. Any
payments under the agreement are also conditioned upon their conformity with the
"golden parachute" provisions of Section 18(k) of the FDI Act.
Harbor Federal had previously entered into change-in-control agreements with
each of Messrs. Bluestone, Hankle, Bebber and Fort. These agreements expired
January 6, 1996.
Certain Transactions
The Financial Institutions Reform, Recovery and Enforcement Act of 1989
("FIRREA") 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
32
<PAGE>
more than the normal risk of repayment or present other unfavorable features. In
addition, loans made to a director or an executive officer that exceeded in the
aggregate an amount equal to the greater of $25,000 or 5% of Harbor Federal's
capital and surplus, or in any event $500,000, must be approved in advance by a
majority of the disinterested members of the Board of Directors.
Before FIRREA, Harbor Federal made owner-occupied home mortgage loans from
time to time to directors, officers and other employees on terms substantially
the same as those made in the ordinary course of business on comparable
transactions at the time and which did not involve more than the normal risk of
collectibility. However, before FIRREA it was Harbor Federal's policy to charge
such persons interest tied to an index at a rate adjusted by Harbor Federal's
cost of funds, adjusted annually. The following table presents the loan
outstanding during the fiscal year ended September 30, 1996, to the director
which was made under this loan program. This loan is a fixed rate home
mortgage. Should any of these persons cease his affiliation with Harbor Federal
the rate will revert to the note rate that would have applied at the time of the
loan's origination.
<TABLE>
<CAPTION>
Highest Amount
Outstanding Outstanding at Actual Stated
Name Year Since September September 30, Interest Interest
- - ---- ---- --------------- -------------- -------- --------
Made 30, 1995 1996 Rate Rate
---- -------- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Edward G. Enns 1982 $135,723 $66,079 7.5% 16.5%
</TABLE>
33
<PAGE>
In addition, Frank H. Fee, III, a director of Harbor Federal, is also a
director, stockholder and the President of the law firm of Fee & Koblegard, P.A.
which does business under the registered firm name of Fee, Koblegard & DeRoss.
In the year ended September 30, 1996, Harbor Federal paid this firm $191,482 in
monthly retainers and extraordinary fees for general legal services, document
preparation and review and litigation services.
Richard K. Davis, a director of Harbor Federal, is also chairman of Richard K.
Davis Construction Corp. In the year ended September 30, 1996, Harbor Federal
paid this firm a total of $76,887 for a roof on a new branch facility and re-
roofing of an existing branch facility.
Richard N. Bird, a nominee to the Board of Directors of Harbor Federal, is
also President and Principal Broker of Bird Realty Group, Inc. Bird Realty
Group, Inc. has a listing agreement with Harbor Federal on property known as St.
Lucie Crossroads. The listing agreement, executed on June 15, 1996, has a one
year term and provides for a 3% commission. The total listing price is
$3,895,000. The commission could be up to 6% of the selling price if Bird
Realty also becomes the selling broker.
Report of the Compensation Committee
The Compensation Committee (the "Committee") reviews and recommends to the
Board of Directors compensation levels for executive officers and evaluates
executive officer performance. During fiscal 1996 the Committee consisted of
Messrs. Abernethy, Enns and Hellstrom. All are outside directors of Harbor
Federal.
Harbor Federal's compensation policy is to ensure that an appropriate
relationship exists between executive pay and the creation of shareholder value,
while at the same time motivating and retaining key officers. To achieve this
goal, Harbor Federal's compensation policy integrates base salary with annual
bonuses, as well as awards of stock options and restricted stock. The Committee
considers each potential element when determining compensation goals.
34
<PAGE>
President Brown's compensation and related benefits are based principally on
his rights under his employment agreement with Harbor Federal, which is
described elsewhere in this Proxy Statement. However, the Committee also
considers the performance of Harbor Federal as well as the performance of Harbor
Federal's common stock. Pursuant to the employment contract, Mr. Brown's salary
was $235,550 for fiscal 1996. For fiscal 1997, Mr. Brown's salary is $252,440.
Mr. Brown's salary reflects the increase in shareholder value, as reflected in
the increase in the price of the common stock of Harbor Federal since the
reorganization, as well as Harbor Federal's record of profitability. In this
connection, the Committee took note of Harbor Federal's return on stockholder's
equity for fiscal 1996 of 10.51%, excluding extraordinary items, return on
average assets for fiscal 1996, excluding the one time SAIF special assessment,
of 1.20% and return on average equity for fiscal 1996, excluding the one-time
SAIF assessment, was 13.9%.
Bruce R. Abernethy, Sr., Chairman
Edward G. Enns
Richard B. Hellstrom
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely upon a review of Forms 3 and 4 and amendments thereto furnished
to Harbor Federal pursuant to Rule 16a-3(e) during the fiscal year ended
September 30, 1996, no person who is a director, officer or beneficial owner of
10% of Harbor Federal common stock failed to file on a timely basis reports
required by Section 16(a) of the Securities Exchange Act.
35
<PAGE>
Performance Graph
The following graph shows a 33 month comparison of cumulative total return on
Harbor Federal's Common Stock, based on the market price of the Common Stock
assuming reinvestment of dividends, with the cumulative total return of
companies in the NASDAQ National Market and NASDAQ Bank Stocks for the period
beginning January 6, 1994, the day Harbor Federal's Common Stock began trading,
through September 30, 1996. The graph was derived from a very limited period of
time, in part, and reflects the market's reaction to the initial public offering
of the Common Stock, and, as a result, is not necessarily indicative of possible
future performance of Harbor Federal's Common Stock.
36
<PAGE>
PROPOSAL II - FORMATION OF MIDDLE TIER HOLDING COMPANY
The following descriptions are qualified in their entirety by reference to the
------------------------------------------------------------------------------
Plan of Reorganization, the Certificate of Incorporation of Bancorp, and the
- - ----------------------------------------------------------------------------
Bylaws of Bancorp which are attached hereto as Exhibits A, B, and C,
- - --------------------------------------------------------------------
respectively.
- - ------------
The Board of Directors of Harbor Federal has unanimously approved the
formation, subject to necessary shareholder and regulatory approvals, of a
middle tier stock holding company to be known as Harbor Florida Bancorp, Inc.
(the "Reorganization"), pursuant to the Plan of Reorganization by and among
Harbor Federal, Bancorp and Interim Harbor Federal Savings Bank ("Interim"). A
copy of the Plan of Reorganization is attached as Exhibit A hereto and is
incorporated herein by reference. The following discussion is qualified in its
entirety by reference to the Plan of Reorganization.
Upon completion of the Reorganization, the shareholders of Harbor Federal will
become the shareholders of Bancorp by conversion of their shares of Harbor
Federal common stock into Bancorp common stock on a one-for-one basis. The
diagram below demonstrates the current structure of Harbor Federal and the
proposed structure with the creation of Bancorp. Harbor Federal will continue
its existing business and operations after the Reorganization under its present
name as a wholly-owned subsidiary of Bancorp. Harbor Financial, M.H.C. will
continue to hold a majority of the issued and outstanding common stock of
Bancorp. The consolidated capitalization, assets, liabilities and financial
statements of Bancorp immediately following the Reorganization will be the same
as those of Harbor Federal immediately prior to the Reorganization. After the
Reorganization, the deposits of Harbor Federal will continue to be insured by
the FDIC through the Savings Association Insurance Fund ("SAIF") to the maximum
amount provided by law.
THE MUTUAL HOLDING COMPANY INTENDS TO VOTE FOR THIS PROPOSAL. THE MUTUAL
HOLDING COMPANY CONTROLS 53.79% OF THE ISSUED AND OUTSTANDING SHARES OF HARBOR
FEDERAL'S COMMON STOCK. THEREFORE THE APPROVAL OF THE PLAN OF REORGANIZATION IS
ASSURED.
37
<PAGE>
CURRENT STRUCTURE
-----------------
- - --------------------------- ----------------------------
Harbor Financial Minority
M.H.C. Stockholders
- - --------------------------- ----------------------------
53.79% of 46.21% of
Harbor Federal's Harbor Federal's
Common Stock Common Stock
-------------------------
Harbor Federal
Savings Bank
-------------------------
RESULTANT STRUCTURE
--------------------
- - --------------------------- ----------------------------
Harbor Financial Minority
M.H.C. Shareholders
- - --------------------------- ----------------------------
53.79% of 46.21% of
Harbor Florida Harbor Florida
Bancorp common Bancorp common
stock stock
-------------------------
Harbor
Florida
Bancorp, Inc.
-------------------------
--------------100% Owned
-------------------------
Harbor
Federal
Savings Bank
-------------------------
38
<PAGE>
THE BOARD OF DIRECTORS OF HARBOR FEDERAL UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS OF HARBOR FEDERAL VOTE FOR APPROVAL OF THE REORGANIZATION. THE
---
AFFIRMATIVE VOTE OF A MAJORITY OF THE SHARES OF COMMON STOCK PRESENT OR
REPRESENTED BY PROXY AT THE ANNUAL MEETING IS REQUIRED TO APPROVE THE
REORGANIZATION.
Reasons for and Risks of the Reorganization
At present the majority of the shares of Harbor Federal are owned by the
Mutual Holding Company. As such the Mutual Holding Company, under the HOLA, is
required to continually own at least 50.1% of the voting shares of Harbor
Federal. The activities of the Mutual Holding Company are governed by the
provisions of Section 10(o) of the HOLA and regulations thereunder. The
authorized activities of a mutual holding company are essentially similar to
those of a multiple savings and loan holding company. See "FORMATION OF MIDDLE
TIER HOLDING COMPANY -- Regulation of Bancorp."
A holding company is created for a wide variety of purposes. However, in
connection with savings associations such as Harbor Federal, such holding
companies have been used for acquisitions or activities not available for
federal savings associations such as Harbor Federal to facilitate the repurchase
of stock. The Mutual Holding Company, although a holding company, has not
repurchased Harbor Federal common stock. The reason this has not occurred is
the risk that a repurchase by the Mutual Holding Company would have adverse tax
consequences. Similarly, Harbor Federal may also not repurchase its common
stock because such a repurchase would trigger unfavorable tax treatment pursuant
to (S) 593(e) of the Internal Revenue Code. See "FORMATION OF MIDDLE TIER
HOLDING COMPANY -- Income Tax Consequences of the Reorganization." Harbor
Federal has used the percentage of taxable income method for establishing its
bad debt reserves and if Harbor Federal were to repurchase its outstanding
common stock, it would cause recapture of all or part of its bad debt reserves.
The reason for this is that under the tax laws, and in particular (S) 593(e),
the repurchase would be treated as a redemption of stock instead of a
repurchase. The creation of Bancorp would permit different tax treatment and
the repurchase of Bancorp's shares would not be treated as a redemption pursuant
to (S) 593(e), allowing a repurchase to occur without triggering bad debt
recapture.
With the creation of Bancorp, Harbor Federal will be able to overcome the
prohibition in its current structure prohibiting the Mutual Holding Company or
Harbor Federal from repurchasing Harbor Federal's common stock. Management also
recognizes that stock repurchase programs, as a general matter, have enabled
companies, including bank holding companies, with excess capital to reduce such
capital and return the excess to the corporation's shareholders while at the
same time creating a mechanism by which future returns might be improved through
capital reduction. The Board of Directors of Harbor Federal, therefore, has
determined to proceed with the Reorganization with the primary goal of
facilitating the future repurchase of common stock of Bancorp, subject to
favorable market conditions. This
39
<PAGE>
flexibility, which will be provided by the Reorganization, will allow Bancorp to
reduce excess capital in a manner which is common among bank and thrift
institutions owned by holding companies and which Harbor Federal's board
believes may enhance shareholder value.
Any stock repurchase program by Bancorp will be subject to the regulations and
policies of the OTS. Under the policies of the OTS, a financial institution
which is converting from the mutual to the stock form may not repurchase its
stock for a period of six months following conversion. Thereafter, the policies
of the OTS permit stock repurchases of up to 5% for each six month period to a
maximum of 20%. OTS policies also permit stock repurchases in greater amounts
upon the approval of the OTS. While it is uncertain how much stock may be
repurchased, the policies of the OTS permit purchases in excess of 20% for valid
and compelling business reasons. The OTS requires the directors of the company
making the repurchase, such as Bancorp, to consider market and economic factors,
the effect on stockholder dilution, adequacy of capital to undertake the
repurchase and any other circumstances that determine whether a purchase would
be in the best interests of the institution and its shareholders. The OTS also
requires a board of directors considering repurchase to conclude that the
repurchase provides an acceptable return that may generally be deemed to be
equal if not better than an alternative similarly safe and sound investment.
Upon completion of the Reorganization, Bancorp will consider all of these
factors and the relevant market conditions to determine if the stock repurchase
is in the best interest of shareholders.
The ability of Bancorp to effect a stock repurchase program without adverse
tax consequences is the primary benefit of the Reorganization.
Another reason, although less significant, for formation of Bancorp is the
ability to use a middle tier stock corporation to facilitate acquisitions. In
June 1996, Harbor Federal effected an acquisition of a federal savings
association in a cash acquisition. Because of the requirements of federal law -
- - - in particular the requirement that the Mutual Holding Company own a majority
of Harbor Federal at all times -- Harbor Federal as a practical matter could not
make acquisitions through issuance of additional stock at the subsidiary level
nor can it make numerous, large acquisitions under its current structure without
the risk that it might fail to meet capital requirements. Further, the Mutual
Holding Company cannot acquire additional institutions and hold such
institutions as a separate subsidiary because it would be difficult to structure
and accomplish such an acquisition in a way that benefits minority stockholders
and the Mutual Holding Company in proportion to their respective ownership
interest in Harbor Federal since minority stockholders would have no direct
interest in such other financial institution if it is held as a separate
subsidiary of the Mutual Holding Company. In contrast, Bancorp, as a stock
holding company will, following consummation of the Reorganization, be in a
better, and more flexible, position to take advantage of any acquisition
opportunities which may arise, for the benefit of all of its stockholders.
Neither Harbor Federal nor Bancorp has present plans, upon consummation of the
transaction, to effect any acquisition.
The middle tier stock holding company is not specifically discussed or
specifically authorized in regulations of the OTS. The OTS had, until recently,
taken the position that
40
<PAGE>
(S) 10(o) of the Home Owners Loan Act ("HOLA") did not permit formation of a
middle tier holding company in a mutual holding company structure. On November
1, 1996, the OTS issued an advanced notice of proposed rulemaking (the "advanced
rulemaking") addressing the issued raised by creation of an intermediate or
middle tier holding company. The OTS advised in the advanced rulemaking that it
was soliciting comments on an intermediate holding company to determine whether
to proceed with the development of a proposed rule to permit formation of
intermediate or middle tier holding companies. The OTS is seeking comment on
such matters as whether the middle tier holding company can have greater powers
than or engage in a wider range of activities than the mutual holding company,
whether restrictions of mutual holding companies regarding waiver of dividends,
indemnification and employment contracts should apply to the middle tier holding
company, the extent that the middle tier charter and bylaws should be subject to
OTS review and whether middle tier holding companies can and should retain
capital. At present none of these issues or other issues relating to formation
of a middle tier holding company have been resolved or clarified because the
final regulations on middle tier companies have not been issued. Harbor Federal
anticipates that many of the issues raised in the advanced rulemaking will be
resolved when OTS promulgates final regulations.
After considering the advanced rulemaking and the benefits of a new structure,
such as the stock repurchase described above, Harbor Federal submitted its
application to the OTS seeking approval to form a middle tier holding company.
However, Harbor Federal may be required to materially change its application
once the OTS promulgates the regulations, as there is no certainty as to the
nature of final OTS rules on a middle tier holding company or conditions of
approval in lieu of final rules that might be imposed by the OTS. Certain
restrictions may prevent Harbor Federal from completing the Reorganization. The
Board of Directors of Harbor Federal reserves the right to terminate the
Reorganization if the conditions are burdensome. Harbor Federal will monitor
OTS policies in this connection to determine whether, in light of any conditions
or requirements contained in final or proposed rulemaking, that it is in the
shareholders' interest to go forward with the Reorganization or to retain Harbor
Federal's current organizational structure. See "FORMATION OF MIDDLE TIER
HOLDING COMPANY -- Regulation of Bancorp."
Harbor Federal's Board of Directors recognizes that there will also be
increased costs that will be incurred in the operation of a middle tier holding
company and that the securities of Bancorp, unlike those of Harbor Federal, must
be registered with the Commission and may not be legal investments for
institutions as fiduciaries in certain jurisdictions. Nevertheless, for the
reasons stated above, the Board of Directors believes that the holding company
formation is in the best interests of Harbor Federal and its shareholders.
Harbor Federal's Board of Directors chose Delaware as the state of
incorporation of Bancorp because of the flexibility and predictability which the
corporate law of Delaware provides to the shareholders and management of a
Delaware corporation and because of the authority Delaware law provides to limit
the liability of Directors for monetary damages to
41
<PAGE>
shareholders. See " FORMATION OF MIDDLE TIER HOLDING COMPANY -- Limitations on
Director Liability."
Future Conversion of the Mutual Holding Company
The Mutual Holding Company has no present intention of effecting a mutual to
stock conversion.
Should such conversion occur, under the current policies of the OTS dealing
with mutual holding companies, upon consummation of the conversion of a mutual
holding company to the stock form the shares in its publicly held subsidiaries,
such as Harbor Federal or, after the Reorganization, Bancorp, would be exchanged
for common stock of the newly converted institution based upon an exchange ratio
submitted to the OTS. Those holding subscription rights pursuant to the plan of
conversion would be allowed to purchase stock in the subscription offering. OTS
regulations require that subscription rights would be held available for
depositors of Harbor Federal who meet an eligibility record date, an employee
stock ownership plan, supplemental account holders and borrowers of Harbor
Federal. Those holding shares of Harbor Federal and later Bancorp would have
the right to exchange their shares for shares in the converting entity.
Description of the Reorganization
Harbor Federal caused Bancorp to be incorporated as a Delaware corporation on
November _______, 1996, with authorized capitalization of 13,000,000 shares of
common stock, $0.01 par value, and 1,000,000 shares of preferred stock, $0.01
par value. Harbor Federal will, prior to the effectiveness of the
Reorganization, capitalize Bancorp with cash contributions not exceeding $12
million. Bancorp will organize Interim as a corporation with an Interim Federal
Stock Charter. Bancorp will be the sole shareholder of Interim. Contingent
upon regulatory and shareholder approvals, the Reorganization will be
accomplished as follows:
1. Interim as a wholly owned acquisition subsidiary of Bancorp will merge
with and into Harbor Federal with Harbor Federal being the surviving
corporation (the "Merger"). All shares of common stock of Harbor Federal
outstanding immediately before the Merger will be converted in the Merger, on
a share-for-share basis, into shares of common stock of Bancorp. All shares of
common stock of Interim outstanding immediately before the Merger (which will
be held by Bancorp) will be converted in the Merger into shares of common
stock of Harbor Federal on a one share for one share basis. All shares of
common stock of Bancorp outstanding immediately before the Merger (which will
be held by Harbor Federal) will be cancelled in the Merger.
(a) Harbor Federal, as the surviving corporation, will retain all
incidents of its corporate existence prior to the Reorganization, including
its
42
<PAGE>
Federal Stock Charter, bylaws, deposits, loans and other assets and its
operating offices. Harbor Federal will carry on its business and
activities, as before the Merger, under the name Harbor Federal Savings
Bank.
(b) The directors and officers of Harbor Federal in office
immediately before the Reorganization will, immediately after the
Reorganization, be directors and officers of Harbor Federal as the
surviving corporation.
2. As a result of the Merger, the persons who held all of Harbor
Federal's outstanding common stock immediately before the Merger will,
immediately thereafter, hold instead all of the outstanding shares of common
stock of Bancorp. Certificates representing outstanding shares of Harbor
Federal's common stock outstanding immediately before the Merger will,
immediately after the Merger, represent the same number of shares of Bancorp's
common stock and may be traded as such. Upon surrender of such stock
certificates, the holder will be entitled to receive stock certificates for
shares of common stock of Bancorp. Shareholders will not be required to
surrender their Harbor Federal stock certificates until they desire to make a
transfer.
3. As a result of the Merger, the shares of common stock of Harbor
Federal held by Bancorp immediately after the Merger will constitute the only
issued and outstanding shares of common stock of Harbor Federal. Accordingly,
Harbor Federal will be a wholly-owned subsidiary of Bancorp.
4. As a result of the Merger, Interim will cease to exist as a legal
entity.
5. As a result of the Merger and the Reorganization, Bancorp will be a
publicly held corporation. Bancorp will register its common stock under the
Exchange Act and will seek to have its shares included in the NASDAQ-NMS.
There is no assurance that Bancorp common stock will be included in NASDAQ-
NMS, or that a public trading market will develop in its common stock,
although a market has existed in the past for the common stock of Harbor
Federal.
Upon completion of the Reorganization, the capital of Bancorp will consist
solely of the amount with which it will be capitalized by Harbor Federal before
completion of the Reorganization, which will not exceed $12 million. Subject to
certain regulatory restrictions, additional funds may be obtained from Harbor
Federal after the completion of the Reorganization by payment of dividends by
Harbor Federal to Bancorp. Should acquisitions or engaging in other businesses
occur, Bancorp may need to issue additional common or preferred stock or to
incur debt in the future. Bancorp has no plans to make any such acquisitions or
engage in any other business at this time. Harbor Federal believes that the
Reorganization will be accounted for in a manner similar to a "pooling of
interest" for accounting and other financial reporting purposes.
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<PAGE>
Effective Date
The Effective Date of the Reorganization (the "Effective Date") will be the
date upon which all the conditions set forth in the Plan of Reorganization are
satisfied, including, but not limited to, receipt of shareholder approval and
all required regulatory approvals and the filing of required documents with the
OTS.
Business of Bancorp and Harbor Federal
Bancorp. Bancorp is a general business corporation formed under the laws of
-------
Delaware on November ____, 1996, for the purpose of becoming the middle tier
stock holding company of Harbor Federal. The principal executive offices of
Bancorp are located at the principal executive offices of Harbor Federal, 100 S.
Second Street, Fort Pierce, Florida, 34950. Its telephone number is (561) 461-
2414. Upon completion of the middle tier holding company formation, Harbor
Federal will become a wholly owned subsidiary of Bancorp. Pursuant to OTS
policy regarding middle tier holding companies such as Bancorp, it is expected
Bancorp will have the same restrictions on its activities as apply to the Mutual
Holding Company. See "FORMATION OF MIDDLE TIER HOLDING COMPANY -- Reasons for
and Risks of the Reorganization." "-- Regulation of Bancorp." Following the
middle tier holding company formation, the primary business of Bancorp will be
the ongoing business of Harbor Federal, and the competitive conditions to be
faced by Bancorp will be the same as those faced by Harbor Federal.
At the present time, Bancorp does not intend to have any employees. Bancorp
will make occasional use of staff of Harbor Federal from time to time. If
Bancorp acquires other savings institutions it may at such time hire employees.
It is currently expected that unless and until Bancorp becomes actively
involved in the operation or acquisition of additional savings institutions no
separate compensation will be paid to the directors and officers of Bancorp.
However, Bancorp may determine that separate compensation is appropriate in the
future.
Upon completion of the middle tier holding company formation, the benefit
plans of Harbor Federal, including the ESOP, the Recognition and Retention Plan,
the Directors' Recognition and Retention Plan, the Stock Option Plan and the
Directors Stock Option Plan will remain the benefit plans of Harbor Federal with
directors, officers and other employees of Harbor Federal eligible to
participate. Since the directors and officers of Bancorp will not initially be
compensated by Bancorp but will continue to serve and be compensated by Harbor
Federal, no Bancorp benefit plans are anticipated at this time. However, the
stock benefit plans of Harbor Federal will, after the Reorganization, hold
Bancorp stock and options to purchase Bancorp stock. Harbor Federal will
continue to maintain its other benefit programs. See "FORMATION OF MIDDLE TIER
HOLDING COMPANY -- Management of Bancorp and Harbor Federal after the
Reorganization."
44
<PAGE>
Initially, Bancorp will neither own nor lease any real property. Bancorp
intends instead to use certain premises, equipment and furniture of Harbor
Federal.
Harbor Federal has requested OTS approval to enable it to provide Bancorp with
an initial capitalization of up to $12 million for working capital purposes.
Upon formation of the middle tier holding company, the assets of Bancorp will
consist of the initial capitalization plus all of the then outstanding shares of
Harbor Federal common stock. Bancorp, on an unconsolidated basis, will
initially have no indebtedness or other liabilities. Additional financial
resources may be available to Bancorp in the future through cash dividends from
Harbor Federal, borrowings from third parties, and the public or private sale of
equity or debt securities of Bancorp. Pursuant to OTS policy, Bancorp must
obtain approval of the OTS prior to issuing any additional equity or debt
securities.
There can be no assurance, however, as to the amount of additional financial
resources that will be available to Bancorp. There will be substantial
regulatory limitations on borrowings by Bancorp and any nonsavings institution
subsidiaries as well as on cash dividends paid by Harbor Federal to Bancorp. In
addition, Bancorp might have taxable income as the result of the initial
capitalization of Bancorp, and any subsequent transfers by Harbor Federal to
Bancorp, in the form of cash dividends or otherwise. To the extent that such
transfers are deemed to be made out of the reserve for losses on real property
loans (the "bad debt reserve") that Harbor Federal is permitted to establish,
and additions to which it is permitted to deduct, under federal income tax laws,
Harbor Federal will realize taxable income. See "FORMATION OF MIDDLE TIER
HOLDING COMPANY -- Income Tax Consequences of the Reorganization" "-- Dividend
Policy."
Harbor Federal. Harbor Federal conducts business from its main office in Fort
--------------
Pierce, Florida and twenty-three (23) branch offices in six counties in East
Central Florida. At September 30, 1996, Harbor Federal had total assets of
approximately $1.1 billion and net worth of approximately $85 million or 8.62%
of total assets. Net income for the fiscal year ended September 30, 1996 was
approximately $8.6 million. Harbor Federal was established as a federally
chartered savings and loan association in 1934. In 1994, it reorganized into
the mutual holding company form of organization with the Mutual Holding Company
holding the majority of Harbor Federal's outstanding common stock. A minority
of the outstanding stock of Harbor Federal is owned by the public.
Harbor Federal's primary business consists of attracting deposits mainly from
the communities it serves and using these and other funds to originate one to
four family first mortgage loans for retention in its portfolio. Harbor
Federal's principal sources of funds are deposits and principal and interest
payments on loans. Its principal source of income is interest received from
loans, investments and mortgage backed securities. Its principal expenses are
interest paid on deposit accounts and employee compensation and benefits.
Harbor Federal is a member of the FHLB System and its deposits are insured by
the FDIC through the SAIF. It is subject to comprehensive examination and
regulation by the
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<PAGE>
OTS and the FDIC and to regulations governing such matters as capital standards,
mergers, establishing of branch offices, subsidiary investments and activities
in general investment authority. Such examination and regulation is intended
primarily for the protection of the SAIF and of depositors. The regulatory
structure provides regulatory officials with extensive discretion in connection
with their supervisory and enforcement activities and examination policies.
Harbor Federal competes for real estate loans with other thrift institutions,
and with commercial banks, mortgage companies, insurance companies, governmental
agencies, real estate investment trusts and credit unions. Harbor Federal
competes for real estate loans primarily through the interest rates and loan
fees it charges, by convenient office locations and through personal contact by
its officers with members of the communities served by Harbor Federal.
Competition for real estate loans is affected by, among other matters, the
availability of lendable funds, economic conditions, and prevailing interest
rate levels.
Harbor Federal competes for savings deposits with other thrift institutions,
and with money market mutual funds, commercial banks, credit unions, savings
banks and corporate and government securities. Harbor Federal competes for
deposit accounts primarily through the interest rates it offers, the convenience
of its office locations and personal contacts by its officers with members of
the communities served by Harbor Federal.
Large national or regional financial institutions operate in the areas where
Harbor Federal conducts its business. Many of these institutions have greater
financial resources than Harbor Federal.
At September 30, 1996, Harbor Federal had a total of 286 full-time and 35
part-time employees, none of whom were represented by a collective bargaining
unit. Harbor Federal considers its relations with its employees to be good.
Harbor Federal conducts its business out of twenty-three (23) offices located
in six counties.
<TABLE>
<CAPTION>
Year Lease
Location Opened Owned/Leased Expiration Date
-------- ------ ------------ ---------------
<S> <C> <C> <C>
ST. LUCIE COUNTY
- - ----------------
MAIN OFFICE 1934 OWNED
100 SOUTH SECOND STREET
FORT PIERCE, FL 34950
VIRGINIA AVENUE 1968 OWNED
500 VIRGINIA AVENUE
FORT PIERCE, FL 34982
</TABLE>
46
<PAGE>
PSL MAIN 1975 OWNED
7181 SOUTH U.S. #1
PORT ST. LUCIE, FL 34952
H.F. CENTER 1981 OWNED
2400 S.E. MIDPORT RD.
PORT ST. LUCIE, FL 34952
LAKEWOOD PARK 1981 OWNED
5100 TURNPIKE FEEDER RD.
FORT PIERCE, FL 34950
DARWIN SQUARE 1991 LEASED 11/30/97
3251 S.W. PSL BLVD.
PORT ST. LUCIE, FL 34953
ORANGE BLOSSOM 1984 OWNED
4156 OKEECHOBEE ROAD
FORT PIERCE, FL 34947
ST. LUCIE WEST 1993 OWNED
1375 S.W. ST. LUCIE WEST
BLVD.
PORT ST. LUCIE, FL 34986
INDIAN RIVER
- - ------------
VERO MAIN 1978 OWNED
655 21st STREET
VERO BEACH, FL 32960
CAUSEWAY 1981 OWNED
1700 S.A1A
VERO BEACH, FL 32963
RYANWOOD CENTER 1986 LEASED 9/30/97
2062 KINGS HIGHWAY
VERO BEACH, FL 32966
SEBASTIAN 1979 OWNED
13397 U.S. HIGHWAY #1
SEBASTIAN, FL 32958
MARTIN COUNTY
- - -------------
STUART MAIN 1996 LEASED 8/15/99
789 S. FEDERAL HWY.
STUART, FL 34994
PALM CITY 1978 LEASED 7/31/97
1251 S.W. 27th Street
PALM CITY, FL 34990
EAST OCEAN 1981 OWNED
1500 E. OCEAN BLVD.
STUART, FL 34996
BREVARD COUNTY
- - --------------
PALM BAY 1981 OWNED
5245 BABCOCK ST., N.E.
PALM BAY, FL 32905
INDIALANTIC 1981 OWNED
305 5th AVENUE
INDIALANTIC, FL 32903
47
<PAGE>
WEST MELBOURNE 1982 OWNED
2950 W. NEW HAVEN AVENUE
MELBOURNE, FL 32904
VIERA 1995 OWNED
100 CAPRON TRAIL
MELBOURNE, FL 32940
OKEECHOBEE COUNTY
- - -----------------
OKEECHOBEE 1980 OWNED
2801 HIGHWAY #441 SOUTH
OKEECHOBEE, FL 34974
VOLUSIA COUNTY
- - --------------
NEW SMYRNA 1988 LEASED 09/30/97
REGIONAL SHOPPING CENTER
1940 STATE ROAD #44
NEW SMYRNA BEACH, FL 32069
PORT ORANGE 1983 OWNED
4035 NOVA ROAD
PORT ORANGE, FL 32127
ORMOND BEACH 1984 OWNED
75 N. NOVA ROAD
ORMOND BEACH, FL 32174
Management of Bancorp and Harbor Federal after the Reorganization
No change will occur in the directors of Harbor Federal by reason of the
Reorganization.
The following table sets forth the name and the year of expiration of the term
of office of each director of Bancorp.
<TABLE>
<CAPTION>
Term of
Name Office Expires
---- --------------
<S> <C>
Michael J. Brown, Sr. 1998
Richard B. Hellstrom 1998
Bruce R. Abernethy, Sr. 1999
Edward G. Enns 1999
Richard N. Bird 2000
Richard K. Davis 2000
Frank H. Fee, III 2000
</TABLE>
Each director of Bancorp is also a director of Harbor Federal, except Richard
N. Bird, who is a nominee for the Board of Directors. For additional
information concerning the directors of Bancorp and information concerning the
directors of Harbor Federal, see "ELECTION OF DIRECTORS."
48
<PAGE>
The Certificate of Incorporation of Bancorp, like the bylaws of Harbor
Federal, provide that the directors shall serve for terms of three years and
that the terms shall be staggered to provide for the election of approximately
one-third of the board members each year. Approval of the Reorganization by the
holders of Harbor Federal common stock will ratify the appointment of the
persons set forth herein as directors of Bancorp for their respective terms,
without further action by the shareholders of Harbor Federal.
No change will occur in the persons who are officers of Harbor Federal by
reason of the Reorganization.
The executive officers of Bancorp are, and upon completion of the
Reorganization will be the following:
<TABLE>
<CAPTION>
Name Position
---- --------
<S> <C>
Michael J. Brown, Sr. President and Chief Executive
Officer
Don W. Bebber Chief Financial Officer
Christine Fowler Secretary
Michael H. Callahan Controller
Todd P. Bevan Treasurer
</TABLE>
At the present time, Bancorp does not intend to employ any persons other than
its management and the employees of Harbor Federal. No compensation will be
paid to its directors and officers in their capacities as directors and officers
of Bancorp. Bancorp may determine that such separate compensation is
appropriate in the future, however.
For additional information concerning the Directors and officers of Bancorp,
see "ELECTION OF DIRECTORS."
Income Tax Consequences of the Reorganization
Harbor Federal will not seek a ruling from the Internal Revenue Service (the
"IRS") concerning the federal income tax consequences of the proposed middle
tier holding company formation, but will instead rely upon opinions of Harbor
Federal's special counsel, Peabody & Brown, and accountant KPMG Peat Marwick,
L.L.P. Peabody & Brown has advised Harbor Federal that:
1. Provided that the proposed merger of Interim with and into Harbor Federal
qualifies as a statutory merger, the transaction will qualify as a
reorganization within the meaning of Section 368(a)(1)(A) of the Code.
49
<PAGE>
2. Harbor Federal, Bancorp and Interim will each be "a party to a
reorganization" within the meaning of Section 368(b) of the Code.
3. No gain or loss will be recognized for federal income tax purposes by
Interim upon the transfer of its assets to Harbor Federal solely in exchange for
the transfer to Bancorp of the stock of Harbor Federal.
4. No gain or loss will be recognized for federal income tax purposes by
Interim upon the receipt of the assets of Interim in exchange for the transfer
to Bancorp of Interim stock.
5. The basis of Interim's assets in the hands of Harbor Federal will be the
same for federal income tax purposes as the basis of those assets in the hands
of Interim immediately prior to the merger.
6. No gain or loss will be recognized for federal income tax purposes by
Bancorp upon the receipt of Harbor Federal stock solely in exchange for Interim
stock.
7. No gain or loss will be recognized for federal income tax purposes by
Harbor Federal shareholders upon the receipt of Bancorp stock solely in exchange
for their shares of Harbor Federal stock.
8. The basis of Bancorp stock to be received by Harbor Federal shareholders
will be the same for federal income tax purposes as the basis of Harbor Federal
stock surrendered in exchange therefor.
9. The holding period of Bancorp stock to be received by Harbor Federal
shareholders will include for federal income tax purposes the holding period of
Harbor Federal stock surrendered in exchange therefor, provided that Harbor
Federal stock is held as a capital asset on the date of the exchange.
10. The holding period of the assets of Interim in the hands of Harbor
Federal will include for federal income tax purposes the period during which
such assets were held by Interim.
11. No gain or loss will be recognized for federal income tax purposes by
Harbor Federal upon the receipt of the assets of Interim in exchange for Harbor
Federal stock.
KPMG Peat Marwick, LLP has advised Harbor Federal that the conclusions reached
above with respect to the effect of the Reorganization on Harbor Federal,
Interim and Bancorp and their shareholders for federal income tax purposes shall
also apply for Florida income tax purposes.
An opinion of counsel has no binding effect on the IRS.
50
<PAGE>
Bancorp and Harbor Federal intend to file consolidated federal income tax
returns, which would have the effect of eliminating intercompany distributions,
including dividends or Harbor Federal stock, in the computation of consolidated
taxable income. If Bancorp and Harbor Federal were not permitted to file
consolidated federal income tax returns, they would be adversely affected
because, among other things, intercompany dividends paid out of earnings and
profits of Harbor Federal prior to the Reorganization would be subject to
federal tax.
Moreover, even if Bancorp and Harbor Federal are permitted to file
consolidated federal income tax returns, distributions from Harbor Federal to
Bancorp would have adverse tax consequences to Harbor Federal to the extent that
the distributions were deemed to be out of Harbor Federal's bad debt reserve. A
distribution will be deemed to be out of the bad debt reserve only if it exceeds
the sum of the current and accumulated earnings and profits of Harbor Federal.
As a general rule, income of Bancorp or any subsidiaries other than Harbor
Federal would not be taken into account in determining the bad debt deduction
allowed Harbor Federal, whether or not consolidated tax returns are filed.
However, certain "functionally related" losses of Bancorp or subsidiaries (if
any) other than Harbor Federal included in the consolidated tax returns will
reduce the percentage of taxable income bad debt deduction allowed Harbor
Federal.
Under the laws of the State of Florida, Harbor Federal and subsidiaries are
subject generally to a 5.5% tax on net income. The tax may be reduced by a
credit of up to 65% of the tax due as a result of certain intangible taxes and
taxes deducted by Harbor Federal in determining its federal income tax
liability.
The majority interest in Harbor Federal currently held by the Mutual Holding
Company is exempt from the Florida intangible tax pursuant to Fla. Stat.
199.103(8). Harbor Federal is currently seeking a ruling from the Florida
Department of Revenue to the determine if the majority interest in Bancorp that
will be held by the Mutual Holding Company after the Reorganization will also be
exempt from the state intangible tax. If such a ruling is not forthcoming,
Harbor Federal may reconsider its determination to consummate the
Reorganization, pursuant to the Plan of Reorganization.
After the Reorganization Bancorp will be able to repurchase shares of its own
stock without adverse tax consequences at the corporate level. Prior to the
Reorganization if Harbor Federal engaged in a repurchase plan the repurchase
would be treated as a redemption pursuant to (S) 593(e) of the Internal Revenue
Code and require that portions of Harbor Federal's reserves for bad debt
accumulated pursuant to (S) 593 of the Internal Revenue Code be recaptured. See
"FORMATION OF MIDDLE TIER HOLDING COMPANY -- Reasons For and Risks of the
Reorganization."
51
<PAGE>
No Dissenters' Rights
Harbor Federal's common stock is traded on the NASDAQ-NMS under the trading
symbol "HARB." Immediately upon consummation of the Reorganization, Bancorp
common stock is also expected to trade on the NASDAQ-NMS under the same symbol.
Because holders of Harbor Federal stock are required to accept only Bancorp
common stock pursuant to the Reorganization, the holders of Harbor Federal
common stock will receive only qualified consideration. Therefore holders of
Harbor Federal common stock will not have the right to dissent to the
Reorganization.
Dividend Policy
Harbor Federal has paid quarterly cash dividends each quarter since the
completion of its mutual holding company reorganization and minority stock
issuance in January 1994. It is the intention of Bancorp to continue to pay
cash dividends. Dividends paid by Bancorp will be determined by Bancorp's Board
of Directors and will be based upon its consolidated financial condition,
results of operations, tax considerations, economic conditions, regulatory
actions which affect the payment of dividends by Harbor Federal to Bancorp, and
other factors. There can be no assurance that dividends will be paid on the
common stock of Bancorp or that, if paid, such dividends will not be reduced or
eliminated in the future. See "FORMATION OF MIDDLE TIER HOLDING COMPANY --
Regulation of Harbor Federal" and "-- Dividends and Other Capital Distribution
Limitations" for information regarding regulatory restrictions on the ability to
pay dividends.
Bancorp as a Delaware corporation 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.
Bancorp 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
Bancorp (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 Harbor Federal, 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. Currently, OTS policy is to review
dividend waiver notices on a case-by-case basis, and, in general, not object to
any such waiver if: 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 are considered as a restriction
on the 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
52
<PAGE>
Mutual Holding Company is available for declaration as a dividend solely to the
Mutual Holding Company, and 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.
OTS policy requires the amount of waived dividends received by the Mutual
Holding Company to be adjusted in the formula governing the exchange ratio for
shares held by minority shareholders in a mutual to stock conversion of the
Mutual Holding Company. The adjustment reflects the amount of dividends waived
by the Mutual Holding Company. Mutual holding companies formed prior to
February 1, 1995, are currently exempted from this policy with respect to both
past and future waived dividends, provided the aggregate dividends paid by the
subsidiary 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 Harbor Federal exceed the amount of dividends paid by the
comparable savings association. Accordingly, based on the current OTS policy
regarding waived dividends, management does not anticipate any adjustment of
minority stockholders ownership interest 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. AS A POLICY AND NOT A REGULATION THE
TREATMENT OF WAIVED DIVIDENDS COULD BE CHANGED BY THE OTS WITHOUT OPPORTUNITY
FOR NOTICE AND COMMENT AS IS THE CASE WITH RESPECT TO REGULATION. 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.
Conditions of Plan of Reorganization
The Plan of Reorganization will not become effective until all of the
following conditions have been satisfied: (i) the Plan of Reorganization is
approved by the stockholders of Harbor Federal; (ii) all regulatory and other
approvals required by the Plan of Reorganization for the consummation of the
Reorganization have been obtained; (iii) the parties to the Plan of
Reorganization have received favorable opinions of counsel concerning the
federal and state income tax consequences of the transaction; and (iv) in the
sole discretion of Harbor Federal's Directors the regulatory and other approvals
contain no unduly burdensome or unfavorable conditions of approval or
restrictions on operations.
Applications have been filed with the OTS to obtain its approval of the Plan
of Reorganization and the transactions contemplated therein. These applications
are pending and the required approvals have not yet been received. The parties
to the Plan of Reorganization have received favorable opinions of counsel
regarding the federal and state income tax consequences of the Merger.
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Amendment or Termination of Plan of Reorganization
The Plan of Reorganization may be abandoned by Harbor Federal at any time
before the Effective Date in the event that, for any reason, consummation of the
formation of the middle tier holding company contemplated by the Plan of
Reorganization becomes inadvisable in the sole judgment of Harbor Federal's
Board of Directors. In the event of such abandonment Harbor Federal will pay
the fees and expenses incurred in connection with the Plan of Reorganization and
the proposed middle tier holding company formation.
The Plan of Reorganization may be amended at any time by the Boards of
Directors of Harbor Federal and Bancorp either prior to or after its approval by
Harbor Federal's shareholders, provided that after the Plan of Reorganization is
approved by Harbor Federal's shareholders, there shall be no amendment or
modification which would result in a material adverse effect on the benefits
intended to be received by the holders of Harbor Federal's common stock in the
Merger pursuant to the Plan of Reorganization.
If the Plan of Reorganization is approved by the shareholders of Harbor
Federal at the Annual Meeting, the Reorganization is expected to become
effective as soon as possible thereafter. If the Reorganization is not
approved, Harbor Federal will continue to operate without a middle tier holding
company structure. All expenses in connection with the Reorganization will be
paid by Harbor Federal whether or not the Plan of Reorganization is approved by
its shareholders or the Reorganization is completed.
Stock Certificates Need Not But May Be Exchanged; Transfer Agent
After the effectiveness of the Reorganization, the former holders of Harbor
Federal common stock may, but are not required, to exchange their Harbor Federal
stock certificates for new certificates evidencing the same number of shares of
Bancorp common stock. Until exchanged, Harbor Federal stock certificates will,
for all purposes, represent the same number of shares of Bancorp common stock as
the number of shares of Harbor Federal common stock previously represented. The
holders of such certificates will have all the rights of holders of common stock
of Bancorp. American Stock Transfer & Trust Company, the transfer agent and
registrar for Harbor Federal's common stock, is expected to serve in the same
capacities for Bancorp's common stock.
Effect on Stock Benefit Programs
The Plan of Reorganization provides that upon consummation of the
Reorganization all stock benefit plans of Harbor Federal will, by virtue of the
Reorganization, remain the stock benefit plans of Harbor Federal. Stock options
for, and restricted stock awards of, Harbor Federal common stock granted prior
to the consummation of the Reorganization will, immediately upon such
consummation, automatically become stock options for, and restricted stock
awards of, Bancorp common stock with identical terms and conditions and exercise
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prices. Stock options covering 170,106 shares are outstanding but unexercised.
21,404 shares of restricted stock have been awarded but have not vested as of
September 30, 1996. Harbor Federal's Directors, officers and employees will
continue to participate in the stock benefit plans as before the Reorganization.
As a result of the Reorganization, Harbor Federal's ESOP will remain the ESOP
of Harbor Federal. Harbor Federal will continue to make contributions to the
ESOP with respect to its employees. The ESOP Trustees will vote the shares of
Bancorp common stock which are allocated to participants' stock accounts in
accordance with instructions from the participants and all other shares of
common stock of Bancorp held by the ESOP Trustees shall be voted by the Trustees
in their discretion. On September 30, 1996, the ESOP held 151,705 shares, or
approximately 3.07%, of Harbor Federal's outstanding common stock.
All other employee benefit plans of Harbor Federal will be unchanged by the
Reorganization.
Approval by Regulatory Authorities Required
The Reorganization requires the approvals of the OTS. Bancorp has filed
applications with OTS seeking such approvals, but no assurance can be given that
such approvals will be granted or that they will be obtained prior to a
substantial period of time after the Annual Meeting.
Regulation of Harbor Federal
General. As a federally-chartered, SAIF-insured savings association, Harbor
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Federal is subject to extensive regulation by the OTS and the FDIC. Lending
activities and other investments must comply with various federal statutory and
regulatory requirements. Harbor Federal is also subject to certain reserve
requirements promulgated by the Federal Reserve Board. Certain of the
regulatory requirements are referred to below or elsewhere herein.
The OTS, in conjunction with the FDIC, regularly examines Harbor Federal and
prepares reports for the consideration of Harbor Federal's Board of Directors on
any deficiencies that they find in Harbor Federal's operations. Harbor
Federal's relationship with its depositors and borrowers is also regulated to a
great extent by federal law, especially in such matters as the ownership of
savings accounts and the form and content of Harbor Federal's mortgage
documents.
Harbor Federal must file reports with the OTS and the FDIC concerning its
activities and financial condition, in addition to obtaining regulatory
approvals prior to entering into certain transactions such as mergers with or
acquisitions of other savings institutions. This regulation and supervision
establishes a comprehensive framework of activities in which an institution can
engage and is intended primarily for the protection of the SAIF and depositors.
The regulatory structure also gives the regulatory authorities extensive
discretion in connection
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with their supervisory and enforcement activities and examination policies,
including policies with respect to the classification of assets and the
establishment of adequate loan loss reserves for regulatory purposes. Any change
in such regulations, whether by the OTS, the FDIC or the United States Congress
could have a material adverse impact on Harbor Federal and its operations.
Insurance of Deposit Accounts. Harbor Federal's deposit accounts are insured
-----------------------------
by the SAIF to a maximum of $100,000 for each insured member. Harbor Federal's
federal deposit insurance premium for the year ended September 30, 1996,
amounted to $1.7 million, not including the one-time SAIF special assessment
discussed below.
The FDIC has the authority to suspend the deposit insurance of any savings
association without tangible capital. However, if a savings association has
positive capital when it includes qualifying intangible assets, the FDIC cannot
suspend deposit insurance unless capital declines materially, the institution
fails to enter into and remain in compliance with an approved capital plan or
the institution is operating in an unsafe or unsound manner.
Regardless of an institution's capital level, insurance of deposits may be
terminated by the FDIC upon a finding that the institution has engaged in unsafe
or unsound practices, is in an unsafe or unsound condition to continue
operations or has violated any applicable law, regulation, rule, order or
condition imposed by the FDIC or the institution's primary regulator. The
management of Harbor Federal is not aware of any practice, condition or
violation that might lead to termination of its deposit insurance.
Harbor Federal is a member of the SAIF fund of the Federal Deposit Insurance
Corporation. On September 30, 1996, the President signed the Deposit Insurance
Funds Act of 1996 (the "Funds Act") which provided, among other things, a one-
time assessment on SAIF member institutions including Harbor Federal to
capitalize the SAIF. This would, in turn, permit SAIF premiums to be reduced to
levels comparable to those of the commercial banking industry. Specifically, on
November 27, 1996, Harbor Federal, along with other SAIF-insured institutions,
was required to submit a payment of 65.7 basis points of deposits as of March
31, 1995 to the FDIC. In Harbor Federal's case this amount was approximately $5
million and was recognized as an expense for the year ended September 30, 1996.
As a consequence of this payment, the annual premiums of Harbor Federal will,
beginning in January of 1997, be reduced from 23 basis points of deposits to a
level approximating that of commercial banks. The new law also contemplates
shifting of the burden for payment of the Financing Corporation ("FICO") bonds,
bonds issued by a financing subsidiary of the United States Government to cover
the cost of failed thrift institutions. Beginning in January 1997, the interest
on FICO bonds will be shared between the commercial banking and thrift
industries. Harbor Federal will pay approximately 6.44 basis points for FICO
bonds. Commercial banks will pay 20% of that amount for a three year period
through the earlier of December 31, 1999, or the time that last savings
association charter ceases to exist. When either of these events occurs the
responsibility for FICO bonds will be shared pro rata between commercial banks
and thrift institutions such as Harbor Federal.
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The law also contemplates an eventual merger of the BIF and SAIF funds on
January 1, 1999. However, this merger cannot take place unless there is no
insured depository institution, that is, "savings association on that date."
Since Harbor Federal is deemed a savings association under federal law, it is
likely that Harbor Federal will at some point, by operation of law, be required
to change its charter to that of either a state chartered bank, a savings bank,
a national bank or an as yet undefined new federal charter. How or whether that
charter change will be mandated and what new powers Harbor Federal will have
under this law cannot be determined at this juncture.
Examination Fees. In addition to federal deposit insurance premiums, savings
----------------
institutions like Harbor Federal are required by OTS regulations to pay
assessments to the OTS to fund the operations of the OTS. The general
assessment is paid on a semi-annual basis and is computed based on total assets
of the institution, including subsidiaries. Harbor Federal's OTS assessments
for the fiscal year ended September 30, 1996 totaled $189,901.
Regulatory Capital Requirements. OTS capital regulations require savings
-------------------------------
associations to meet three capital standards: (1) a tangible capital requirement
of 1.5% of total adjusted assets; (2) a leverage ratio (core capital)
requirement of 3% of total adjusted assets; and (3) a risk-based capital
requirement equal to 8% of total risk-weighted assets.
Tangible capital is defined as core capital less all intangible assets
(including supervisory goodwill), plus purchased mortgage servicing rights
valued at the lower of the maximum percentage established by the OTS or the
amount includable in core capital. Core capital is defined as common
stockholders' equity (including retained income), noncumulative perpetual
preferred stock and minority interests in the equity accounts of consolidated
subsidiaries, plus purchased mortgage servicing rights valued at the lower of
90% of fair market value, 90% of original cost or 100% of the current amortized
book value as determined under GAAP, and qualifying supervisory goodwill, less
nonqualifying intangible assets.
Savings associations are required to maintain "total capital" equal to 8.0% of
risk-weighted assets. Total capital is defined as core capital plus
supplementary capital, which may include, among other items, cumulative
perpetual preferred stock, perpetual subordinated debt, mandatory convertible
subordinated debt, intermediate-term preferred stock and the allowance for loan
losses. The allowance for loan losses includable in supplementary capital is
limited to 1.25 % of risk-weighted assets. Overall, supplementary capital is
limited to 100% of core capital. A savings association must calculate its risk-
weighted assets by multiplying each asset and off-balance sheet item by various
risk factors, which range from 0% for cash and securities issued by the U.S.
Government or its agencies to 100% for REO.
Savings associations are required to deduct from capital, for purposes of
meeting the leverage ratio requirement, tangible capital requirement and risk-
based capital requirement, their entire investment in and loans to a subsidiary
engaged in activities not permissible for a
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national bank ("nonconforming subsidiaries"). Harbor Federal deducts its
investment in H.F. Development due to its holding REO property for over five (5)
years. This deduction was $263,707 at September 30, 1996.
OTS regulations set forth the methodology for calculating an interest rate
risk ("IRR") component which is added to the risk-based capital requirements for
OTS regulated thrift institutions. Generally, savings associations with a
greater than "normal" level of interest rate exposure will be subject to a
deduction from total capital for purposes of calculating their risk-based
capital requirement. Specifically, interest rate exposure will be measured as
the decline in net portfolio value due to a 200 basis point change in market
interest rates. The IRR component to be deducted from total capital is equal to
one-half the difference between an institution's measured exposure and the
"normal" level of exposure which is defined as two percent of the estimated
economic value of its assets.
The OTS must prohibit asset growth by a savings association that is not in
compliance with the capital standards and require such institution to comply
with a capital directive which may, among other things, restrict the payment of
dividends or officers' salaries.
At September 30, 1996, Harbor Federal met each of its capital requirements, in
each case on a fully phased in basis.
Dividend and Other Capital Distribution Limitations. An OTS regulation
---------------------------------------------------
governs capital distributions by savings institutions, which include cash
dividends, stock redemptions or repurchases, cash-out mergers, interest payments
on convertible debt and other transactions charged to the capital account of a
savings association 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 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 I
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 requirement 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 restrictions on capital
distributions, including possible prohibition of capital distributions without
specific OTS approval. Harbor Federal is a Tier I institution under the OTS
capital distribution regulation.
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In order to make distributions under these safe harbors, a Tier I institution
must submit 30 days 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 I 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 Harbor Federal to pay dividends on its 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 Harbor Federal
on the amount of such income removed from reserves for such purpose at the then
current income tax rate. Additionally, Harbor Federal is precluded from paying
dividends on its common stock if its regulatory capital would thereby be reduced
below the regulatory capital requirements prescribed for savings associations.
Harbor Federal currently satisfies its applicable regulatory capital
requirements.
Qualified Thrift Lender Test. Savings institutions are required to meet a
----------------------------
qualified thrift lender ("QTL") test. If Harbor Federal maintains an
appropriate level of Qualified Thrift Investments (primarily residential
mortgages and related investments, including certain mortgage-backed securities)
and, otherwise qualifies as a QTL, it will continue to enjoy full borrowing
privileges from the FHLB of Atlanta. The required percentage of Qualified
Thrift Investments is 65% of portfolio assets (defined as all assets minus
intangible assets, property used by the institution in conducting its business
and liquid assets equal to 10% of total assets). Certain assets are subject to
a percentage limitation of 20% of portfolio assets. In addition, savings
associations may include shares of stock of the Federal Home Loan Banks, FNMA
and FHLMC as qualifying QTL assets. Compliance with the QTL test is determined
on a monthly basis in nine out of every 12 months. As of September 30, 1996,
Harbor Federal was in compliance with its QTL requirement with 96.09% of its
portfolio assets invested in Qualified Thrift Investments.
A savings association that does not meet a QTL test must either convert to a
bank charter or comply with the following restrictions on its operations: (i)
the savings association may not engage in any new activity or make any new
investment, directly or indirectly, unless such activity or investment is
permissible for a national bank; (ii) the branching powers of the savings
association shall be restricted to those of a national bank; (iii) the savings
association shall not be eligible to obtain any advances from its FHLB; and (iv)
payment of dividends by the savings association shall be subject to the rules
regarding payment of dividends by a national bank. Upon the expiration of three
years from the date the savings association ceases to be a QTL, it must cease
any activity and not retain any investment not permissible for a national bank
and immediately repay any outstanding FHLB advances (subject to safety and
soundness considerations).
Transactions With Affiliates. Generally, restrictions on transactions with
----------------------------
affiliates require that transactions between a savings association or its
subsidiaries and its affiliates be
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on terms as favorable to Harbor Federal as transactions with non-affiliates. In
addition, certain of these transactions are restricted to a percentage of Harbor
Federal's capital. Affiliates of Harbor Federal include Bancorp and the Mutual
Holding Company, as well as any company which would be under common control with
Harbor Federal. In addition, a savings association may not lend to any affiliate
engaged in activities not permissible for a bank holding company or acquire the
securities of any affiliate which is not a subsidiary.
Harbor Federal's authority to extend credit to executive officers, directors
and 10% shareholders, as well as entities such persons control is currently
governed by Sections 22(g) and 22(h) of the Federal Reserve Act and Regulation O
promulgated by the Federal Reserve Board and administered by the OTS. Among
other things, these regulations require such loans to be made on terms
substantially similar to those offered to unaffiliated individuals, place limits
on the amount of loans Harbor Federal may make to such persons based, in part,
on Harbor Federal's capital position, and require certain approval procedures to
be followed.
Community Reinvestment. Under the Community Reinvestment Act ("CRA"), as
----------------------
implemented by OTS regulations, a savings association has a continuing and
affirmative obligation consistent with its safe and sound operation to help meet
the credit needs of its entire community, including low and moderate income
neighborhoods. The CRA does not establish specific lending requirements or
programs for financial institutions nor does it limit an institution's
discretion to develop the types of products and services that it believes are
best suited to its particular community, consistent with the CRA. The CRA
requires the OTS, in connection with its examination of a savings association,
to assess the institution's record of meeting the credit needs of its community
and to take such record into account in its evaluation of certain applications
by such institution, and to provide a written evaluation of an institution's CRA
performance utilizing a four tiered descriptive rating system. Harbor Federal
received an "outstanding record of meeting community credit needs" rating in its
last CRA examination in 1995.
Federal Home Loan Bank System. The FHLB System consists of 12 regional FHLBs
-----------------------------
supervision and regulation by the Federal Housing Finance Board. The FHLBs
provide a central credit facility primarily for member institutions. Harbor
Federal, as a member of the FHLB of Atlanta, is required to acquire and hold
shares of capital stock in the FHLB of Atlanta in an amount at least equal to 1%
of the aggregate principal amount of its unpaid residential mortgage loans, home
purchase contracts, and similar obligations at the beginning of each year, or
1/20th of its advances (borrowings) from the FHLB of Atlanta, whichever is
greater. Harbor Federal is in compliance with this requirement.
Federal Reserve System. The Federal Reserve Board requires all depository
----------------------
institutions to maintain noninterest bearing reserves at specified levels
against their transaction accounts (primarily checking, NOW and Super NOW
checking accounts) and non-personal time deposits. At September 30, 1996,
Harbor Federal was in compliance with these reserve requirements. The balances
maintained to meet the reserve requirements imposed by the
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Federal Reserve Board may be used to satisfy the liquidity requirements that are
imposed by the OTS.
Savings associations have authority to borrow from the Federal Reserve Bank
"discount window," but Federal Reserve Board policy generally requires savings
associations to exhaust all FHLB and other sources before borrowing from the
Federal Reserve System. Harbor Federal had no discount window borrowings at
September 30, 1996.
Regulation of Bancorp
General. Upon completion of the Reorganization, Bancorp will be a savings and
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loan holding company subject to regulatory oversight by the OTS. As such,
Bancorp is required to register and file reports with the OTS and is subject to
regulation and examination by the OTS. In addition, the OTS will have
enforcement authority over Bancorp and its non-savings association subsidiaries,
should such subsidiaries be formed, which also permits the OTS to restrict or
prohibit activities that are determined to be a serious risk to the subsidiary
savings association. This regulation and oversight is intended primarily for
the protection of the depositors of Harbor Federal and not for the benefit of
stockholders of Bancorp. Bancorp will also be required to file certain reports
with, and otherwise comply with, the rules and regulations of the OTS and the
SEC.
Further, the approval of the Reorganization by the OTS is expected to be
conditioned on Bancorp's being subject to the same restrictions as the Mutual
Holding Company. If such condition is not imposed by the OTS, Bancorp would
operate as a unitary savings and loan holding company. As such, Bancorp
generally would not be restricted under existing laws to the types of business
activities in which it may engage provided that Harbor Federal continues to be a
QTL. See "FORMATION OF MIDDLE TIER HOLDING COMPANY -- Regulation of Harbor
Federal" for a discussion of the QTL requirements. Upon any non-supervisory
acquisition by Bancorp of another savings association, Bancorp would become a
multiple savings and loan holding company (if the acquired institution is held
as a separate subsidiary) and would be subject to extensive limitations on the
type of business activities in which it could engage. The HOLA limits the
activities of a multiple savings and loan holding company and its non-insured
institution subsidiaries, primarily to activities permissible for bank holding
companies under Section 4(c)(8) of the Bank Holding Company Act, as amended (the
"BHCA"), subject to prior approval of the OTS, and to other activities
authorized by OTS regulation.
Specifically, the HOLA prohibits a savings and loan holding company, as well
as a mutual 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 (of holding company thereof) which is not a subsidiary,
subject to certain exceptions; (iii) acquiring through merger, consolidation or
purchase of assets, another savings association (whether or not it is insured by
the SAIF) or holding company thereof, or acquiring all or substantially all
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of the assets of such institution (or holding company thereof) without prior OTS
approval; or (iv) acquiring control of a savings association not insured by the
SAIF (except through a merger with and into the holding company's savings
association subsidiary that is approved by the OTS). A savings and loan holding
company may acquire up to 15% of the voting shares of an undercapitalized
savings association. 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
association chartered by that state to be acquired by a savings association
chartered by the state where the acquiring savings association or savings and
loan holding company is located, or by a holding company that controls such a
state chartered association. 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.
Additionally, Section 10(o) of the HOLA places additional restrictions on
mutual holding companies. Pursuant to OTS policy, the following restrictions
will apply to Bancorp. Specifically, a mutual holding company may engage in the
following activities:
(i) Investing in the stock of a savings association.
(ii) Acquiring a mutual association through the merger of such
association into a savings association subsidiary of such mutual holding company
or an interim savings association of such mutual holding company.
(iii) Merging with or acquiring another holding company, one of whose
subsidiaries is a savings association.
(iv) Investing in a corporation the capital stock of which is available
for purchase by a savings association under federal law or under the law of any
state where the subsidiary savings association or associations share their home
offices.
(v) Furnishing or performing management services for a savings
association subsidiary of such company.
(vi) Holding, managing, or liquidating assets owned or acquired from a
savings association subsidiary of such company.
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(vii) Holding or managing properties used or occupied by a savings
association subsidiary of such company.
(viii) Acting as trustee under deed of trust.
(ix) Any other activity (A) that the Federal Reserve Board, by
regulation, has determined to be permissible for bank holding companies under
section 4(c) of the Bank Holding Company Act of 1956 ("BHCA"), unless the
Director, by regulation, prohibits or limits any such activity for savings and
loan holding companies; or (B) in which multiple savings and loan holding
companies were authorized (by regulation) to directly engage on March 5, 1987.
(x) Purchasing, holding, or disposing of stock acquired in connection
with a qualified stock issuance if the purchase of such stock by such savings
and loan holding company is approved by the Director.
The OTS has not adopted final rules governing the establishment of a middle
tier holding company in a mutual holding company structure such as Bancorp.
Pending promulgation, the OTS has advised Harbor Federal that applications for
middle tier holding companies will be approved pursuant to enumerated conditions
of approval in lieu of regulations. Each application will differ and it is
impossible, therefore, to determine the specific conditions of approval which
OTS will impose upon Harbor Federal or any other applicant. However, until
final regulations are promulgated by the OTS, all applications of this nature
are likely to be subject to the imposition of such detailed conditions. The
conditions may restrict the activities, securities and corporate governance of
middle tier entities. Harbor Federal believes that some or all of the
conditions described below are likely to be imposed by the OTS on Bancorp.
Acquisitions. In a middle tier holding company structure such as that which
------------
Harbor Federal proposes to undertake, Bancorp would ordinarily be treated as a
unitary savings and loan holding company. As a unitary savings and loan holding
company Bancorp is permitted under the HOLA to engage in virtually any activity.
The Mutual Holding Company, by contrast, is restricted to the activities of a
mutual savings and loan holding company under Sec. 10(o) of the HOLA. Harbor
Federal anticipates that it is likely that the OTS will require as a condition
of approval that the activities of Bancorp also be limited to those of a mutual
savings and loan holding company. See "Regulation of Bancorp -- General."
Harbor Federal does not believe that this restriction will not be unduly
burdensome or unduly limit the activities of Bancorp. In particular this
limitation should not restrict the ability of Bancorp to repurchase its common
stock.
Cessation or Reversal of Activities, Amendment of Charter of Bylaws. Harbor
-------------------------------------------------------------------
Federal believes that the OTS will also impose a condition of approval on
Bancorp's application requiring reversal or cessation of activities or actions
that conflict with current OTS regulations on mutual holding companies or with
future regulations on mutual holding
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companies which may be promulgated in the future. There is no specific date by
which regulations on middle tier holding companies such as Bancorp will be
promulgated. During that interim period an activity undertaken in reliance on
current regulations governing mutual holding companies may be deemed
inappropriate under future regulations. Harbor Federal and the Mutual Holding
Company will use their best efforts to confer closely with OTS, with respect to
any activities or actions undertaken by Bancorp.
Stock Issuance Requirements. Harbor Federal also anticipates the OTS will
---------------------------
require that Bancorp be required to obtain approval from the OTS for the
issuance of any securities and that Bancorp will be required to hold all of the
issued and outstanding common stock of Harbor Federal. Harbor Federal also will
not be permitted to issue any other class of equity security such as preferred
stock. Further, the OTS is also likely to require that both Bancorp and Harbor
Federal may not issue any securities including common stock without prior OTS
approval.
Governance. Bancorp will also be required under anticipated conditions of
----------
approval to obtain the approval of the OTS prior to amending its Certificate of
Incorporation and bylaws.
Mutual to Stock Conversion. The anticipated conditions expected to be imposed
--------------------------
by the OTS will also govern the rights of shareholders of Bancorp should the
Mutual Holding Company undertake a mutual to stock conversion in the future.
The Mutual Holding Company has no plans to undertake such a conversion. Current
OTS policies which now apply to the shareholders of Harbor Federal will also
apply to shareholders who receive shares of Bancorp in the Reorganization. As a
general matter those shareholders have received the right to exchange shares of
the subsidiary institution such as Harbor Federal in exchange for shares of the
newly converted mutual holding company. See "FORMATION OF MIDDLE TIER HOLDING
COMPANY -- Reasons For and Risks of the Reorganization." Shareholders of
Bancorp will not, however, receive any greater rights than those which were
available to former holders of Harbor Federal stock.
Description of Bancorp Capital Stock
The 14,000,000 shares of capital stock authorized by the Certificate of
Incorporation of Bancorp are divided into two classes consisting of 13,000,000
shares of common stock (par value $0.01 per share) and 1,000,000 shares of
preferred stock (par value $0.01 per share). Harbor Federal's Federal Stock
Charter authorize 20,000,000 shares of common stock (par value $1.00 per share)
and 1,000,000 shares of preferred stock (par value $1.00 per share). On
September 30, 1996, Harbor Federal had 4,934,454 outstanding shares of common
stock and no shares of preferred stock outstanding. The number of shares of
Bancorp common stock to be outstanding upon consummation of the Plan of
Reorganization will be the same as the number of shares of Harbor Federal's
common stock outstanding immediately prior to such consummation. Each share of
common stock of Bancorp will have the same relative rights and will be identical
in all respects with each other share of its common stock.
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There are no material differences between the common stock of Bancorp and of
Harbor Federal as to voting, liquidation, preemptive or redemption rights.
Each holder of the common stock of Bancorp will be entitled to one vote for
each share held on all matters voted upon by shareholders.
In the event of any liquidation or dissolution of Bancorp, the holders of the
common stock would be entitled to receive -- after payment or provision for
payment of all debts and liabilities of Bancorp and the full preferential
amounts to which holders of any preferred stock may be entitled -- all remaining
assets of Bancorp available for distribution, in cash or in kind. Distributions
of the assets of Harbor Federal upon liquidation are subject to the payment of
Harbor Federal's debts and liabilities, including all deposits and accrued
interest thereon.
The holders of common stock of Bancorp will not be entitled to preemptive
rights with respect to any shares which may be issued. The common stock will
not be subject to call for redemption. Upon receipt by Bancorp of the full
consideration therefor each share of the common stock will be fully paid and
nonassessable.
Bancorp has no present plans for the issuance of the additional authorized
shares of common or preferred stock (other than pursuant to the exercise of
outstanding stock options). In the future, the authorized but unissued and
unreserved shares of common stock of Bancorp will be available for general
corporate purposes, including, but not limited to, possible issuance as stock
dividends or stock splits, in future mergers or other acquisitions, under a cash
dividend reinvestment and stock purchase plan, in a future public offering or
private placement or under the stock benefit plans of Harbor Federal.
No shareholder approval would be required after the Merger for the issuance of
additional shares of common stock. Accordingly, the Board of Directors of
Bancorp (as is currently the case for the Board of Directors of Harbor Federal),
without shareholder approval, could in the future issue additional shares of
common stock on a dilutive basis and could also issue shares of serial preferred
stock with voting or other rights that might adversely affect the rights of
holders of common stock. However, pursuant to OTS policy, approval of the
Reorganization by the OTS is likely to be conditioned on the requirement that
Bancorp and Harbor Federal must obtain approval from the OTS prior to issuing
any equity or debt securities. See "FORMATION OF MIDDLE TIER HOLDING COMPANY --
Dividend Policy," "-- Income Tax Consequences of the Reorganization," "--
Regulation of Bancorp" and "-- Regulation of Harbor Federal" for a description
of certain matters relating to the future payment of dividends on Bancorp's
common stock.
Anti-Takeover Provisions
Bancorp's Certificate of Incorporation and bylaws contain certain takeover
defense provisions. These provisions, while similar in many respects to those
of Harbor Federal's Federal Stock Charter and bylaws, also contain certain
differences. However, the Mutual
65
<PAGE>
Holding Company, which currently holds a majority of the outstanding shares of
common stock of Harbor Federal will also own the majority of the outstanding
common stock of Bancorp. Further, the Mutual Holding Company is required by law
and OTS regulation to own at least a majority of the outstanding common stock of
Bancorp as long as it is in existence. As the Mutual Holding Company is not a
stock entity but instead is owned by the depositors of Harbor Federal, control
of Bancorp cannot be gained without the consent of the Board of Directors of the
Mutual Holding Company. The Board of Directors of the Mutual Holding Company is
currently identical to that of Harbor Federal. It is anticipated that for the
foreseeable future the individuals who serve on the Board of Directors of Harbor
Federal and Bancorp will also serve on the Board of Directors of the Mutual
Holding Company.
In addition, the state of Delaware has 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 certain 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, with the number of shares outstanding
calculated without regard to those shares owned by the corporation's directors
who are also officers and by 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 electing not to be governed by Section 203. At the present time, the
Board of Directors does not intend to propose any such amendment.
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<PAGE>
Indemnification
Bancorp's Certificate of Incorporation or bylaws provide that it will
indemnify its directors and officers and may indemnify its employees and agents
to the full extent authorized by Delaware law in connection with certain matters
in which they may be involved because of their positions with Bancorp, including
criminal, civil, administrative or investigative proceedings. Delaware law
permits indemnification against expenses (including attorneys' fees), judgments,
fines, penalties and amounts paid in settlement in third-party actions involving
such persons, provided there is a determination by a majority vote of the
disinterested directors, by independent legal counsel, by the shareholders or by
a court that the person seeking indemnification acted in good faith and in a
manner reasonably believed to be in or not opposed to the best interests of
Bancorp and, in the case of any criminal action, had no reason to believe his
conduct was unlawful.
In the case of derivative actions on behalf of Bancorp, Delaware law generally
permits indemnification for expenses (including attorneys' fees) in defending
oneself, assuming a determination as to the conduct of the person seeking to be
indemnified similar to that required for third-party actions.
Delaware law provides for advances of legal expenses as they are incurred to
persons seeking to be indemnified, provided that the person receiving the
advances undertakes to repay such amounts if it is subsequently determined that
he or she is not entitled to indemnification.
The obligation of Bancorp to provide indemnification as described above will
continue, even if the Certificate of Incorporation or bylaws are subsequently
amended to restrict or eliminate the right to indemnification, with respect to
any state of facts existing at or before the time of such amendment and any
proceeding, whenever brought, based in whole or in part upon any such state of
facts. Bancorp is presently unaware of any actual or threatened actions or
proceedings that might result in a claim for indemnification under Bancorp's
bylaws.
In recent years, there has been a significant increase in the number and
amount of claims brought against Directors and officers of corporations. As a
result, certain corporations have experienced difficulties in attracting and
retaining qualified persons to serve on their Boards of Directors. To date,
Harbor Federal has not encountered a problem in attracting or retaining
qualified Directors, nor has Harbor Federal encountered a problem in obtaining
adequate insurance coverage. It is expected that such insurance will be
extended to cover Directors and officers of Bancorp upon completion of the
middle tier holding company formation. If liability insurance coverage for
-----------------------------------
Directors and officers of Bancorp were to become unavailable or prohibitively
- - -----------------------------------------------------------------------------
expensive in the future, Bancorp would be required to act as a self-insurer and
- - -------------------------------------------------------------------------------
bear the full cost of any indemnification provided.
- - ---------------------------------------------------
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<PAGE>
Limitations on Director Liability
In performing their duties, Directors, and officers acting in the capacity of
Directors, of a Delaware corporation such as Bancorp are obligated as
fiduciaries to exercise their business judgment and to act in what they
reasonably believe in good faith, after consideration, to be in the best
interests of the corporation and its shareholders. Such actions are generally
protected by the so-called "business judgment" rule and will normally be upheld
by a court in the event of a lawsuit challenging them. Under Delaware law
Directors can be held liable for gross negligence, as that term may be defined
by the Delaware courts, in connection with decisions made in the performance of
their duties, but generally not for ordinary negligence in most circumstances.
Bancorp has included in its Certificate of Incorporation a provision which
eliminates the personal liability of Directors and officers acting in the
capacity of Directors or performing duties as a Director, for monetary damages
to Bancorp and its shareholders for breach of their fiduciary duty except for
liability for: (i) willful or negligent violations of certain provisions of the
Delaware General Corporation Law with respect to the unlawful payment of
dividends or unlawful stock purchases or redemptions; (ii) a breach of a
Director's duty of loyalty to the Bancorp or its shareholders; (iii) acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law; or (iv) a transaction from which the Director derived improper
personal benefit. This provision relieves Bancorp's directors of liability to
Bancorp and to shareholders for negligence in the performance of their duties,
including gross negligence, subject to the limitations specified below. It thus
could eliminate liability of Directors, and officers acting as Directors, even
for grossly negligent business decisions in certain circumstances. It does not
eliminate or limit liability of Directors arising in connection with causes of
action brought under the federal securities laws or to parties other than
Bancorp or its shareholders. The provision has no effect on the availability of
equitable remedies, such as an injunction or rescission, based upon a Director's
breach of his fiduciary duty to Bancorp and to shareholders. At present, there
are no pending or contemplated actions or proceedings against any Directors of
Bancorp, and Bancorp knows of no threatened litigation against its Directors
that would be affected by the foregoing provisions of law.
The SEC takes the position that similar provisions limiting the liability of
directors under state laws would not protect those corporations' directors from
liability for violations of the federal securities laws. Federal banking
regulators may also take the same position with respect to violations of federal
banking laws and regulations.
Currently federal law does not permit federally chartered savings banks such
as Harbor Federal to limit the personal liability of directors in the manner
provided for by Delaware law and the laws of many other states.
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<PAGE>
Changes in Shareholders' Rights
As a result of the middle tier holding company formation, shareholders of
Harbor Federal, whose rights are presently governed by Federal law and Harbor
Federal's Federal Stock Charter and bylaws, will become shareholders of Bancorp.
As such, their rights will be governed by the Delaware General Corporation Law
and Bancorp's Certificate of Incorporation and bylaws. The Mutual Holding
Company, the majority shareholder of Harbor Federal, will remain the majority
stockholder of Bancorp.
Although the governing instruments of Harbor Federal and Bancorp are similar
in most material respects, there are certain material differences. The
---
following discussion does not purport to be a complete statement of the
- - -----------------------------------------------------------------------
differences affecting the rights of shareholders but summarizes those
- - ---------------------------------------------------------------------
differences that are deemed by Harbor Federal to be material. See the
- - ----------------------------------------------------------------------
Certificate of Incorporation and bylaws of Harbor Federal attached as Exhibits B
- - --------------------------------------------------------------------------------
and C to this Proxy Statement/Prospectus.
- - -----------------------------------------
Purpose Clause. The Certificate of Incorporation of Bancorp provides that
--------------
it may engage in any lawful act or activity for which corporations may be formed
under the Delaware General Corporation Law. Harbor Federal's Federal Stock
Charter limit its activities to all lawful objectives of a Federal savings bank.
However, pursuant to OTS policy, Bancorp is subject to the same restrictions on
activities as the Mutual Holding Company. See "FORMATION OF MIDDLE TIER HOLDING
COMPANY -- Regulation of Bancorp."
Dividend Rights and Policies. The shareholders of both Harbor Federal and
----------------------------
Bancorp are entitled to dividends if, when and as declared by their respective
Boards of Directors. The declaration of future dividends, whether by the Board
of Directors of Harbor Federal or of Bancorp, will be subject to favorable
operating results, financial conditions, regulatory limitations and other
relevant factors. Accordingly, no assurance can be given as to the likelihood,
amount or timing of any future dividend payments.
Harbor Federal may not pay cash dividends at any time when payment of such
dividends would reduce its regulatory capital below the regulatory capital
requirements of the OTS. After the Reorganization, Harbor Federal as Bancorp's
subsidiary will be required to give the OTS 30 days advance notice of any
proposed declaration of cash dividends to Bancorp.
The Mutual Holding Company has currently waived receipt of all dividends on
its shares of common stock of Harbor Federal. It anticipates the continued
waiver of all such dividends on Bancorp stock. Pursuant to OTS policy, the
Mutual Holding Company is a "grandfathered" entity.
In addition, to the extent that distributions by Harbor Federal to Bancorp
exceed Harbor Federal's accumulated earnings and profits and current earnings
and profits (as computed for federal income tax purposes), such distributions
will be treated for tax purposes
69
<PAGE>
as being made out of Harbor Federal's bad debt reserve. See "FORMATION OF MIDDLE
TIER HOLDING COMPANY -- Income Tax Consequences of the Reorganization."
Like Harbor Federal, it is anticipated that Bancorp will be subject to OTS
restrictions with respect to the payment of dividends. Delaware law permits the
Board of Directors of Bancorp generally to pay dividends out of Bancorp's net
income and surplus. Bancorp's principal income source initially will be
dividends from Harbor Federal. See "FORMATION OF MIDDLE TIER HOLDING COMPANY --
Dividend Policy" and "--Dividend and Other Capital Distribution Limitations."
Bancorp anticipates that initially it will pay quarterly cash dividends to
shareholders on the same basis that Harbor Federal has previously paid dividends
to its shareholders. It is anticipated the Mutual Holding Company will continue
to waive receipt of all dividends. However, there can be no assurance as to the
amount or timing of future dividend payments, if any. The declaration of
dividends by Bancorp and Harbor Federal are subject to favorable operating
results, the financial condition of Bancorp and Harbor Federal, tax and
regulatory limitations and other factors.
Voting Rights. All voting rights are currently vested in the holders of
-------------
Harbor Federal's common stock. Each share of common stock is currently entitled
to one vote on all matters voted upon by shareholders. Cumulative voting is not
currently permitted. Holders of Bancorp's common stock will have the same
voting rights.
Call of Special Meetings. Harbor Federal's bylaws provide that special
------------------------
meetings of shareholders may be called at any time by the Chairman of the Board,
President, by the majority of Board of Directors or by shareholders entitled to
cast at least 10% of the votes which all shareholders are entitled to cast at a
particular meeting. Harbor Federal's Federal Stock Charter provides that
Special Meetings relating to change in control of the savings bank shall be
called only upon the direction of the Board of Directors. Bancorp's bylaws
provide that special meetings for any purpose may be called only by a majority
of the Board of Directors.
Quorum for Shareholder Meeting. Both Harbor Federal's bylaws and Bancorp's
------------------------------
provide that generally a majority of the outstanding shares entitled to vote,
represented in person or by proxy, constitutes the necessary quorum for a
shareholder meeting.
Inspection of Stock Ledger and Corporate Books and Records. Bancorp's
----------------------------------------------------------
bylaws and Delaware law require a list of shareholders as of the applicable
record date to be made available for inspection by any shareholder at any
meeting of shareholders. Federal law has a substantially identical requirement
which additionally requires such list to be available twenty (20) days before
the meeting.
Business Combinations. Harbor Federal may, in general, effect a merger or
---------------------
consolidation (other than with an interim association) or sell all or
substantially all of its assets, if authorized by holders of at least a majority
of the outstanding common stock. However, no person other than the Mutual
Holding Company may acquire more than 10% of
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<PAGE>
the stock of Harbor Federal until January 4, 1999. Under Delaware law the
approval of the holders of at least a majority of the voting shares of the
corporation is required for Bancorp to merge or consolidate with other
companies. In addition, Delaware law and Bancorp's Certificate of Incorporation
requires the approval of the holders of at least 66 2/3% of the voting shares
(excluding those of the interested shareholder), when a business combination,
which is defined to include a merger, is with an interested shareholder (defined
generally as a holder of more than 15% of the outstanding voting shares or an
affiliate of such a shareholder). Additionally, Bancorp's Certificate of
Incorporation does not permit any person or entity, except the Mutual Holding
Company or the ESOP, to own or to have beneficial ownership of more than 10% of
the outstanding stock of Bancorp.
Amendment of Certificate and Federal Stock Charter. Delaware law requires
--------------------------------------------------
that any amendment to the Certificate of Incorporation must be approved by the
affirmative vote of a majority of the votes which all shareholders are entitled
to cast thereon and the affirmative vote of the holders of at least a majority
of the outstanding shares in each class of shares entitled to vote as a class
thereon. However, the approval of the Reorganization by the OTS is expected to
be conditioned upon the requirement that Bancorp must receive the OTS' non-
objection to any proposed amendments to its Certificate of Incorporation. See
"FORMATION OF MIDDLE TIER HOLDING COMPANY -- Regulations of Bancorp." Federal
law requires approval of amendments of Harbor Federal's charter by (i) the Board
of Directors; (ii) the OTS; and (iii) by the stockholders by a majority of the
total votes eligible to be cast thereon.
Amendment of Bylaws. Harbor Federal's bylaws provide they may be amended in a
-------------------
manner consistent with OTS regulation by a majority vote of the Board of
Directors or by the majority of votes cast by the stockholders at any legal
meeting. Bancorp's bylaws allow the shareholders or the Board of Directors to
amend or repeal the bylaws or adopt new bylaws. Bancorp's bylaw provisions
governing the calling of special meetings of stockholders and governing the
numbers, terms, replacement, removal and nomination of Directors may only be
amended or repealed by a vote of two-thirds of all the votes entitled to be cast
in the election of Directors. Further, the approval of the Reorganization by
the OTS is expected to be conditioned upon the requirement that Bancorp must
receive the OTS' non-objection to any proposed amendments to its Bylaws. See
"FORMATION OF MIDDLE TIER HOLDING COMPANY -- Regulations of Bancorp."
Shareholder Nomination and New Business. The nominating committee of Harbor
---------------------------------------
Federal's Board of Directors selects the management nominees for election as
directors. Except where a nominee is substituted as a result of the death or
incapacity of a management nominee, Harbor Federal's bylaws require the
nominating committee to submit nominations to the secretary of Harbor Federal at
least 30 days prior to the date of the shareholder meeting at which directors
are to be elected. Nominations may be made by shareholders, provided they are
made in writing and are delivered to the secretary of Harbor Federal at least 20
days before the date of such meeting. Bancorp's bylaws require that nominations
for Director made by the Board of Directors shall be made not less than 5 days
prior to the date of the meeting at
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<PAGE>
which Directors are to be elected. If made by stockholders, such nominations
must be made at least 90 days prior to such meeting, if it is the Annual
Meeting, or within 7 days following the date of notice of the meeting, if a
special meeting.
Directors. The Federal Stock Charter of Harbor Federal provides for a Board
---------
of not less than 5 nor more than 15 Directors. The Certificate of Incorporation
of Bancorp provides for a minimum of 5 Directors and a maximum of 15 Directors.
Under the bylaws of Harbor Federal, vacancies existing of the Board of
Directors arising from death, resignation, retirement, disqualification, removal
from office or other cause are filled by a majority vote of the Directors then
in office. A Director who is appointed by the Board of Directors to fill a
vacancy on the Board serves until the next annual meeting of shareholders.
Bancorp's Certificate of Incorporation provides that a Director who is
appointed by the Board of Directors to fill a vacancy on the board serves for
the unexpired term of the class in which the vacancy occurs but that a Director
who has been appointed to fill a vacancy caused by an increase in the number of
directors shall serve only until the next annual meeting of shareholders.
Bancorp's Certificate of Incorporation provides for removal of a Director
only for cause and only with the affirmative vote of 66 2/3% of the voting power
of Bancorp's outstanding stock. Harbor Federal's bylaws provide that at a
meeting called expressly for that purpose, any director may be removed for cause
by a vote of the holders of a majority of the shares entitled to vote at an
election of directors. Under Delaware law, any Director or the entire Board of
Directors may be removed with or without cause by the holders of a majority of
the shares then entitled to vote at an election of Directors except where a
Board is classified, such removal can be only for cause (unless the Certificate
of Incorporation otherwise provides). Bancorp's Board will be classified and its
certificates does not provide for removal for other than cause.
Bancorp's bylaws permit Directors to participate in any Board meetings
telephonically as long as all parties to the meeting can hear each other.
Telephonic participation will qualify as presence at the meeting for all
purposes. Federal law permits attendance at Board meetings by means of
conference telephone but providing that such participation does not constitute
attendance for the purpose of compensation for service on the Board.
Federal Securities Laws
Bancorp has filed with the Commission a registration statement under the
Securities Act for the registration of the common stock of Bancorp to be issued
in connection with the Reorganization. This Proxy Statement/Prospectus
constitutes the prospectus of Bancorp filed as part of such registration
statement. Upon consummation of the Reorganization, the common stock of Bancorp
will be registered under the Exchange Act with the Commission.
72
<PAGE>
Bancorp will then be subject to the information, proxy solicitation and other
requirements of the Commission under the Exchange Act.
This Proxy Statement/Prospectus also constitutes proxy material of Harbor
Federal and has been filed with the OTS under the Exchange Act. Upon completion
of the Reorganization, the common stock of Harbor Federal will be deregistered
with the OTS under the Exchange Act.
Resales of Bancorp Common Stock
All shares of the Bancorp Common Stock received by shareholders of Harbor
Federal in connection with the Reorganization will be freely transferable,
except for shares issued to any shareholders of Harbor Federal who may be deemed
to be "affiliates" of Harbor Federal for purposes of Rule 144 under the
Securities Act. Such shareholders may resell their shares only in transactions
permitted by the resale provisions of Rule 144, or as otherwise permitted under
the Securities Act.
LEGAL PROCEEDINGS
Harbor Federal is involved in various legal proceedings occurring in the
ordinary course of its business. None is believed by management to be material
to the financial condition of Harbor Federal.
MARKET FOR COMMON STOCK
Since January 6, 1994, the date of the reorganization, the common stock of
Harbor Federal has been quoted on the NASDAQ-NMS. The following table presents
quarterly information on the range of high and low prices since that time.
<TABLE>
<CAPTION>
Quarter Ended High Low Dividends Declared Per Share
------------- ---- --- ----------------------------
<S> <C> <C> <C>
March 31, 1994 $14.50 $12.125 $.1125
June 30, 1994 15.25 11.875 .1125
September 30, 1994 20.25 14.438 .1125
December 31, 1994 18.50 15.00 .2250
March 31, 1995 18.50 16.00 .2250
June 30, 1995 19.75 17.75 .2250
September 30, 1995 23.50 19.50 .2250
December 31, 1995 27.50 22.50 .30
March 31, 1996 28.00 24.75 .30
June 30, 1996 29.25 25.50 .30
September 30, 1996 30.00 23.75 .30
</TABLE>
73
<PAGE>
On ___________, 1996, the closing price for Harbor Federal's common stock as
reported in The Wall Street Journal was _____________. On that date, there were
-----------------------
approximately _______ holders of such common stock.
74
<PAGE>
PROPOSAL III - RATIFICATION OF APPOINTMENT
OF INDEPENDENT AUDITORS
The Board of Directors of Harbor Federal has appointed the firm of KPMG Peat
Marwick LLP, Certified Public Accountants, to continue as independent auditors
for Harbor Federal for the fiscal year ending September 30, 1997, subject to
ratification of such appointment by the stockholders. A representative of KPMG
Peat Marwick LLP will be present at the Annual Meeting, will be given an
opportunity to make a statement if he or she desires to do so and will be
available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE APPOINTMENT
---
OF KPMG PEAT MARWICK LLP AS HARBOR FEDERAL'S INDEPENDENT AUDITORS FOR FISCAL
1997 UNDER THIS PROPOSAL III.
SHAREHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
If the middle tier holding company formation is consummated, any shareholder
proposal intended for inclusion in Bancorp's proxy statement and form of proxy
relating to Bancorp's Annual Meeting of Shareholders expected to be held on or
about January 19, 1998 must be received by Bancorp _______________________
pursuant to the proxy solicitation regulations of the Commission. If the middle
tier holding company formation is not consummated, any shareholder proposal
intended for inclusion in Harbor Federal's proxy statement and form of proxy
relating to Harbor Federal's annual meeting of shareholders expected to be held
on or about January 19, 1998 must be received by Harbor Federal by ___________
pursuant to the proxy solicitation regulations of the OTS. Nothing in this
paragraph shall be deemed to require Bancorp or Harbor Federal to include in its
proxy statement and form of proxy any shareholder proposal which does not meet
the requirements of the Commission or the OTS in effect at the time.
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<PAGE>
FURTHER INFORMATION
This proxy statement is also a prospectus of Bancorp delivered in compliance
with the Securities Act. A registration statement under the Securities Act has
been filed by Bancorp with the Commission and the OTS, with respect to the
securities offered hereby. This Proxy Statement/Prospectus does not contain all
the information set forth in the registration statement, certain parts of which
are omitted in accordance with the rules and regulations of the Commission. The
registration statement may be inspected at the offices of the Commission without
charge, and copies of all or any part of it may be obtained on payment of the
fee prescribed by the Commission. For further information pertaining to Bancorp
and the securities offered hereby, reference is made to the registration
statement, including the exhibits filed as a part thereof. The summaries or
descriptions of documents, statutes or regulations in this Proxy
Statement/Prospectus do not purport to be complete. Reference is made to the
copies of such documents attached to this Proxy Statement/Prospectus or
otherwise filed as part of the registration statement and to such statutes or
regulations for a full and complete statement of their provisions, and such
summaries and descriptions are qualified in their entirety by such reference.
This proxy statement has been filed by Harbor Federal with the OTS, 1700 G
Street, N.W., Washington, D.C., under the Exchange Act. Harbor Federal has also
filed reports and other information with the OTS under the Exchange Act. Such
information can be inspected and copied at the OTS.
LEGAL OPINION
The legality of the Bancorp common stock to be issued pursuant to the
Reorganization will be passed upon for Bancorp by Peabody & Brown, 1255 23rd
Street, N.W., Washington, D.C. 20037.
FINANCIAL INFORMATION
No financial statement disclosure is included herein because, in accordance
with the rules of the Commission: (i) the only parties to the Reorganization
(other than Harbor Federal) are Bancorp and its wholly-owned subsidiary,
Interim, neither of which has any significant assets or liabilities; (ii)
Bancorp's only substantial asset if the Reorganization is effected will be cash
and its investment in Harbor Federal; and (iii) the consolidated financial
statements of Bancorp immediately after the Reorganization will be substantially
identical to the financial statements of Harbor Federal immediately before the
Reorganization. The Reorganization will be characterized and accounted for at
historical cost in a manner similar to a "pooling of interest" for financial
reporting and related purposes.
Harbor Federal's Annual Report for 1996 is being mailed to shareholders with
this Proxy Statement/Prospectus and includes Harbor Federal's audited financial
statements for the fiscal year ended September 30, 1996, including a comparative
statement of financial
76
<PAGE>
condition, a comparative statement of operations, a comparative statement of
cash flows, and a comparative statement of changes in shareholders' equity. Any
present shareholder who did not receive an Annual Report, or who has misplaced
his or her copy, will be furnished a copy without charge, upon written request
to the Secretary of Harbor Federal at the address shown on the cover hereof.
A copy of Harbor Federal's Annual Report on Form 10-K for the fiscal year
ended September 30, 1996, as filed with the Office of Thrift Supervision
(excluding exhibits) may be obtained by any stockholder, without charge, upon
written request to Anne W. Satterlee, Stockholder Relations, Harbor Federal
Savings Bank, P.O. Box 249, Fort Pierce, Florida 34954.
OTHER BUSINESS
As of the date of this Proxy Statement/Prospectus, the Board of Directors of
Harbor Federal knows of no matters to be brought before the Annual Meeting other
than procedural matters incident to the conduct of the Annual Meeting. If
further business is properly presented, the proxy holders will vote proxies, as
determined by a majority of the Board of Directors.
The Board of Directors of Harbor Federal urges each shareholder, whether or
not he or she intends to be present at the Annual Meeting, to complete, sign and
return the enclosed proxy as promptly as possible.
By Order of the Board of Directors of
Harbor Federal Savings Bank
Michael J. Brown, Sr.
President and CEO
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<PAGE>
EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
------------------------------------
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement"), dated as
of November 27, 1996, between Harbor Federal Savings Bank, a federally chartered
savings bank (the "Bank") and Harbor Florida Bancorp, Inc., a Delaware
corporation (the "Holding Company") which is wholly-owned by the Bank. Promptly
after its incorporation, Interim Harbor Federal Savings Bank ("Interim"), a
stock savings bank to be organized by the Holding Company under Federal law for
the sole purpose of consummating the reorganization provided herein, will
execute and deliver this Agreement and, thereby, become a Party hereto.
BACKGROUND
----------
The Board of Directors of the Bank has determined that it is in the
best interests of the Bank and its stockholders for the Bank to be reorganized
into a middle tier stock holding company form of ownership in accordance with
the terms of this Agreement as follows:
A. Upon the organization of Interim, the Holding Company will be the
sole stockholder of Interim.
B. Interim will thereafter merge into the Bank, on terms whereby the
stockholders of the Bank will exchange all of the outstanding shares of common
stock of the Bank for Shares of the Holding Company, and the Holding Company (as
the former sole stockholder of Interim) will receive all of the outstanding
shares of common stock of the Bank.
C. Whereupon, the former stockholders of the Bank will be all of the
stockholders of the Holding Company which, in turn, will own all of the
outstanding shares of stock of the Bank.
TERMS
-----
The parties hereto, intending to be legally bound hereby, agree as
follows:
ARTICLE ONE
DEFINITIONS
The following terms used herein have the meanings specified below:
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1.1 "Agreement" means this Agreement and Plan of Reorganization.
1.2 The "Bank" means Harbor Federal Savings Bank a federally chartered
savings bank organized under Federal law.
1.3 "Bank Common Stock" means the shares of $1.00 par value common stock
of the Bank.
1.4 "Effective Date" means that the date provided for in Section 8.1 on
which the Merger shall become effective.
1.5 "Effective Time" means the time on the Effective Date when the Merger
shall become effective.
1.6 "Holding Company" means Harbor Florida Bancorp, Inc., a corporation
organized under Delaware law.
1.7 "Holding Company Common Stock" means the shares of $0.01 par value
common stock of the Holding Company.
1.8 "Interim" means Interim Harbor Federal Savings Bank, an interim stock
savings bank to be organized under Federal law.
1.9 "Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended.
1.10 "Merger" means the merger of Interim with and into the Bank provided
for in Section 2.1 of this Agreement.
1.11 "OTS" means the Office of Thrift Supervision.
1.12 "Party" means each of the Bank, the Holding Company and Interim, as a
Party to this Agreement.
1.13 "Resulting Institution" means the Bank as the surviving Party to the
Merger,
1.14 "SEC" means the Securities and Exchange Commission .
ARTICLE TWO
MERGER OF INTERIM INTO THE BANK AND RELATED MATTERS
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2.1 The Merger. On the Effective Date, Interim will merge with and into
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the Bank pursuant to the terms of this Agreement, and thereupon the separate
existence of Interim will cease. The Bank, as the Resulting Institution, will
possess all of the rights, privileges, powers and franchises, and be subject to
all the restrictions, duties and liabilities of Interim, and all property, real,
personal and mixed, and all debts due to Interim on whatever account, shall be
vested in the Bank, and all such property, rights, privileges, powers and
franchises, and all and every other interest of Interim shall be as effectively
the property of the Bank as they were of Interim.
2.2 Continued Existence of the Bank. Following the Merger, the existence
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of the Bank will 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 savings bank organized under the laws of the United States. The
home and branch offices of the Bank will be at the location of the home and
branch offices of the Bank immediately prior to the Effective Time. The Federal
Stock Charter and bylaws of the Bank, as presently in effect, will continue in
full force and effect and shall not be changed in any manner whatsoever by the
Merger. The Bank will continue to operate immediately after the Effective Time
under its present name, "Harbor Federal Savings Bank."
2.3 Continued Business of the Bank. From and after the Effective Time, the
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business presently conducted by the Bank will continue to be conducted by it as
a wholly-owned subsidiary of the Holding Company, subject to the management and
control of the board of directors of the Bank and, subject to such action as the
board of directors of the Bank might take hereafter, the present officers of the
Bank will continue in their present positions. It is the Parties' intention that
a continuity of operation of the Bank business and a continuity of present
management will be maintained.
2.4 Directors of the Holding Company. On the Effective Date, the directors
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of the Holding Company who will serve until the expiration of the respective
terms for which they were elected and until their respective successors are
elected and duly qualified will be as follows:
<TABLE>
<CAPTION>
<S> <C>
Name and Address Term
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Bruce R. Abernethy, Sr. 1999
100 S. Second Street
Fort Pierce, FL 34950
Richard N. Bird 2000
100 S. Second Street
Fort Pierce, FL 34950
</TABLE>
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<TABLE>
<S> <C>
Michael J. Brown, Sr. 1998
100 S. Second Street
Fort Pierce, FL 34950
Richard K. Davis 2000
100 S. Second Street
Fort Pierce, FL 34950
Edward G. Enns 1999
100 S. Second Street
Fort Pierce, FL 34950
Frank H. Fee, III 2000
100 S. Second Street
Fort Pierce, FL 34950
Richard B. Hellstrom 1998
100 S. Second Street
Fort Pierce, FL 34950
</TABLE>
2.5 Directors of the Bank. On the Effective Date, the directors of the
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Bank, who will serve until the expiration of the respective terms for which they
were elected and until their respective successors elected and qualified, will
be as follows:
<TABLE>
<S> <C>
Name and Address Term
---------------- ----
Bruce R. Abernethy, Sr. 1999
100 S. Second Street
Fort Pierce, FL 34950
Richard N. Bird 2000*
100 S. Second Street
For Pierce, FL 34950
Michael J. Brown, Sr. 1998
100 S. Second Street
Fort Pierce, FL 34950
Richard K. Davis 2000*
100 S. Second Street
Fort Pierce, FL 34950
</TABLE>
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<TABLE>
<S> <C>
Edward G. Enns 1999
100 S. Second Street
Fort Pierce, FL 34950
Frank H. Fee, III 2000*
100 S. Second Street
Fort Pierce, FL 34950
Richard B. Hellstrom 1998
100 S. Second Street
Fort Pierce, FL 34950
</TABLE>
* Assumes election at the 1997 Annual Meeting of Stockholders of the Bank.
2.6 Savings Accounts. Immediately after the Effective Time, the Bank will
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continue to issue savings accounts on the same basis as immediately prior
thereto.
ARTICLE THREE
CONVERSION OF SHARES
3.1 Terms and Conditions of Merger. The manner and basis of converting the
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shares of the Bank and Interim in the Merger will be as follows:
(a) The Bank's Common Stock.
(i) Conversion. Each share of Bank Common Stock issued and
outstanding immediately prior to the Effective Time shall immediately
and by virtue of the Merger, without any action on the part of the
Bank or the holder of such share, be converted into and become one
fully paid and nonassessable share of Holding Company Common Stock.
Such shares of Bank Common Stock shall thereupon, without any further
action on the part of the Bank, be cancelled and retired, shall no
longer be outstanding and the number of such shares shall be restored
to the number of authorized but unissued shares of Bank Common Stock.
(ii) Stock Certificates. At any time after the Effective Time,
the holder of an outstanding certificate which prior to the Effective
Time represented shares of Bank Common Stock may surrender the same to
the Holding Company's Stock Registrar and Transfer Agent, or to its
corporate Secretary, and such holder thereupon shall be entitled to
receive, in exchange therefor, one or more certificates representing
the number of shares of Holding Company Common Stock into which such
shares of Bank Common Stock shall have been converted. Until so
surrendered, each outstanding certificate which,
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prior to the Effective Time represented shares of Bank Common Stock,
shall be deemed for all purposes (including the payment of dividends)
to evidence ownership of the number of shares of Holding Company
Common Stock into which such shares of Bank Common Stock shall have
been so converted.
(iii) Satisfaction of All Rights. All shares of Holding Company
Common Stock into which shares of Bank Common Stock shall have been
converted pursuant to the Merger shall be deemed to have been issued
in full satisfaction of all rights pertaining to such converted
shares.
(iv) Sole Right, Etc. At the Effective Time, the holders of
certificates formerly representing shares of Bank Common Stock
outstanding immediately prior to the Effective Time shall cease to
have any rights with respect to Bank Common Stock and their sole
rights on and following the Effective Time shall be with respect to
the shares of Holding Company Common Stock into which their shares of
Bank Common Stock shall have been converted by the Merger.
(b) Holding Company Stock Owned Directly or Indirectly by the Bank.
At the Effective Time, all shares of Holding Company Common Stock issued
and outstanding immediately prior to the Effective Time shall, by virtue of
the Merger and without any action on the part of the Holding Company or the
holder of any such share, be cancelled and returned, shall no longer be
outstanding, and the number of such shares shall be restored to the number
of authorized but unissued shares of Holding Company Common Stock. All such
shares of Holding Company Common Stock outstanding at the date of this
Agreement are owned by the Bank.
(c) Interim Common Stock. Each share of Interim common stock issued
and outstanding immediately prior to the Effective Time shall immediately
and by virtue of the Merger, without any action on the part of Interim or
the holder of such share, be converted into and become one fully paid and
nonassessable share of Bank Common Stock, whereupon the Holding Company as
the holder of such shares of common stock of Interim will be the holder of
all of the outstanding shares of common stock of the Bank.
3.2 The Bank's Employee Stock Benefit Programs. At the Effective Time, the
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Harbor Federal Savings Bank Employee Stock Ownership Plan (the "ESOP") shall
automatically by virtue of the Merger, be continued as the Employee Stock
Ownership Plan of the Bank with its Bank Common Stock exchanged for Holding
Company Common Stock. The Harbor Federal Savings Bank 1993 Incentive Stock
Option Plan and the Harbor Federal Savings Bank Option Plan for Non-Employee
Directors (collectively, the "Option Plans") including each stock option granted
under the Option Plans outstanding and unexercised, in whole or in part,
immediately prior to the Effective Time shall, by virtue of the Merger, without
any action on the part of the Bank, the Holding Company or the holder of such
option,
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remain the Option Plans of the Bank with each option to purchase under the
Option Plans becoming the same number of shares of Holding Company Common Stock,
and subject to the same terms and conditions (including, but not limited to, the
exercise price), as the shares of Bank Common Stock which such holder would then
or thereafter be entitled to purchase or receive pursuant to such option. The
Harbor Federal Savings Bank Recognition and Retention Plan and Harbor Federal
Outside Directors' Recognition and Retention Plan (collectively, the
"Recognition and Retention Plans") shall automatically, by virtue of the Merger,
be continued as the Recognition and Retention Plan of the Bank with their Bank
Common Stock exchanged for Holding Company Common Stock. The Bank and the
Holding Company will amend the ESOP, the Option Plans and the Recognition and
Retention Plans to provide for stock or options granted after the Effective Time
to be granted with respect to Holding Company Common Stock in lieu of Bank
Common Stock.
3.3 Reservation or Issuance of Stock. At the Effective Time, the Board of
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Directors of the Holding Company shall be deemed to have reserved for issuance
or to have authorized the issuance of a number of shares of Holding Company
Common Stock, and such shares shall automatically be so reserved and so
authorized in respect of the Employee Stock Benefit Programs and options granted
thereunder mentioned in Section 3.2, equal to the number of shares of the Bank
Common Stock that the Bank had reserved for issuance and had authorized the
issuance of in respect of such Programs immediately prior to the Effective Time.
3.4 Employment Agreement. At the Effective Time the employment agreement
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between Mr. Brown and the Bank shall remain in full force and effect and any
references in such agreements to shares of stock under any Employee Benefit
Programs of the Bank shall be deemed to apply to shares of Holding Company
Common Stock.
ARTICLE FOUR
REPRESENTATIONS AND WARRANTIES
4.1 Representation and Warranties of the Bank. The Bank represents and
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warrants as follows:
(a) The Bank Corporate Standing. The Bank is a federally chartered
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stock savings bank organized, existing and in good standing under the laws
of the United States, and it has all requisite corporate power, licenses
and authority to own its property and to carry on its business as now
conducted.
(b) Authorized Stock of the Bank. The Bank is authorized to issue
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20,000,000 shares of common stock, par value $1.00 per share, of which
4,934,454 shares are issued and outstanding, and 1,000,000 shares of
preferred stock, par value $1.00 per share, of which no shares are issued
and outstanding.
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(c) Financial Information of the Bank. The balance sheet of the Bank
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at September 30, 1995, and 1996 and the related consolidated statements of
operations, stockholders' equity and changes in financial position have
been audited by independent certified public accountants, as contained in
the 1996 Annual Report of the Bank, and fairly present the financial
condition of the Bank and the results of its operations, as of the dates
and for the periods indicated, in accordance with generally accepted
accounting principles consistently applied. Since September 30, 1996, there
has been no adverse change in the business, assets or condition, financial
or otherwise, of the Bank, nor any damage, destruction nor loss of a
material nature affecting the business, properties or financial condition
of the Bank.
(d) Legal Proceedings of the Bank. The Bank is not a party to, nor
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has it been threatened with, any litigation or governmental proceedings
which, if adversely decided, would have a material adverse effect upon the
transactions contemplated hereby or upon the financial condition,
regulatory capital or business of the Bank or which would create a
material liability of the Bank.
4.2 Representations and Warranties of the Holding Company. The Holding
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Company represents and warrants as follows:
(a) Corporate Standing of the Holding Company. The Holding Company is
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a corporation organized, existing and in good standing under the laws of
the State of Delaware and has all requisite corporate power, licenses and
authority to own its own property and to carry on its business as now
conducted.
(b) Authorized Stock of the Holding Company. The Holding Company is
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authorized to issue 13,000,000 shares of common stock, par value $0.01 per share
of which 10 shares are issued and outstanding and are owned by the Bank and
1,000,000 shares of preferred stock, none of which are issued or outstanding.
(c) Legal Proceedings of the Holding Company. The Holding Company is
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not a party to, nor has it been threatened with, any litigation or
governmental proceedings which if adversely decided would have a material
adverse effect upon the transactions contemplated hereby or upon the
financial condition, regulatory capital or business of the Holding Company,
or which would create a material liability of the Holding Company.
(d) Interim Corporate Standing. Before the Effective Date, the
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Holding Company will take all necessary or appropriate action to organize
and incorporate Interim in accordance with Federal law for the sole purpose
of facilitating the merger of Interim with and into the Bank pursuant
hereto, and at the Effective Time Interim will be duly organized and
existing in good standing under the laws of the United States, will have
all requisite corporate power, licenses and authority to own its
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property, and carry on its business as then conducted and all its
outstanding shares of common stock will be owned by the Holding Company.
ARTICLE FIVE
TRANSACTIONS PRIOR TO EFFECTIVE DATE
5.1 Restrictions on Certain Activities. Except as contemplated by this
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Agreement, prior to the Effective Time none of the Parties will, without the
prior consent of the others, do any of the following:
(a) Amend its Federal Stock Charter or Certificate of Incorporation
or bylaws, or merge into or consolidate with any other corporation, or
change in any manner the rights of its outstanding shares of capital stock
or the character of its principal business.
(b) Issue or sell, or issue options or rights to acquire, or enter
into any contract or commitment to issue or sell, any shares of its capital
stock, or subdivide or in any way reclassify any shares of its capital
stock, except for (i) shares of common stock issued under the ESOP; (ii)
options and rights which may be granted by the Bank pursuant to its Option
Plans and shares of its common stock issued upon exercise of options; (iii)
shares of common stock issued under the Recognition and Retention Plans;
and, (iv) the shares of its common stock to be issued by Interim to the
Holding Company;
(c) Acquire or agree to acquire any shares of its capital stock;
(d) Make or contract for any substantial acquisition of assets except
in the ordinary course of business; or
(e) Sell, dispose of or encumber any substantial and material
property or assets, or engage in any material activity or transaction,
except in the ordinary course of business.
5.2 Stockholder Approvals. The execution and delivery of this Agreement
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has been duly authorized and approved by the Boards of Directors of the Bank and
the Holding Company. A meeting of the stockholders of the Bank will be held,
inter alia, for the purpose of adopting and approving this Agreement. In
addition, the incorporators of Interim, and the Holding Company as the sole
owner of all the outstanding shares of capital stock of Interim, will execute
such written consents and take all such other action as may be required for the
adoption and approval of this Agreement.
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ARTICLE SIX
CONDITIONS
6.1 Conditions to Performance by the Holding Company and Interim. The
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obligations of each of the Parties to effect the Merger pursuant hereto is
subject to the following conditions:
(a) Representations and Warranties and Covenants of Each Party.
The representations and warranties of each Party contained herein
shall be true on and as of the Effective Time with the same effect as
though made as of such time, except for such variations as may be
permitted hereby or pursuant hereto. Each Party shall have performed
all covenants and obligations and complied with all conditions
required by this Agreement to be performed or complied with by it
prior to the Effective Time.
(b) Approval by the Bank's Stockholders. The holders of a
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majority of the shares of the Bank Common Stock present in person or
by proxy shall, at a meeting thereof duly called, inter alia, for the
purpose of considering and acting upon this Agreement, have voted in
favor of this Agreement and the consummation of the Merger
contemplated hereby.
(c) Registration of Shares of Holding Company Common Stock:
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Compliance with Securities Laws. A registration statement covering the
shares of Holding Company Common Stock to be issued to the
stockholders of the Bank pursuant to the Merger shall have been filed
with and declared effective by the OTS in accordance with the
provisions of the Securities Act of 1933, as amended, and the Holding
Company shall have complied with the requirements of all applicable
state securities or "blue sky" laws necessary to offer and issue
lawfully such shares pursuant hereto.
(d) Listing of Holding Company Common Stock. The shares of
Holding Company Common Stock shall have been approved for trading,
when issued, on the NASDAQ-NMS .
(e) Government Approval. All approvals by the OTS and the SEC and
such other governmental agency as may be required for the lawful
consummation of the Merger and the issuance and delivery of Holding
Company Common Stock as contemplated by this Agreement shall have been
obtained. If any approval contains any restriction or condition which,
in the sole discretion of the Board of Directors of Harbor Federal, is
deemed to be not beneficial to Harbor Federal, Harbor Florida or the
stockholders thereof, the Board of Directors may terminate the
transaction pursuant to the Article Seven hereof.
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(f) Federal Tax Ruling or opinion. The Bank shall have received
either (i) a ruling from the Internal Revenue Service or (ii) an
opinion of its counsel in form and substance satisfactory to it that:
(1) Provided that the proposed merger of Interim with and
into Harbor Federal qualifies as a statutory merger, the
transaction will qualify as a reorganization within the meaning
of Section 368(a)(1)(A) of the Code.
(2) Harbor Federal, Bancorp and Interim will each be "a
party to a reorganization" within the meaning of Section 368(b) of the
Code.
(3) No gain or loss will be recognized for federal income
tax purposes by Interim upon the transfer of its assets to Harbor
Federal solely in exchange for the transfer to Bancorp of the stock of
Harbor Federal.
(4) No gain or loss will be recognized for federal income
tax purposes by Interim upon the receipt of the assets of Interim in
exchange for the transfer to Bancorp of Interim stock.
(5) The basis of Interim's assets in the hands of Harbor
Federal will be the same for federal income tax purposes as the basis
of those assets in the hands of Interim immediately prior to the
merger.
(6) No gain or loss will be recognized for federal income
tax purposes by Bancorp upon the receipt of Harbor Federal stock
solely in exchange for Interim stock.
(7) No gain or loss will be recognized for federal income
tax purposes by Harbor Federal shareholders upon the receipt of
Bancorp stock solely in exchange for their shares of Harbor Federal
stock.
(8) The basis of Bancorp stock to be received by Harbor
Federal shareholders will be the same for federal income tax purposes
as the basis of Harbor Federal stock surrendered in exchange therefor.
(9) The holding period of Bancorp stock to be received by
Harbor Federal shareholders will include for federal income tax
purposes the holding period of Harbor Federal stock surrendered in
exchange therefor, provided that Harbor Federal stock is held as a
capital asset on the date of the exchange.
(10) The holding period of the assets of Interim in the
hands of Harbor Federal will include for federal income tax purposes
the period during which such assets were held by Interim.
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(11) No gain or loss will be recognized for federal income
tax purposes by Harbor Federal upon the receipt of the assets of
Interim in exchange for Harbor Federal stock.
(g) Florida Tax Ruling or Opinion. The Bank shall have received either
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a ruling or an opinion in form and substance satisfactory to it with respect to
Florida income taxation as to the matters set forth in paragraph (f) of this
Section.
(h) The reorganization will be characterized and accounted for at
historical cost in a manner similar to a "pooling of interest" for
financial reporting and related purposes.
(i) Consents of Third Parties. Each of the Parties shall have received
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such approvals, permits or consents of third parties, including
governmental bodies or agencies, as may be required to permit them to
perform this Agreement in accordance with its terms, except for such
consents with regard to agreements and arrangements which are not in the
aggregate material to the Bank, the Holding Company and Interim, considered
on a consolidated basis.
ARTICLE SEVEN
TERMINATION
7.1 Termination. This Agreement may be terminated at any time prior to the
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Effective Time (i) at the election of any Party if any of the conditions
specified in Article Six shall not have been fulfilled and shall have become
incapable of fulfillment or (ii) by mutual consent of the respective boards of
directors of the parties.
7.2 No Further Liability. In the event of the termination of this
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Agreement pursuant to any of the foregoing provisions, the Bank will pay all the
costs and expenses incurred by the Parties in connection with this Agreement and
the transactions contemplated hereby, and no Party shall have any further
liability or obligation of any nature to any other Party.
ARTICLE EIGHT
EFFECTIVE DATE OF MERGER
8.1 Effective Date and Effective Time. Upon satisfaction of the conditions
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set forth in Article Six (unless waived in accordance with this Agreement) the
Parties shall execute and cause to be filed (i) with the OTS articles of merger,
consistent with the terms hereof, and such other agreements, certificates and
other documents as may be required by applicable law and (ii) with such other
federal and state government agencies or authorities, including the OTS, such
other agreements, certificates and documents as may be required by applicable
law
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to cause the Merger to become effective. The date and time by which all of such
filings are completed and the Merger becomes effective are referred to in this
Agreement, respectively, as the "Effective Date" and the "Effective Time."
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ARTICLE NINE
MISCELLANEOUS
9.1 Waiver, Amendment, etc. Any of the terms or conditions of this
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Agreement which legally may be waived may be waived at any time by any Party
hereto which is, or the shareholders of which are, entitled to the benefit
thereof, by action taken or authorized by the Board of Directors of such Party,
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 after authorization to do
so by the Boards of Directors of the Parties hereto; provided, however that no
such waiver, amendment or modification shall have a material adverse effect on
the benefits intended to be received in the Merger pursuant to this Agreement by
the holders of shares of Bank Common Stock.
9.2 Counterparts. This Agreement may be executed in any number of
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counterparts, each of which shall be an original, but such counterparts together
shall constitute one and the same instrument.
9.3 Governing Law. This Agreement is made pursuant to, and shall be
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construed under and be governed by the laws of Delaware, unless in conflict with
federal law and if so, then by such federal law, including the rules and
regulations of the OTS.
9.4 Execution by Interim. At the date hereof, Interim is in the process of
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organization and has not been granted a Federal stock charter under Federal law
and therefore does not have the legal capacity to execute this Agreement. The
Holding Company agrees to cause Interim to execute this Agreement promptly
following the issuance of Interim's Federal stock charter. The Bank and the
Holding Company agree to be bound by this Agreement prior to and following such
execution by Interim.
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IN WITNESS WHEREOF, each of the Parties hereto have caused this Agreement
and Plan of Reorganization to be signed on its behalf by its officers thereunto
duly authorized, all as of the date first set forth above.
HARBOR FEDERAL SAVINGS BANK HARBOR FLORIDA BANCORP, INC.
By: _____________________________ By: ______________________________
Michael J. Brown, Sr. Michael J. Brown, Sr.
President and CEO President and CEO
INTERIM HARBOR FEDERAL SAVINGS BANK
By: _____________________________
Michael J. Brown, Sr.
President and CEO
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EXHIBIT B
CERTIFICATE OF INCORPORATION
OF
HARBOR FLORIDA BANCORP, INC.
ARTICLE I
Name
The name of the corporation is HARBOR FLORIDA BANCORP, INC. (the
"Corporation").
ARTICLE II
Registered Office
The address of the Corporation's registered office in the State of Delaware
is Corporation Service Company, 1013 Centre Road, Wilmington, Delaware 19805.
The name of the Corporation's registered agent at such address is the
Corporation Service Company.
ARTICLE III
Purpose and Powers
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.
ARTICLE IV
Capital Stock
SECTION 1. Authorized Shares. The total number of shares of all
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classes of stock which the Corporation shall have authority to issue is
14,000,000 shares, divided into two classes consisting of 13,000,000 shares of
Common Stock, par value $0.01 per share ("Common Stock"), and 1,000,000 shares
of Preferred Stock, par value $0.01 per share ("Preferred Stock"). The Board of
Directors shall have authority by resolution to issue the shares of Preferred
Stock from time to time on such terms as it may determine and to divide the
Preferred Stock into one or more series and, in connection with the creation of
any such series, to determine and fix by the resolution or resolutions providing
for the issuance of shares thereof:
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(a) the distinctive designation of such series, the number of shares
which shall constitute such series, which number may be increased or
decreased (but not below the number of shares then outstanding) from time
to time by action of the Board of Directors, and the stated value thereof,
if different from the par value thereof;
(b) the dividend rate, the times of payment of dividends on the shares
of such series, whether dividends shall be cumulative, and, if so, from
what date or dates, and the preference or relation which such dividends
will bear to the dividends payable on any shares of stock of any other
class or any other series of this class;
(c) the price or prices at which, and the terms and conditions on
which, the shares of such series may be redeemed;
(d) whether or not the shares of such series shall be entitled to the
benefit of a retirement or sinking fund to be applied to the purchase or
redemption of such shares and, if so entitled the amount of such fund and
the terms and provisions relative to the operation thereof;
(e) whether or not the shares of such series shall be convertible
into, or exchangeable for, any other shares of stock of the Corporation or
any other securities and, if so convertible or exchangeable, the conversion
price or prices, or the rates of exchange, and any adjustments thereof, at
which such conversion or exchange may be made, and any other terms and
conditions of such conversion or exchange;
(f) the rights of the shares of such series in the event of voluntary
or involuntary liquidation, dissolution or winding up or upon any
distribution of the assets of the Corporation;
(g) whether or not the shares of such series shall have priority over
or parity with or be junior to the shares of any other class or series in
any respect, or shall be entitled to the benefit of limitations restricting
(i) the creation of indebtedness of the Corporation, (ii) the issuance of
shares of any other class or series having priority over or being on a
parity with the shares of such series in any respect, or (iii) the payment
of dividends on, the making of other distributions in respect of, or the
purchase or redemption of shares of any other class or series on parity
with or ranking junior to the shares of such series as to dividends or
assets, and the terms of any such restrictions, or any other restriction
with respect to shares of any other class or series on parity with or
ranking junior to the share of such series in any respect;
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(h) whether such series shall have voting rights, in addition to
any voting rights provided by law, and, if so, the terms of such
voting rights, which may be general or limited; and
(i) any other powers, preferences, privileges, and relative
participating, optional, or other special rights of such series, and
the qualifications, limitations or restrictions thereof, to the full
extent now or hereafter permitted by law.
The powers, preferences and relative participating, optional and other
special rights of each series of Preferred Stock, and the qualifications,
limitations or restrictions thereof, if any, may differ from those of any and
all other series at any time outstanding. All shares of any one series of
Preferred Stock shall be identical in all respects with all other shares of such
series, except that shares of any one series issued at different times may
differ as to the dates from which dividends thereon shall be cumulative.
SECTION 2. Rights of Holders of Common Stock. Each holder of Common
---------------------------------
Stock shall be entitled to one vote for each share of Common Stock held of
record on all matters on which stockholders generally are entitled to vote.
Subject to the provisions of law and the rights of the holders of the Preferred
Stock and any other class or series of stock having a preference as to dividends
over the Common Stock then outstanding, dividends may be paid on the Common
Stock at such times and in such amounts as the Board of Directors may determine.
Upon the dissolution, liquidation or winding up of the Corporation, after any
preferential amounts to be distributed to the holders of the Preferred Stock and
any other class or series of stock having a preference over the Common Stock
then outstanding have been paid or declared and set apart for payment, the
holders of the Common Stock shall be entitled to receive all the remaining
assets of the Corporation available for distribution to its stockholders ratably
in proportion to the number of shares held by them, respectively.
There shall be no cumulation of votes for the election of Directors or for
any other purpose.
Every share of Common Stock shall have the same relative rights as, and be
identical in all respects with, all the other shares of Common Stock.
ARTICLE V
Business Combinations
The provisions of Section 203 of the Delaware General Corporation Law or
any successor provision shall govern the Corporation.
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ARTICLE VI
Board of Directors
SECTION 1. Number. The business and affairs of the Corporation shall
------
be managed under the direction of the Board of Directors which, subject to any
right of the holders of any series of Preferred Stock then outstanding to elect
additional Directors under specified circumstances, shall consist of not less
than five nor more than 15 persons. The exact number of Directors within the
minimum and maximum limitations specified in the preceding sentence shall be
fixed from time to time by the Board of Directors pursuant to a resolution
adopted by a majority of the entire Board of Directors.
SECTION 2. Terms. Beginning with the first annual meeting of
-----
stockholders held after the filing of this Certificate of Incorporation, the
Board of Directors, other than those who may be elected by the holders of any
class or series of stock having a preference over the Common Stock as to
dividends or upon liquidation, shall be divided into three classes, class I,
class II and class III, as nearly equal in number as possible. The terms of
office of the classes of Directors elected at the initial annual meeting shall
expire as follows: the term of office of class I will expire at the 1998 Annual
Meeting of Stockholders, the term of office of class II will expire at the 1999
Annual Meeting of Stockholders and the term of office of class III will expire
at the 2000 Annual Meeting of Stockholders. 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.
SECTION 3. Stockholder Nomination of Director Candidates.
---------------------------------------------
Stockholder nominations for the election of Directors shall be given in the
manner provided in the Bylaws of the Corporation.
SECTION 4. Newly Created Directorships and Vacancies. Subject to the
-----------------------------------------
rights of the holders of any series of Preferred Stock then outstanding,
Directors serving in newly created Directorships resulting from any increase in
the authorized number of Directors shall serve until the next Annual Meeting of
Stockholders. Vacancies on the Board of Directors resulting from death,
resignation, retirement, disqualification, removal from office or other cause
shall be filled by a majority vote of the Directors then in office, and
Directors so chosen shall hold office for a term expiring at the Annual Meeting
of Stockholders at which the term of the class to which they have been elected
expires. No decrease in the number of Directors constituting the Board of
Directors shall shorten the term of any incumbent Director.
SECTION 5. Removal. 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 two-thirds of the voting
power of all of the shares of the Corporation entitled to vote generally in the
election of Directors, voting together as a single class.
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SECTION 6. Initial Directors. The names and addresses of the persons
-----------------
who are to serve as Directors until the first annual meeting of stockholders or
until their successors are elected and qualified are as follows:
Name and Address Term
---------------- ----
Bruce R. Abernethy, Sr. 1999
100 S. Second Street
Fort Pierce, FL 34950
Richard N. Bird 2000
100 S. Second Street
Fort Pierce, FL 34950
Michael J. Brown, Sr. 1998
100 S. Second Street
Fort Pierce, FL 34950
Richard K. Davis 2000
100 S. Second Street
Fort Pierce, FL 34950
Edward G. Enns 1999
100 S. Second Street
Fort Pierce, FL 34950
Frank H. Fee, III 2000
100 S. Second Street
Fort Pierce, FL 34950
Richard B. Hellstrom 1998
100 S. Second Street
Fort Pierce, FL 34950
ARTICLE VII
Stockholder Action
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. Except as otherwise required by law and subject to
the rights of the holders of any class of preferred stock having a preference
over the Common Stock as to dividends or upon liquidation, special meetings of
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stockholders of the Corporation may be called only by the Board of Directors
pursuant to a resolution approved by a majority of the entire Board of
Directors.
ARTICLE VIII
Bylaw Amendments
The Board of Directors shall have power to make, alter, amend and repeal
the Bylaws of the Corporation (except so far as the Bylaws of the Corporation
adopted by the stockholders shall otherwise provide). Any Bylaws made by the
Board of Directors under the powers conferred hereby may be altered, amended or
repealed by the Board of Directors or by the stockholders. Notwithstanding the
foregoing and anything contained in this Certificate of Incorporation or the
Bylaws to the contrary, Section 2 of Article I and Sections 1 through 5 of
Article II of the Bylaws shall not be altered, amended or repealed and no
provision inconsistent therewith shall be adopted without the affirmative vote
of the holders of two-thirds of all votes entitled to be cast in the election of
Directors, voting together as a single class.
ARTICLE IX
Purchase of Equity Securities
SECTION 1. Prevention of "Greenmail". Any direct or indirect purchase or
-------------------------
other acquisition by the Corporation of any Equity Security of any class from
any Substantial Securityholder who has beneficially owned such securities for
less than two years prior to the date of such purchase or any agreement in
respect thereof shall, except as hereinafter expressly provided, require the
affirmative vote of the holders of at least a majority of all votes entitled to
be cast in the election of Directors, excluding Voting Stock beneficially owned
by such Substantial Securityholder, 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 any agreement
with any national securities exchange, or otherwise, but no such affirmative
vote shall be required with respect to any purchase or other acquisition of
securities made as part of a tender or exchange offer by the Corporation to
purchase securities of the same class made on the same terms to all holders of
such securities and complying with the applicable requirements of the Securities
Exchange Act of 1934 and the rules and regulations thereunder (or any subsequent
provisions replacing such Act, rules or regulations).
SECTION 2. Certain Definitions. For the purposes of this Article IX:
-------------------
(a) A "Person" shall mean any individual, firm, corporation or other
entity.
(b) "Substantial Securityholder" shall mean any person (other than the
Corporation or any corporation of which a majority of any class of Equity
Security is owned, directly or indirectly, by the Corporation or Harbor
Financial, M.H.C.) who or which:
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(i) is the beneficial owner, directly or indirectly, of five
percent or more of the class or securities to be acquired;
(ii) 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 five percent or more of
the class of securities to be acquired;
(iii) is an assignee or has otherwise succeeded to any shares of
the class of securities to be acquired which were at any time within
the two-year period immediately prior to the date in question
beneficially owned by a Substantial Securityholder, if such assignment
or succession shall have occurred in the course of a transaction or
transactions not involving a public offering within the meaning of the
Securities Act of 1933.
(c) A person shall be a "beneficial owner" of any security of any class of
the Corporation:
(i) which such person or any of its Affiliates or Associates
(as hereinafter defined) beneficially owns, directly or indirectly;
(ii) which such person or any of its Affiliates or Associates
has (A) the right to acquire (whether such right is exercisable
immediately or only after the passage of time), pursuant to any
agreement, arrangement or understanding or upon the exercise of
conversion rights, exchange rights, warrants or options, or otherwise,
or (B) any right to vote pursuant to any agreement, arrangement or
understanding; or
(iii) which is beneficially owned, directly or indirectly, by
any such person with which such person or any of its Affiliates or
Associates has any agreement, arrangement or understanding for the
purpose of acquiring, holding, voting or disposing any security of any
class of the Corporation.
(d) For the purposes of determining whether a person is a Substantial
Securityholder pursuant to paragraph (b) of this Section 2, the relevant class
of securities outstanding shall be deemed to comprise all such securities deemed
owned through application of paragraph (c) of this Section 2, but shall not
include other securities of such class which may be issuable pursuant to any
agreement, arrangement or understanding, or upon exercise of conversion rights,
warrants or options, or otherwise.
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(e) "Affiliate" or "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 December 31,
1996.
(f) "Equity Security" shall have the meaning ascribed to such term in
Section 3(a)(11) of the Securities Exchange Act of 1934, as in effect on
December 31, 1996.
ARTICLE X
Acquisition of Stock
Notwithstanding anything contained in this Certificate of Incorporation to
the contrary:
SECTION 1. Restriction. No person shall directly or indirectly offer to
-----------
acquire or acquire the beneficial ownership of more than 10% of any class of any
equity security of the Corporation. This limitation shall not apply to Harbor
Financial, M.H.C., any tax qualified employee stock benefit plan of the
Corporation, or to any transaction in which Harbor Financial, M.H.C. converts
from the mutual form of organization to the stock form of organization.
In the event shares are acquired in violation of this Article X, all shares
beneficially owned by any person in excess of 10% shall be considered "excess
shares" and shall not be counted as shares entitled to vote and shall not be
voted by any person or counted as voting shares in connection with any matters
submitted to the stockholders for a vote.
SECTION 2. Certain Definitions. For the purposes of this Article X, the
-------------------
following definitions apply:
(a) The term "person" includes an individual, a group acting in
concert, a corporation, a partnership, an association, a joint stock
company, a trust, and any unincorporated organization or similar
company, a syndicate or any other group formed for the purpose of
acquiring, holding or disposing of securities of the Corporation.
(b) The term "offer" includes every offer to buy or otherwise
acquire, solicitation of an offer to sell, tender offer for, or
request or invitation for tenders of, a security or interest in a
security for value.
(c) The term "acquire" includes every type of acquisition,
whether effected by purchase, exchange, operation of law or otherwise.
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(d) The term "acting in concert" means (i) knowing participation
in a joint activity or conscious parallel action towards a common goal
whether or not pursuant to an express agreement, or (ii) a combination
or pooling of voting or other interests in the securities of an issuer
or a common purpose pursuant to any contract, understanding,
relationship, agreement or other arrangement, whether written or
otherwise.
ARTICLE XI
Director Liability
No Director of officer acting in the capacity of a Director or performing
duties as Director shall be personally liable to the Corporation or any
stockholder for monetary damages for a breach of fiduciary duty as a Director,
except for any matter in respect of which such Director or officer acting as a
Director shall be liable under Section 174 of Title 8 of the Delaware Code
(relating to the Delaware Corporation Law) or any amendment thereto or successor
provision thereto or shall be liable by reason that, in addition to any and all
other requirements for such liability, he (i) shall have breached his duty of
loyalty to the Corporation or its stockholders, (ii) shall not have acted in
good faith or, in failing to act, shall not have acted in good faith, (iii)
shall have acted in a manner involving intentional misconduct or a knowing
violation of law or, in failing to act, shall have acted in a manner involving
intentional misconduct or a knowing violation of law or (iv) shall have derived
an improper personal benefit. Neither the Amendment nor repeal of this Article,
nor the adoption of any provision of the Certificate of Incorporation
inconsistent with this Article, shall eliminate or reduce the effect of this
Article in respect of any matter occurring, or any cause of action, suit or
claim, that, but for this Article, would accrue or arise, prior to such
amendment, repeal or adoption of an inconsistent provision.
ARTICLE XII
Amendments to Certificate of Incorporation
Notwithstanding any other provisions of this Certificate of Incorporation
or the Bylaws of the Corporation (and notwithstanding the fact that a lesser
percentage may be specified by law, this Certificate of Incorporation or the
Bylaws of the Corporation), the affirmative vote of the holders of at least two-
thirds of all votes entitled to be cast in the election of Directors, voting
together as a single class, shall be required to amend or repeal, or adopt any
provisions inconsistent with, Articles V, VI, VII, VIII, IX or this Article XII
of this Certificate of Incorporation.
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ARTICLE XIII
Certain Business Combinations
SECTION 1. Vote Required for Certain Business Combinations.
-----------------------------------------------
(a) Higher Vote for Certain Business Combinations. Unless
---------------------------------------------
otherwise required by law, in addition to any affirmative vote required by
law or this Certificate of Incorporation or the Bylaws of the Corporation,
and except as otherwise expressly provided in Section 2 of this Article
XIII, a Business Combination with, or proposed by or on behalf of, any
Interested Stockholder or any Affiliate or Associate of any Interested
Stockholder or any person who after such Business Combination would be an
Affiliate or Associate of such Interested Stockholder, shall require the
approval of the Board of Directors and the affirmative vote of the holders
of at least 66-2/3% of the voting power of the then outstanding Voting
Stock which is not owned by the Interested Stockholder or any Affiliate or
Associate of such Interested Stockholder. 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 in any agreement with any
national securities exchange or otherwise.
(b) Definition of "Business Combination". The term "Business
------------------------------------
Combination" as used in this Article XIII shall mean:
(i) any merger, consolidation or share exchange of the
Corporation or any Subsidiary with (A) any Interested Stockholder
or (B) any other corporation (whether or not itself an Interested
Stockholder) which is, or after such merger or consolidation
would be, an Affiliate or Associate of an Interested Stockholder;
(ii) any sale, lease, exchange, mortgage, pledge, transfer
or other disposition (in one transaction or a series of
transactions), except proportionately as a stockholder of such
corporation, to or with any Interested Stockholder or any
Affiliate or Associate of any Interested Stockholder of any
assets of the Corporation or any Subsidiary having an aggregate
Market Value equal to 10% or more of either the aggregate market
value of all the assets of the Corporation determined on a
consolidated basis or the aggregate market value of all of the
outstanding stock of the Corporation;
(iii) any transaction which results in 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
or Associate of any Interested Stockholder except (A) pursuant to
the exercise, exchange or conversion
B-10
<PAGE>
of securities exercisable for, exchangeable for or convertible
into stock of the Corporation or any Subsidiary which securities
were outstanding prior to the time the Interested Stockholder
became such, (B) pursuant to a dividend or distribution paid or
made, or the exercise, exchange or conversion of securities
exercisable for, exchangeable for or convertible into stock of
the Corporation or any Subsidiary which security is distributed
pro rata to all holders of a class or series of stock of the
Corporation subsequent to the time the Interested Stockholder
became such, (C) pursuant to an exchange offer by the Corporation
to purchase stock made on the same terms to all holders of such
stock or (D) any issuance or transfer of stock by the
Corporation, provided, however, that in no case under (B) through
(D) above shall there be an increase in the Interested
Stockholder's proportionate share of the stock of any class or
series of the Corporation or of the Voting Stock of the
Corporation;
(iv) the adoption of any plan or proposal for the
liquidation or dissolution of the Corporation or any Subsidiary
proposed by or on behalf of an Interested Stockholder or any
Affiliate or Associate of any Interested Stockholder; or
(v) any reclassification of securities (including any
reverse stock split), or recapitalization of the Corporation, or
any merger, consolidation or share exchange 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 in any such case has the effect, directly or
indirectly, of increasing the proportionate 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 any Interested Stockholder or any
Affiliate or Associate of any Interested Stockholder;
(vi) any transaction involving the Corporation or any
Subsidiary which has the effect, directly or indirectly, of
increasing the proportionate share of the stock of any class or
securities convertible into the stock of any class or series
owned by the Interested Stockholder of the Corporation or of any
Subsidiary, except as a result of immaterial changes due to
fractional share adjustments or as a result of any purchase or
redemption of any shares of stock not caused, directly or
indirectly, by the Interested Stockholder; or
(vii) any receipt by the Interested Stockholder of the
benefit, directly or indirectly (except proportionately as a
stockholder of such corporation) of any loans, advances,
guarantees, pledges, or other financial benefits (other than
those expressly permitted in subparagraphs
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(i)-(vi) above) provided by or through the Corporation or any
Subsidiary.
SECTION 2. When Higher Vote is Not Required. The provisions of Section
--------------------------------
1 of this Article XIII shall not be applicable to any particular Business
Combination, and such Business Combination shall require only such affirmative
vote as is required by law and any other provisions of this Certificate of
Incorporation or the bylaws of the Corporation, if all of the conditions
specified in either the following paragraphs (a) or (b) are met:
(a) Approval by Disinterested Directors. The Business
-----------------------------------
Combination shall have been approved by a majority of the
Disinterested Directors.
(b) Price and Procedure Requirements. All of the following
--------------------------------
conditions shall have been met:
(1) Minimum Price Requirements. With respect to every
--------------------------
class or series of Voting Stock of the Corporation, whether or
not the Interested Stockholder has previously acquired beneficial
ownership of any shares of such class or series of Voting Stock:
(i) 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 Common Stock in such
Business Combination shall be at least equal to the higher
of the following:
(A) (if applicable) the highest per share price
(including any brokerage commissions, transfer taxes
and soliciting dealers' fees) paid by or on behalf of
the Interested Stockholder for any share of Common
Stock in connection with the acquisition by the
Interested Stockholder of beneficial ownership of
shares of Common Stock (1) within the two-year period
immediately prior to the first public announcement of
the proposal of the Business Combination (the
"Announcement Date"), or (2) in the transaction or
series of related transactions in which it became an
Interested Stockholder, whichever is higher, in either
case as adjusted for any subsequent stock split, stock
dividend, subdivision or reclassification with respect
to Common Stock; and
(B) the Fair Market Value per share of Common
Stock on the Announcement Date or on the date on which
the Interested
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Stockholder became an Interested Stockholder (such
latter date is referred to in this Article XIII as the
"Determination Date"), whichever is higher, as adjusted
for any subsequent stock split, stock dividend,
subdivision or reclassification with respect to Common
Stock.
(ii) 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 other class
or series of outstanding Voting Stock shall be at least
equal to the highest of the following (it being intended
that the requirements of this paragraph (b)(ii) shall be
required to be met with respect to every class or series of
outstanding Voting Stock, whether or not the Interested
Stockholder has previously acquired any shares of a
particular class or series of Voting Stock):
(A) (if applicable) the highest per share price
(including any brokerage commissions, transfer taxes
and soliciting dealers' fees) paid by or on behalf of
the Interested Stockholder for any shares of such class
or series of Voting Stock in connection with the
acquisition by the Interested Stockholder of beneficial
ownership of such shares (1) within the two-year period
immediately prior to the Announcement Date, or (2) in
the transaction in which it became an Interested
Stockholder, whichever is higher, in either case as
adjusted for any subsequent stock split, stock
dividend, subdivision or reclassification with respect
to such class or series of Voting Stock;
(B) (if applicable) the highest preferential
amount per share to which the holders of shares of such
class or series of Voting Stock are entitled in the
event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation; and
(C) the Fair Market Value per share of such class
or series of Voting Stock on the Announcement Date or
on the Determination Date, whichever is higher, in
either case as adjusted for any subsequent stock split,
stock dividend, subdivision or reclassification with
respect to such class or series of Voting Stock.
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(2) Other Requirements.
------------------
(i) The consideration to be received by holders of a
particular class or series of outstanding Voting Stock (including
Common Stock) shall be in cash or in the same form as the
Interested Stockholder has previously paid for shares of such
class or series of Voting Stock. If the Interested Stockholder
has paid for shares of any class or series of Voting Stock with
varying forms of consideration, the form of consideration for
such class or series of Voting Stock shall be either cash or the
form used to acquire the largest number of shares of such class
or series of Voting Stock previously acquired by it.
(ii) After such Interested Stockholder has become an
Interested Stockholder and prior to the consummation of such
Business Combination: (A) except as approved by a majority of the
Disinterested Directors, there shall have been no failure to
declare and pay at the regular date therefor any full periodic
dividends (whether or not cumulative) on any outstanding
Preferred Stock; (B) there shall have been (1) 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 (2)
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 so to increase such annual
rate is approved by a majority of the Disinterested Directors;
and (C) such Interested Stockholder shall have not 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 or by virtue of
proportionate stock splits or stock dividends.
(iii) 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 or
any Subsidiary, whether in anticipation of or in connection with
such Business Combination or otherwise.
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(iv) 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 the 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).
(v) After such Interested Stockholder has become an
Interested Stockholder, such Interested Stockholder shall
not have made any major change in the Corporation's business
or capital structure without the approval of a majority of
the Disinterested Directors.
SECTION 3. Certain Definitions. For the purpose of this Article XIII:
-------------------
(a) A "person" shall mean any individual or firm, corporation,
partnership, limited partnership, joint venture, trust, unincorporated
association, government or any political subdivision or agency or
instrumentality of a government or other entity and shall include any
group comprised of any person and any other person with whom such
person or any Affiliate or Associate of such person has any agreement,
arrangement or understanding, directly or indirectly, for the purpose
of acquiring, holding, voting or disposing of Voting Stock.
(b) "Interested Stockholder" shall mean any person (other than
the Corporation, any Subsidiary or Harbor Financial, M.H.C.) who or
which:
(i) is the beneficial owner, directly or
indirectly, of Voting Stock entitled to cast more than 15%
of the votes in the election of Directors; is an Affiliate
or Associate 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 15%
or more of the combined voting power of the then
outstanding Voting Stock; or
(ii) 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 any Interested
Stockholder, if such assignment or succession shall have
occurred in the course of a transaction or
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series of transactions not involving a public offering within the
meaning of the Securities Act of 1933.
(c) A person shall be a "beneficial owner" of any Voting Stock:
(i) which such person or any of its Affiliates or
Associates beneficially owns, directly or indirectly;
(ii) which such person or any of its Affiliates or
Associates has (A) the right to acquire (whether such right is
exercisable immediately or only after the passage of time),
pursuant to any agreement, arrangement or understanding or upon
the exercise of conversion rights, exchange rights, warrants or
options, or otherwise, or (B) the right to vote or direct the
voting pursuant to any agreement, arrangement or understanding,
or (C) the right to dispose of or direct the disposition of
pursuant to any agreement, arrangement or understanding; or
(iii) which is beneficially owned, directly or indirectly,
by any other person with which such person or any of its
Affiliates or Associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or
disposing of any shares of Voting Stock.
(d) For the purpose of determining whether a person is an Interested
Stockholder pursuant to paragraph (b) of this Section 3, the number of
shares of Voting Stock deemed to be outstanding shall include shares deemed
owned through application of paragraph (c) of this Section 3 but shall not
include any other shares of Voting Stock which may be issuable pursuant to
any agreement, arrangement or understanding, or upon exercise of conversion
rights, warrants or options, or otherwise.
(e) "Affiliate" or "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 December 31,
1996, except that the Corporation or any Subsidiary shall not be deemed to
be an Affiliate or an Associate of any Interested Stockholder.
(f) "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 (b) of this Section 3, 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.
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(g) "Disinterested Director" means any member of the Board of
Directors of the Corporation 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 successor of a Disinterested Director who is not an Affiliate
of the Interested Stockholder and is recommended to succeed a
Disinterested Director by a majority of Disinterested Directors then
serving on the Board of Directors.
(h) "Fair Market Value" means: (i) in the case of stock, the
highest closing sale price during the 30-day period immediately
preceding the date in question of a share of such stock on the
Composite Tape for New York Stock Exchange-Listed Stocks, or, if such
stock is not quoted on the Composite Tape, on such exchange, or, if
such stock is not listed on such exchange, on the principal United
States securities exchange registered under the Securities Exchange
Act of 1934 on which such stock is listed, or, if such stock is not
listed on such exchange, on the National Association of Securities
Dealers, Inc. Automated Quotations System ("NASDAQ") National Market
("NMS"), or if such stock is not included on NASDAQ-NMS, the highest
closing bid quotation with respect to a share of such stock during the
30-day period preceding the date in question on the NASDAQ or any
system then in use, 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; and (ii) 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.
(i) In the event of any Business Combination in which
the Corporation survives, the phrase "consideration other than
cash to be received" as used in paragraphs (b)(1)(i) and (ii)
of Section 2 of this Article XIII shall include the shares of
Common Stock and/or the shares of any other class or series of
outstanding Voting Stock retained by the holders of such
shares.
(ii) "Voting Stock" means the then outstanding shares
of capital stock of the Corporation entitled to vote generally
in the election of Directors.
SECTION 4. Powers of the Board of Directors. A majority of the Directors
--------------------------------
of the Corporation shall have the power and duty to determine for the purposes
of this Article XIII, 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 persons, (c) whether a person
is an Affiliate or Associate of another, and (d) whether the requirements of
Section 2(b) have been met.
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SECTION 5. No Effect on Fiduciary Obligations of Interested Stockholders.
----------------------------------------------------------
Nothing contained in this Article XIII shall be construed to relieve any
Interested Stockholder from any fiduciary obligation imposed by law.
SECTION 6. Amendment, Repeal, Etc. Notwithstanding any other provision of
-----------------
this Certificate of Incorporation or the bylaws of the Corporation (and
notwithstanding the fact that a lesser percentage or separate class vote may be
specified by law, this Certificate of Incorporation or the bylaws of the
Corporation), any proposal to amend or repeal this Article XIII or adopt any
provision of this Certificate of Incorporation inconsistent with it which is
proposed by or on behalf of an Interested Stockholder or any Affiliate or
Associate of such Interested Stockholder shall require the affirmative vote of
the holders of at least 66-2/3% of the Voting Stock entitled to be cast at the
election of Directors, excluding Voting Stock beneficially owned by such
Interested Stockholder, unless such amendment, repeal or adoption is declared
advisable by the affirmative vote of two thirds of the entire Board of Directors
and a majority of the Disinterested Directors.
ARTICLE XIV
Indemnification
Indemnification shall be provided for to the fullest extent authorized in
the Bylaws. Any repeal or amendment of this Article XIV shall not effect
indemnification provided under this Article with respect to any state of facts
existing at or before the time of such amendment and any proceeding, whenever
brought, based in whole or in part upon any such state of facts.
ARTICLE XV
Incorporator
The name and mailing address of the incorporator of the Corporation is
_____________, Corporation Service Company, 1013 Centre Road, Wilmington, DE
19805.
The undersigned being the sole incorporator hereinbefore named, for the
purpose of forming a corporation pursuant to the General Corporation Law of the
State of Delaware, makes this certificate, hereby declaring and certifying that
this is my act and deed and the facts herein stated are true, and accordingly
have hereunto set my hand this ______ day of November, 1996.
____________________________________
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EXHIBIT C
BYLAWS
OF
HARBOR FLORIDA BANCORP, INC.
ARTICLE I
Name
SECTION 1. Annual Meeting of Stockholders.
(a) The annual meeting of stockholders of the Corporation, for the
purpose of electing Directors and of transacting such other business as may
properly come before the meeting, shall be held on such date, at such place and
such time as shall be designated by the Board of Directors.
(b) To be properly brought before an annual meeting, business must
be either (i) specified in the notice of meeting (or any supplement thereto)
given by or at the direction of the Board of Directors, (ii) otherwise properly
brought before the meeting by or at the direction of the Board of Directors, or
(iii) otherwise properly brought before the meeting by a stockholder.
(c) In addition to any other applicable requirements, for business
to be properly brought before an annual meeting by a stockholder, 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 to or
mailed and received at the principal executive office of the Corporation, not
later than 120 days prior to the anniversary date of the immediately preceding
annual meeting. A stockholder's notice to the Secretary shall set forth as to
each matter the 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 record address of the Stockholder proposing such business, (iii)
the class and number of shares of the Corporation which are beneficially owned
by the stockholder, and (iv) any material interest of the stockholder in such
business.
(d) Notwithstanding anything in these Bylaws to the contrary, no
business shall be conducted at the annual meeting except in accordance with the
procedures set forth in this Article I, provided, however, that nothing in this
Article I shall be deemed to preclude discussion by any stockholder of any
business properly brought before the annual meeting.
(e) The Chairman of an annual meeting shall, if the facts warrant,
determine and declare to the meeting that business was not properly brought
before the meeting in
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accordance with the provisions of this Article 1, and if he should so determine,
he shall so declare to the meeting and any such business not properly brought
before the meeting shall not be transacted.
SECTION 2. Special Meetings of Stockholders.
Subject to the rights of the holders of any class or series of stock having
a preference over the Common Stock as to dividends or upon liquidation, special
meetings of the stockholders for any purpose may be called only by a majority of
the entire Board of Directors.
SECTION 3. Notice of Meeting.
The Secretary shall cause written notice of the time, place and purposes of
each meeting to be mailed, or delivered personally, not less than 10 nor more
than 60 days before the date of the meeting, to each stockholder of record
entitled to vote at the meeting.
Attendance of a person at a meeting of stockholders, in person or by proxy,
constitutes a waiver of notice of the meeting, except when the stockholder
attends a meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened.
SECTION 4. Quorum.
At any meeting of stockholders the holders of a majority of the shares of
the capital stock of the Corporation issued and outstanding and entitled to
vote, present in person or represented by proxy, shall constitute a quorum of
the stockholders for all purposes unless a greater or lesser quorum shall be
provided by law or by the Certificate of Incorporation and in such case the
representation of the number so required shall constitute a quorum. The
stockholders present in person or by proxy at a meeting at which a quorum is
present may continue to do business until adjournment, notwithstanding
withdrawal of enough stockholders to leave less than a quorum.
Whether or not a quorum is present, the meeting may be adjourned from time
to time by a vote of the shares present. At any such adjourned meeting, at which
a quorum shall be present, any business may be transacted which might have been
transacted at the meeting if held at the time specified in the notice thereof.
SECTION 5. Organization.
The Chairman of the Board of Directors, the Vice Chairman of the Board of
Directors, the President, Senior Vice President or Vice President as the
Chairman of the Board of Directors may designate, shall act as Chairman of
meetings of the stockholders. The Board of Directors or the stockholders may
appoint any stockholder to act as Chairman of any meeting
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in the absence of the Chairman of the Board of Directors, the Vice Chairman of
the Board of Directors, the President, Senior Vice President or Vice President.
The Secretary of the Corporation shall act as Secretary at all meetings of
the stockholders; but in the absence of the Secretary, the Chairman of the
meeting may appoint any person to act as Secretary of the meeting.
SECTION 6. Voting.
Each holder of Common Stock and any series of Preferred Stock having voting
rights shall be entitled to one vote for each share of Common Stock or such
Preferred Stock held of record on all matters on which stockholders generally
are entitled to vote.
Directors shall be elected by ballot and upon demand of any stockholder the
vote upon any question before the meeting shall be by ballot.
Directors shall be elected by a plurality of the votes cast at an election.
All other action shall be authorized by a majority of the votes cast by the
holders of shares entitled to vote thereon, unless a greater vote is required by
law, by the Certificate of Incorporation or these Bylaws.
A stockholder entitled to vote at a meeting of stockholders may authorize
another person to act for him by written proxy.
SECTION 7. Inspectors of Elections.
The Board of Directors or Chairman of the meeting of stockholders shall
appoint one or more inspectors to count and tabulate the votes and to perform
such other acts or duties as may be required by the Chairman or required by law.
On request of the Chairman of the meeting, or as otherwise required by law, the
inspectors shall make and execute a written report to the Chairman of the
meeting of any facts found by them and matters determined by them. The report is
prima facie evidence of the facts stated and of the vote certified by the
inspectors.
ARTICLE II
Directors
SECTION 1. Number.
The business and affairs of the Corporation shall be managed under the
direction of the Board of Directors which, subject to any right of the holders
of any series of Preferred Stock then outstanding to elect additional directors
under specified circumstances, shall consist of not
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less than five nor more than 15 persons. The exact number of directors within
the minimum and maximum limitations specified in the preceding sentence shall be
fixed from time to time by the Board of Directors pursuant to a resolution
adopted by a majority of the entire Board of Directors.
SECTION 2. Terms.
The Directors shall be divided into such classes and shall have such terms
as are set forth in the Certificate of Incorporation.
SECTION 3. Newly Created Directorships and Vacancies.
Newly created Directorships and vacancies in the Board of Directors shall
be filled in the manner set forth in the Certificate of Incorporation.
SECTION 4. Removal.
Removal of Directors shall be effected in the manner set forth in the
Certificate of Incorporation.
SECTION 5. Nominations of Director Candidates.
(a) Nominations of candidates for election as Directors of the Corporation
at any meeting of stockholders called for election of Directors (an "Election
Meeting") may be made by the Board of Directors or by any stockholder entitled
to vote at such Election Meeting.
(b) Nominations made by the Board of Directors shall be made at a meeting
of the Board of Directors, or by written consent of Directors in lieu of a
meeting, not less than 30 days prior to the date of the Election Meeting, and
such nominations shall be reflected in the minute books of the Corporation as of
the date made. At the request of the Secretary of the Corporation each proposed
nominee shall provide the Corporation with such information concerning himself
as is required under the rules of the Securities and Exchange Commission, to be
included in the Corporation's proxy statement soliciting proxies for his
election as a Director.
(c) Not less than 90 days prior to the date of the Election Meeting in the
case of an annual meeting, and not more than seven days following the date of
notice of the meeting in the case of a special meeting, any stockholder who
intends to make a nomination at the Election Meeting shall deliver a notice to
the Secretary of the Corporation setting forth (i) the name, age, business
address and residence address of each nominee proposed in such notice, (ii) the
principal occupation or employment of each such nominee, (iii) the number of
shares of capital stock of the Corporation which are beneficially owned by each
such nominee, (iv) a statement that the nominee is willing to be nominated, (v)
a representation that the stockholder is a holder of record of the capital stock
of the Corporation entitled to vote at such meeting
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and intends to appear in person or by proxy at the meeting to nominate the
person or persons specified in the notice, (vi) a description of all
arrangements or understandings between the stockholder and each nominee and any
other person or persons (naming such person or persons) pursuant to which the
nomination or nominations are to be made by the stockholder, and (vii) such
other information concerning each such nominee as would be required, under the
rules of the Securities and Exchange Commission, in a proxy statement soliciting
proxies for the election of such nominees. The presiding officer of the meeting
may refuse to acknowledge the nomination by a stockholder of any person not made
in compliance with the foregoing procedures.
(d) In the event that a person is validly designated as a nominee in
accordance with paragraph (b) or paragraph (c) hereof and shall thereafter
become unable or unwilling to stand for election to the Board of Directors, the
Board of Directors or the stockholder who proposed such nominee, as the case may
be, may designate a substitute nominee.
(e) If the Chairman of the Election Meeting determines that a nomination
was not made in accordance with the procedures as set forth in these Bylaws,
such nomination shall be void.
No person shall be elected a Director of the Corporation after having
attained the age of 70 years.
SECTION 6. Place and Manner of Meeting.
All meetings of the Board of Directors shall be held at the principal
office of the Corporation or at any other place within or without the State of
Delaware as the Board of Directors may from time to time fix therefor. Any
meeting of the Board of Directors, regular or special, may be held by conference
telephone or similar communication equipment so long as all Directors
participating in the meeting can hear one another, and all such Directors shall
be deemed to be present in person at the meeting.
SECTION 7. Regular Meetings.
A regular meeting of the Board of Directors, of which no notice shall be
required to be given, shall be held, if a quorum be present, in each and every
year immediately after the adjournment of the annual meeting of stockholders for
the purpose of electing officers and transacting such other business as might be
transacted at any regular meeting of the Board of Directors. Regular meetings of
the Board of Directors, of which no notice shall be required to be given, shall
be held every month in accordance with a schedule established by the Board of
Directors from time to time, except that the scheduled date of any meeting may
be changed by the Chairman of the Board or the President, in the discretion of
either, provided that notice of such change shall be given to all Directors
personally or by mail, telephone or telegraph at least 24 hours prior to such
scheduled date upon which such meeting is to be held.
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SECTION 8. Special Meetings.
Special meetings of the Board of Directors shall be called by the Secretary
at the direction of the Chairman of the Board, the President, or a majority of
the Directors. Notice of the time and place of any special meeting of the Board
of Directors shall be given by serving the same personally or by telephone or by
telegram addressed to each Director at his post office address as the same shall
appear on the books of the Corporation at least two hours before such meeting.
Each member of the Board of Directors shall, by writing filed with the
Secretary, designate his post office address to which notices or meetings of the
Board of Directors of the Corporation shall be directed, and in the event of any
change therein shall likewise designate his new post office address.
SECTION 9. Quorum.
A majority of the members of the Board of Directors then in office, or of a
committee thereof, shall constitute a quorum for the transaction of business,
and the vote of a majority of the members present at a meeting at which a quorum
is present shall be the act of the Board of Directors or of the Committee
thereof, except for the amendment of the Bylaws which shall require a vote of
not less than a majority of the members of the Board of Directors then in
office.
SECTION 10. Action Without a-Meeting.
Action required or permitted to be taken at a meeting of the Board of
Directors, or a committee thereof, may be taken without a meeting, if all
members of the Board of Directors or of the committee consent thereto in
writing. The written consent shall be filed with the minutes of the proceedings
of the Board of Directors or Committee. The consent shall have the same effect
as a vote of the Board of Directors or Committee thereof for all purposes.
SECTION 11. Organization.
At all meetings of the Board of Directors, the Chairman of the Board of
Directors, the Vice Chairman of the Board of Directors, the President, a Senior
Vice President or a Vice President or in their absence a member of the Board to
be selected by the members present, shall preside as Chairman of the meeting.
The Secretary or an Assistant Secretary of the Corporation shall act as
secretary of all meetings of the Board, except that in their absence the
Chairman of the meeting may designate any other person to act as secretary.
At meetings of the Board of Directors business shall be transacted in such
order as from time to time the Board may determine.
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SECTION 12. Committees of the Board.
The Board of Directors may designate one or more Committees, including an
Executive Committee, each consisting of one or more Directors of the Corporation
as members and one or more Directors as alternate members, with such power and
authority as prescribed by the Bylaws or as provided in a resolution of the
Board of Directors. Each Committee, and each member thereof, shall serve at the
pleasure of the Board of Directors.
ARTICLE III
Officers
SECTION 1. Officers.
The officers of the Corporation shall be a President, one or more Senior
Vice Presidents, one or more Vice Presidents, a Secretary, a Treasurer and/or a
Controller, and such additional officers, if any, as shall be elected by the
Board of Directors in accordance with these Bylaws. The Board of Directors,
immediately after each annual meeting of stockholders, shall select a President
and one or more Senior Vice Presidents and Vice Presidents, and a Secretary, a
Treasurer and/or a Controller. The failure to hold such election shall not of
itself terminate the term of office of any officer. All officers shall hold
office at the pleasure of the Board of Directors. Any officer may resign at any
time upon written notice to the Corporation. Officers may, but need not, be
Directors. Any two or more of the above offices may be held by the same persons
except as prohibited by law, but no officer shall execute, acknowledge or verify
an instrument in more than one capacity if the instrument is required by law to
be acknowledged or verified by two or more officers.
All officers shall be subject to removal with or without cause at any time
by the affirmative vote of a majority of the members of the Board of Directors
then in office. The removal of an officer without cause shall be without
prejudice to his contract rights, if any. The election or appointment of an
officer shall not of itself create contract rights. All agents and employees
other than officers elected by the Board of Directors shall also be subject to
removal, with or without cause, at any time by the officers appointing them.
Any vacancy caused by the death of any officer, his resignation, his
removal or otherwise, may be filled by the Board of Directors, and any officer
so elected shall hold office at the pleasure of the Board of Directors.
In addition to the powers and duties of the officers of the Corporation as
set forth in these Bylaws, the officers shall have such authority and shall
perform such duties as from time to time may be determined by the Board of
Directors.
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SECTION 2. President.
The President shall be the chief executive officer of the Corporation and,
subject to the direction of the Board of Directors, shall have general
management and control of the affairs and business of the Corporation and shall
have general charge, control and supervision over the administration and
operations of the Corporation. He shall have all other powers and perform all
other duties commonly incident to his office or delegated to him by the Board of
Directors or which are or may at any time be authorized or required by law.
SECTION 3. Vice Presidents.
Each Senior Vice President and each of the other Vice Presidents shall have
such powers and perform such duties as may be assigned to him by the Board of
Directors or be delegated to him by the Board of Directors or the President. In
case of death, disability or absence of the President, the powers, duties and
functions of the President shall be temporarily performed and exercised by such
one of the Senior Vice Presidents or the Vice Presidents as shall be designated
by the Board of Directors.
SECTION 4. Secretary.
The Secretary shall keep the minutes of all meetings of the stockholders
and of the Board of Directors, and also (unless otherwise directed) the minutes
of all meetings of Committees. He shall procure and keep in his files copies of
the minutes of all meetings of stockholders and Boards of Directors of all
corporations which the Corporation controls by ownership of stock or otherwise.
He shall attend to the giving and serving of all notices and shall be custodian
of the seal of the Corporation. He may sign with the President or a Vice
President, in the name of the Corporation, all bonds, contracts and instruments
of conveyance authorized by the Board of Directors, and when so ordered by the
Board of Directors he shall affix the seal of the Corporation thereto. He shall
have charge of all such books and papers as the Board of Directors may direct;
all of which shall at all reasonable times be open to the examination of any
Director upon application at the office of the Corporation during business
hours. He shall publish promptly to stockholders any action in respect to
dividends or the allotment of rights for subscription to securities. He shall
have charge of the capital stock transfer records, ledgers and unissued and
cancelled certificates and shall prepare and certify for use at the annual
meeting of stockholders a list, alphabetically arranged, of the stockholders
entitled to vote at such meeting. He shall, in general, perform all the duties
incident to the office of the Secretary and shall also have such other powers
and shall perform such other duties as may from time to time be assigned to him
by these Bylaws, the Board of Directors or the President.
SECTION 5. Powers and Duties of the Treasurer.
The Treasurer shall have custody of all funds of the Corporation. He is
authorized and empowered to receive and collect all monies due to the
Corporation and to receipt therefor.
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All monies received by the Treasurer shall be deposited to the credit of the
Corporation with such depositories as may be designated by the Board of
Directors; he may endorse for deposit therein, or for collection, all checks,
drafts, vouchers, notes or other obligations drawn to the order of the
Corporation or payable to it. He is authorized to pay, by check or otherwise,
vouchers, payrolls, drafts and other accounts payable when approved for payment
by the Controller or such person or persons as may be designated by the Board of
Directors or the President. He is authorized to make disbursements which have
been otherwise ordered or provided for by the Board of Directors, and for
dividends on stock when due and payable. He is also authorized to draw checks
against any funds to the credit of the Corporation with any of its depositories;
but all checks drawn by him except as otherwise provided for by resolution of
the Board of Directors shall be countersigned by such person or persons as may
be designated by the Board of Directors or the President from time to time to
countersign the same. He shall sign, with the President or such other person or
persons as may be designated for the purpose by the Board of Directors, all
bills of exchange and promissory notes of the Corporation. He shall enter
regularly in the books of the Corporation, to be kept by him for that purpose, a
full and accurate account of all monies received and paid by him on account of
the Corporation; and shall render reports thereof to the Controller at such
times and in such form as the latter may prescribe. Whenever required by the
Board of Directors he shall render a statement of his cash and security
accounts, and shall at all reasonable times exhibit his books and accounts to
any director of the Corporation upon application at the office of the
Corporation during business hours. He shall perform all acts incident to the
position of the Treasurer and shall also have such other powers and shall
perform such other duties as may from time to time be assigned to him by these
Bylaws, the Board of Directors or the President.
SECTION 6. Additional Officers.
The Board of Directors may from time to time elect such other officers
(who may but need not be Directors), including but not limited to a Controller,
Assistant Treasurers, Assistant Secretaries and Assistant Controllers, as the
Board may deem advisable and such officers shall have such authority and shall
perform such duties as may from time to time be assigned to them by the Board of
Directors or the President.
The Board of Directors may from time to time by resolution delegate to any
Assistant Treasurer or Assistant Treasurers any of the powers or duties herein
assigned to the Treasurer; and may similarly delegate to any Assistant Secretary
or Assistant Secretaries any of the powers or duties herein assigned to the
Secretary.
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ARTICLE IV
Capital Stock
SECTION 1. Certificates of Stock.
The certificates for shares of the capital stock of the Corporation shall
be in such form as shall be approved by the Board of Directors. The certificates
shall be signed by the President or any Vice President and also by the Treasurer
or the Secretary, and may be sealed with the seal of the Corporation, or a
facsimile thereof.
The signatures of the aforesaid officers may be facsimiles if the
certificate is countersigned by a transfer agent or registered by a registrar
other than the Corporation or its employee. The validity of any stock
certificate of the Corporation signed and executed by or in the name of duly
qualified officers of the Corporation shall not be affected by the subsequent
death, resignation, or the ceasing for any other reason of any such officer to
hold such office, whether before or after the date borne by or the actual
delivery of such certificates.
All certificates for shares of stock shall be consecutively numbered as the
same are issued. The name of the person owning the shares represented thereby,
with the number of such shares and the date of issue, shall be entered on the
Corporation's capital stock records.
Except as hereinafter provided, all certificates surrendered to the
Corporation shall be cancelled, and no new certificates shall be issued until
the former certificate for the same number of shares shall have been surrendered
and cancelled except in case of a lost or destroyed certificate.
The Corporation may treat the holder of record of any share or shares of
stock as the holder in fact thereof, and shall not be bound to recognize any
equitable or other claim to or interest in any such share or shares on the part
of any other person, whether or not it shall have express or other notice
thereof, save as expressly provided by law.
SECTION 2. Lost Certificate.
The Corporation may issue a new certificate for shares in place of a
certificate theretofore issued by it, alleged to have been lost or destroyed,
and the Board of Directors may require the owner of the lost or destroyed
certificate, or his legal representative, to give the Corporation a bond in form
satisfactory to the Corporation sufficient to indemnify the Corporation, its
transfer agents and registrars against any claim that may be made against them
on account of the alleged lost or destroyed certificate or the issuance of such
a new certificate.
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SECTION 3. Transfer of Shares.
Shares of the capital stock of the Corporation shall be transferable by the
owner thereof in person or by a duly authorized attorney, upon surrender of the
certificates therefor properly endorsed. The Board of Directors, at its option,
may appoint a transfer agent and registrar, or one or more transfer agents and
one or more registrars, or either, for the stock of the Corporation.
SECTION 4. Regulations.
The Board of Directors shall have power and authority to make all such
rules and regulations as they may deem expedient concerning the issue, transfer
and registration of certificates for shares of the capital stock of the
Corporation.
SECTION 5. Record Date.
In order that the Corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders or any adjournment thereof,
or entitled to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock or for the purpose of any other lawful
action, as the case may be, the Board of Directors may fix, in advance, a record
date, which shall not be more than sixty (60) nor less than ten (10) days before
the date of such meeting, nor more than sixty (60) days prior to any other
action.
If no record date is fixed, 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 the record date for determining
stockholders for any other purpose shall be at the close of business on the day
on which the Board of Directors adopts the 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 6. Dividends and Stock Repurchases.
Subject to the provisions of the Certificate of Incorporation, the Board of
Directors shall have the power to declare and pay dividends upon shares of, and
authorize repurchase programs for, stock of the Corporation, but only out of
funds available for the payment of dividends or repurchase of shares as provided
by law.
Subject to the provisions of the Certificate of Incorporation, any
dividends declared upon the stock of the Corporation shall be payable on such
date or dates as the Board of Directors shall determine. If the date fixed for
the payment of any dividend shall in any year
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fall upon a legal holiday, then the dividend payable on such date shall be paid
on the next day not a legal holiday.
SECTION 7. Corporate Seal.
The Board of Directors shall provide a suitable seal, containing the name
of the Corporation, which seal shall be kept in the custody of the Secretary. A
duplicate of the seal may be kept and be used by any officer of the Corporation
designated by the Board or the President.
SECTION 8. Fiscal Year.
The fiscal year of the Corporation shall end on September 30 or shall be
such other fiscal year as the Board of Directors from time-to time by resolution
shall determine.
ARTICLE V
Miscellaneous Provisions
SECTION 1. Checks, Notes, Etc.
All checks, drafts, bills of exchange, acceptances, notes or other
obligations or orders for the payment of money shall be signed by at least one
(1) officer of the Corporation, or by a greater number of officers of the
Corporation and/or other persons as the Board of Directors from time to time
shall designate or as otherwise required by law.
Checks, drafts, bills of exchange, acceptances, notes, obligations and
orders for the payment of money made payable to the Corporation may be endorsed
for deposit to the credit of the Corporation with a duly authorized depositary
by the Treasurer, or otherwise as the Board of Directors may from time to time,
by resolution, determine.
SECTION 2. Loans.
No loans and no renewals of any loans shall be contracted on behalf of the
Corporation except as authorized by the Board of Directors. When authorized so
to do, any officer or agent of the Corporation may effect loans and advances for
the Corporation from any bank, trust company or other institution or from any
firm, corporation or individual, and for such loans and advances may make,
execute and deliver promissory notes, bonds or other evidences of indebtedness
of the Corporation. When authorized so to do, any officer or agent of the
Corporation may pledge, hypothecate or transfer, as security for the payment of
any and all loans,, advances, indebtedness and liabilities of the Corporation,
any and all stocks, securities and other personal property at any time held by
the Corporation, and to that end may endorse, assign and deliver the same. Such
authority may be general or confined to specific instances.
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SECTION 3. Waivers of Notice.
Whenever any notice whatever is required to be given by law, by the
Certificate of Incorporation or by these Bylaws to any person or persons, a
waiver thereof in writing, signed by the person or persons entitled to the
notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
SECTION 4. Offices Outside of Delaware.
Except as otherwise required by the laws of the State of Delaware, the
Corporation may have an office or offices and keep its books, documents and
papers outside of the State of Delaware at such place or places as from time to
time may be determined by the Board of Directors or the President.
ARTICLE VI
Indemnification
SECTION 1. Indemnification of Directors, Officers and Employees.
The Corporation shall indemnify to the full extent authorized by law any
Director or officer made or threatened to be made a party to an action, suit or
proceeding, whether criminal, civil, administrative or investigative, by reason
of the fact that he, his testator or intestate is or was a Director or officer
of the Corporation or is or was serving, at the request of the Corporation, as a
Director or officer of another corporation, partnership, joint venture, trust or
other enterprise.
The Corporation may, at the discretion of the Board of Directors, indemnify
to the full extent authorized by law any employee or agent made or threatened to
be made a party to an action, suit or proceeding, whether criminal, civil,
administrative or investigative by reason of the fact that he, his testator or
intestate is or was an employee or agent of the Corporation or is or was serving
at the request of the Corporation as an employee or agent of another
corporation, partnership, joint venture, trust or other enterprise.
SECTION 2. Expenses Advanced.
Expenses incurred with respect to any claim, action or proceeding of the
character, actual or threatened, described in Section 1 of this Article VI, may
be advanced by the Corporation prior to the final disposition thereof upon
receipt of an undertaking by such person to repay the mount so advanced if and.
to the extent it shall ultimately be determined by a court of competent
jurisdiction that he was not entitled to indemnification under this Bylaw.
C-13
<PAGE>
SECTION 3. Automatic Conformity to Law.
The intention of this Bylaw is to provide indemnification with the broadest
and most inclusive coverage permitted by law (a) at the time of the act or
omission to be indemnified against, or (b) so permitted at the time of carrying
out such indemnification, whichever of (a) or (b) may be broader or more
inclusive and permitted by law to be applicable. If the indemnification
permitted by law at this present time, or at any future time, shall be broader
or more inclusive than the provisions of this Bylaw, then indemnification shall
nevertheless extend to the broadest and most inclusive permitted by law at any
time and this Bylaw shall be deemed to have been amended accordingly. If any
provision or portion of this Article shall be found, in any action, suit or
proceeding, to be invalid or ineffective, the validity and effect of the
remaining parts shall not be affected.
ARTICLE VII
Amendments
The stockholders or the Board of Directors of the Corporation may amend or
repeal the Bylaws or adopt new Bylaws. Except as otherwise required by law, the
Certificate of Incorporation or these Bylaws, the vote of a majority of the
shares present or represented by proxy and entitled to vote at any annual or
special meeting shall be required to amend or repeal the Bylaws or to adopt new
Bylaws. Except as otherwise required by law, the Certificate of Incorporation or
these Bylaws, such action by the Board of Directors requires an affirmative vote
of not less than a majority of the members of the Board of Directors then in
office.
C-14
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
-----------------------------------------
Article VI of Bancorp's bylaws, which relates to indemnification of
certain persons, including the directors and officers of Bancorp, is set forth
as part of Exhibit C to the Proxy Statement/Prospectus constituting part of this
Registration Statement and is incorporated herein by reference thereto. A
description of the effect of Bancorp's bylaws concerning indemnification of
certain persons is set forth under the caption "FORMATION OF MIDDLE TIER HOLDING
COMPANY -- Indemnification" in the Proxy Statement/Prospectus and is
incorporated herein by reference. It is anticipated that Bancorp will obtain a
directors' and officers' liability insurance policy pursuant to which the
directors and officers of Bancorp will be insured against certain liabilities,
including certain liabilities under the Securities Act of 1933.
Item 21. Exhibits and Financial Statement Schedules.
------------------------------------------
See the list of the Exhibits filed with this Registration Statement
set forth on the Index of Exhibits which appears immediately following the
signature page of this Registration Statement and is incorporated herein by
reference.
Item 22. Undertakings.
------------
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 a 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 as used in connection
with an offering of securities subject to Rule 415, will be filed as part of an
amendment to the Registration Statement and will not be used until such
amendment is effective and 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 an initial bona
fide offering thereof.
1
<PAGE>
3. 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.
2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned thereunto duly authorized in the city of Fort Pierce, state of
Florida, on December 13, 1996.
HARBOR FLORIDA BANCORP, INC.
By:
/s/
----------------------------
Michael J. Brown
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1993, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<S> <C> <C>
/s/ Vice Chairman of the Board and December 13, 1996
- - ---------------------- Director
Bruce R. Abernethy, Sr.
/s/ President and Chief Executive December 13, 1996
- - ---------------------- Officer and Director
Michael J. Brown, Sr.
/s/ Director December 13, 1996
- - ----------------------
Richard K. Davis
/s/ Chairman of the Board and December 13, 1996
- - ---------------------- Director
Edward G. Enns
/s/ Director December 13, 1996
- - ----------------------
Frank H. Fee III
</TABLE>
3
<PAGE>
/s/ Director December 13, 1996
- - ----------------------
Richard B. Hellstrom
/s/ Director December 13, 1996
- - ----------------------
Maltby F. Watkins, M.D.
/s/ Senior Vice President, Finance December 13, 1996
- - ----------------------
Don W. Bebber
4
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT NAME
- - ----------- ------------
<S> <C>
2 Agreement and Plan of Reorganization dated as of
November 27, 1996 between Harbor Federal Savings
Bank, Harbor Florida Bancorp, Inc. and Interim
Harbor Federal Savings Bank
3(a) Certificate of Incorporation of Bancorp
3(b) Bylaws of Bancorp
5(a)* Opinion of Peabody & Brown
8(a)* Opinion of Peabody & Brown
8(b)* Opinion of KPMG Peat Marwick, LLP
10(a) Employment Agreement of Michael J. Brown, Sr.
10(b) Harbor Federal Savings Bank 1993 Incentive Stock
Option Plan
10(c) Harbor Federal Savings Bank Stock Option Plan for
Nonemployee Directors
10(d) Harbor Federal Savings Bank Recognition and
Retention Plan
10(e) Harbor Federal Savings Bank Outside Directors'
Recognition and Retention Plan
24(a)* Consent of Peabody & Brown
24(b)* Consent of KPMG Peat Marwick, LLP
</TABLE>
_____________________
* To Be Filed By Amendment
<PAGE>
EXHIBIT 2
AGREEMENT AND PLAN OF REORGANIZATION
DATED AS OF NOVEMBER 27, 1996 BETWEEN
HARBOR FEDERAL SAVINGS BANK, HARBOR FLORIDA BANCORP, INC.
AND INTERIM HARBOR FEDERAL SAVINGS BANK
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
------------------------------------
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement"), dated as
of November 27, 1996, between Harbor Federal Savings Bank, a federally chartered
savings bank (the "Bank") and Harbor Florida Bancorp, Inc., a Delaware
corporation (the "Holding Company") which is wholly-owned by the Bank. Promptly
after its incorporation, Interim Harbor Federal Savings Bank ("Interim"), a
stock savings bank to be organized by the Holding Company under Federal law for
the sole purpose of consummating the reorganization provided herein, will
execute and deliver this Agreement and, thereby, become a Party hereto.
BACKGROUND
----------
The Board of Directors of the Bank has determined that it is in the
best interests of the Bank and its stockholders for the Bank to be reorganized
into a middle tier stock holding company form of ownership in accordance with
the terms of this Agreement as follows:
A. Upon the organization of Interim, the Holding Company will be the
sole stockholder of Interim.
B. Interim will thereafter merge into the Bank, on terms whereby the
stockholders of the Bank will exchange all of the outstanding shares of common
stock of the Bank for Shares of the Holding Company, and the Holding Company (as
the former sole stockholder of Interim) will receive all of the outstanding
shares of common stock of the Bank.
C. Whereupon, the former stockholders of the Bank will be all of the
stockholders of the Holding Company which, in turn, will own all of the
outstanding shares of stock of the Bank.
TERMS
-----
The parties hereto, intending to be legally bound hereby, agree as
follows:
ARTICLE ONE
DEFINITIONS
The following terms used herein have the meanings specified below:
1.1 "Agreement" means this Agreement and Plan of Reorganization.
<PAGE>
1.2 The "Bank" means Harbor Federal Savings Bank a federally
chartered savings bank organized under Federal law.
1.3 "Bank Common Stock" means the shares of $1.00 par value common
stock of the Bank.
1.4 "Effective Date" means that the date provided for in Section 8.1
on which the Merger shall become effective.
1.5 "Effective Time" means the time on the Effective Date when the
Merger shall become effective.
1.6 "Holding Company" means Harbor Florida Bancorp, Inc., a
corporation organized under Delaware law.
1.7 "Holding Company Common Stock" means the shares of $0.01 par
value common stock of the Holding Company.
1.8 "Interim" means Interim Harbor Federal Savings Bank, an interim
stock savings bank to be organized under Federal law.
1.9 "Internal Revenue Code" means the Internal Revenue Code of 1986,
as amended.
1.10 "Merger" means the merger of Interim with and into the Bank
provided for in Section 2.1 of this Agreement.
1.11 "OTS" means the Office of Thrift Supervision.
1.12 "Party" means each of the Bank, the Holding Company and Interim,
as a Party to this Agreement.
1.13 "Resulting Institution" means the Bank as the surviving Party to
the Merger,
1.14 "SEC" means the Securities and Exchange Commission.
ARTICLE TWO
MERGER OF INTERIM INTO THE BANK AND RELATED MATTERS
2.1 The Merger. On the Effective Date, Interim will merge with and
----------
into the Bank pursuant to the terms of this Agreement, and thereupon the
separate existence of Interim will cease. The Bank, as the Resulting
Institution, will possess all of the rights, privileges, powers and franchises,
and be subject to all the restrictions, duties and liabilities of Interim, and
all property, real, personal and mixed, and all debts due to Interim on whatever
account, shall be
2
<PAGE>
vested in the Bank, and all such property, rights, privileges, powers and
franchises, and all and every other interest of Interim shall be as effectively
the property of the Bank as they were of Interim.
2.2 Continued Existence of the Bank. Following the Merger, the
-------------------------------
existence of the Bank will 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 savings bank organized under the laws of the United
States. The home and branch offices of the Bank will be at the location of the
home and branch offices of the Bank immediately prior to the Effective Time.
The Federal Stock Charter and bylaws of the Bank, as presently in effect, will
continue in full force and effect and shall not be changed in any manner
whatsoever by the Merger. The Bank will continue to operate immediately after
the Effective Time under its present name, "Harbor Federal Savings Bank."
2.3 Continued Business of the Bank. From and after the Effective
------------------------------
Time, the business presently conducted by the Bank will continue to be conducted
by it as a wholly-owned subsidiary of the Holding Company, subject to the
management and control of the board of directors of the Bank and, subject to
such action as the board of directors of the Bank might take hereafter, the
present officers of the Bank will continue in their present positions. It is
the Parties' intention that a continuity of operation of the Bank business and a
continuity of present management will be maintained.
2.4 Directors of the Holding Company. On the Effective Date, the
--------------------------------
directors of the Holding Company who will serve until the expiration of the
respective terms for which they were elected and until their respective
successors are elected and duly qualified will be as follows:
Name and Address Term
---------------- ----
Bruce R. Abernethy, Sr. 1999
100 S. Second Street
Fort Pierce, FL 34950
Richard N. Bird 2000
100 S. Second Street
Fort Pierce, FL 34950
Michael J. Brown, Sr. 1998
100 S. Second Street
Fort Pierce, FL 34950
Richard K. Davis 2000
100 S. Second Street
Fort Pierce, FL 34950
Edward G. Enns 1999
100 S. Second Street
Fort Pierce, FL 34950
3
<PAGE>
Frank H. Fee, III 2000
100 S. Second Street
Fort Pierce, FL 34950
Richard B. Hellstrom 1998
100 S. Second Street
Fort Pierce, FL 34950
2.5 Directors of the Bank. On the Effective Date, the directors of
---------------------
the Bank, who will serve until the expiration of the respective terms for which
they were elected and until their respective successors are duly elected and
qualified, will be as follows:
Name and Address Term
----------------
Bruce R. Abernethy, Sr. 1999
100 S. Second Street
Fort Pierce, FL 34950
Richard N. Bird 2000*
100 S. Second Street
For Pierce, FL 34950
Michael J. Brown, Sr. 1998
100 S. Second Street
Fort Pierce, FL 34950
Richard K. Davis 2000*
100 S. Second Street
Fort Pierce, FL 34950
Edward G. Enns 1999
100 S. Second Street
Fort Pierce, FL 34950
Frank H. Fee, III 2000*
100 S. Second Street
Fort Pierce, FL 34950
Richard B. Hellstrom 1998
100 S. Second Street
Fort Pierce, FL 34950
* Assumes election at the 1997 Annual Meeting of Stockholders of the
Bank.
2.6 Savings Accounts. Immediately after the Effective Time, the Bank
----------------
will continue to issue savings accounts on the same basis as immediately prior
thereto.
4
<PAGE>
ARTICLE THREE
CONVERSION OF SHARES
3.1 Terms and Conditions of Merger. The manner and basis of
------------------------------
converting the shares of the Bank and Interim in the Merger will be as follows:
(a) The Bank's Common Stock.
(i) Conversion. Each share of Bank Common Stock issued
and outstanding immediately prior to the Effective Time shall
immediately and by virtue of the Merger, without any action on
the part of the Bank or the holder of such share, be converted
into and become one fully paid and nonassessable share of Holding
Company Common Stock. Such shares of Bank Common Stock shall
thereupon, without any further action on the part of the Bank, be
cancelled and retired, shall no longer be outstanding and the
number of such shares shall be restored to the number of
authorized but unissued shares of Bank Common Stock.
(ii) Stock Certificates. At any time after the Effective
Time, the holder of an outstanding certificate which prior to the
Effective Time represented shares of Bank Common Stock may
surrender the same to the Holding Company's Stock Registrar and
Transfer Agent, or to its corporate Secretary, and such holder
thereupon shall be entitled to receive, in exchange therefor, one
or more certificates representing the number of shares of Holding
Company Common Stock into which such shares of Bank Common Stock
shall have been converted. Until so surrendered, each outstanding
certificate which, prior to the Effective Time represented shares
of Bank Common Stock, shall be deemed for all purposes (including
the payment of dividends) to evidence ownership of the number of
shares of Holding Company Common Stock into which such shares of
Bank Common Stock shall have been so converted.
(iii) Satisfaction of All Rights. All shares of Holding
Company Common Stock into which shares of Bank Common Stock shall
have been converted pursuant to the Merger shall be deemed to
have been issued in full satisfaction of all rights pertaining to
such converted shares.
(iv) Sole Right, Etc. At the Effective Time, the holders
of certificates formerly representing shares of Bank Common Stock
outstanding immediately prior to the Effective Time shall cease
to have any rights with respect to Bank Common Stock and their
sole rights on and following the Effective Time shall be with
respect to the shares of Holding Company Common Stock into which
their shares of Bank Common Stock shall have been converted by
the Merger.
5
<PAGE>
(b) Holding Company Stock Owned Directly or Indirectly by the
Bank. At the Effective Time, all shares of Holding Company Common
Stock issued and outstanding immediately prior to the Effective Time
shall, by virtue of the Merger and without any action on the part of
the Holding Company or the holder of any such share, be cancelled and
returned, shall no longer be outstanding, and the number of such
shares shall be restored to the number of authorized but unissued
shares of Holding Company Common Stock. All such shares of Holding
Company Common Stock outstanding at the date of this Agreement are
owned by the Bank.
(c) Interim Common Stock. Each share of Interim common stock
issued and outstanding immediately prior to the Effective Time shall
immediately and by virtue of the Merger, without any action on the
part of Interim or the holder of such share, be converted into and
become one fully paid and nonassessable share of Bank Common Stock,
whereupon the Holding Company as the holder of such shares of common
stock of Interim will be the holder of all of the outstanding shares
of common stock of the Bank.
3.2 The Bank's Employee Stock Benefit Programs. At the Effective
------------------------------------------
Time, the Harbor Federal Savings Bank Employee Stock Ownership Plan (the "ESOP")
shall automatically by virtue of the Merger, be continued as the Employee Stock
Ownership Plan of the Bank with its Bank Common Stock exchanged for Holding
Company Common Stock. The Harbor Federal Savings Bank 1993 Incentive Stock
Option Plan and the Harbor Federal Savings Bank Option Plan for Non-Employee
Directors (collectively, the "Option Plans") including each stock option granted
under the Option Plans outstanding and unexercised, in whole or in part,
immediately prior to the Effective Time shall, by virtue of the Merger, without
any action on the part of the Bank, the Holding Company or the holder of such
option, remain the Option Plans of the Bank with each option to purchase under
the Option Plans becoming the same number of shares of Holding Company Common
Stock, and subject to the same terms and conditions (including, but not limited
to, the exercise price), as the shares of Bank Common Stock which such holder
would then or thereafter be entitled to purchase or receive pursuant to such
option. The Harbor Federal Savings Bank Recognition and Retention Plan and
Harbor Federal Outside Directors' Recognition and Retention Plan (collectively,
the "Recognition and Retention Plans") shall automatically, by virtue of the
Merger, be continued as the Recognition and Retention Plan of the Bank with
their Bank Common Stock exchanged for Holding Company Common Stock. The Bank and
the Holding Company will amend the ESOP, the Option Plans and the Recognition
and Retention Plans to provide for stock or options granted after the Effective
Time to be granted with respect to Holding Company Common Stock in lieu of Bank
Common Stock.
3.3 Reservation or Issuance of Stock. At the Effective Time, the
--------------------------------
Board of Directors of the Holding Company shall be deemed to have reserved for
issuance or to have authorized the issuance of a number of shares of Holding
Company Common Stock, and such shares shall automatically be so reserved and so
authorized in respect of the Employee Stock Benefit Programs and options granted
thereunder mentioned in Section 3.2, equal to the number of shares of the Bank
Common Stock that the Bank had reserved for issuance and had
6
<PAGE>
authorized the issuance of in respect of such Programs immediately prior to the
Effective Time.
3.4 Employment Agreement. At the Effective Time the employment
--------------------
agreement between Mr. Brown and the Bank shall remain in full force and effect
and any references in such agreements to shares of stock under any Employee
Benefit Programs of the Bank shall be deemed to apply to shares of Holding
Company Common Stock.
ARTICLE FOUR
REPRESENTATIONS AND WARRANTIES
4.1 Representation and Warranties of the Bank. The Bank represents
-----------------------------------------
and warrants as follows:
(a) The Bank Corporate Standing. The Bank is a federally
---------------------------
chartered stock savings bank organized, existing and in good standing
under the laws of the United States, and it has all requisite
corporate power, licenses and authority to own its property and to
carry on its business as now conducted.
(b) Authorized Stock of the Bank. The Bank is authorized to
----------------------------
issue 20,000,000 shares of common stock, par value $1.00 per share, of
which 4,934,454 shares are issued and outstanding, and 1,000,000
shares of preferred stock, par value $1.00 per share, of which no
shares are issued and outstanding.
(c) Financial Information of the Bank. The balance sheet of the
---------------------------------
Bank at September 30, 1995, and 1996 and the related consolidated
statements of operations, stockholders' equity and changes in
financial position have been audited by independent certified public
accountants, as contained in the 1996 Annual Report of the Bank, and
fairly present the financial condition of the Bank and the results of
its operations, as of the dates and for the periods indicated, in
accordance with generally accepted accounting principles consistently
applied. Since September 30, 1996, there has been no adverse change in
the business, assets or condition, financial or otherwise, of the
Bank, nor any damage, destruction nor loss of a material nature
affecting the business, properties or financial condition of the Bank.
(d) Legal Proceedings of the Bank. The Bank is not a party to,
-----------------------------
nor has it been threatened with, any litigation or governmental
proceedings which, if adversely decided, would have a material adverse
effect upon the transactions contemplated hereby or upon the financial
condition, regulatory capital or business of the Bank or which would
create a material liability of the Bank.
4.2 Representations and Warranties of the Holding Company. The
-----------------------------------------------------
Holding Company represents and warrants as follows:
7
<PAGE>
(a) Corporate Standing of the Holding Company. The Holding
-----------------------------------------
Company is a corporation organized, existing and in good standing
under the laws of the State of Delaware and has all requisite
corporate power, licenses and authority to own its own property and to
carry on its business as now conducted.
(b) Authorized Stock of the Holding Company. The Holding Company
---------------------------------------
is authorized to issue 13,000,000 shares of common stock, par value
$0.01 per share of which 10 shares are issued and outstanding and are
owned by the Bank and 1,000,000 shares of preferred stock, none of
which are issued or outstanding.
(c) Legal Proceedings of the Holding Company. The Holding
----------------------------------------
Company is not a party to, nor has it been threatened with, any
litigation or governmental proceedings which if adversely decided
would have a material adverse effect upon the transactions
contemplated hereby or upon the financial condition, regulatory
capital or business of the Holding Company, or which would create a
material liability of the Holding Company.
(d) Interim Corporate Standing. Before the Effective Date, the
--------------------------
Holding Company will take all necessary or appropriate action to
organize and incorporate Interim in accordance with Federal law for
the sole purpose of facilitating the merger of Interim with and into
the Bank pursuant hereto, and at the Effective Time Interim will be
duly organized and existing in good standing under the laws of the
United States, will have all requisite corporate power, licenses and
authority to own its property, and carry on its business as then
conducted and all its outstanding shares of common stock will be owned
by the Holding Company.
ARTICLE FIVE
TRANSACTIONS PRIOR TO EFFECTIVE DATE
5.1 Restrictions on Certain Activities. Except as contemplated by
----------------------------------
this Agreement, prior to the Effective Time none of the Parties will, without
the prior consent of the others, do any of the following:
(a) Amend its Federal Stock Charter or Certificate of
Incorporation or bylaws, or merge into or consolidate with any other
corporation, or change in any manner the rights of its outstanding
shares of capital stock or the character of its principal business.
(b) Issue or sell, or issue options or rights to acquire, or
enter into any contract or commitment to issue or sell, any shares of
its capital stock, or subdivide or in any way reclassify any shares of
its capital stock, except for (i) shares of common stock issued under
the ESOP; (ii) options and rights which may be granted by the Bank
pursuant to its Option Plans and shares of its common stock issued
upon exercise of options; (iii) shares of common stock issued under
the Recognition and Retention
8
<PAGE>
Plans; and, (iv) the shares of its common stock to be issued by
Interim to the Holding Company;
(c) Acquire or agree to acquire any shares of its capital stock;
(d) Make or contract for any substantial acquisition of assets
except in the ordinary course of business; or
(e) Sell, dispose of or encumber any substantial and material
property or assets, or engage in any material activity or transaction,
except in the ordinary course of business.
5.2 Stockholder Approvals. The execution and delivery of this
---------------------
Agreement has been duly authorized and approved by the Boards of Directors of
the Bank and the Holding Company. A meeting of the stockholders of the Bank will
be held, inter alia, for the purpose of adopting and approving this Agreement.
In addition, the incorporators of Interim, and the Holding Company as the sole
owner of all the outstanding shares of capital stock of Interim, will execute
such written consents and take all such other action as may be required for the
adoption and approval of this Agreement.
ARTICLE SIX
CONDITIONS
6.1 Conditions to Performance by the Holding Company and Interim. The
------------------------------------------------------------
obligations of each of the Parties to effect the Merger pursuant hereto is
subject to the following conditions:
(a) Representations and Warranties and Covenants of Each Party.
----------------------------------------------------------
The representations and warranties of each Party contained herein
shall be true on and as of the Effective Time with the same effect as
though made as of such time, except for such variations as may be
permitted hereby or pursuant hereto. Each Party shall have performed
all covenants and obligations and complied with all conditions
required by this Agreement to be performed or complied with by it
prior to the Effective Time.
(b) Approval by the Bank's Stockholders. The holders of a
-----------------------------------
majority of the shares of the Bank Common Stock present in person or
by proxy shall, at a meeting thereof duly called, inter alia, for the
purpose of considering and acting upon this Agreement, have voted in
favor of this Agreement and the consummation of the Merger
contemplated hereby.
(c) Registration of Shares of Holding Company Common Stock:
------------------------------------------------------
Compliance with Securities Laws. A registration statement covering the
-------------------------------
shares of Holding Company Common Stock to be issued to the
stockholders of the Bank pursuant to the Merger shall have been filed
with and declared effective by the OTS in
9
<PAGE>
accordance with the provisions of the Securities Act of 1933, as
amended, and the Holding Company shall have complied with the
requirements of all applicable state securities or "blue sky" laws
necessary to offer and issue lawfully such shares pursuant hereto.
(d) Listing of Holding Company Common Stock. The shares of
---------------------------------------
Holding Company Common Stock shall have been approved for trading,
when issued, on the NASDAQ-NMS.
(e) Government Approval. All approvals by the OTS and the SEC
-------------------
and such other governmental agency as may be required for the lawful
consummation of the Merger and the issuance and delivery of Holding
Company Common Stock as contemplated by this Agreement shall have been
obtained. If any approval contains any restriction or condition which,
in the sole discretion of the Board of Directors of Harbor Federal, is
deemed to be not beneficial to Harbor Federal, Harbor Florida or the
stockholders thereof, the Board of Directors may terminate the
transaction pursuant to the Article Seven hereof.
(f) Federal Tax Ruling or opinion. The Bank shall have received
-----------------------------
either (i) a ruling from the Internal Revenue Service or (ii) an
opinion of its counsel in form and substance satisfactory to it that:
(1) The proposed merger will constitute a tax-free
reorganization under the Internal Revenue Code and the Bank, the
Holding Company and Interim will each be "a party to a
reorganization" within the meaning of the Internal Revenue Code.
(2) No gain or loss will be recognized by Interim upon the
transfer of its assets to the Bank solely in exchange for the
transfer to the Holding Company of the Bank Common Stock.
(3) No gain or loss will be recognized by the Bank upon the
receipt of the assets of Interim in the Merger.
(4) The basis of Interim's assets in the hands of the Bank
will be the same as the basis of those assets in the hands of
Interim immediately prior to the Merger.
(5) No gain or loss will be recognized by the Holding
Company upon the receipt of the Bank Common Stock in the Merger.
(6) No gain or loss will be recognized by the holders of
shares of Bank Common Stock upon their receipt of Holding Company
Common Stock as a result of the Merger.
10
<PAGE>
(7) The basis of the shares of Holding Company Common Stock
received as a result of the Merger by each holder of shares of
Bank Common Stock will be the same as the basis of such shares of
Bank Common Stock converted therefor pursuant to the Merger.
(8) For purposes of determining whether any disposition
thereof results in a long term or short term capital gain or
loss, the holding period of the shares of Bank Common Stock will
include the holding period of the shares of Bank Common Stock
converted in the Merger into such shares of Holding Company
Common Stock, provided that such shares of Bank Common Stock were
held as a capital asset at the Effective Time.
(g) Florida Tax Ruling or Opinion. The Bank shall have received
-----------------------------
either a ruling or an opinion in form and substance satisfactory to it
with respect to Florida income taxation as to the matters set forth in
paragraph (f) of this Section.
(h) The reorganization will be characterized and accounted for
at historical cost in a manner similar to a "pooling of interest" for
financial reporting and related purposes.
(i) Consents of Third Parties. Each of the Parties shall have
-------------------------
received such approvals, permits or consents of third parties,
including governmental bodies or agencies, as may be required to
permit them to perform this Agreement in accordance with its terms,
except for such consents with regard to agreements and arrangements
which are not in the aggregate material to the Bank, the Holding
Company and Interim, considered on a consolidated basis.
ARTICLE SEVEN
TERMINATION
7.1 Termination. This Agreement may be terminated at any time prior
-----------
to the Effective Time (i) at the election of any Party if any of the conditions
specified in Article Six shall not have been fulfilled and shall have become
incapable of fulfillment or (ii) by mutual consent of the respective boards of
directors of the parties.
7.2 No Further Liability. In the event of the termination of this
--------------------
Agreement pursuant to any of the foregoing provisions, the Bank will pay all the
costs and expenses incurred by the Parties in connection with this Agreement and
the transactions contemplated hereby, and no Party shall have any further
liability or obligation of any nature to any other Party.
11
<PAGE>
ARTICLE EIGHT
EFFECTIVE DATE OF MERGER
8.1 Effective Date and Effective Time. Upon satisfaction of the
---------------------------------
conditions set forth in Article Six (unless waived in accordance with this
Agreement) the Parties shall execute and cause to be filed (i) with the OTS
articles of merger, consistent with the terms hereof, and such other agreements,
certificates and other documents as may be required by applicable law and (ii)
with such other federal and state government agencies or authorities, including
the OTS, such other agreements, certificates and documents as may be required by
applicable law to cause the Merger to become effective. The date and time by
which all of such filings are completed and the Merger becomes effective are
referred to in this Agreement, respectively, as the "Effective Date" and the
"Effective Time."
ARTICLE NINE
MISCELLANEOUS
9.1 Waiver, Amendment, etc. Any of the terms or conditions of this
----------------------
Agreement which legally may be waived may be waived at any time by any Party
hereto which is, or the shareholders of which are, entitled to the benefit
thereof, by action taken or authorized by the Board of Directors of such Party,
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 after authorization to do
so by the Boards of Directors of the Parties hereto; provided, however that no
such waiver, amendment or modification shall have a material adverse effect on
the benefits intended to be received in the Merger pursuant to this Agreement by
the holders of shares of Bank Common Stock.
9.2 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be an original, but such counterparts together
shall constitute one and the same instrument.
9.3 Governing Law. This Agreement is made pursuant to, and shall be
-------------
construed under and be governed by the laws of Delaware, unless in conflict with
federal law and if so, then by such federal law, including the rules and
regulations of the OTS.
9.4 Execution by Interim. At the date hereof, Interim is in the
--------------------
process of organization and has not been granted a Federal stock charter under
Federal law and therefore does not have the legal capacity to execute this
Agreement. The Holding Company agrees to cause Interim to execute this Agreement
promptly following the issuance of Interim's Federal stock charter. The Bank and
the Holding Company agree to be bound by this Agreement prior to and following
such execution by Interim.
12
<PAGE>
IN WITNESS WHEREOF, each of the Parties hereto have caused this
Agreement and Plan of Reorganization to be signed on its behalf by its officers
thereunto duly authorized, all as of the date first set forth above.
HARBOR FEDERAL SAVINGS BANK HARBOR FLORIDA BANCORP, INC.
By: _________________________ By: ______________________________
Michael J. Brown, Sr. Michael J. Brown, Sr.
President and CEO President and CEO
INTERIM HARBOR FEDERAL SAVINGS BANK
By: _____________________________
Michael J. Brown, Sr.
President and CEO
13
<PAGE>
EXHIBIT 3(A)
CERTIFICATE OF INCORPORATION OF BANCORP
<PAGE>
CERTIFICATE OF INCORPORATION
OF
HARBOR FLORIDA BANCORP, INC.
ARTICLE I
Name
The name of the corporation is HARBOR FLORIDA BANCORP, INC. (the
"Corporation").
ARTICLE II
Registered Office
The address of the Corporation's registered office in the State of Delaware
is Corporation Service Company, 1013 Centre Road, Wilmington, County of New
Castle, Delaware 19805. The name of the Corporation's registered agent at such
address is the Corporation Service Company.
ARTICLE III
Purpose and Powers
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.
<PAGE>
ARTICLE IV
Capital Stock
SECTION 1. Authorized Shares. The total number of shares of all classes of
----------
stock which the Corporation shall have authority to issue is 14,000,000 shares,
divided into two classes consisting of 13,000,000 shares of Common Stock, par
value $0.01 per share ("Common Stock"), and 1,000,000 shares of Preferred Stock,
par value $0.01 per share ("Preferred Stock"). The Board of Directors shall have
authority by resolution to issue the shares of Preferred Stock from time to time
on such terms as it may determine and to divide the Preferred Stock into one or
more series and, in connection with the creation of any such series, to
determine and fix by the resolution or resolutions providing for the issuance of
shares thereof:
(a) the distinctive designation of such series, the number of
shares which shall constitute such series, which number may be
increased or decreased (but not below the number of shares then
outstanding) from time to time by action of the Board of Directors,
and the stated value thereof, if different from the par value thereof;
(b) the dividend rate, the times of payment of dividends on the
shares of such series, whether dividends shall be cumulative, and, if
so, from what date or dates, and the preference or relation which such
dividends will bear to
2
<PAGE>
the dividends payable on any shares of stock of any other class or any
other series of this class;
(c) the price or prices at which, and the terms and conditions on
which, the shares of such series may be redeemed;
(d) whether or not the shares of such series shall be entitled to
the benefit of a retirement or sinking fund to be applied to the
purchase or redemption of such shares and, if so entitled the amount
of such fund and the terms and provisions relative to the operation
thereof;
(e) whether or not the shares of such series shall be convertible
into, or exchangeable for, any other shares of stock of the
Corporation or any other securities and, if so convertible or
exchangeable, the conversion price or prices, or the rates of
exchange, and any adjustments thereof, at which such conversion or
exchange may be made, and any other terms and conditions of such
conversion or exchange;
(f) the rights of the shares of such series in the event of
voluntary or involuntary liquidation, dissolution or winding up or
upon any distribution of the assets of the Corporation;
3
<PAGE>
(g) whether or not the shares of such series shall have priority
over or parity with or be junior to the shares of any other class or
series in any respect, or shall be entitled to the benefit of
limitations restricting (i) the creation of indebtedness of the
Corporation, (ii) the issuance of shares of any other class or series
having priority over or being on a parity with the shares of such
series in any respect, or (iii) the payment of dividends on, the
making of other distributions in respect of, or the purchase or
redemption of shares of any other class or series on parity with or
ranking junior to the shares of such series as to dividends or assets,
and the terms of any such restrictions, or any other restriction with
respect to shares of any other class or series on parity with or
ranking junior to the share of such series in any respect;
(h) whether such series shall have voting rights, in addition to
any voting rights provided by law, and, if so, the terms of such
voting rights, which may be general or limited; and
(i) any other powers, preferences, privileges, and relative
participating, optional, or other special rights of such series, and
the qualifications, limitations or restrictions thereof, to the full
extent now or hereafter permitted by law.
4
<PAGE>
The powers, preferences and relative participating, optional and other
special rights of each series of Preferred Stock, and the qualifications,
limitations or restrictions thereof, if any, may differ from those of any and
all other series at any time outstanding. All shares of any one series of
Preferred Stock shall be identical in all respects with all other shares of such
series, except that shares of any one series issued at different times may
differ as to the dates from which dividends thereon shall be cumulative.
SECTION 2. Rights of Holders of Common Stock. Each holder of Common Stock
---------------------------------
shall be entitled to one vote for each share of Common Stock held of record on
all matters on which stockholders generally are entitled to vote. Subject to
the provisions of law and the rights of the holders of the Preferred Stock and
any other class or series of stock having a preference as to dividends over the
Common Stock then outstanding, dividends may be paid on the Common Stock at such
times and in such amounts as the Board of Directors may determine. Upon the
dissolution, liquidation or winding up of the Corporation, after any
preferential amounts to be distributed to the holders of the Preferred Stock and
any other class or series of stock having a preference over the Common Stock
then outstanding have been paid or declared and set apart for payment, the
holders of the Common Stock shall be entitled to receive all the remaining
assets of the Corporation available for distribution to its stockholders ratably
in proportion to the number of shares held by them, respectively.
There shall be no cumulation of votes for the election of Directors or for
any other purpose.
5
<PAGE>
Every share of Common Stock shall have the same relative rights as, and be
identical in all respects with, all the other shares of Common Stock.
ARTICLE V
Business Combinations
The provisions of Section 203 of the Delaware General Corporation Law or
any successor provision shall govern the Corporation.
ARTICLE VI
Board of Directors
SECTION 1. Number. The business and affairs of the Corporation shall be
------
managed under the direction of the Board of Directors which, subject to any
right of the holders of any series of Preferred Stock then outstanding to elect
additional Directors under specified circumstances, shall consist of not less
than five nor more than 15 persons. The exact number of Directors within the
minimum and maximum limitations specified in the preceding sentence shall be
fixed from time to time by the Board of Directors pursuant to a resolution
adopted by a majority of the entire Board of Directors.
SECTION 2. Terms. Beginning with the first annual meeting of stockholders
-----
held after the filing of this Certificate of Incorporation, the Board of
Directors, other than those who may be elected by the holders of any class or
series of stock having a preference over the Common Stock as to dividends or
upon liquidation, shall be divided into three classes, class I,
6
<PAGE>
class II and class III, as nearly equal in number as possible. The terms of
office of the classes of Directors elected at the initial annual meeting shall
expire as follows: the term of office of class I will expire at the 1998 Annual
Meeting of Stockholders, the term of office of class II will expire at the 1999
Annual Meeting of Stockholders and the term of office of class III will expire
at the 2000 Annual Meeting of Stockholders. 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.
SECTION 3. Stockholder Nomination of Director Candidates. Stockholder
---------------------------------------------
nominations for the election of Directors shall be given in the manner provided
in the Bylaws of the Corporation.
SECTION 4. Newly Created Directorships and Vacancies. Subject to the
-----------------------------------------
rights of the holders of any series of Preferred Stock then outstanding,
Directors serving in newly created Directorships resulting from any increase in
the authorized number of Directors shall serve until the next Annual Meeting of
Stockholders. Vacancies on the Board of Directors resulting from death,
resignation, retirement, disqualification, removal from office or other cause
shall be filled by a majority vote of the Directors then in office, and
Directors so chosen shall hold office for a term expiring at the Annual Meeting
of Stockholders at which the term of the class to which they have been elected
expires. No decrease in the number of Directors constituting the Board of
Directors shall shorten the term of any incumbent Director.
7
<PAGE>
SECTION 5 . Removal. 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 two-thirds of the voting
power of all of the shares of the Corporation entitled to vote generally in the
election of Directors, voting together as a single class.
SECTION 6. Initial Directors. The names and addresses of the persons who
-----------------
are to serve as Directors until the first annual meeting of stockholders or
until their successors are elected and qualified are as follows:
Name and Address Term
---------------- ----
Bruce R. Abernethy, Sr. 1999
100 S. Second Street
Fort Pierce, FL 34950
Richard N. Bird 2000
100 S. Second Street
Fort Pierce, FL 34950
Michael J. Brown, Sr. 1998
100 S. Second Street
Fort Pierce, FL 34950
Richard K. Davis 2000
100 S. Second Street
Fort Pierce, FL 34950
Edward G. Enns 1999
100 S. Second Street
Fort Pierce, FL 34950
8
<PAGE>
Frank H. Fee, III 2000
100 S. Second Street
Fort Pierce, FL 34950
Richard B. Hellstrom 1998
100 S. Second Street
Fort Pierce, FL 34950
ARTICLE VII
Stockholder Action
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. Except as otherwise required by law and subject
to the rights of the holders of any class of preferred stock having a preference
over the Common Stock as to dividends or upon liquidation, special meetings of
stockholders of the Corporation may be called only by the Board of Directors
pursuant to a resolution approved by a majority of the entire Board of
Directors.
ARTICLE VIII
Bylaw Amendments
The Board of Directors shall have power to make, alter, amend and repeal
the Bylaws of the Corporation (except so far as the Bylaws of the Corporation
adopted by the stockholders shall otherwise provide). Any Bylaws made by the
Board of Directors under the powers conferred hereby may be altered, amended or
repealed by the Board of Directors or by the
9
<PAGE>
stockholders. Notwithstanding the foregoing and anything contained in this
Certificate of Incorporation or the Bylaws to the contrary, Section 2 of Article
I and Sections 1 through 5 of Article II of the Bylaws shall not be altered,
amended or repealed and no provision inconsistent therewith shall be adopted
without the affirmative vote of the holders of two-thirds of all votes entitled
to be cast in the election of Directors, voting together as a single class.
ARTICLE IX
Purchase of Equity Securities
SECTION 1. Prevention of "Greenmail". Any direct or indirect purchase or
-------------------------
other acquisition by the Corporation of any Equity Security of any class from
any Substantial Securityholder who has beneficially owned such securities for
less than two years prior to the date of such purchase or any agreement in
respect thereof shall, except as hereinafter expressly provided, require the
affirmative vote of the holders of at least a majority of all votes entitled to
be cast in the election of Directors, excluding Voting Stock beneficially owned
by such Substantial Securityholder, 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 any agreement
with any national securities exchange, or otherwise, but no such affirmative
vote shall be required with respect to any purchase or other acquisition of
securities made as part of a tender or exchange offer by the Corporation to
purchase securities of the same class made on the same terms to all holders of
such securities and complying with the applicable requirements of the Securities
Exchange Act of 1934 and the rules and regulations thereunder (or any subsequent
provisions replacing such Act, rules or regulations).
10
<PAGE>
SECTION 2. Certain Definitions. For the purposes of this Article IX:
-------------------
(a) A "Person" shall mean any individual, firm, corporation or other
entity.
(b) "Substantial Securityholder" shall mean any person (other than
the Corporation or any corporation of which a majority of any class of
Equity Security is owned, directly or indirectly, by the Corporation or
Harbor Financial, M.H.C.) who or which:
(i) is the beneficial owner, directly or indirectly, of
five percent or more of the class or securities to be acquired;
(ii) 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
five percent or more of the class of securities to be acquired;
(iii) is an assignee or has otherwise succeeded to any
shares of the class of securities to be acquired which were at
any time within the two-year period immediately prior to the date
in question beneficially owned by a Substantial Securityholder,
if such assignment or succession
11
<PAGE>
shall have occurred in the course of a transaction or
transactions not involving a public offering within the meaning
of the Securities Act of 1933.
(c) A person shall be a "beneficial owner" of any security of any
class of the Corporation:
(i) which such person or any of its Affiliates or
Associates (as hereinafter defined) beneficially owns, directly
or indirectly;
(ii) which such person or any of its Affiliates or
Associates has (A) the right to acquire (whether such right is
exercisable immediately or only after the passage of time),
pursuant to any agreement, arrangement or understanding or upon
the exercise of conversion rights, exchange rights, warrants or
options, or otherwise, or (B) any right to vote pursuant to any
agreement, arrangement or understanding; or
(iii) which is beneficially owned, directly or indirectly,
by any such person with which such person or any of its
Affiliates or Associates has any agreement, arrangement or
understanding for the purpose of
12
<PAGE>
acquiring, holding, voting or disposing any security of any class
of the Corporation.
(d) For the purposes of determining whether a person is a Substantial
Securityholder pursuant to paragraph (b) of this Section 2, the relevant
class of securities outstanding shall be deemed to comprise all such
securities deemed owned through application of paragraph (c) of this
Section 2, but shall not include other securities of such class which may
be issuable pursuant to any agreement, arrangement or understanding, or
upon exercise of conversion rights, warrants or options, or otherwise.
(e) "Affiliate" or "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 December 31,
1996.
(f) "Equity Security" shall have the meaning ascribed to such term in
Section 3(a)(11) of the Securities Exchange Act of 1934, as in effect on
December 31, 1996.
13
<PAGE>
ARTICLE X
Acquisition of Stock
Notwithstanding anything contained in this Certificate of Incorporation to
the contrary:
SECTION 1. Restriction. No person shall directly or indirectly offer to
-----------
acquire or acquire the beneficial ownership of more than 10% of any class of any
equity security of the Corporation. This limitation shall not apply to Harbor
Financial, M.H.C., any tax qualified employee stock benefit plan of the
Corporation, or to any transaction in which Harbor Financial, M.H.C. converts
from the mutual form of organization to the stock form of organization.
In the event shares are acquired in violation of this Article X, all shares
beneficially owned by any person in excess of 10% shall be considered "excess
shares" and shall not be counted as shares entitled to vote and shall not be
voted by any person or counted as voting shares in connection with any matters
submitted to the stockholders for a vote.
SECTION 2. Certain Definitions. For the purposes of this Article X, the
-------------------
following definitions apply:
(a) The term "person" includes an individual, a group acting in
concert, a corporation, a partnership, an association, a joint stock
company, a trust, and any unincorporated organization or similar
company, a syndicate or
14
<PAGE>
any other group formed for the purpose of acquiring, holding or
disposing of securities of the Corporation.
(b) The term "offer" includes every offer to buy or otherwise
acquire, solicitation of an offer to sell, tender offer for, or
request or invitation for tenders of, a security or interest in a
security for value.
(c) The term "acquire" includes every type of acquisition,
whether effected by purchase, exchange, operation of law or otherwise.
(d) The term "acting in concert" means (i) knowing participation
in a joint activity or conscious parallel action towards a common goal
whether or not pursuant to an express agreement, or (ii) a combination
or pooling of voting or other interests in the securities of an issuer
or a common purpose pursuant to any contract, understanding,
relationship, agreement or other arrangement, whether written or
otherwise.
ARTICLE XI
Director Liability
No Director of officer acting in the capacity of a Director or performing
duties as Director shall be personally liable to the Corporation or any
stockholder for monetary damages for a breach of fiduciary duty as a Director,
except for any matter in respect of which such
15
<PAGE>
Director or officer acting as a Director shall be liable under Section 174 of
Title 8 of the Delaware Code (relating to the Delaware Corporation Law) or any
amendment thereto or successor provision thereto or shall be liable by reason
that, in addition to any and all other requirements for such liability, he (i)
shall have breached his duty of loyalty to the Corporation or its stockholders,
(ii) shall not have acted in good faith or, in failing to act, shall not have
acted in good faith, (iii) shall have acted in a manner involving intentional
misconduct or a knowing violation of law or, in failing to act, shall have acted
in a manner involving intentional misconduct or a knowing violation of law or
(iv) shall have derived an improper personal benefit. Neither the Amendment nor
repeal of this Article, nor the adoption of any provision of the Certificate of
Incorporation inconsistent with this Article, shall eliminate or reduce the
effect of this Article in respect of any matter occurring, or any cause of
action, suit or claim, that, but for this Article, would accrue or arise, prior
to such amendment, repeal or adoption of an inconsistent provision.
ARTICLE XII
Amendments to Certificate of Incorporation
Notwithstanding any other provisions of this Certificate of Incorporation
or the Bylaws of the Corporation (and notwithstanding the fact that a lesser
percentage may be specified by law, this Certificate of Incorporation or the
Bylaws of the Corporation), the affirmative vote of the holders of at least two-
thirds of all votes entitled to be cast in the election of Directors, voting
together as a single class, shall be required to amend or repeal, or adopt any
provisions inconsistent with, Articles V, VI, VII, VIII, IX or this Article XII
of this Certificate of Incorporation.
16
<PAGE>
ARTICLE XIII
Certain Business Combinations
SECTION 1. Vote Required for Certain Business Combinations.
-----------------------------------------------
(a) Higher Vote for Certain Business Combinations. Unless
---------------------------------------------
otherwise required by law, in addition to any affirmative vote
required by law or this Certificate of Incorporation or the Bylaws of
the Corporation, and except as otherwise expressly provided in Section
2 of this Article XIII, a Business Combination with, or proposed by or
on behalf of, any Interested Stockholder or any Affiliate or Associate
of any Interested Stockholder or any person who after such Business
Combination would be an Affiliate or Associate of such Interested
Stockholder, shall require the approval of the Board of Directors and
the affirmative vote of the holders of at least 66-2/3% of the voting
power of the then outstanding Voting Stock which is not owned by the
Interested Stockholder or any Affiliate or Associate of such
Interested Stockholder. 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 in any agreement with
any national securities exchange or otherwise.
(b) Definition of "Business Combination". The term "Business
------------------------------------
Combination" as used in this Article XIII shall mean:
17
<PAGE>
(i) any merger, consolidation or share exchange of the
Corporation or any Subsidiary with (A) any Interested Stockholder
or (B) any other corporation (whether or not itself an Interested
Stockholder) which is, or after such merger or consolidation
would be, an Affiliate or Associate of an Interested Stockholder;
(ii) any sale, lease, exchange, mortgage, pledge, transfer
or other disposition (in one transaction or a series of
transactions), except proportionately as a stockholder of such
corporation, to or with any Interested Stockholder or any
Affiliate or Associate of any Interested Stockholder of any
assets of the Corporation or any Subsidiary having an aggregate
Market Value equal to 10% or more of either the aggregate market
value of all the assets of the Corporation determined on a
consolidated basis or the aggregate market value of all of the
outstanding stock of the Corporation;
(iii) any transaction which results in 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
or Associate of any Interested Stockholder except (A) pursuant to
the exercise, exchange or conversion
18
<PAGE>
of securities exercisable for, exchangeable for or convertible
into stock of the Corporation or any Subsidiary which securities
were outstanding prior to the time the Interested Stockholder
became such, (B) pursuant to a dividend or distribution paid or
made, or the exercise, exchange or conversion of securities
exercisable for, exchangeable for or convertible into stock of
the Corporation or any Subsidiary which security is distributed
pro rata to all holders of a class or series of stock of the
Corporation subsequent to the time the Interested Stockholder
became such, (C) pursuant to an exchange offer by the Corporation
to purchase stock made on the same terms to all holders of such
stock or (D) any issuance or transfer of stock by the
Corporation, provided, however, that in no case under (B) through
(D) above shall there be an increase in the Interested
Stockholder's proportionate share of the stock of any class or
series of the Corporation or of the Voting Stock of the
Corporation;
(iv) the adoption of any plan or proposal for the
liquidation or dissolution of the Corporation or any Subsidiary
proposed by or on behalf of an Interested Stockholder or any
Affiliate or Associate of any Interested Stockholder; or
(v) any reclassification of securities (including any
reverse stock split), or recapitalization of the Corporation, or
any merger,
19
<PAGE>
consolidation or share exchange 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 in
any such case has the effect, directly or indirectly, of
increasing the proportionate 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 any
Interested Stockholder or any Affiliate or Associate of any
Interested Stockholder;
(vi) any transaction involving the Corporation or any
Subsidiary which has the effect, directly or indirectly, of
increasing the proportionate share of the stock of any class or
securities convertible into the stock of any class or series
owned by the Interested Stockholder of the Corporation or of any
Subsidiary, except as a result of immaterial changes due to
fractional share adjustments or as a result of any purchase or
redemption of any shares of stock not caused, directly or
indirectly, by the Interested Stockholder; or
(vii) any receipt by the Interested Stockholder of the
benefit, directly or indirectly (except proportionately as a
stockholder of such corporation) of any loans, advances,
guarantees, pledges, or other financial benefits (other than
those expressly permitted in subparagraphs
20
<PAGE>
(i)-(vi) above) provided by or through the Corporation or any
Subsidiary.
SECTION 2. When Higher Vote is Not Required. The provisions of Section 1
--------------------------------
of this Article XIII shall not be applicable to any particular Business
Combination, and such Business Combination shall require only such affirmative
vote as is required by law and any other provisions of this Certificate of
Incorporation or the bylaws of the Corporation, if all of the conditions
specified in either the following paragraphs (a) or (b) are met:
(a) Approval by Disinterested Directors. The Business
-----------------------------------
Combination shall have been approved by a majority of the
Disinterested Directors.
(b) Price and Procedure Requirements. All of the following
--------------------------------
conditions shall have been met:
(1) Minimum Price Requirements. With respect to every
--------------------------
class or series of Voting Stock of the Corporation, whether or
not the Interested Stockholder has previously acquired beneficial
ownership of any shares of such class or series of Voting Stock:
(i) The aggregate amount of the cash and the Fair
Market Value as of the date of the consummation of the
Business
21
<PAGE>
Combination of consideration other than cash to be received
per share by holders of Common Stock in such Business
Combination shall be at least equal to the higher of the
following:
(A) (if applicable) the highest per share price
(including any brokerage commissions, transfer taxes
and soliciting dealers' fees) paid by or on behalf of
the Interested Stockholder for any share of Common
Stock in connection with the acquisition by the
Interested Stockholder of beneficial ownership of
shares of Common Stock (1) within the two-year period
immediately prior to the first public announcement of
the proposal of the Business Combination (the
"Announcement Date"), or (2) in the transaction or
series of related transactions in which it became an
Interested Stockholder, whichever is higher, in either
case as adjusted for any subsequent stock split, stock
dividend, subdivision or reclassification with respect
to Common Stock; and
(B) 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
22
<PAGE>
Stockholder (such latter date is referred to in this
Article XIII as the "Determination Date"), whichever is
higher, as adjusted for any subsequent stock split,
stock dividend, subdivision or reclassification with
respect to Common Stock.
(ii) 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 other class
or series of outstanding Voting Stock shall be at least
equal to the highest of the following (it being intended
that the requirements of this paragraph (b)(ii) shall be
required to be met with respect to every class or series of
outstanding Voting Stock, whether or not the Interested
Stockholder has previously acquired any shares of a
particular class or series of Voting Stock):
(A) (if applicable) the highest per share price
(including any brokerage commissions, transfer taxes
and soliciting dealers' fees) paid by or on behalf of
the Interested Stockholder for any shares of such class
or series of Voting Stock in connection with the
acquisition
23
<PAGE>
by the Interested Stockholder of beneficial ownership
of such shares (1) within the two-year period
immediately prior to the Announcement Date, or (2) in
the transaction in which it became an Interested
Stockholder, whichever is higher, in either case as
adjusted for any subsequent stock split, stock
dividend, subdivision or reclassification with respect
to such class or series of Voting Stock;
(B) (if applicable) the highest preferential
amount per share to which the holders of shares of such
class or series of Voting Stock are entitled in the
event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation; and
(C) the Fair Market Value per share of such class
or series of Voting Stock on the Announcement Date or
on the Determination Date, whichever is higher, in
either case as adjusted for any subsequent stock split,
stock dividend, subdivision or reclassification with
respect to such class or series of Voting Stock.
24
<PAGE>
(2) Other Requirements.
------------------
(i) The consideration to be received by holders of a
particular class or series of outstanding Voting Stock
(including Common Stock) shall be in cash or in the same
form as the Interested Stockholder has previously paid for
shares of such class or series of Voting Stock. If the
Interested Stockholder has paid for shares of any class or
series of Voting Stock with varying forms of consideration,
the form of consideration for such class or series of Voting
Stock shall be either cash or the form used to acquire the
largest number of shares of such class or series of Voting
Stock previously acquired by it.
(ii) After such Interested Stockholder has become an
Interested Stockholder and prior to the consummation of such
Business Combination: (A) except as approved by a majority
of the Disinterested Directors, there shall have been no
failure to declare and pay at the regular date therefor any
full periodic dividends (whether or not cumulative) on any
outstanding Preferred Stock; (B) there shall have been (1)
no reduction in the annual rate of dividends paid on the
Common Stock (except as necessary to reflect any subdivision
of the Common Stock),
25
<PAGE>
except as approved by a majority of the Disinterested
Directors, and (2) 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 so to increase such annual
rate is approved by a majority of the Disinterested
Directors; and (C) such Interested Stockholder shall have
not 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 or by virtue of proportionate stock splits or
stock dividends.
(iii) 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 or any Subsidiary, whether in anticipation of or
in connection with such Business Combination or otherwise.
26
<PAGE>
(iv) 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 the 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).
(v) After such Interested Stockholder has become an
Interested Stockholder, such Interested Stockholder shall
not have made any major change in the Corporation's business
or capital structure without the approval of a majority of
the Disinterested Directors.
SECTION 3. Certain Definitions. For the purpose of this Article XIII:
-------------------
(a) A "person" shall mean any individual or firm, corporation,
partnership, limited partnership, joint venture, trust, unincorporated
association, government or any political subdivision or agency or
instrumentality of a government or other entity and shall include any
group comprised of any person
27
<PAGE>
and any other person with whom such person or any Affiliate or
Associate of such person has any agreement, arrangement or
understanding, directly or indirectly, for the purpose of acquiring,
holding, voting or disposing of Voting Stock.
(b) "Interested Stockholder" shall mean any person (other than
the Corporation, any Subsidiary or Harbor Financial, M.H.C.) who or
which:
(i) is the beneficial owner, directly or indirectly,
of Voting Stock entitled to cast more than 15% of the votes
in the election of Directors; is an Affiliate or Associate
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 15% or more of
the combined voting power of the then outstanding Voting
Stock; or
(ii) 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 any Interested Stockholder, if such
assignment or succession shall have occurred in the course
of a transaction or
28
<PAGE>
series of transactions not involving a public offering
within the meaning of the Securities Act of 1933.
(c) A person shall be a "beneficial owner" of any Voting Stock:
(i) which such person or any of its Affiliates or
Associates beneficially owns, directly or indirectly;
(ii) which such person or any of its Affiliates or
Associates has (A) the right to acquire (whether such right
is exercisable immediately or only after the passage of
time), pursuant to any agreement, arrangement or
understanding or upon the exercise of conversion rights,
exchange rights, warrants or options, or otherwise, or (B)
the right to vote or direct the voting pursuant to any
agreement, arrangement or understanding, or (C) the right to
dispose of or direct the disposition of pursuant to any
agreement, arrangement or understanding; or
(iii) which is beneficially owned, directly or
indirectly, by any other person with which such person or
any of its Affiliates or Associates has any agreement,
arrangement or
29
<PAGE>
understanding for the purpose of acquiring, holding, voting
or disposing of any shares of Voting Stock.
(d) For the purpose of determining whether a person is an
Interested Stockholder pursuant to paragraph (b) of this Section 3,
the number of shares of Voting Stock deemed to be outstanding shall
include shares deemed owned through application of paragraph (c) of
this Section 3 but shall not include any other shares of Voting Stock
which may be issuable pursuant to any agreement, arrangement or
understanding, or upon exercise of conversion rights, warrants or
options, or otherwise.
(e) "Affiliate" or "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
December 31, 1996, except that the Corporation or any Subsidiary shall
not be deemed to be an Affiliate or an Associate of any Interested
Stockholder.
(f) "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 (b) of
this Section 3, the term "Subsidiary"
30
<PAGE>
shall mean only a corporation of which a majority of each class of
equity security is owned, directly or indirectly, by the Corporation.
(g) "Disinterested Director" means any member of the Board of
Directors of the Corporation 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 successor of a Disinterested Director who is not an Affiliate
of the Interested Stockholder and is recommended to succeed a
Disinterested Director by a majority of Disinterested Directors then
serving on the Board of Directors.
(h) "Fair Market Value" means: (i) in the case of stock, the
highest closing sale price during the 30-day period immediately
preceding the date in question of a share of such stock on the
Composite Tape for New York Stock Exchange-Listed Stocks, or, if such
stock is not quoted on the Composite Tape, on such exchange, or, if
such stock is not listed on such exchange, on the principal United
States securities exchange registered under the Securities Exchange
Act of 1934 on which such stock is listed, or, if such stock is not
listed on such exchange, on the National Association of Securities
Dealers, Inc. Automated Quotations System ("NASDAQ") National Market
("NMS"), or if such stock is not included on NASDAQ-NMS, the highest
closing bid quotation with respect to a share of such stock during the
30-day period preceding the
31
<PAGE>
date in question on the NASDAQ or any system then in use, 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; and (ii) 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.
(i) In the event of any Business Combination in which the
Corporation survives, the phrase "consideration other than cash
to be received" as used in paragraphs (b)(1)(i) and (ii) of
Section 2 of this Article XIII shall include the shares of Common
Stock and/or the shares of any other class or series of
outstanding Voting Stock retained by the holders of such shares.
(ii) "Voting Stock" means the then outstanding shares of
capital stock of the Corporation entitled to vote generally in
the election of Directors.
SECTION 4. Powers of the Board of Directors. A majority of the Directors
--------------------------------
of the Corporation shall have the power and duty to determine for the purposes
of this Article XIII, 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
32
<PAGE>
persons, (c) whether a person is an Affiliate or Associate of another, and (d)
whether the requirements of Section 2(b) have been met.
SECTION 5. No Effect on Fiduciary Obligations of Interested Stockholders.
----------------------------------------------------------
Nothing contained in this Article XIII shall be construed to relieve any
Interested Stockholder from any fiduciary obligation imposed by law.
SECTION 6. Amendment, Repeal, Etc. Notwithstanding any other provision of
-----------------
this Certificate of Incorporation or the bylaws of the Corporation (and
notwithstanding the fact that a lesser percentage or separate class vote may be
specified by law, this Certificate of Incorporation or the bylaws of the
Corporation), any proposal to amend or repeal this Article XIII or adopt any
provision of this Certificate of Incorporation inconsistent with it which is
proposed by or on behalf of an Interested Stockholder or any Affiliate or
Associate of such Interested Stockholder shall require the affirmative vote of
the holders of at least 66-2/3% of the Voting Stock entitled to be cast at the
election of Directors, excluding Voting Stock beneficially owned by such
Interested Stockholder, unless such amendment, repeal or adoption is declared
advisable by the affirmative vote of two thirds of the entire Board of Directors
and a majority of the Disinterested Directors.
33
<PAGE>
ARTICLE XIV
Indemnification
Indemnification shall be provided for to the fullest extent authorized in
the Bylaws. Any repeal or amendment of this Article XIV shall not effect
indemnification provided under this Article with respect to any state of facts
existing at or before the time of such amendment and any proceeding, whenever
brought, based in whole or in part upon any such state of facts.
ARTICLE XV
Incorporator
The name and mailing address of the incorporator of the Corporation is
Anthony Johnson, Corporation Service Company, 1090 Vermont Avenue, N.W., 4th
Floor, Washington, D.C. 20005.
The undersigned being the sole incorporator hereinbefore named, for the
purpose of forming a corporation pursuant to the General Corporation Law of the
State of Delaware, makes this certificate, hereby declaring and certifying that
this is my act and deed and the facts herein stated are true, and accordingly
have hereunto set my hand this ______ day of December 1996.
____________________________________________
Anthony Johnson
34
<PAGE>
EXHIBIT 3(B)
BYLAWS OF BANCORP
<PAGE>
BYLAWS
OF
HARBOR FLORIDA BANCORP, INC.
ARTICLE I
Name
SECTION 1. Annual Meeting of Stockholders.
(a) The annual meeting of stockholders of the Corporation, for the
purpose of electing Directors and of transacting such other business as may
properly come before the meeting, shall be held on such date, at such place and
such time as shall be designated by the Board of Directors.
(b) To be properly brought before an annual meeting, business must
be either (i) specified in the notice of meeting (or any supplement thereto)
given by or at the direction of the Board of Directors, (ii) otherwise properly
brought before the meeting by or at the direction of the Board of Directors, or
(iii) otherwise properly brought before the meeting by a stockholder.
(c) In addition to any other applicable requirements, for business
to be properly brought before an annual meeting by a stockholder, 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 to or
mailed and received at the principal executive
<PAGE>
office of the Corporation, not later than 120 days prior to the anniversary date
of the immediately preceding annual meeting. A stockholder's notice to the
Secretary shall set forth as to each matter the 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 record address of the Stockholder
proposing such business, (iii) the class and number of shares of the Corporation
which are beneficially owned by the stockholder, and (iv) any material interest
of the stockholder in such business.
(d) Notwithstanding anything in these Bylaws to the contrary, no
business shall be conducted at the annual meeting except in accordance with the
procedures set forth in this Article I, provided, however, that nothing in this
Article I shall be deemed to preclude discussion by any stockholder of any
business properly brought before the annual meeting.
(e) The Chairman of an annual meeting shall, if the facts warrant,
determine and declare to the meeting that business was not properly brought
before the meeting in accordance with the provisions of this Article 1, and if
he should so determine, he shall so declare to the meeting and any such business
not properly brought before the meeting shall not be transacted.
2
<PAGE>
SECTION 2. Special Meetings of Stockholders.
Subject to the rights of the holders of any class or series of stock having
a preference over the Common Stock as to dividends or upon liquidation, special
meetings of the stockholders for any purpose may be called only by a majority of
the entire Board of Directors.
SECTION 3. Notice of Meeting.
The Secretary shall cause written notice of the time, place and purposes of
each meeting to be mailed, or delivered personally, not less than 10 nor more
than 60 days before the date of the meeting, to each stockholder of record
entitled to vote at the meeting.
Attendance of a person at a meeting of stockholders, in person or by proxy,
constitutes a waiver of notice of the meeting, except when the stockholder
attends a meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened.
SECTION 4. Quorum.
At any meeting of stockholders the holders of a majority of the shares of
the capital stock of the Corporation issued and outstanding and entitled to
vote, present in person or
3
<PAGE>
represented by proxy, shall constitute a quorum of the stockholders for all
purposes unless a greater or lesser quorum shall be provided by law or by the
Certificate of Incorporation and in such case the representation of the number
so required shall constitute a quorum. The stockholders present in person or by
proxy at a meeting at which a quorum is present may continue to do business
until adjournment, notwithstanding withdrawal of enough stockholders to leave
less than a quorum.
Whether or not a quorum is present, the meeting may be adjourned from time
to time by a vote of the shares present. At any such adjourned meeting, at which
a quorum shall be present, any business may be transacted which might have been
transacted at the meeting if held at the time specified in the notice thereof.
SECTION 5. Organization.
The Chairman of the Board of Directors, the Vice Chairman of the Board of
Directors, the President, Senior Vice President or Vice President as the
Chairman of the Board of Directors may designate, shall act as Chairman of
meetings of the stockholders. The Board of Directors or the stockholders may
appoint any stockholder to act as Chairman of any meeting in the absence of the
Chairman of the Board of Directors, the Vice Chairman of the Board of Directors,
the President, Senior Vice President or Vice President.
4
<PAGE>
The Secretary of the Corporation shall act as Secretary at all meetings of
the stockholders; but in the absence of the Secretary, the Chairman of the
meeting may appoint any person to act as Secretary of the meeting.
SECTION 6. Voting.
Each holder of Common Stock and any series of Preferred Stock having voting
rights shall be entitled to one vote for each share of Common Stock or such
Preferred Stock held of record on all matters on which stockholders generally
are entitled to vote.
Directors shall be elected by ballot and upon demand of any stockholder the
vote upon any question before the meeting shall be by ballot.
Directors shall be elected by a plurality of the votes cast at an election.
All other action shall be authorized by a majority of the votes cast by the
holders of shares entitled to vote thereon, unless a greater vote is required by
law, by the Certificate of Incorporation or these Bylaws.
A stockholder entitled to vote at a meeting of stockholders may authorize
another person to act for him by written proxy.
5
<PAGE>
SECTION 7. Inspectors of Elections.
The Board of Directors or Chairman of the meeting of stockholders shall
appoint one or more inspectors to count and tabulate the votes and to perform
such other acts or duties as may be required by the Chairman or required by law.
On request of the Chairman of the meeting, or as otherwise required by law, the
inspectors shall make and execute a written report to the Chairman of the
meeting of any facts found by them and matters determined by them. The report is
prima facie evidence of the facts stated and of the vote certified by the
inspectors.
ARTICLE II
Directors
SECTION 1. Number.
The business and affairs of the Corporation shall be managed under the
direction of the Board of Directors which, subject to any right of the holders
of any series of Preferred Stock then outstanding to elect additional directors
under specified circumstances, shall consist of not less than five nor more than
15 persons. The exact number of directors within the minimum and maximum
limitations specified in the preceding sentence shall be fixed from time to time
by the Board of Directors pursuant to a resolution adopted by a majority of the
entire Board of Directors.
6
<PAGE>
SECTION 2. Terms.
The Directors shall be divided into such classes and shall have such terms
as are set forth in the Certificate of Incorporation.
SECTION 3. Newly Created Directorships and Vacancies.
Newly created Directorships and vacancies in the Board of Directors shall
be filled in the manner set forth in the Certificate of Incorporation.
SECTION 4. Removal.
Removal of Directors shall be effected in the manner set forth in the
Certificate of Incorporation.
SECTION 5. Nominations of Director Candidates.
(a) Nominations of candidates for election as Directors of the Corporation
at any meeting of stockholders called for election of Directors (an "Election
Meeting") may be made by the Board of Directors or by any stockholder entitled
to vote at such Election Meeting.
7
<PAGE>
(b) Nominations made by the Board of Directors shall be made at a meeting
of the Board of Directors, or by written consent of Directors in lieu of a
meeting, not less than 30 days prior to the date of the Election Meeting, and
such nominations shall be reflected in the minute books of the Corporation as of
the date made. At the request of the Secretary of the Corporation each proposed
nominee shall provide the Corporation with such information concerning himself
as is required under the rules of the Securities and Exchange Commission, to be
included in the Corporation's proxy statement soliciting proxies for his
election as a Director.
(c) Not less than 90 days prior to the date of the Election Meeting in the
case of an annual meeting, and not more than seven days following the date of
notice of the meeting in the case of a special meeting, any stockholder who
intends to make a nomination at the Election Meeting shall deliver a notice to
the Secretary of the Corporation setting forth (i) the name, age, business
address and residence address of each nominee proposed in such notice, (ii) the
principal occupation or employment of each such nominee, (iii) the number of
shares of capital stock of the Corporation which are beneficially owned by each
such nominee, (iv) a statement that the nominee is willing to be nominated, (v)
a representation that the stockholder is a holder of record of the capital stock
of the Corporation entitled to vote at such meeting and intends to appear in
person or by proxy at the meeting to nominate the person or persons specified in
the notice, (vi) a description of all arrangements or understandings between the
stockholder and each nominee and any other person or persons (naming such person
or persons) pursuant to which the nomination or nominations are to be made by
the stockholder,
8
<PAGE>
and (vii) such other information concerning each such nominee as would be
required, under the rules of the Securities and Exchange Commission, in a proxy
statement soliciting proxies for the election of such nominees. The presiding
officer of the meeting may refuse to acknowledge the nomination by a stockholder
of any person not made in compliance with the foregoing procedures.
(d) In the event that a person is validly designated as a nominee in
accordance with paragraph (b) or paragraph (c) hereof and shall thereafter
become unable or unwilling to stand for election to the Board of Directors, the
Board of Directors or the stockholder who proposed such nominee, as the case may
be, may designate a substitute nominee.
(e) If the Chairman of the Election Meeting determines that a nomination
was not made in accordance with the procedures as set forth in these Bylaws,
such nomination shall be void.
No person shall be elected a Director of the Corporation after having
attained the age of 70 years.
SECTION 6. Place and Manner of Meeting.
All meetings of the Board of Directors shall be held at the principal
office of the Corporation or at any other place within or without the State of
Delaware as the Board of
9
<PAGE>
Directors may from time to time fix therefor. Any meeting of the Board of
Directors, regular or special, may be held by conference telephone or similar
communication equipment so long as all Directors participating in the meeting
can hear one another, and all such Directors shall be deemed to be present in
person at the meeting.
SECTION 7. Regular Meetings.
A regular meeting of the Board of Directors, of which no notice shall be
required to be given, shall be held, if a quorum be present, in each and every
year immediately after the adjournment of the annual meeting of stockholders for
the purpose of electing officers and transacting such other business as might be
transacted at any regular meeting of the Board of Directors. Regular meetings of
the Board of Directors, of which no notice shall be required to be given, shall
be held every month in accordance with a schedule established by the Board of
Directors from time to time, except that the scheduled date of any meeting may
be changed by the Chairman of the Board or the President, in the discretion of
either, provided that notice of such change shall be given to all Directors
personally or by mail, telephone or telegraph at least 24 hours prior to such
scheduled date upon which such meeting is to be held.
SECTION 8. Special Meetings.
Special meetings of the Board of Directors shall be called by the Secretary
at the direction of the Chairman of the Board, the President, or a majority of
the Directors. Notice
10
<PAGE>
of the time and place of any special meeting of the Board of Directors shall be
given by serving the same personally or by telephone or by telegram addressed to
each Director at his post office address as the same shall appear on the books
of the Corporation at least two hours before such meeting. Each member of the
Board of Directors shall, by writing filed with the Secretary, designate his
post office address to which notices or meetings of the Board of Directors of
the Corporation shall be directed, and in the event of any change therein shall
likewise designate his new post office address.
SECTION 9. Quorum.
A majority of the members of the Board of Directors then in office, or of a
committee thereof, shall constitute a quorum for the transaction of business,
and the vote of a majority of the members present at a meeting at which a quorum
is present shall be the act of the Board of Directors or of the Committee
thereof, except for the amendment of the Bylaws which shall require a vote of
not less than a majority of the members of the Board of Directors then in
office.
SECTION 10. Action Without a-Meeting.
Action required or permitted to be taken at a meeting of the Board of
Directors, or a committee thereof, may be taken without a meeting, if all
members of the Board of Directors or of the committee consent thereto in
writing. The written consent shall be filed with the
11
<PAGE>
minutes of the proceedings of the Board of Directors or Committee. The consent
shall have the same effect as a vote of the Board of Directors or Committee
thereof for all purposes.
SECTION 11. Organization.
At all meetings of the Board of Directors, the Chairman of the Board of
Directors, the Vice Chairman of the Board of Directors, the President, a Senior
Vice President or a Vice President or in their absence a member of the Board to
be selected by the members present, shall preside as Chairman of the meeting.
The Secretary or an Assistant Secretary of the Corporation shall act as
secretary of all meetings of the Board, except that in their absence the
Chairman of the meeting may designate any other person to act as secretary.
At meetings of the Board of Directors business shall be transacted in such
order as from time to time the Board may determine.
SECTION 12. Committees of the Board.
The Board of Directors may designate one or more Committees, including an
Executive Committee, each consisting of one or more Directors of the Corporation
as members and one or more Directors as alternate members, with such power and
authority as prescribed by the Bylaws or as provided in a resolution of the
Board of Directors. Each Committee, and each member thereof, shall serve at the
pleasure of the Board of Directors.
12
<PAGE>
ARTICLE III
Officers
SECTION 1. Officers.
The officers of the Corporation shall be a President, one or more Senior
Vice Presidents, one or more Vice Presidents, a Secretary, a Treasurer and/or a
Controller, and such additional officers, if any, as shall be elected by the
Board of Directors in accordance with these Bylaws. The Board of Directors,
immediately after each annual meeting of stockholders, shall select a President
and one or more Senior Vice Presidents and Vice Presidents, and a Secretary, a
Treasurer and/or a Controller. The failure to hold such election shall not of
itself terminate the term of office of any officer. All officers shall hold
office at the pleasure of the Board of Directors. Any officer may resign at any
time upon written notice to the Corporation. Officers may, but need not, be
Directors. Any two or more of the above offices may be held by the same persons
except as prohibited by law, but no officer shall execute, acknowledge or verify
an instrument in more than one capacity if the instrument is required by law to
be acknowledged or verified by two or more officers.
All officers shall be subject to removal with or without cause at any time
by the affirmative vote of a majority of the members of the Board of Directors
then in office. The removal of an officer without cause shall be without
prejudice to his contract rights, if any. The election or appointment of an
officer shall not of itself create contract rights. All agents
13
<PAGE>
and employees other than officers elected by the Board of Directors shall also
be subject to removal, with or without cause, at any time by the officers
appointing them.
Any vacancy caused by the death of any officer, his resignation, his
removal or otherwise, may be filled by the Board of Directors, and any officer
so elected shall hold office at the pleasure of the Board of Directors.
In addition to the powers and duties of the officers of the Corporation as
set forth in these Bylaws, the officers shall have such authority and shall
perform such duties as from time to time may be determined by the Board of
Directors.
SECTION 2. President.
The President shall be the chief executive officer of the Corporation and,
subject to the direction of the Board of Directors, shall have general
management and control of the affairs and business of the Corporation and shall
have general charge, control and supervision over the administration and
operations of the Corporation. He shall have all other powers and perform all
other duties commonly incident to his office or delegated to him by the Board of
Directors or which are or may at any time be authorized or required by law.
14
<PAGE>
SECTION 3. Vice Presidents.
Each Senior Vice President and each of the other Vice Presidents shall have
such powers and perform such duties as may be assigned to him by the Board of
Directors or be delegated to him by the Board of Directors or the President. In
case of death, disability or absence of the President, the powers, duties and
functions of the President shall be temporarily performed and exercised by such
one of the Senior Vice Presidents or the Vice Presidents as shall be designated
by the Board of Directors.
SECTION 4. Secretary.
The Secretary shall keep the minutes of all meetings of the stockholders
and of the Board of Directors, and also (unless otherwise directed) the minutes
of all meetings of Committees. He shall procure and keep in his files copies of
the minutes of all meetings of stockholders and Boards of Directors of all
corporations which the Corporation controls by ownership of stock or otherwise.
He shall attend to the giving and serving of all notices and shall be custodian
of the seal of the Corporation. He may sign with the President or a Vice
President, in the name of the Corporation, all bonds, contracts and instruments
of conveyance authorized by the Board of Directors, and when so ordered by the
Board of Directors he shall affix the seal of the Corporation thereto. He shall
have charge of all such books and papers as the Board of Directors may direct;
all of which shall at all reasonable times be open to the examination of any
Director upon application at the office of the Corporation during business
15
<PAGE>
hours. He shall publish promptly to stockholders any action in respect to
dividends or the allotment of rights for subscription to securities. He shall
have charge of the capital stock transfer records, ledgers and unissued and
cancelled certificates and shall prepare and certify for use at the annual
meeting of stockholders a list, alphabetically arranged, of the stockholders
entitled to vote at such meeting. He shall, in general, perform all the duties
incident to the office of the Secretary and shall also have such other powers
and shall perform such other duties as may from time to time be assigned to him
by these Bylaws, the Board of Directors or the President.
SECTION 5. Powers and Duties of the Treasurer.
The Treasurer shall have custody of all funds of the Corporation. He is
authorized and empowered to receive and collect all monies due to the
Corporation and to receipt therefor. All monies received by the Treasurer shall
be deposited to the credit of the Corporation with such depositories as may be
designated by the Board of Directors; he may endorse for deposit therein, or for
collection, all checks, drafts, vouchers, notes or other obligations drawn to
the order of the Corporation or payable to it. He is authorized to pay, by check
or otherwise, vouchers, payrolls, drafts and other accounts payable when
approved for payment by the Controller or such person or persons as may be
designated by the Board of Directors or the President. He is authorized to make
disbursements which have been otherwise ordered or provided for by the Board of
Directors, and for dividends on stock when due and payable. He is also
authorized to draw checks against any funds to the credit of the Corporation
with any of
16
<PAGE>
its depositories; but all checks drawn by him except as otherwise provided for
by resolution of the Board of Directors shall be countersigned by such person or
persons as may be designated by the Board of Directors or the President from
time to time to countersign the same. He shall sign, with the President or such
other person or persons as may be designated for the purpose by the Board of
Directors, all bills of exchange and promissory notes of the Corporation. He
shall enter regularly in the books of the Corporation, to be kept by him for
that purpose, a full and accurate account of all monies received and paid by him
on account of the Corporation; and shall render reports thereof to the
Controller at such times and in such form as the latter may prescribe. Whenever
required by the Board of Directors he shall render a statement of his cash and
security accounts, and shall at all reasonable times exhibit his books and
accounts to any director of the Corporation upon application at the office of
the Corporation during business hours. He shall perform all acts incident to the
position of the Treasurer and shall also have such other powers and shall
perform such other duties as may from time to time be assigned to him by these
Bylaws, the Board of Directors or the President.
SECTION 6. Additional Officers.
The Board of Directors may from time to time elect such other officers
(who may but need not be Directors), including but not limited to a Controller,
Assistant Treasurers, Assistant Secretaries and Assistant Controllers, as the
Board may deem advisable and such officers shall have such authority and shall
perform such duties as may from time to time be assigned to them by the Board of
Directors or the President.
17
<PAGE>
The Board of Directors may from time to time by resolution delegate to any
Assistant Treasurer or Assistant Treasurers any of the powers or duties herein
assigned to the Treasurer; and may similarly delegate to any Assistant Secretary
or Assistant Secretaries any of the powers or duties herein assigned to the
Secretary.
ARTICLE IV
Capital Stock
SECTION 1. Certificates of Stock.
The certificates for shares of the capital stock of the Corporation shall
be in such form as shall be approved by the Board of Directors. The certificates
shall be signed by the President or any Vice President and also by the Treasurer
or the Secretary, and may be sealed with the seal of the Corporation, or a
facsimile thereof.
The signatures of the aforesaid officers may be facsimiles if the
certificate is countersigned by a transfer agent or registered by a registrar
other than the Corporation or its employee. The validity of any stock
certificate of the Corporation signed and executed by or in the name of duly
qualified officers of the Corporation shall not be affected by the subsequent
death, resignation, or the ceasing for any other reason of any such officer to
hold such office, whether before or after the date borne by or the actual
delivery of such certificates.
18
<PAGE>
All certificates for shares of stock shall be consecutively numbered as the
same are issued. The name of the person owning the shares represented thereby,
with the number of such shares and the date of issue, shall be entered on the
Corporation's capital stock records.
Except as hereinafter provided, all certificates surrendered to the
Corporation shall be cancelled, and no new certificates shall be issued until
the former certificate for the same number of shares shall have been surrendered
and cancelled except in case of a lost or destroyed certificate.
The Corporation may treat the holder of record of any share or shares of
stock as the holder in fact thereof, and shall not be bound to recognize any
equitable or other claim to or interest in any such share or shares on the part
of any other person, whether or not it shall have express or other notice
thereof, save as expressly provided by law.
SECTION 2. Lost Certificate.
The Corporation may issue a new certificate for shares in place of a
certificate theretofore issued by it, alleged to have been lost or destroyed,
and the Board of Directors may require the owner of the lost or destroyed
certificate, or his legal representative, to give the Corporation a bond in form
satisfactory to the Corporation sufficient to indemnify the
19
<PAGE>
Corporation, its transfer agents and registrars against any claim that may be
made against them on account of the alleged lost or destroyed certificate or the
issuance of such a new certificate.
SECTION 3. Transfer of Shares.
Shares of the capital stock of the Corporation shall be transferable by the
owner thereof in person or by a duly authorized attorney, upon surrender of the
certificates therefor properly endorsed. The Board of Directors, at its option,
may appoint a transfer agent and registrar, or one or more transfer agents and
one or more registrars, or either, for the stock of the Corporation.
SECTION 4. Regulations.
The Board of Directors shall have power and authority to make all such
rules and regulations as they may deem expedient concerning the issue, transfer
and registration of certificates for shares of the capital stock of the
Corporation.
SECTION 5. Record Date.
In order that the Corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders or any adjournment thereof,
or entitled to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any
20
<PAGE>
rights in respect of any change, conversion or exchange of stock or for the
purpose of any other lawful action, as the case may be, the Board of Directors
may fix, in advance, a record date, which shall not be more than sixty (60) nor
less than ten (10) days before the date of such meeting, nor more than sixty
(60) days prior to any other action.
If no record date is fixed, 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 the record date for determining
stockholders for any other purpose shall be at the close of business on the day
on which the Board of Directors adopts the 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 6. Dividends and Stock Repurchases.
Subject to the provisions of the Certificate of Incorporation, the Board of
Directors shall have the power to declare and pay dividends upon shares of, and
authorize repurchase programs for, stock of the Corporation, but only out of
funds available for the payment of dividends or repurchase of shares as provided
by law.
21
<PAGE>
Subject to the provisions of the Certificate of Incorporation, any
dividends declared upon the stock of the Corporation shall be payable on such
date or dates as the Board of Directors shall determine. If the date fixed for
the payment of any dividend shall in any year fall upon a legal holiday, then
the dividend payable on such date shall be paid on the next day not a legal
holiday.
SECTION 7. Corporate Seal.
The Board of Directors shall provide a suitable seal, containing the name
of the Corporation, which seal shall be kept in the custody of the Secretary. A
duplicate of the seal may be kept and be used by any officer of the Corporation
designated by the Board or the President.
SECTION 8. Fiscal Year.
The fiscal year of the Corporation shall end on September 30 or shall be
such other fiscal year as the Board of Directors from time-to time by resolution
shall determine.
22
<PAGE>
ARTICLE V
Miscellaneous Provisions
SECTION 1. Checks, Notes, Etc.
All checks, drafts, bills of exchange, acceptances, notes or other
obligations or orders for the payment of money shall be signed by at least one
(1) officer of the Corporation, or by a greater number of officers of the
Corporation and/or other persons as the Board of Directors from time to time
shall designate or as otherwise required by law.
Checks, drafts, bills of exchange, acceptances, notes, obligations and
orders for the payment of money made payable to the Corporation may be endorsed
for deposit to the credit of the Corporation with a duly authorized depositary
by the Treasurer, or otherwise as the Board of Directors may from time to time,
by resolution, determine.
SECTION 2. Loans.
No loans and no renewals of any loans shall be contracted on behalf of the
Corporation except as authorized by the Board of Directors. When authorized so
to do, any officer or agent of the Corporation may effect loans and advances for
the Corporation from any bank, trust company or other institution or from any
firm, corporation or individual, and for such loans and advances may make,
execute and deliver promissory notes, bonds or other evidences of indebtedness
of the Corporation. When authorized so to do, any officer or agent of the
23
<PAGE>
Corporation may pledge, hypothecate or transfer, as security for the payment of
any and all loans,, advances, indebtedness and liabilities of the Corporation,
any and all stocks, securities and other personal property at any time held by
the Corporation, and to that end may endorse, assign and deliver the same. Such
authority may be general or confined to specific instances.
SECTION 3. Waivers of Notice.
Whenever any notice whatever is required to be given by law, by the
Certificate of Incorporation or by these Bylaws to any person or persons, a
waiver thereof in writing, signed by the person or persons entitled to the
notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
SECTION 4. Offices Outside of Delaware.
Except as otherwise required by the laws of the State of Delaware, the
Corporation may have an office or offices and keep its books, documents and
papers outside of the State of Delaware at such place or places as from time to
time may be determined by the Board of Directors or the President.
24
<PAGE>
ARTICLE VI
Indemnification
SECTION 1. Indemnification of Directors, Officers and Employees.
The Corporation shall indemnify to the full extent authorized by law any
Director or officer made or threatened to be made a party to an action, suit or
proceeding, whether criminal, civil, administrative or investigative, by reason
of the fact that he, his testator or intestate is or was a Director or officer
of the Corporation or is or was serving, at the request of the Corporation, as a
Director or officer of another corporation, partnership, joint venture, trust or
other enterprise.
The Corporation may, at the discretion of the Board of Directors, indemnify
to the full extent authorized by law any employee or agent made or threatened to
be made a party to an action, suit or proceeding, whether criminal, civil,
administrative or investigative by reason of the fact that he, his testator or
intestate is or was an employee or agent of the Corporation or is or was serving
at the request of the Corporation as an employee or agent of another
corporation, partnership, joint venture, trust or other enterprise.
SECTION 2. Expenses Advanced.
Expenses incurred with respect to any claim, action or proceeding of the
character, actual or threatened, described in Section 1 of this Article VI, may
be advanced by the
25
<PAGE>
Corporation prior to the final disposition thereof upon receipt of an
undertaking by such person to repay the mount so advanced if and. to the extent
it shall ultimately be determined by a court of competent jurisdiction that he
was not entitled to indemnification under this Bylaw.
SECTION 3. Automatic Conformity to Law.
The intention of this Bylaw is to provide indemnification with the broadest
and most inclusive coverage permitted by law (a) at the time of the act or
omission to be indemnified against, or (b) so permitted at the time of carrying
out such indemnification, whichever of (a) or (b) may be broader or more
inclusive and permitted by law to be applicable. If the indemnification
permitted by law at this present time, or at any future time, shall be broader
or more inclusive than the provisions of this Bylaw, then indemnification shall
nevertheless extend to the broadest and most inclusive permitted by law at any
time and this Bylaw shall be deemed to have been amended accordingly. If any
provision or portion of this Article shall be found, in any action, suit or
proceeding, to be invalid or ineffective, the validity and effect of the
remaining parts shall not be affected.
ARTICLE VII
Amendments
The stockholders or the Board of Directors of the Corporation may amend or
repeal the Bylaws or adopt new Bylaws. Except as otherwise required by law, the
Certificate of
26
<PAGE>
Incorporation or these Bylaws, the vote of a majority of the shares present or
represented by proxy and entitled to vote at any annual or special meeting shall
be required to amend or repeal the Bylaws or to adopt new Bylaws. Except as
otherwise required by law, the Certificate of Incorporation or these Bylaws,
such action by the Board of Directors requires an affirmative vote of not less
than a majority of the members of the Board of Directors then in office.
27
<PAGE>
EXHIBIT 10(A)
EMPLOYMENT AGREEMENT MICHAEL J. BROWN, SR.
<PAGE>
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made as of this 13th day of September, 1995 between
Harbor Federal Savings Bank whose principal place of business is located at
100 S. Second Street, Fort Pierce, Florida 34950, Harbor Financial, M.H.C.
(together, "Employer"), and Michael J. Brown Sr., whose residence is 10960
Kimberfyld Lane, Port St. Lucie, Florida ("Employee").
1. Term of Employment.
------------------
1.1. Initial Term. The Employer hereby employees the Employee and the
------------
Employee hereby accepts employment with the Employer for an initial term of two
(2) years and four (4) months beginning on September 13, 1995 and terminating on
January 6, 1988 (the "Initial Term").
1.2. Renewal. This Employment Agreement and the employment term may be
-------
extended for additional periods not to exceed one (1) year upon successive
Anniversary Date of each year beginning on January 6, 1996, provided that the
Board of Directors of Employer specifically reviews the Employment Agreement and
the arrangements herein and adopts a resolution not later than thirty (30) days
prior to the Anniversary Date affirmatively approving the extension of the
Employment Agreement for such additional term not to exceed one (1) year as the
Board shall determine. Without such approvals the Employment Agreement shall
expire three (3) years from the date of the last approval or, if the Board does
not make such an approval, at the end of the Initial Term. Any such renewal
term shall be upon such terms, conditions and for such compensation as the
parties shall mutually agree in writing.
1.3. "Employment Term " Defined. As used herein, the phrase "Employment
--------------------------
Term" refers to the entire period of employment of the Employee hereunder,
whether for the Initial Term provided above, or extended for terms as provided
at Section 1.2 above.
2. Duties of Employee.
------------------
2.1. General Duties. Employee has, for a number of years, served as
--------------
President and Chief Executive Officer of Employer, and shall continue to serve
in that position, with the duties and responsibilities customary to that office.
During the Employment Term, Employee's title and specific reporting
responsibilities may be changed by action of Employer's Board of Directors in
the light of changing circumstances of Employer, including specifically a
transaction described in Section 4.9 hereof, providing that Employee shall at
all times during the term hereof have a substantial executive position in
keeping with the dignity and prestige of his present position. He shall do and
perform all services, acts or things necessary or advisable to manage and
conduct the business of the Employer, subject always to the policies set by the
Board of Directors, in accordance with any and all governing rules and
regulations of regulatory agencies.
<PAGE>
2.2. Devotion of Entire Time to Employer's Business. The Employee shall
----------------------------------------------
devote his entire productive time, ability and attention during normal business
hours to the business of the Employer during the Employment Term. The employee
shall not directly or indirectly render any services of a business, commercial,
or professional nature to any other person or organization for compensation
without the prior written consent of the Board of directors of the employer;
providing, however, that the foregoing shall not preclude reasonable
participation as a member in community, civic or similar organizations, or the
pursuit of personal investments which do not interfere with normal business
activities for Employer.
2.3. No Other Agreements. The Employee shall have no employment contract
-------------------
or other written or oral Agreement concerning employment as President and Chief
Executive Officer of Employer with any entity or person other than Employer.
2.4. Uniqueness of Employee's Services. The Employee hereby represents
---------------------------------
that the services to be performed by him under the terms of this Agreement are
of a special, unique, unusual, extraordinary and intellectual character which
gives them a peculiar value, the loss of which cannot be reasonably or
adequately compensated in damages in an action at law. The Employee therefore
expressly agrees that the Employer, in addition to any other rights or remedies
which the Employer may possess, shall be entitled to injunctive and other
equitable relief to present a breach of this Agreement by the Employee.
2.5. Location and Travel. Employee's principal office shall continue to be
-------------------
located in St Lucie County, Florida throughout the Employment Term. Such office
may be relocated elsewhere in St Lucie County, but any relocation of the
Employer's principal office outside St Lucie County without the Employee's
consent shall be treated as a termination not for cause under Section 4.1 and
shall entitle the Employee to all applicable benefits under Section 4.
3. Compensation of Employee
------------------------
3.1. Salary. As compensation for his services hereunder, the Employee
------
shall, during the first year of his employment hereunder, receive a base annual
salary equal to that in effect on the commencement of the Initial Term payable
in accordance with the general payroll practice of Employer and any bonus
compensation as determined by the Board of Directors or the Compensation
Committee. During each succeeding calendar year or portion thereof, his salary
shall be adjusted to equal the greater of (a) the past year base salary, or (b)
an amount which includes an annual increase as determined by the Board of
Directors or the Compensation Committee of the Board of Directors.
3.2. Employee Benefit Programs. Employee shall be entitled to continue
-------------------------
participation in all employee benefit, bonus, pension, restricted stock,
supplemental retirement plan, profit sharing plans and similar programs in which
he is now participating, including programs of insurance, civic and social
clubs, professional organizations and to participate throughout the Employment
Term in these, and in all programs subsequently adopted by Employer for senior
management personnel.
2
<PAGE>
4. Termination of Employment.
-------------------------
4.1. By Employer. Employer's Board of Directors may terminate Employee's
-----------
employment at any time by giving written notice of such termination to Employee
in the manner provided below for the giving of notices, such termination to be
effective on a date specified therein which is not less than sixty (60) days
from the date of such notice; provided, however, any termination other than for
cause shall not prejudice the Employee's right to compensation and other
benefits under this Agreement during the balance of the Employment Term (as
provided at Section 1.3, and without regard to such termination). Such
compensation shall be paid at the same time as current wages are payable, or, at
the election of Employee, in a lump sum paid at the effective date of
termination, but without any discount for such prepayment. Employee's
participation in all benefit programs shall continue throughout the Employment
Term (as provided at Section 1.3, and without regard to such termination) as if
Employee were still an employee. The amounts payable to Employee under this
Section 4.1 shall not be reduced by any amounts earned by Employee from other
employment or otherwise, and the Employee shall be under no duty to seek other
employment, or otherwise to mitigate the amounts payable hereunder. Employee
shall have the right (but not the obligation) at any time following receipt of
notice of termination under this Section 4.1 until the effective date thereof to
resign as an officer and/or as a Director of Employer while continuing to serve
as an employee at the same compensation, but with such reduction in duties as
may be appropriate in order that Employee shall no longer be an officer of
Employer within the meaning of Section 16(b) of the Securities Exchange Act of
1934.
4.2. Termination for Cause. Employee shall have no right to receive
---------------------
compensation or other benefits for any period after termination for cause. For
purposes of this Agreement, "cause" shall mean termination for personal
dishonesty, incompetence, willful misconduct, 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, material breach of any provision of
this Agreement, fraud, dishonesty, or felonious activities which result in a
conviction in any court of competent jurisdiction.
4.3. Temporary Suspension. If Employee is suspended from office and/or
--------------------
temporarily prohibited from participating in the conduct of Employer's affairs
by a notice served under Section 8(e)(4) or (g)(1) of the Federal Deposit
Insurance Act ("FDI Act"), Employer's obligations under this Agreement shall be
suspended as of the date of service, unless stayed by appropriate proceedings.
If the charges in the notice are dismissed, Employer may in its discretion: (a)
pay Employee all or part of the compensation withheld while its contract
obligations were suspended and (b) reinstate (in whole or in part) any of its
obligations which were suspended.
4.4. Permanent Removal From Office. If Employee is removed from office
-----------------------------
and/or permanently prohibited from participating in the conduct of Employer's
affairs by an order issued under Section 8(e)(4) or (g)(1) of the FDI Act,
obligations of Employer under this
3
<PAGE>
Agreement shall terminate as of the effective date of the Order, but vested
rights of the contracting parties shall not be affected.
4.5. Default of Employer. If Employer is in default (as defined in Section
-------------------
3(x)(1) of the FDI Act, all obligations under this Agreement shall terminate as
of the date of default, but vested rights of the parties under this Agreement
shall not be affected.
4.6. Termination by Regulatory Agency. All obligations under this
--------------------------------
Agreement shall be terminated, except to the extent it is determined that the
continuation of this Agreement is necessary for the continued operation of the
Employer: (i) by the Director of the Office of Thrift Supervision, or his or her
designee, at the time the Federal Deposit Insurance Corporation or the
Resolution Trust Corporation enters into an agreement to provide assistance to
or on behalf of the Employer under the authority contained in section 13(c) of
the Federal Deposit Insurance Act; or (ii) by the Director of the Office of
Thrift Supervision, or his or her designee, at the time the Director, or his or
her designee, approves a supervisory merger to resolve problems related to
operation of the Employer or when the Employer is determined by the Director to
be in an unsafe or unsound condition.
4.7. Effect of Certain Terminations. Upon a termination of the Employment
------------------------------
Term pursuant to any of Sections 4.2 through 4.6 above, the Employer shall have
no further liability or obligation to the Employee under this Agreement except
to pay the Employee or his estate (i) all compensation accrued pursuant to
Section 3.1 through the Date of Termination and unpaid, and (ii) all sums
payable and owed to the Employee as specified in Section 3.2 hereof.
4.8. Termination by the Employee.
---------------------------
(a) The Employment Term and the obligations of the Employer and the
Employee under this Agreement shall terminate:
(i) upon the death of the Employee;
(ii) upon the date on which the Employee retires;
(iii) if the Employee is incapacitated by accident, sickness, or
otherwise so as to render the Employee, for a period of 180
consecutive days, mentally or physically incapable of
performing the services required of the Employee under this
Agreement (a "Disability") and, if requested by the Employer,
the basis for such Disability is certified by a licensed
physician, and if within thirty days after written notice of
potential termination is given, the Employee shall not have
returned to the performance of the Employee's duties hereunder
on a full-time basis.
(b) Upon a termination of the Employment Term pursuant to (a)(i), (ii) or
(iii), above, the Employer shall have no further liability or obligation to the
Employee under this Agreement
4
<PAGE>
except to pay the Employee or his estate (i) all compensation accrued pursuant
to Section 3.1 through the Date of Termination and unpaid, and (ii) all sums
payable and owed to the Employee as specified in Section 3.2 for expenses and
benefits, in each case earned before termination of the Employment Term.
(c) The Employee may also terminate his employment with the Employer at
any time, by giving sixty (60) days written notice of such termination to the
Employer in the manner provided for the giving of notices in Section 7.1. The
Employee shall have no right to receive compensation, Severance Payments or
other benefits for any period after the Date of Termination, unless such
termination is as a result of one of the terminations described in Section 4.10,
or such notice is a notice of nonrenewal. Such termination shall not prejudice
any remedy which either party may have at law, in equity, or under this
Agreement.
4.9. Effective of Employer's Merger, Transfer of Assets or Dissolution.
-----------------------------------------------------------------
This Agreement shall not, except as provided in 4.6 above, be terminated by any:
(a) merger or consolidation where the Employer is not the consolidated or
surviving association, (b) transfer of all or substantially all of the assets of
Employer, (c) voluntary or involuntary dissolution of Employer or (d) change in
control as defined under the Change in Bank Control Act of 1978. The surviving
or resulting association, the transferee of Employer's assets or the control
person shall be bound by and have the benefit of the provisions of this
Agreement, and Employer shall take all actions necessary to insure that such
association, transferee or control person is bound by the provisions of this
Agreement; it being understood, however, that Employee's job title, duties and
reporting responsibilities may be realigned to reflect the fact that the
combination has resulted in a larger organization with several personnel groups
who must be integrated into a unified operational work force. In the event of a
termination of the operations of Employer (other than a formal dissolution in
connection with a reorganization, merger or other form of acquisitive
reorganization), Employee shall not be entitled to any relief other than to
receive the full amount of salary and benefits otherwise payable over the
balance of the Employment Term, without discount for the fact that such payments
are accelerated in time. Employee, in the event of such merger or consolidation
or transfer of assets, dissolution or change in control, shall not be required
to report to a location, as his place of work, more than 50 miles from his
current residence.
4.10. Additional Provisions Respecting Fringe Benefits on Termination. In
---------------------------------------------------------------
the event of any termination pursuant to Section 4.1, Section 4.9 or this
Section 4.10 hereof then, in addition to all other rights of Employee hereunder,
the following special provisions shall apply as to matters here specified:
4.10.1 Any contrary provision of the Employer's employee stock
option plan not withstanding, all stock options held by Employee shall become
immediately exercisable, in full, notwithstanding any provisions herein for
deferred "vesting" based on the completion of a specified period of employment,
and such options shall remain exercisable for a period of twelve (12) months
after the effective date of the termination of Employee's employment as
specified in such notice.
5
<PAGE>
4.10.2 (a) If within one year following an occurrence of any of
the events described in Sections 4.9(a), (b), (c) or (d) above, the Employee's
employment hereunder is terminated 1) by the Board for any reason other than:
(i) for cause; or (ii) as a result of the Employee's retirement or disability,
or 2) by the Employee, after the occurrence of any of the following:
(A) without the express written consent of the
Employee, a material diminution in his position, duties,
responsibilities or status with the Employer from those in existence
on the date of this Agreement, a material reduction in his
compensation as defined in Section 3.1, benefits as defined in
Section 3.2, a material reduction in his reporting responsibilities,
titles or offices from those in effect on the date of this Agreement,
or the removal from or failure to be re-elected to his current
position, except in each case in connection with the termination of
his employment pursuant to section 4.2 or due to the Employee's
death, disability or retirement; or
(B) the failure by any successor to the Employer to
assume this Agreement;
(collectively known as an "Involuntary Termination"), then upon the Date of
Involuntary Termination the Employee shall be entitled to receive the
Employee's full basic salary pursuant to Section 3.1 and such other sums
payable for expenses and benefits as specified in Section 3.2 through the
Date of Involuntary Termination at the rate in effect at the time Notice of
Termination is given, and, in lieu of any other payments due under this
Agreement, the "Severance Payment" set forth in subparagraph (b) below.
(b) In the event of an Involuntary Termination, in lieu of
any further salary payments to the Employee for periods subsequent to the
date of the Involuntary Termination, the Employer shall pay to the
Employee, or in the event of his subsequent death, his beneficiary or
beneficiaries, or his estate, as the case may be, subject to the limitation
set forth in subparagraph (c), Severance Payments in an amount equal to
three times the sum of:
(i) the Employee's base salary from the Employer
during the 12-month period immediately preceding
the Date of Involuntary Termination, plus
(ii) the amount of the bonuses received by the
Employee from the Employer during the 12-month
period immediately preceding the Date of
Involuntary Termination, plus
(iii) the cost to the Employer of all benefits to
which the Employee is entitled under Section 3.2
above during the 12-month period immediately
preceding the Date of
6
<PAGE>
Involuntary Termination, including, without
limitation (but without duplication), any
insurance, pension, savings, contingent stock,
stock option or other employee benefit plans,
excluding any amounts forfeited thereunder by
reason of termination prior to vesting, plus
(iv) upon the election of the Employee at his sole
discretion, an amount equivalent to the excess,
if any, of the aggregate fair market value
(measured as of the close of trading on the date
of Involuntary Termination) of all shares of any
class or series of the Employer's capital stock
issuable upon exercise of then outstanding
exercisable employee stock options granted to
the Employee over the aggregate exercise price
of such options; and such options shall
thereupon be cancelled and of no further force
or effect;
No Severance Payments shall be due or payable to the Employee under this
Agreement in the event the Employee resigns or terminates his employment with
the Employer or the Employer terminates the Employee's employment, except as
specifically provided above.
(c) Amounts otherwise payable by the Employer to the
Employee pursuant to Section 4.10.2(b) above shall not, in the aggregate, exceed
the amount which is $100 less than three times the Employee's "base amount," as
that term is defined in Section 280G(b)(3) of the Internal Revenue Code of 1986
(the "Code") or any successory provision, as such Section or provision may be
amended and applicable to contracts entered into on the date of this Agreement.
(d) The full Severance Payment shall be made by the
Employer to the Employee in a lump sum on the tenth business day (the "Payment
Date") following the Date of Involuntary Termination; provided that the Employee
may elect in writing, on the date this Agreement is executed, to have any such
Severance Payment paid in installments.
(e) Any purported termination by the Employer or by the
Employee shall be communicated by written Notice of Termination to the other
party hereto in accordance with Section 7.1 hereof. For purposes of this
Agreement, a "Notice of Termination" shall mean a 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 the Employee's employment under the provision so
indicated.
7
<PAGE>
5. Remedies in the Event of Controversies or Breach.
------------------------------------------------
5.1. Damages for Breach of Contract. In the event of a breach of this
------------------------------
Agreement by either Employer or the Employee, resulting in damages to the other
party, that party may recover from the party breaching the agreement any and all
damages that may be sustained.
5.2. Additional Recovery. The parties recognize that in the event of any
-------------------
dispute as to Employee's entitlement to continuing compensation hereunder,
Employer's economic position is greatly stronger than that of Employee, and the
Employee could be seriously damaged were Employer to stop the payment of
compensation due to Employee in the case of a termination under Section 4.1, 4.9
or 4.10 by claiming that such termination was made pursuant to Sections 4.2
through 4.6. Accordingly, the parties have agreed that in the case of any
termination which Employer contends is subject to Section 4.2 through 4.6, but
Employee claims is subject to Section 4.1, if Employer continues to make
compensation payment to Employee during resolution of such dispute that Employer
shall be entitled to return of such payments, with interest at the discount rate
payable by Employer on borrowings from its Federal Home Loan Bank, if it is
ultimately determined that termination was subject to Sections 4.2 through 4.6;
and if Employer shall cease such payments and it be determined that such
termination was subject to Section 4.1, 4.9 or 4.10 hereof, that Employee shall
be entitled to recovery of the amount due to Employee for payments not made,
together with interest at the prime rate as announced from time to time by The
---
Wall Street Journal, and legal fees as provided at Section 5.3, and in addition,
- - -------------------
the term during which payments are to be made to Employee under Section 4.1, 4.9
or 4.10 shall be extended for a number of months equal to the number of months
for which payments were not made. This provision is made by the parties hereto
for the purpose of compensating Employee for the loss he will suffer in the case
of an unfounded discontinuation of compensation payments, and to encourage
fairness and equal dealing between the parties in the event of a dispute.
5.3. Attorney's Fees and Costs. If any action at law or in equity is
-------------------------
necessary to enforce or interpret the terms of this Agreement, the Employee
shall be entitled to reasonable attorney's fees, costs and necessary
disbursements if he receives a legal judgment or settlement in his favor.
6. Golden Parachute.
----------------
6.1. Payments. Any payments to the Employee pursuant to the Agreement or
--------
otherwise are subject to and conditioned upon their compliance with 12 U.S.C,
(S) 1828(k) and any regulations promulgated thereunder to the extent such may be
applicable.
7. General Provisions.
------------------
7.1. Notices. Any notices to be given hereunder by either party to the
-------
other may be effected by personal delivery in writing or by mail, registered or
certified postage prepaid with return receipt requested. Mailed notices shall be
addressed to the parties at the addresses
8
<PAGE>
appearing in the introductory paragraph of this Agreement, but each party may
change his address by written notice in accordance with this paragraph. Notices
delivered personally shall be deemed communicated as of actual receipt; mailed
notices shall be deemed communicated as of the second day following deposit in
the United States mail.
7.2. Entire Agreement. This Agreement supersedes any and all other
----------------
agreements, either oral or in writing, other than certain stock option
agreements, between the parties hereto with respect to the employment in any
manner whatsoever. Each party to this Agreement acknowledges that no
representations, inducements, promises, or agreements, orally or otherwise, have
been made by any party, or anyone acting on behalf of any party, which are not
embodied herein, and that no other Agreement shall be valid or binding. Any
modification of this Agreement will be effective only if it is in writing signed
by the party to be charged.
7.3. Partial Invalidity. If any provision in this Agreement is held by a
------------------
court of competent jurisdiction to be invalid, void, or unenforceable, the
remaining provisions shall nevertheless continue in full force without being
impaired or invalidated in any way.
7.4. Assignment. This Agreement and the rights and obligations of the
----------
parties hereto shall bind and inure to the benefit of any successor or
successors of the Employer and any assignee of all or substantially all of its
business and properties, but except as to such successor or assignee of the
Employer, neither this Agreement nor any rights or benefits hereunder may be
assigned by the Employer, except by operation of law. This Agreement and all
rights of the Employee hereunder shall inure to the benefit of and be
enforceable by the Employee's personal or legal representatives, executors,
administrators, successors, heirs, distributors, devisees and legatees.
7.5. Law Governing Agreement. This Agreement shall be governed by and
-----------------------
construed in accordance with the laws of the State of Florida and Section 563.39
Chapter V, Title 12 of the Code of Federal Regulations.
9
<PAGE>
Executed at Fort Piece, Florida as of the day and year first above written.
HARBOR FEDERAL SAVINGS BANK
DATE September 13, 1995 EMPLOYER:
------------------
ATTEST:/s/ Christine Fowler BY: /s/ Edward G. Enns
-------------------- ----------------------------------
Secretary Edward G. Enns
Chairman of the Board of Directors
EMPLOYEE:
ATTEST:/s/ Christine Fowler /s/ Michael J. Brown, Sr.
-------------------- ----------------------------------
Secretary Michael J. Brown, Sr.
10
<PAGE>
EXHIBIT 10(B)
HARBOR FEDERAL SAVINGS BANK
1993 INCENTIVE STOCK OPTION PLAN
<PAGE>
EFFECTIVE: 1/6/94
HARBOR FEDERAL SAVINGS BANK
1994 INCENTIVE STOCK OPTION PLAN
--------------------------------
1. Purpose
-------
The purpose of this Harbor Federal Savings Bank ("Harbor Federal")
Incentive Stock Option Plan (the "Plan") is to advance the interests of Harbor
Federal and its shareholders by providing selected officers and key employees of
Harbor Federal and its subsidiaries upon whose judgement, initiative and efforts
the successful conduct of the business of Harbor Federal largely depends, with
an additional incentive to continue to perform in a superior manner through the
ownership of common stock of Harbor Federal. The Plan is also intended to
encourage qualified persons to seek and accept employment with Harbor Federal.
Pursuant to the Plan, such employees will be offered the opportunity to acquire
such common stock through the grant of options under the Plan.
As used in this Plan, the term "subsidiary" shall mean any present or
future corporation which becomes a "subsidiary corporation" of Harbor Federal as
the term is defined in Section 424 of the Internal Revenue Code of 1986, as
amended from time to time (the "Code").
2. Administration of the Plan
--------------------------
The Plan shall be administered by the Compensation Committee (the
"Committee") as appointed from time to time by the Board of Directors of Harbor
Federal, which Committee shall consist of not less than three directors, none of
whom are employees of Harbor Federal or any subsidiary or affiliate and which
shall otherwise be constituted so as to permit the Plan to comply with SEC Rule
16b-3.
In administering the Plan, the Committee may adopt rules and
regulations for carrying out the Plan. Any interpretation or decision of the
Committee with regard to questions arising under the Plan made by the Committee
shall be final and conclusive. The Committee shall determine the employees to
whom, and the time or times at which, grants shall be made, the number of shares
to be included in such grants and the time or times at which stock options shall
first become exercisable.
3. Shares of Stock Subject to the Plan
-----------------------------------
(a) Maximum Amount Available. The total number of shares that may be
------------------------
issued or transferred pursuant to the exercise of options under the Plan
shall not exceed 159,900 shares of the $1.00 par value common stock of
Harbor Federal ("Common Stock") which shall be issued in connection with
the Reorganization of Harbor Federal
<PAGE>
into the mutual holding company structure and the related stock offering
(the "Reorganization") assuming the maximum 2,140,000 shares are sold, or,
if fewer shares are sold, approximately 7.47% of the shares so sold. Such
shares may be authorized and unissued shares or previously issued shares
acquired or to be acquired by Harbor Federal and held in treasury. Any
shares subject to an option which for any reason expires or is terminated
unexercised as to such shares may again be subject to an option under the
Plan.
(b) Adjustment in Event of Vitalization of Harbor Federal. In the
---------------------------------------------
event of a reorganization, recapitalization, stock split, stock dividend,
combination of shares, merger, consolidation, rights offering, or any other
change in the corporate structure or shares of Harbor Federal, the Board of
Directors shall make an appropriate adjustment in the number and the kind
of shares covered by options, and in the option price.
4. Eligibility
-----------
Options may only be granted to officers and other key employees who
are employed by Harbor Federal ("Key Executives"), provided that the Committee
may exclude any individual from eligibility under the Plan. An option may not
be granted under this Plan to a director who is not an employee of Harbor
Federal.
5. Duration of the Plan
--------------------
Subject to the provisions of paragraph 12, the Plan shall remain in
effect until all shares subject to or which may become subject to the Plan shall
have been purchased pursuant to the exercise of options granted under the Plan,
provided that no options may be granted after January 6, 2004.
6. Types of Options
----------------
Options granted under this Plan shall be in the form of (i) incentive
stock options as defined in Section 422 of the Code, or (ii) options not
qualifying under such Section ("nonstatutory options"), or both, in the
discretion of the Committee. The character of the option granted shall be
clearly identified at the time of grant.
7. Terms and Conditions of Incentive Stock Options
-----------------------------------------------
Incentive stock options shall be evidenced by stock option agreements
in such form, not inconsistent with this Plan, as the Committee shall approve
from time to time, which agreements shall be subject to the terms and conditions
set forth in paragraph 9 of this Plan and shall contain in substance the
following terms and conditions and such other terms and conditions not
inconsistent therewith as the Committee may approve:
2
<PAGE>
(a) Option Price. The option price per share of the Common Stock
------------
underlying each option shall be fixed by the Committee, but shall not be
less than 100% of the fair market value of the Common Stock at the time
such option is granted.
(b) Ten Percent -Shareholders. The option price per share of the
-------------------------
Common Stock underlying any incentive stock option granted to any
individual who, at the time of the grant, owns stock possessing more than
ten percent of the total combined voting power of all classes of stock of
Harbor Federal shall not be less than I IO % of the fair market value of
the Common Stock at the time such option is granted.
(c) Annual Limit. The aggregate fair market value (determined at the
------------
time the option is granted) of shares of Common Stock with respect to which
incentive stock options under the Plan (or any other plan of Harbor Federal
for the grant of incentive stock options) are first exercisable by an
employee during any calendar year (the "Annual Limit") shall not exceed
$100,000.
(d) Medium and Time of Payment. Stock purchased pursuant to an
--------------------------
option agreement shall be paid for in full at time of purchase. The
purchase price upon exercise of an option may be paid in whole or in part
in (a) cash or (b) whole shares of Common Stock which the Optionee has held
for at least six months, evidenced by negotiable certificates, valued at
their fair market value on the date of exercise. Upon receipt of payment
Harbor Federal shall deliver to the optionee (or other person entitled to
exercise the option) a certificate or certificates for such shares. If
certificates representing shares of Common Stock are used to pay all or
part of the purchase price of an option, the Committee shall determine
acceptable methods for tendering Common Stock and may impose such
limitations and prohibitions on the use of Common Stock to pay all or part
of the purchase price of an option as it deems appropriate. It shall be a
condition to the performance of Harbor Federal's obligation to issue or
transfer Common Stock upon the exercise of an option or options that the
optionee pay, or make provision satisfactory to Harbor Federal for the
payment of, any taxes (other than stock transfer taxes) which Harbor
Federal is obligated to collect with respect to the issue or transfer of
Common Stock upon such exercise.
8. Terms and Conditions of Nonstatutory Options
--------------------------------------------
Nonstatutory options shall be evidenced by stock option agreements
which shall be subject to the terms and conditions set forth in paragraph 9 of
this Plan and shall contain in substance the terms and conditions set forth in
subparagraphs (a) and (d) of paragraph 7 of this Plan and such other terms and
conditions not inconsistent therewith as the Committee may determine.
9. Provisions Relating to Options
------------------------------
All options granted under this Plan shall be subject to the following
provisions:
3
<PAGE>
(a) Term. An option shall be exercisable as determined by the
----
Committee and shall have such term as is fixed by the Committee, provided
that (i) no incentive stock option may be exercised after the expiration of
ten (10) years from the date of grant of such option and no nonstatutory
option may be exercised after the expiration of ten (10) years and one day
from the date of grant of such option; (ii) no incentive stock option
granted to any individual who, at the time of the grant, owns stock of
Harbor Federal possessing more than ten percent of the total combined
voting power of all classes of stock of Harbor Federal or any of its
subsidiary companies may be exercised after the expiration of five years
from the date of grant of such option; and (iii) with respect to both
incentive options and nonstatutory options, a recipient may not exercise
any option granted under this Plan unless at the time of exercise and for
the preceding six months the recipient owns at least the number of shares
of Harbor Federal common stock shown opposite his or her position as
follows: president, 10,000 shares; senior vice president, 2,500 shares; and
vice president, 500 shares.
(b) Partial Exercise. Partial exercise will be permitted from time
----------------
to time, provided that no partial exercise may result in the issuance or
transfer of less than fifty (50) shares of Common Stock.
(c) Rights as a Shareholder. A recipient of options rights shall
-----------------------
have no rights as a shareholder with respect to any shares issuable or
transferable upon exercise thereof until the date of issuance of a stock
certificate to him for such shares. Except as otherwise expressly provided
in the Plan, no adjustment shall be made for dividends or other rights for
which the record date is prior to the date such stock certificate is
issued.
(d) Non-Assignability of Options. No option shall be assignable or
----------------------------
transferable by the recipient except by will or by the laws of descent and
distribution.
(e) Effect of Termination of Employment, Death or Disability. No
--------------------------------------------------------
option shall be exercisable after the expiration of a period of three (3)
months from the date of termination of employment, unless such termination
of employment occurs by reason of death or disability within the meaning of
Section 22(e)(3) of the Code. In the event of the death of a recipient of
options while an employee of Harbor Federal the unexercised portion of
options granted to the deceased employee shall be exercisable by his
personal representatives, heirs or legatees at any time prior to the
expiration of two (2) years from the date of his death. In the event of
the termination of employment of a recipient of options because of
disability within the meaning of Section 22(e)(3) of the Code, the
unexercised portion of options granted to such recipient shall expire
unless exercised within one (1) year from the date of such termination. In
no event shall an option be exercisable after the expiration of the term of
the option fixed by the Committee pursuant to subparagraph (a) of this
paragraph 9.
(f) Exception for Terminations After a Change in Control.
----------------------------------------------------
Notwithstanding the option exercise schedule determined by the Committee
under Section 9(a), all
4
<PAGE>
options held by a recipient whose employment with the Company or an
Affiliate terminates following a Change in Control of the or Company, shall
be deemed earned and fully exercisable as of the recipient's last day of
employment with the Company or an Affiliate. A "Change in Control of the
Company" is defined as a Change in Control of a nature that: (i) would be
required to be reported in response to Item I 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 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 Sections 13(d) and 14(d) of the Exchange Act) is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company representing 20% or
more of the combined voting power of the Company's outstanding securities;
or (b) individuals who constitute the Board on the date hereof (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 Company's stockholders was approved by the
same nominating committee serving under an Incumbent Board, shall be, for
purposes of this clause (b), considered as though he were a member of the
Incumbent Board; or (c) a plan of reorganization, merger, consolidation,
sale of all or substantially all the assets of the Company or similar
transaction in which the Company is not the surviving institution occurs
and which the incumbent board of Directors does not approve of or consent
to; or (d) a proxy statement soliciting proxies from stockholders of the
Company, by someone other than the current management of the Company,
seeking stockholder approval of a plan of reorganization, merger or
consolidation of the Company 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 are to be exchanged for or converted
into cash or property or securities not issued by the Company shall be
distributed; or (e) a tender offer is made for 20% or more of the voting
securities of the Company.
(g) Leave of Absence. In the case of a recipient on an approved
----------------
leave of absence, the Committee may, if it determines that to do so would
be in the best interests of Harbor Federal, provide in a specific case for
continuation of options during such leave of absence, such continuation to
be on such terms and conditions as the Committee determines to be
appropriate, except that in no event shall an option be exercisable after
the expiration of the term of the option fixed by the Committee pursuant to
subparagraph (a) of this paragraph 9.
5
<PAGE>
10. Amendment to the Plan
---------------------
The Board of Directors shall have the right to amend the Plan
(including, without limitation, the amount of the Annual Limit to the extent
permitted by the provisions of the Code relating to incentive stock options) or
suspend or terminate the Plan at any time; provided, however, that no such
action shall affect or in any way impair the rights of a recipient under any
option theretofore granted under the Plan; and provided, further, that unless
first duly approve by the holders of stock entitled to vote thereon at a meeting
(which may be the annual meeting duly called and held for such purpose, no
amendment or change shall be made in the Plan (a increasing (except as provided
in subparagraph (b) of paragraph 3 of this Plan) the total numb of shares which
may be issued or transferred under the Plan; (b) changing the minimum purchase
price hereinbefore specified for the shares subject to options; (c) changing the
maximum period during which options may be exercised; or (d) extending the
period during which options may be granted under the Plan beyond January 6,
2004.
11. Use of Proceeds
---------------
The proceeds from the sale of Common Stock pursuant to options granted
under the Plan shall constitute general funds of Harbor Federal.
12. General Restriction
-------------------
Each option granted under the Plan shall be subject to the requirement
that, if a any time the Board of Directors shall determine, in its discretion,
that the listing, registration or qualification of the shares issuable or
transferable upon exercise thereof upon any security exchange or under any state
or federal law, or the consent or approval of any government regulatory body, is
necessary or desirable as a condition of, or in connection with, the granting of
such option or the issue or transfer of shares thereunder, such option may not
be exercise or granted in whole or in part unless such listing, registration,
qualification, consent, or approve shall have been effected or obtained free of
any conditions not acceptable to the Board of Directors.
13. Effective Date of the Plan
--------------------------
The Plan shall be effective as of the effective date of the
Reorganization.
6
<PAGE>
EXHIBIT 10(C)
HARBOR FEDERAL SAVINGS BANK
STOCK OPTION PLAN FOR NONEMPLOYEE DIRECTORS
<PAGE>
EFFECTIVE: 1/6/94
HARBOR FEDERAL SAVINGS BANK
1994 STOCK OPTION PLAN
FOR NON-EMPLOYEE DIRECTORS
---------------------------
1. Purpose
-------
The purpose of this Harbor Federal Savings Bank 1993 Stock Option Plan
for Non-employee Directors (the "Directors' Option Plan") is to promote the
growth and profitability of Harbor Federal Savings Bank (the "Company") and to
attract and retain experienced persons of the highest caliber as directors, to
provide non-employee directors with an incentive to assume the significant
duties and responsibilities entailed therewith and to achieve the long-term
objectives of the Company by providing non-employee directors with a personal
and financial interest in the success of the Holding Company and its subsidiary
through the ownership of common stock of the Holding Company. Pursuant to the
Directors' Option Plan, such directors will be offered the opportunity to
acquire such common stock through the grant of options under such Plan.
As used in this Plan, the term "subsidiary" shall mean any present or
future corporation which becomes a "subsidiary corporation" of the Company
within the meaning of Section 424 of the Internal Revenue Code of 1986, as
amended from time to time (the "Code").
2. Administration of the Director's Option Plan
--------------------------------------------
The Directors' Option Plan shall be administered by a Committee (the
"Committee") as appointed from time to time by the Board of Directors of the
Company, which Committee shall consist of not less than three directors, none of
whom are employees of the Company or any affiliates, and which shall otherwise
be constituted so as to permit the Directors' Option Plan to comply with
Securities and Exchange Commission Rule 16b-3.
In administering the Directors' Option Plan, the Committee may adopt
rules and regulations for carrying out the Directors' Option Plan. Any
interpretation or decision of the Committee with regard to questions arising
under the Directors' Option Plan made by the Committee shall be final and
conclusive.
3. Shares of Stock Subject to the Director's Option Plan
-----------------------------------------------------
(a) Maximum Amount Available. The total number of shares that may be
------------------------
issued or transferred pursuant to the exercise of options under the Directors'
Option Plan ("Option
<PAGE>
Shares") shall not exceed 54,100 shares of the $1.00 par value common stock of
the Company (the "Common Stock") which shall be issued in connection with its
reorganization into the mutual holding company structure and the related stock
offering (the "Reorganization") assuming the maximum 2,140,000 shares are sold
in the offering, or, if fewer shares are sold, approximately 2.53% of such
shares. Such shares may be authorized and unissued shares or previously issued
shares acquired or to be acquired by the Company and held in treasury. Any
shares subject to an option which for any reason expires or terminates
unexercised may again be subject to an option under the Directors' Option Plan.
(b) Adjustment in Event of Recapitalization of the Company. In the
-------------------------------------------------------
event of a reorganization, recapitalization, stock split, stock dividend,
combination of shares, merger, consolidation, rights offering, or any other
change in the corporate structure or shares of the Company, the Board of
Directors shall make an appropriate adjustment in the number and the kind of
shares that may be subjected to options under the Directors' Option Plan and the
number and kind of shares covered by options granted, and in the option price.
4. Eligibility
-----------
Options may only be granted to present or future non-employee members
of the Company's Board of Directors ("Director").
Upon the effective date of the Reorganization, each of the following
non-employee Directors, if serving on the Board of Directors at that time, shall
receive options to purchase the following number of shares: Mr. Enns, 11,450,
Mr. Abernethy, 9,850, and 8,200 each to Messrs. Watkins, Davis, Hellstrom and
Fee.
5. Duration of the Plan
--------------------
Subject to the provisions of Section 10, the Directors' Option Plan
shall remain in effect until all shares subject to or which may become subject
to such Plan shall have been purchased pursuant to the exercise of options
granted under the Directors' Option Plan, provided that no option may be granted
after January 6, 2004.
6. Terms and Conditions of Options
-------------------------------
Options shall be evidenced by stock option agreements in such form,
not inconsistent with this Directors' Plan, as the Committee shall approve from
time to time, which shall be subject to the terms and conditions of this
Directors' Plan and shall contain in substance the terms and conditions set
forth below:
2
<PAGE>
(a) Price. The purchase price of the shares purchased pursuant to
-----
options granted to present directors shall be equal to the actual purchase price
of shares of Common Stock issued in the Reorganization. The purchase price of
the shares purchased pursuant to options granted after the effective date of the
Directors' Option Plan shall be 100% of the fair market value of the Common
Stock on the date such future option is granted.
(b) Medium and Time of Payment. Stock purchased pursuant to an
--------------------------
option agreement shall be paid for in full at the time of purchase. The
purchase price upon exercise of an option may be paid in whole or in part in (a)
cash or (b) whole shares of Common Stock which the Optionee has held for at
least six months, evidenced by negotiable certificates, valued at their fair
market value on the date of exercise. Upon receipt of payment the Company shall
deliver to the optionee (or other person entitled to exercise the option) a
certificate or certificates for such shares. If certificates representing
shares of Common Stock are used to pay all or part of the purchase price of an
option, the Committee shall determine acceptable methods for tendering Common
Stock and may impose such limitations and prohibitions on the use of Common
Stock to pay all or part of the purchase price of an option as it deems
appropriate. It shall be a condition to the performance of the Company's
obligation to issue or transfer Common Stock upon the exercise of an option or
options that the optionee pay, or make provision satisfactory to the Company
for the payment of, any taxes (other than stock transfer taxes) which the
Company is obligated to collect with respect to the issue or transfer of Common
Stock upon such exercise.
7. Provisions Relating to Options
------------------------------
All options granted under the Directors' Option Plan shall be subject
to the following provisions:
(a) Term and Exercisability. No option or stock appreciation right
-----------------------
may be exercised after the expiration of ten (10) years and one day from the
date of grant of such option. Options may be exercised from time to time, as to
all or any of the Option Shares not previously purchased, in accordance with the
following schedule:
Date(s) on Which Options Percent of Number of
Become Exercisable Option Shares Granted
------------------ ----------------------
First Anniversary of
Date of Grant 33
Second Anniversary of
Date of Grant 33
3
<PAGE>
Third Anniversary of
Date of Grant 34
(b) Partial Exercise. Partial exercise will be permitted from time
----------------
to time, provided that no partial exercise may result in the issuance or
transfer of less than fifty (50) shares of Common Stock.
(c) Rights as a Shareholder. A recipient of options shall have no
-----------------------
rights as a shareholder with respect to any shares issuable or transferable upon
exercise thereof until the date of issuance of a stock certificate to him for
such shares. Except as otherwise expressly provided in the Directors' Option
Plan, no adjustment shall be made for dividends or other which the record date
is prior to the date such stock certificate is issued.
(d) Non-Assignability of Options. No option shall be assignable or
----------------------------
transferable by the recipient except by will or by the laws of descent and
distribution.
(e) Effect of Termination of Director's Directorship or Death. No
---------------------------------------------------------
option shall be exercisable after the expiration of a period of three (3) months
from the date of termination of an optionee's directorship, unless such
termination occurs by reason of death or disability within the meaning of
Section 22(e)(3) of the Code. In the event of the death of a recipient of
options while a Director of the Company, the unexercised portion of options
granted to the deceased Director shall be exercisable by his personal
representatives, heirs or legatees at any time prior to the expiration of two
(2) years from the date of his death. In the event of the termination of the
Director's directorship because of disability within the meaning of Section
22(e)(3) of the Code, the unexercised portion of options granted to such
recipient shall expire unless exercised within one (1) year from the date of
such termination. In no event shall an option be exercisable after the
expiration of the term of the option fixed pursuant to subparagraph (a) of this
Section 7, shall be exercisable after the expiration of the related option.
(f) Exception for Terminations After a Change in Control.
----------------------------------------------------
Notwithstanding the exercise schedule contained in Section 7(a) above, all
options held by a recipient whose service as a Director of the Company or an
Affiliate terminates following a Change in Control of the Company, shall be
deemed earned as of the recipient's last day of service as a Director with the
Company or an Affiliate. A "Change in Control of the Company" is defined as a
Change in Control of a nature that: (i) would be required to be reported in
response to Item I 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 Company or
the Company within the meaning of the Home Owners Loan Act of 1933 and
4
<PAGE>
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 Sections 13(d) and 14(d) of the
Exchange Act) is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the Company
representing 20% or more of the combined voting power of the Company's
outstanding securities; or (b) individuals who constitute the Board of Directors
of the Company on the date hereof (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 Company's stockholders was approved by the
same Nominating Board serving under an Incumbent Board, shall be, for purposes
of this clause (b), considered as though he were a member of the Incumbent
Board; or (c) a merger, consolidation, or sale of all or substantially all the
assets of the Company in which the Company is not the surviving institution
occurs and which the Incumbent Board does not approve of or consent to; or (d) a
proxy statement soliciting proxies from stockholders of the Company, by someone
other than the current management of the Company, seeking stockholder approval
of a plan of reorganization, merger or consolidation of the Company with one or
more corporations as a result of which the outstanding shares of the class of
securities then subject to the Plan are to be exchanged for or converted into
cash or property or securities not issued by the Company shall be distributed;
or (e) a tender offer is made for 20% or more of the voting securities of the
Company.
8. Amendment to the Directors' Option Plan
---------------------------------------
The Board of Directors shall have the right to amend the Directors'
Option Plan or suspend or terminate such Plan at any time; provided, however,
-------- -------
that no such action shall affect or in any way impair the rights of a recipient
under any option theretofore granted under the Directors' Option Plan.
Notwithstanding the foregoing, and except as provided in Sections 3(b)
and 4, without the prior approval of shareholders of the Company (i) the total
number of shares which may be issued or transferred under the Directors' Option
Plan shall not be changed and the method of determining the purchase price of
any option, as described in Section 6(a), shall not be changed, (ii) the class
of persons entitled to receive options may not be changed, (iii) the purchase
price of any outstanding option may not be changed, (iv) no option shall be
exercisable for a term other than 10 years and one day from the date it is
granted, (v) the expiration date of the Directors' Option Plan shall not be
changed and (vi) no amendment of the Directors' Option Plan, any option or other
action of the Committee may materially increase the benefits accruing to
participants under the Directors' Option Plan. However, the Board of Directors
retains the power to terminate the Directors' Option Plan at any time.
5
<PAGE>
9. Use of Proceeds
---------------
The proceeds from the sale of Common Stock pursuant to options granted
under the Directors' Option Plan shall constitute general funds of the Company.
10. General Restriction
-------------------
Each option granted under the Directors' Option Plan shall be subject
to the requirement that, if at any time the Board of Directors shall determine,
in its discretion, that the listing, registration, or qualification of the
shares issuable or transferable upon exercise thereof upon any securities
exchange or under any state or federal law, or the consent or approval of any
governmental regulatory body, is necessary or desirable as a condition of, or in
connection with, the granting of such option or the issue or transfer of shares
thereunder, such option may not be exercised or granted in whole or in part
unless such listing, registration, qualification, consent, or approval shall
have been effected or obtained free of any conditions not acceptable to the
Board of Directors.
11. Effective Date of the Directors' Option Plan
--------------------------------------------
The Directors' Option Plan shall be effective upon the effective date
of the Reorganization.
6
<PAGE>
EXHIBIT 10(D)
HARBOR FEDERAL SAVINGS BANK
RECOGNITION AND RETENTION PLAN
<PAGE>
EFFECTIVE: 1/6/94
HARBOR FEDERAL SAVINGS BANK
RECOGNITION AND RETENTION PLAN AND TRUST AGREEMENT
<PAGE>
ARTICLE I.
ESTABLISHMENT OF THE PLAN AND TRUST
1.01. Harbor Federal Savings Bank hereby establishes the Recognition and
Retention Plan (the "Plan") and Trust (the "Trust") upon the terms and
conditions hereinafter stated in this Recognition and Retention Plan and Trust
Agreement (the "Agreement").
1.02. The Trustee hereby accepts this Trust and agrees to hold the Trust
assets existing on the date of this Agreement and all additions and accretions
thereto upon the terms and conditions hereinafter stated.
1.03. The Trust hereby established shall be revocable by the Company.
1.04. The Trust is intended to be a grantor trust, of which the
Company is the grantor, within the meaning of Subpart E, Part I, subchapter J.,
chapter 1, subtitle A of the Internal Revenue Code of 1986, as amended, and
shall be construed accordingly.
1.05. The principal of the Trust, and any earnings thereof shall be held
separate and apart from other funds of the Company and shall be used exclusively
for the uses and purposes of Recipients and their Beneficiaries and general
creditors as herein set forth. Recipients and their Beneficiaries shall have no
preferred claim on, or any beneficial ownership interest in, any assets of the
Trust. Any rights created under the Plan and this Agreement shall be mere
unsecured contractual rights of the Recipients and their Beneficiaries against
the Company. Any assets held by the Trust will be subject to the claims of the
Company's general creditors under federal and state law in the event of
insolvency of the Company.
ARTICLE II.
PURPOSE OF THE PLAN
2.01. The purpose of the Plan is to continue to attract and retain
employees and officers of experience and ability by providing such persons with
a proprietary interest in the Company as compensation for their contributions to
the Company and its Affiliates and as an incentive to make such contributions
and to promote the Company's growth and profitability in the future.
<PAGE>
ARTICLE III.
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.
3.01. "Affiliate" means the Company and those subsidiaries of the Company
which, with the consent of the Board, agree to participate in this Plan.
3.02. "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.
3.03. "Board" means the Board of Directors of the Company.
3.04. "Committee" means the Compensation Committee of the Board or
such other committee of the Board consisting solely of nonemployee directors of
the Company.
3.05. "Common Stock" means shares of the common stock, $1.00 par value
per share, of the Company.
3.06. "Company" shall mean Harbor Federal Savings Bank.
3.07. "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 said
participant's lifetime.
3.08. "Employee" means any person who is employed by the Company or an
Affiliate, including officers.
3.09. "Normal Retirement" means retirement at the normal or early
retirement date as set forth in the Harbor Federal Savings Bank 401(k) Profit
Sharing Plan.
<PAGE>
3.10. "Plan Shares" means shares of Common Stock held in the Trust and
issued or issuable to a Recipient pursuant to the Plan.
3.11. "Plan Share Award" means a right granted under this Plan to earn
Plan Shares.
3.12. "Plan Share Reserve" means the shares of Common Stock held by the
Trustee pursuant to Sections 5.03 and 5.04.
3.13. "Recipient" means an Employee who receives a Plan Share Award under
the Plan.
3.14. "Trustee" means that person(s) or entity nominated by the Committee
and approved by the Board pursuant to Sections 4.01 and 4.02 to hold legal title
to the Plan assets for the purposes set forth herein.
ARTICLE IV.
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 Plan Share 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. The Committee shall recommend to the Board one or more persons or entity
to act as Trustee(s) in accordance with the provisions of this Plan and Trust
and the terms of Article VIII hereof.
4.02. Role of the Board. The members of the Committee and the
-----------------
Trustee or Trustees 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, and may remove, replace
or add Trustees. 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 7.01(d) hereof, the
------------------
Board may not revoke any Plan Share Award.
4.03. Limitation on Liability. No member of the Board or the Committee
-----------------------
or the Trustee(s) shall be liable for any determination made in good faith with
respect to the Plan or any
<PAGE>
Plan Shares or Plan Share Awards granted under it. If a member of the Board or
the Committee or any Trustee 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 Company
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
Company and its Affiliates and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful.
ARTICLE V.
CONTRIBUTIONS; PLAN SHARE RESERVE
5.01. Amount and Timing of Contributions. The Board shall determine
----------------------------------
the amounts (or the method of computing the amounts) to be contributed by the
Company and its Affiliates to the Trust established under this Plan. Such
amounts shall be paid to the Trustees at the time of contribution. No
contributions by Employees shall be permitted.
5.02. Investment of Trust Assets Upon the Reorganization. The
--------------------------------------------------
Trustee shall invest all of the Trust's assets exclusively in Common Stock
except as otherwise provided below; provided, however, that the Trust shall not
-------- -------
purchase in the Company's common stock offering more than 37,215 shares of
Common Stock.
5.03. Investment of Trust Assets After the Reorganization. To the
---------------------------------------------------
extent that the Company makes additional contributions to the Trust the Trustee
shall invest such contributions in shares of Common Stock (subject to Section
8.02). The Trustee may make such investments through private transactions, open
market purchases and directly from the Company.
5.04. Plan Share Reserve. All shares of Common Stock acquired by
------------------
the Trustee shall constitute the "Plan Share Reserve." Any earnings received
with respect to Common Stock held in the Plan Share Reserve shall be held in an
interest-bearing account. Any earnings received with respect to Common Stock
subject to a Plan Share Award shall be held in an interest-bearing account on
behalf of the individual Recipient.
5.05. Effect of Allocations, Returns and Forfeitures Upon Plan Share
--------------------------------------------------------------
Reserves. Upon the allocation of Plan Share Awards under Section 6.02, or the
- - --------
decision of the Committee to return Plan Shares to the Company, the Plan Share
Reserve shall be reduced by the number of Shares subject to the Awards so
allocated or returned. Any Shares subject to an Award which may not be earned
because of a forfeiture by the Recipient pursuant to Section 7.01 shall be
returned (added) to the Plan Share Reserve.
<PAGE>
ARTICLE VI.
ELIGIBILITY; ALLOCATIONS
6.01. Eligibility. Employees of the Company and its Affiliates are
-----------
eligible to receive Plan Share Awards.
6.02. Allocations. The Committee may determine which of the Employees
-----------
referenced in Section 6.01 above will be granted Plan Share Awards and the
number of Shares covered by each Award, provided, however, that the number
-------- --------
of Shares covered by such Awards may not exceed the number of Shares in the Plan
Share Reserve immediately prior to the grant of such Awards, and provided
--------
further, that in no event shall any Awards be made which will violate the
- - --------
Charter, Bylaws or Plan of Reorganization and Stock Issuance of the Company or
any applicable federal or state law or regulation. In the event Plan Shares are
forfeited for any reason, the Committee may, from time to time, determine which,
if any, of the Employees will be granted additional Plan Share Awards to be
awarded from forfeited Plan Shares. In selecting those Employees to whom Plan
Share Awards will be granted and the number of Plan Shares 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 Company and
its Affiliates, 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 Company and its Affiliates. All allocations by the Committee
shall be subject to review, and approval or rejection, by the Board.
6.03. Form of Allocation. As promptly as practicable after a
------------------
determination is made pursuant to Section 6.02 that a Plan Share Award has been
granted, the Committee shall notify the Recipient in writing of the grant of the
Award, the number of Plan Shares covered by the Award, and the terms upon which
the Plan Shares subject to the Award may be earned. The date on which the
Committee so notifies the Recipient shall be considered the date of grant of the
Plan Share Awards. The Committee shall maintain records as to all grants of
Plan Share Awards under the Plan.
6.04. Allocations Not Required. Notwithstanding anything to the
------------------------
contrary in Sections 6.01 and 6.02, no Employee shall have any right or
entitlement to receive a Plan Share Award hereunder, such Awards being at the
total discretion of the Committee and the Board, nor shall the salaried
Employees as a group have such a right. The Committee may, with the approval of
the Board (or, if so directed by the Board, shall) return all Common Stock in
the Plan Share Reserve to the Company at any time, and cease issuing Plan Share
Awards.
<PAGE>
ARTICLE VII.
EARNING AND DISTRIBUTION OF PLAN SHARES; VOTING RIGHTS
7.01. Earning Plan Shares; Forfeitures.
--------------------------------
(a) General Rules. Unless the Committee shall specifically state to
-------------
the contrary at the time a Plan Share Award is granted, Plan Shares subject to
an Award shall be earned by a Recipient at the rate of one-third of the
aggregate number of Shares covered by the Award at the end of each full twelve
months of consecutive employment with the Company 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 that set forth herein for all Awards or
for any given Award. If the employment of a Recipient is terminated for any
reason (except as specifically provided in Subsections (b) and (c) below), the
Recipient shall forfeit the right to earn any Shares subject to the Award which
have not theretofore been earned.
In determining the number of Plan Shares which are earned, fractional
shares shall be rounded down to the nearest whole number, provided that such
fractional shares shall be aggregated and earned when the last one-third of the
Plan Shares in a Plan Award are earned.
(b) Exception for Terminations Due to Death, Disability and Normal
--------------------------------------------------------------
Retirement. Notwithstanding the general rule contained in Section 7.01(a)
- - ----------
above, Plan Shares subject to a Plan Share Award held by a Recipient whose
employment with the Company or an Affiliate terminates due to death, Disability
or Normal Retirement, or any part thereof which have not theretofore been
earned, shall be deemed earned as of the Recipients' last day of employment with
the Company or an Affiliate.
(c) Exception for Terminations After a Change in Control.
----------------------------------------------------
Notwithstanding the general rule contained in Section 7.01(a) above, all Plan
Shares subject to a Plan Share Award held by a Recipient whose employment with
the Company or an Affiliate terminates following a Change in Control of the or
Company, shall be deemed earned as of the Recipient's last day of employment
with the Company or an Affiliate. A "Change in Control of the Company" is
defined as a Change in Control of a nature that: (i) would be required to be
reported in response to Item I 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
Company within the meaning of the Change in Bank Control Act 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 Sections 13(d) and 14(d) of the Exchange Act)
is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company representing
20% or more of the combined voting power of the Company's outstanding
securities; or (b) individuals who constitute the Board on the date hereof (the
"Incumbent Board") cease for any
<PAGE>
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 Company's stockholders was
approved by the same nominating committee serving under an Incumbent Board,
shall be, for purposes of this clause (b), considered as though he were a member
of the Incumbent Board; or (c) a plan of reorganization, merger, consolidation,
sale of all or substantially all the assets of the Company or similar
transaction in which the Company is not the surviving institution occurs and
which the incumbent board of Directors does not approve of or consent to; or (d)
a proxy statement soliciting proxies from stockholders of the Company, by
someone other than the current management of the Company, seeking stockholder
approval of a plan of reorganization, merger or consolidation of the Company 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 are to be
exchanged for or converted into cash or property or securities not issued by the
Company shall be distributed; or (e) a tender offer is made for 20% or more of
the voting securities of the Company.
(d) Revocation for Misconduct. Notwithstanding anything hereinafter
-------------------------
to the contrary, the Board may by resolution immediately revoke, rescind and
terminate any Plan Share Award, or portion thereof, previously awarded under
this Plan, to the extent Plan Shares have not been delivered thereunder to the
Recipient, whether or not yet earned, in the case of an Employee who is
discharged from the Company 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, incompetence, 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) which results in a material loss to the Company or final
cease and desist order.
7.02. Accrual of Dividends. Whenever Plan Shares are paid to a
--------------------
Recipient or Beneficiary under Section 7.03, such Recipient or Beneficiary shall
also be entitled to receive, with respect to each Plan Share paid, an amount
equal to any cash dividends and a number of shares of Common Stock equal to any
stock dividends, declared and paid with respect to a share of Common Stock
between the date the relevant Plan Share Award was granted and the date the Plan
Shares are being distributed. There shall also be distributed an appropriate
amount of net earnings, if any, of the Trust with respect to any cash dividends
so paid out.
7.03. Distribution of Plan Shares.
---------------------------
(a) Timing of Distributions: General Rule. Except as provided in
-------------------------------------
Subsection (b) below, Plan Shares shall be distributed to the Recipient or his
Beneficiary, as the case may be, as soon as practicable after they have been
earned.
<PAGE>
(b) Timing: Exception for 10% Shareholders. Notwithstanding
--------------------------------------
Subsection (a) above, no Plan Shares may be distributed prior to the date which
is five (5) years from the effective date of the Company's Reorganization into
the mutual holding company structure to the extent the Recipient or Beneficiary,
as the case may be, would after receipt of such shares own in excess of ten (10)
percent of the issued and outstanding shares of Common Stock. Any Plan Shares
remaining unpaid solely by reason of the operation of this Subsection (b) shall
be paid to the Recipient or his Beneficiary on the date which is five (5) years
from the effective date of the Company's Reorganization into the mutual holding
company structure.
(c) Form of Distribution. All Plan Shares, together with any shares
--------------------
representing stock dividends, shall be distributed in the form of Common Stock.
One share of Common Stock shall be given for each Plan Share earned and payable.
Payments representing accumulated cash dividends (and earning thereon) shall be
made in cash.
(d) Withholding. The Trustee may withhold from any payment or
-----------
distribution made under this Plan sufficient amounts of cash or shares of Common
Stock to cover any applicable withholding and employment taxes, and if the
amount of such payment is insufficient, the Trustee may require the Recipient or
Beneficiary to pay to the Trustee the amount required to be withheld as a
condition of delivering the Plan Shares. The Trustee shall pay over to the
Company or Affiliate which employs or employed such Recipient any such amount
withheld from or paid by the Recipient or Beneficiary.
7.04. Voting of Plan Shares. After a Plan Share Award has been
---------------------
granted, the Recipient shall be entitled to direct the Trustee as to the voting
of the Plan Shares which are covered by the Plan Share Award and which have not
yet been earned and distributed to him pursuant to Section 7.03, subject to
rules and procedures adopted by the Committee for this purpose. All shares of
Common Stock held by the Trust as to which Recipients are not entitled to
direct, or have not directed, the voting, shall be voted by the Trustee in the
same proportion as Plan Shares which have been awarded and voted.
ARTICLE VIII.
TRUST
8.01. Trust. The Trustee shall receive, hold, administer, invest
-----
and make distributions and disbursements from the Trust in accordance with the
provisions of the Plan and Trust and the applicable directions, rules,
regulations, procedures and policies established by the Committee pursuant to
the Plan.
8.02. Management of Trust. It is the intent of this Plan and Trust
-------------------
that, subject to the provisions of this Plan, the Trustee shall have complete
authority and discretion with respect to the management, control and investment
of the Trust, and that the Trustee shall invest all assets
<PAGE>
of the Trust, except those attributable to cash dividends paid with respect to
Plan Shares, in Common Stock to the fullest extent practicable and permissible
under applicable law, and except to the extent that the Trustee determines that
the holding of monies in cash or cash equivalents is necessary to meet the
obligation of the Trust. In performing their duties, the Trustees shall have the
power to do all things and execute such instruments as may be deemed necessary
or proper, including the following powers:
(a) To invest up to one hundred percent (100%) of all Trust assets in
Common Stock without regard to any law now or hereafter in force limiting
investments for Trustees or other fiduciaries. The investment authorized herein
constitutes the only investment of the Trust, and in making such investment, the
Trustees are authorized to purchase Common Stock from the Company or an
Affiliate or from any other source, and such Common Stock so purchased may be
outstanding, newly issued, or Treasury shares.
(b) To invest any Trust assets not otherwise invested in accordance
with (a) above in such deposit accounts, and certificates of deposit (including
those issued by the Company), obligations of the United States government or its
agencies or such other investments as shall be considered the equivalent of
cash.
(c) To sell, exchange or otherwise dispose of any property at any
time held or acquired by the Trust.
(d) To cause stocks, bonds or other securities to be registered in
the name of a nominee, without the addition of words indicating that such
security is an asset of the Trust (but accurate records shall be maintained
showing that such security is an asset of the Trust).
(e) To hold cash without interest in such amounts as may be in the
opinion of the Trustee reasonable for the proper operation of the Plan and
Trust.
(f) To employ brokers, agents, custodians, consultants and
accountants.
(g) To hire counsel to render advice with respect to their rights,
duties and obligations hereunder, and such other legal services or
representation as they may deem desirable.
(h) To hold funds and securities representing the amounts to be
distributed to a Recipient or his Beneficiary as a consequence of a dispute as
to the disposition thereof, whether in a segregated account or held in common
with other assets of the Trust.
Notwithstanding anything herein contained to the contrary, the Trustee
shall not be required to make any inventory, appraisal or settlement or report
to any court, or to secure any order of court for the exercise of any power
herein contained, or give bond.
<PAGE>
8.03. Records and Accounts. The Trustee shall maintain accurate and
--------------------
detailed records and accounts of all transactions of the Trust, which shall be
available at all reasonable times for inspection by any legally entitled person
or entity to the extent required by applicable law, or any other person
determined by the Committee.
8.04. Earnings. All earnings, gains and losses with respect to
--------
Trust assets shall be allocated, in accordance with a reasonable procedure
adopted by the Committee, to bookkeeping accounts for Recipients or to the
general account of the Trust, depending on the nature and allocation of the
assets generating such earnings, gains and losses. In particular, any earnings
on cash dividends received with respect to shares of Common Stock shall be
allocated to accounts for Recipients, if such shares are the subject of
outstanding Plan Share Awards, or, otherwise to the Plan Share Reserve.
8.05. Expenses. All costs and expenses incurred in the operation
--------
and administration of this Plan, including those incurred by the Trustee, shall
be borne by the Company.
8.06. Indemnification. The Company shall indemnify, defend and hold
---------------
the Trustee harmless against all claims, expenses and liabilities arising out of
or related to the exercise of the Trustee's powers and the discharge of their
duties hereunder, unless the same shall be due to their gross negligence or
willful misconduct.
ARTICLE IX.
MISCELLANEOUS
9.01. Adjustments for Capital Changes. In the event of any change
-------------------------------
in the outstanding shares of Common Stock of the Company 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 effected without receipt
or payment of consideration by the Company, the Committee shall adjust the
aggregate number of Plan Shares available for issuance pursuant to the Plan and
shall adjust the number of shares to which any Plan Share Award relates to
prevent dilution or enlargement of the rights granted to the Recipient under the
Plan.
9.02. Amendment and Termination of Plan. The Board may, by resolution
---------------------------------
at any time amend or terminate the Plan and Trust. The power to amend or
terminate shall include the power to direct the Trustee to return to the Company
all or any part of the assets of the Trust, including shares of Common Stock
held in the Plan Share Reserve. However, the termination of the Trust shall not
affect a Recipient's right to earn Plan Share Awards and to the distribution of
Common Stock relating thereto, including earnings thereon, in accordance with
the terms of this Plan and the grant by the Committee or Board.
<PAGE>
9.03. Non-Alienation. Benefits payable to Recipients and their
--------------
Beneficiaries under this Agreement may not be anticipated, assigned (either at
law or in equity), alienated, pledged, encumbered or subjected to attachment,
garnishment, levy, execution or other legal or equitable process.
9.04. Employment Rights. Neither the Plan nor any grant of a Plan
-----------------
Share Award or Plan Shares hereunder nor any action taken by the Trustee, the
Committee or the Board in connection with the Plan shall create any right on the
part of any Employee to continue in the employ of the Company or an Affiliate
thereof, or the Company.
9.05. Voting and Dividend Rights. No Recipient shall have any
--------------------------
voting or dividend rights or other rights of a shareholder in respect of any
Plan Shares covered by a Plan Share Award, except as expressly provided in
Sections 7.02 and 7.04 above, prior to the time said Plan Shares are actually
distributed to him.
9.06. Governing Law. The Plan and Trust shall be governed by the laws
-------------
of the State of Florida.
9.07. Effective Date. This Plan is effective as of the effective
--------------
date of the Company's Reorganization into the mutual holding company structure.
The Plan shall be presented to shareholders of the Company for ratification for
purposes of (i) obtaining favorable treatment under Section 16(b) of the
Securities Exchange Act of 1934; and (ii) maintaining listing on the National
Association of Securities Dealers Automated Quotation ("NASDAQ") National Market
System; provided, however, that the failure to obtain shareholder ratification
-------- -------
will not affect the validity of the Plan and the Plan Share Awards hereunder.
9.08. Term of Plan. This Plan shall remain in effect until the
------------
earlier of (1) 21 years from the Effective Date; (2) termination by the Board of
Directors of the Company; or (3) the distribution of all assets of the Trust.
Termination of the Plan shall not affect any Plan Share Awards previously
granted, and such Awards shall remain valid and in effect until they have been
earned and paid, or by their terms expire or are forfeited.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Trust Agreement to be
executed by its duly authorized officers and the corporate seal to be affixed
and duly attested, as of the 6th day of January, 1994.
HARBOR FEDERAL SAVINGS BANK
By: /s/
-------------------------------------
Michael J. Brown, Sr.
President and Chief Executive Officer
Attest:
/s/
- - -------------------------------
Christine Fowler
Secretary
IN WITNESS WHEREOF, I, Richard K. Davis, execute this agreement, as Trustee
accepting and binding myself to undertake and perform the obligations and duties
of the Trustee hereunder and consenting to the foregoing Plan and Trust
Agreement.
Signed: /s/
--------------------------------
Richard K. Davis
Trustee
<PAGE>
EXHIBIT 10(E)
HARBOR FEDERAL SAVINGS BANK
OUTSIDE DIRECTORS' RECOGNITION AND RETENTION PLAN
<PAGE>
EFFECTIVE: 1/6/94
HARBOR FEDERAL SAVINGS BANK
OUTSIDE DIRECTORS'
RECOGNITION AND RETENTION PLAN AND TRUST AGREEMENT
<PAGE>
ARTICLE I.
ESTABLISHMENT OF THE PLAN AND TRUST
1.01. Harbor Federal Savings Bank (the "Company") hereby establishes
the Outside Directors' Recognition and Retention Plan (the "Plan") and Trust
(the "Trust") upon the terms and conditions hereinafter stated in this Outside
Directors' Recognition and Retention Plan and Trust Agreement (the "Agreement").
1.02. The Trustee hereby accepts this Trust and agrees to hold the
Trust assets existing on the date of this Agreement and all additions and
accretions thereto upon the terms and conditions hereinafter stated.
1.03. The Trust hereby established shall be revocable by the Company.
1.04. The Trust is intended to be a grantor trust, of which the Company
is the grantor, within the meaning of Subpart E, Part I, subchapter J., chapter
1, subtitle A of the Internal Revenue Code of 1986, as amended, and shall be
construed accordingly.
1.05. The principal of the Trust, and any earnings thereof shall be held
separate and apart from other funds of the Company and shall be used exclusively
for the uses and purposes of Recipients and their Beneficiaries and general
creditors as herein set forth. Recipients and their Beneficiaries shall have no
preferred claim on, or any beneficial ownership interest in, any assets of the
Trust. Any rights created under the Plan and this Agreement shall be mere
unsecured contractual rights of the Recipients and their Beneficiaries against
the Company. Any assets held by the Trust will be subject to the claims of the
Company's general creditors under federal and state law in the event of
insolvency of the Company.
ARTICLE II.
PURPOSE OF THE PLAN
2.01. The purpose of the Plan is to retain non-employee directors of
experience and ability by providing such persons with a proprietary interest in
the Company as compensation for their contributions to the Company and its
Affiliates and as an incentive to make such contributions and to promote the
Company's growth and profitability in the future.
<PAGE>
ARTICLE III.
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.
3.01. "Affiliate" means the Company and those subsidiaries of the Company
which, with the consent of the Board, agree to participate in this Plan.
3.02. "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 Board and may be changed from time to time by similar
written notice to the Board. In the absence of a written designation, the
Beneficiary shall be the Recipient's surviving spouse, if any or if none, his
estate.
3.03. "Board" means the Board of Directors of the Company.
3.04. "Common Stock" means shares of the common stock, $.01 par value per
share, of the Company.
3.05. "Company" shall mean Harbor Federal Savings Bank.
3.06. "Director" means a member of the Board of Directors of the Company,
who is not also an employee of the Company.
3.07. "Disability" means any physical or mental impairment which would
constitute grounds for disability benefits under the Deferred Benefit plan
maintained by the Company if the Director was eligible to participate in such
Plan.
3.08. "Employee" means any person who is currently employed by the
Company or an Affiliate, including officers.
3.09. "Plan Shares" means shares of Common Stock held in the Trust and
issued or issuable to a Recipient pursuant to the Plan.
3.10. "Plan Share Award" means a right granted under this Plan to earn
Plan Shares.
3.11. "Plan Share Reserve" means the shares of Common Stock held by the
Trustee pursuant to Sections 5.03 and 5.04.
<PAGE>
3.12. "Recipient" means a Director who receives a Plan Share Award under
the Plan.
3.13. "Retirement" means termination of service which would constitute
retirement under any tax qualified plan maintained by the Company or by reaching
age 65.
3.14. "Trustee" means that person(s) or entity nominated by and approved
by the Board pursuant to Sections 4.01 and 4.02 to hold legal title to the Plan
assets for the purposes set forth herein.
ARTICLE IV.
ADMINISTRATION OF THE PLAN
4.01. Role of the Board. The Plan shall be administered and interpreted
-----------------
by the Board in accordance with its terms. The interpretation and construction
by the Board of any provisions of the Plan or of any Plan Share Award granted
hereunder shall be final and binding. The Board shall have all of the powers
allocated to it in this and other Sections of the Plan.
4.02. Limitation on Liability. No member of the Board or the Trustee(s)
-----------------------
shall be liable for any determination made in good faith with respect to the
Plan or any Plan Shares or Plan Share Awards granted under it. If a member of
the Board or any Trustee 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 Company
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
Company and its Affiliates and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful.
ARTICLE V.
CONTRIBUTIONS; PLAN SHARE RESERVE
5.01. Amount and Timing of Contributions. The Board shall contribute to
----------------------------------
the Trust an amount sufficient to purchase the Plan Share Reserve, as defined
below, from the shares of Common Stock issued by the Company in connection with
the Company's reorganization to the mutual holding company structure and the
related common stock offering (the "Reorganization"). No contributions by
Directors shall be permitted.
<PAGE>
5.02. Investment of Trust Assets;Creation of Plan Share Reserve.
---------------------------------------------------------
Upon the Reorganization, the Trustee shall invest all of the Trust's assets
exclusively in Common Stock except as otherwise provided below; provided,
--------
however, that the Trust shall not invest in more than 26,985 shares of Common
- - -------
Stock issued in the Reorganization (the "Plan Share Reserve"). Any earnings
received with respect to Common Stock held in the Reserve shall be held in an
interest-bearing account. Any earnings received with respect to Common Stock
subject to a Plan Share Award shall be held in an interest-bearing account on
behalf of the individual Recipient. To the extent that the Company makes
additional contributions to the Trust the "Trustee shall invest such
contributions in shares of Common Stock (subject to Section 8.02). The Trustee
may make such investments through private transactions, open market purchases
and directly from the Company.
5.03. Effect of Allocations, Returns and Forfeitures Upon Plan Share
--------------------------------------------------------------
Reserves. Upon the allocation of Plan Share Awards under Section 6.02, or any
- - --------
decision of the Board to terminate the Plan and return Plan Shares to the
Company, the Plan Share Reserve shall be reduced by the number of Shares subject
to the Awards so allocated or returned. Any Shares subject to an Award which
may not be earned because of a forfeiture by the Recipient pursuant to Section
7.01 shall be returned (added) to the Plan Share Reserve.
ARTICLE VI.
ELIGIBILITY; ALLOCATIONS
6.01. Eligibility. Directors of the Company and its Affiliates are
-----------
eligible to receive Plan Share Awards.
6.02. The following Directors, if serving on the date of the
Reorganization, shall receive the indicated number of Plan Share Awards: Mr.
Enns, 5,715 shares, Mr. Abernethy, 4,910 shares, and 4,090 shares to each of
Messrs. Watkins, Davis, Hellstrom and Fee.
6.03. Form of Allocation. The recipients shall be notified in writing
------------------
of the grant of a Plan Share Award. Such notice shall include the number of Plan
Shares covered by the Award, and the terms upon which the Plan Shares subject to
the Award may be earned. The Board shall maintain records as to all grants of
Plan Share Awards under the Plan.
<PAGE>
ARTICLE VII.
EARNING AND DISTRIBUTION OF PLAN SHARES; VOTING RIGHTS
7.01. Earning Plan Shares; Forfeitures.
--------------------------------
(a) General Rules. Plan Shares subject to an Award shall be
-------------
earned by a Recipient at the rate of thirty-three and one third percent (33J%)
of the aggregate number of Shares covered by the Award at the end of each full
twelve months of consecutive service with the Company or an Affiliate after the
date of grant of the Award. If the service as a director of a Recipient is
terminated for any reason (except as specifically provided in Subsections (b)
and (c) below), the Recipient shall forfeit the right to earn any Shares subject
to the Award which have not theretofore been earned.
In determining the number of Plan Shares which are earned, fractional
shares shall be rounded down to the nearest whole number, provided that such
fractional shares shall be aggregated and earned, on the third anniversary of
the date of grant.
(b) Exception for Terminations Due to Death, Disability and
-------------------------------------------------------
Retirement. Notwithstanding the general rule contained in Section 7.01(a)
- - ----------
above, Plan Shares subject to a Plan Share Award held by a Recipient whose
service as a Director with the Company or an Affiliate terminates due to death,
Disability or Retirement, shall be deemed earned as of the Recipients' last day
service as a Director with the Company or an Affiliate.
(c) Exception for Terminations After a Change in Control.
----------------------------------------------------
Notwithstanding the general rule contained in Section 7.01(a) above, all Plan
Shares subject to a Plan Share Award held by a Recipient whose service as a
Director of the Company or an Affiliate terminates following a Change in Control
of the Company, shall be deemed earned as of the Recipient's last day of service
as a Director with the Company or an Affiliate. A "Change in Control of the
Company" is defined as a Change in Control of a nature that: (i) would be
required to be reported in response to Item I 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 Company or the Company within the meaning of the Change
in Bank Control Act 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 Sections 13(d)
and 14(d) of the Exchange Act) is or becomes the "beneficial owner" (as defined
in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of
the Company representing 20% or more of the combined voting power of the
Company's outstanding securities; or (b) individuals who constitute the Board of
Directors of the Company on the date hereof (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
<PAGE>
Incumbent Board, or whose nomination for election by the Company's stockholders
was approved by the same Nominating Board serving under an Incumbent Board,
shall be, for purposes of this clause (b), considered as though he were a member
of the Incumbent Board; or (c) a merger, consolidation, or sale of all or
substantially all the assets of the Company in which the Company is not the
surviving institution occurs and which the Incumbent Board does not approve of
or consent to; or (d) a proxy statement soliciting proxies from stockholders of
the Company, by someone other than the current management of the Company,
seeking stockholder approval of a plan of reorganization, merger or
consolidation of the Company with one or more corporations as a result of which
the outstanding shares of the class of securities then subject to the Plan are
to be exchanged for or converted into cash or property or securities not issued
by the Company shall be distributed; or (e) a tender offer is made for 20% or
more of the voting securities of the Company.
(d) Revocation for Misconduct. Notwithstanding anything herein to
-------------------------
the contrary, any previously awarded Plan Share Award (or portion thereof) shall
be immediately revoked, rescinded and terminated, to the extent Plan Shares have
not been earned by the Recipient, in the case of a Director who is discharged
from the service of the Company 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, incompetence, 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) which results in a material loss to the Company
or final cease and desist order.
7.02. Accrual of Dividends. Whenever Plan Shares are paid to a
--------------------
Recipient or Beneficiary under Section 7.03, such Recipient or Beneficiary shall
also be entitled to receive, with respect to each Plan Share paid, an amount
equal to any cash dividends and a number of shares of Common Stock equal to any
stock dividends, declared and paid with respect to a share of Common Stock
between the date the relevant Plan Share Award was granted and the date the Plan
Shares are being distributed. There shall also be distributed an appropriate
amount of net earnings, if any, of the Trust with respect to any cash dividends
so paid out.
7.03. Distribution of Plan Shares.
---------------------------
(a) Timing of Distributions: General Rule. Except as provided in
-------------------------------------
Subsection (b) below, Plan Shares shall be distributed to the Recipient or his
Beneficiary, as the case may be, as soon as practicable after they have been
earned.
(b) Timing: Exception for 10% Shareholders. Notwithstanding
--------------------------------------
Subsection (a) above, no Plan Shares may be distributed prior to the date which
is five (5) years from the effective date of the Reorganization to the extent
the Recipient or Beneficiary, as the case may be, would after receipt of such
shares own in excess of ten (10) percent of the issued and
<PAGE>
outstanding shares of Common Stock. Any Plan Shares remaining unpaid solely by
reason of the operation of this Subsection (b) shall be paid to the Recipient or
his Beneficiary on the date which is five (5) years from the effective date of
the Reorganization.
(c) Form of Distribution. All Plan Shares, together with any shares
--------------------
representing stock dividends, shall be distributed in the form of Common Stock.
One share of Common Stock shall be given for each Plan Share earned and payable.
Payments representing accumulated cash dividends (and earning thereon) shall be
made in cash.
(d) Withholding. The Trustee may withhold from any payment or
-----------
distribution made under this Plan sufficient amounts of cash or shares of Common
Stock to cover any applicable withholding and employment taxes, and if the
amount of such payment is insufficient, the Trustee may require the Recipient or
Beneficiary to pay to the Trustee the amount required to be withheld as a
condition of delivering the Plan Shares. The Trustee shall pay over to the
Company or Affiliate which employs or employed such Recipient any such amount
withheld from or paid by the Recipient or Beneficiary.
7.04. Voting of Plan Shares. After a Plan Share Award has been
---------------------
granted, the Recipient shall be entitled to direct the Trustee as to the voting
of the Plan Shares which are covered by the Plan Share Award and which have not
yet been earned and distributed to him pursuant to Section 7.03, subject to
rules and procedures adopted by the Board for this purpose. All shares of
Common Stock held by the Trust as to which Recipients are not entitled to
direct, or have not directed, the voting, shall be voted by the Trustee in the
same proportion as Plan Shares which have been awarded and voted.
ARTICLE VIII.
TRUST
8.01. Trust. The Trustee shall receive, hold, administer, invest
-----
and make distributions and disbursements from the Trust in accordance with the
provisions of the Plan and Trust and the applicable directions, rules,
regulations, procedures and policies established by the Board pursuant to the
Plan.
8.02. Management of Trust. It is the intent of this Plan and Trust
-------------------
that, subject to the provisions of this Plan, the Trustee shall have complete
authority and discretion with respect to the management, control and investment
of the Trust, and that the Trustee shall invest all assets of the Trust, except
those attributable to cash dividends paid with respect to Plan Shares, in Common
Stock to the fullest extent practicable, and except to the extent that the
Trustee determines that the holding of monies in cash or cash equivalents is
necessary to meet the obligation of the Trust. In performing their duties, the
Trustees shall have the power to do all
<PAGE>
things and execute such instruments as may be deemed necessary or proper,
including the following powers:
(a) To invest up to one hundred percent (100%) of all Trust assets in
Common Stock without regard to any law now or hereafter in force limiting
investments for Trustees or other fiduciaries. The investment authorized herein
constitutes the only investment of the Trust, and in making such investment, the
Trustees are authorized to purchase Common Stock from the Company or an
Affiliate or from any other source, and such Common Stock so purchased may be
outstanding, newly issued, or Treasury shares.
(b) To invest any Trust assets not otherwise invested in accordance
with (a) above in such deposit accounts, and certificates of deposit (including
those issued by the Company), obligations of the United States government or its
agencies or such other investments as shall be considered the equivalent of
cash.
(c) To sell, exchange or otherwise dispose of any property at any
time held or acquired by the Trust.
(d) To cause stocks, bonds or other securities to be registered in
the name of a nominee, without the addition of words indicating that such
security is an asset of the Trust (but accurate records shall be maintained
showing that such security is an asset of the Trust).
(e) To hold cash without interest in such amounts as may be in the
opinion of the Trustee reasonable for the proper operation of the Plan and
Trust.
(f) To employ brokers, agents, custodians, consultants and
accountants.
(g) To hire counsel to render advice with respect to their rights,
duties and obligations hereunder, and such other legal services or
representation as they may deem desirable.
(h) To hold funds and securities representing the amounts to be
distributed to a Recipient or his Beneficiary as a consequence of a dispute as
to the disposition thereof, whether in a segregated account or held in common
with other assets of the Trust.
Notwithstanding anything herein contained to the contrary, the Trustee
shall not be required to make any inventory, appraisal or settlement or report
to any court, or to secure any order of court for the exercise of any power
herein contained, or give bond.
8.03. Records and Accounts. The Trustee shall maintain accurate and
--------------------
detailed records and accounts of all transactions of the Trust, which shall be
available at all reasonable times for
<PAGE>
inspection by any legally entitled person or entity to the extent required by
applicable law, or any other person determined by the Board.
8.04. Earnings. All earnings, gains and losses with respect to
--------
Trust assets shall be allocated, in accordance with a reasonable procedure
adopted by the Board, to bookkeeping accounts for Recipients or to the general
account of the Trust, depending on the nature and allocation of the assets
generating such earnings, gains and losses. In particular, any earnings on cash
dividends received with respect to shares of Common Stock shall be allocated to
accounts for Recipients, if such shares are the subject of outstanding Plan
Share Awards, or, otherwise to the Plan Share Reserve.
8.05. Expenses. All costs and expenses incurred in the operation
--------
and administration of this Plan, including those incurred by the Trustee, shall
be borne by the Company.
8.06. Insurance. The Company shall procure and maintain insurance
---------
at its expense to provide for the payment of benefits to the Trust in the event
of any loss that relates to the exercise of the Trustee's powers and the
discharge of the Trustee's duties hereunder.
ARTICLE IX.
MISCELLANEOUS
9.01. Adjustments for Capital Changes. In the event of any change in
-------------------------------
the outstanding shares of Common Stock of the Company 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 effected without receipt or
payment of consideration by the Company, the aggregate number of Plan Shares
available for issuance pursuant to the Plan shall automatically be adjusted as
shall the number of shares to which any Plan Share Award relates to prevent
dilution or enlargement of the rights granted to the Recipient under the Plan.
9.02. Amendment and Termination of Plan. The Board may, by resolution,
---------------------------------
at any time amend or terminate the Plan and Trust. The power to amend or
terminate shall include the power to direct the Trustee to return to the Company
all or any part of the assets of the Trust, including shares of Common Stock
held in the Plan Share Reserve, as well as shares of Common Stock and other
assets subject to Plan Share Awards but not yet earned by the Employees to whom
they are allocated. However, the termination of the Trust shall not affect a
Recipient's right to earn Plan Share Awards and to the distribution of Common
Stock relating thereto, including earnings thereon, in accordance with the terms
of this Plan and the grant by the Board.
<PAGE>
9.03. Non-Alienation. Benefits payable to Recipients and their
--------------
Beneficiaries under this Agreement may not be anticipated, assigned (either at
law or in equity), alienated, pledged, encumbered or subjected to attachment,
garnishment, levy, execution or other legal or equitable process.
9.04. Employment Rights. Neither the Plan nor any grant of a Plan
-----------------
Share Award or Plan Shares hereunder nor any action taken by the Trustee, the
Board or the Board in connection with the Plan shall create any right on the
part of any Director to continue in the service of the Company or an Affiliate
thereof, or the Company.
9.05. Voting and Dividend Rights. No Recipient shall have any voting
--------------------------
or dividend rights or other rights of a shareholder in respect of any Plan
Shares covered by a Plan Share Award, except as expressly provided in Sections
7.02 and 7.04 above, prior to the time said Plan Shares are actually distributed
to him.
9.06. Governing Law. The Plan and Trust shall be governed by the laws
-------------
of the State of Florida.
9.07. Effective Date. This Plan is effective as of the effective
--------------
date of the Reorganization. Following Reorganization, the Plan shall be
presented to shareholders of the Company for ratification for purposes of (i)
obtaining favorable treatment under Section 16(b) of the Securities Exchange Act
of 1934; and (ii) maintaining listing on the National Association of Securities
Dealers Automated Quotation ("NASDAQ") National Market System; provided,
however, that the failure to obtain shareholder ratification will not affect the
validity of the Plan and the options thereunder.
9.08. Term of Plan. This Plan shall remain in effect until the
------------
earlier of (1) 21 years from the Effective Date; (2) termination by the Board;
or (3) the distribution of all assets of the Trust. Termination of the Plan
shall not affect any Plan Share Awards previously granted, and such Awards shall
remain valid and in effect until they have been earned and paid, or by their
terms expire or are forfeited.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Trust Agreement to be
executed by its duly authorized officers and the corporate seal to be affixed
and duly attested, as of the 6th day of January, 1994.
HARBOR FEDERAL SAVINGS BANK
By: /s/
---------------------------------------
Michael J. Brown, Sr.
President and Chief Executive Officer
Attest:
/s/
- - -------------------------------------------
Christine Fowler
IN WITNESS WHEREOF, I, Richard K. Davis, execute this agreement, as Trustee
accepting and binding myself to undertake and perform the obligations and duties
of the Trustee hereunder and consenting to the foregoing Plan and Trust
Agreement.
Signed: /s/
---------------------------------
Richard K. Davis
Trustee
Attest:
/s/
- - -------------------------------------
Christine Fowler
11
