SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, For Use of the
[X] Definitive Proxy Statement Commission Only (as permitted
[_] Definitive Additional Materials by Rule 14a-6(e)(2))
[_] Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
HARBOR FLORIDA BANCSHARES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
________________________________________________________________________________
1) Title of each class of securities to which transaction applies:
________________________________________________________________________________
2) Aggregate number of securities to which transaction applies:
________________________________________________________________________________
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
________________________________________________________________________________
4) Proposed maximum aggregate value of transaction:
________________________________________________________________________________
5) Total fee paid:
[_] Fee paid previously with preliminary materials:
________________________________________________________________________________
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
1) Amount previously paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
(SC14A-07/98)
<PAGE>
HARBOR FLORIDA BANCSHARES, INC.
100 S. Second Street
Fort Pierce, FL 34950
(561) 461-2414
August 12, 1998
Dear Stockholder:
You are invited to attend the Special Meeting of Stockholders (the "Special
Meeting") of Harbor Florida Bancshares, Inc. ("Bancshares" or the "Company"),
the stock holding company for Harbor Federal Savings Bank (the "Bank"). The
purpose of the Special Meeting is to consider the approval of the Harbor Florida
Bancshares, Inc. 1998 Stock Incentive Plan for Directors, Officers and Employees
(the "Plan"). The Special Meeting is scheduled to be held on Friday, September
18, 1998, at 10:30 a.m., Florida time, at Old City Hall Annex, 315 Avenue A,
Fort Pierce, Florida.
The attached Notice of Special Meeting and Proxy Statement describes the
Plan in detail. Directors and officers of the Company will be present at the
Special Meeting to respond to any questions that you may have regarding the
Plan.
The Board of Directors has determined that the approval of the Plan at the
Special Meeting is in the best interests of the Company and its stockholders.
Therefore, the Board unanimously recommends that you vote for the approval of
the Plan. Additionally, the Company has included as a separate proposal the
adjournment of the Special Meeting, if necessary, to permit the solicitation of
additional proxies. The purpose of this proposal is to allow the Company to seek
additional proxies if sufficient votes to approve the Plan are not present at
the Special Meeting. The Board also unanimously recommends that you vote for the
adjournment, if necessary, of the Special Meeting.
PLEASE SIGN AND RETURN THE ENCLOSED PROXY CARD PROMPTLY. YOUR COOPERATION
IS APPRECIATED SINCE A MAJORITY OF THE COMMON STOCK MUST BE REPRESENTED EITHER
IN PERSON OR BY PROXY TO CONSTITUTE A QUORUM FOR THE CONDUCT OF BUSINESS AT THE
SPECIAL MEETING.
On behalf of the Board of Directors and all of the employees of the Company
and the Bank, I wish to thank you for all your support and interest. We look
forward to seeing you at the Special Meeting.
Sincerely yours,
/s/ Michael J. Brown, Sr.
Michael J. Brown, Sr.
President and CEO
<PAGE>
HARBOR FLORIDA BANCSHARES, INC.
100 S. Second Street
Fort Pierce, Florida 34950
(561) 461-2414
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON SEPTEMBER 18, 1998
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders of Harbor
Florida Bancshares, Inc. ("Bancshares" or the "Company") will be held at Old
City Hall Annex located at 315 Avenue A, Fort Pierce, Florida on Friday,
September 18, 1998, at 10:30 a.m. Florida time, for the following purposes, as
more completely set forth in the accompanying Proxy Statement:
1 . To approve the Harbor Florida Bancshares, Inc. 1998 Stock Incentive
Plan for directors, officers and employees (the "Plan").
2. The approval of the adjournment of the Special Meeting, if necessary, to
permit solicitation of proxies in the event there are not sufficient votes at
the time of the Special Meeting to approve the Plan.
3. To transact such other business as may properly come before the meeting.
Except with respect to procedural matters incident to the conduct of the
meeting, management of Bancshares is not aware of any matters other than those
set forth above which may properly come before the meeting.
The Board of Directors of Bancshares has fixed July 24, 1998, as the voting
record date for the determination of stockholders entitled to notice of and to
vote at the Special Meeting. Only those stockholders of record as of the close
of business on that date will be entitled to vote at the Special Meeting.
BY ORDER OF THE BOARD OF
DIRECTORS
/s/ Michael J. Brown, Sr.
Michael J. Brown, Sr.
President & CEO
August 12, 1998
Fort Pierce, Florida
YOUR VOTE IS IMPORTANT. YOU ARE URGED TO COMPLETE, SIGN, DATE AND RETURN
THE ENCLOSED PROXY CARD PROMPTLY IN THE ENVELOPE PROVIDED. IF YOU ATTEND THE
SPECIAL MEETING YOU MAY VOTE EITHER IN PERSON OR BY YOUR PROXY. ANY PROXY GIVEN
MAY BE REVOKED BY YOU IN WRITING OR IN PERSON AT ANY TIME PRIOR TO THE EXERCISE
THEREOF. PROXIES MUST BE RECEIVED PRIOR TO THE COMMENCEMENT OF THE MEETING.
<PAGE>
HARBOR FLORIDA BANCSHARES, INC.
----------
PROXY STATEMENT
----------
SPECIAL MEETING OF STOCKHOLDERS
SEPTEMBER 18, 1998
This Proxy Statement is being furnished to the holders of the common stock,
par value $0.10 per share ("Common Stock"), of Harbor Florida Bancshares, Inc.
("Bancshares" or the "Company"), in connection with the solicitation of proxies
by the Board of Directors for use at its Special Meeting of Stockholders
("Special Meeting") to be held on Friday, September 18, 1998, at Old City Hall
Annex located at 315 Avenue A, Fort Pierce, Florida at 10:30 a.m. Florida time,
for the purposes set forth in the attached Notice of Special Meeting of
Stockholders. This Proxy Statement is first being mailed to stockholders on or
about August 14, 1998.
Each proxy solicited hereby, if properly signed and returned to Bancshares
and not revoked prior to its use, will be voted in accordance with the
instructions indicated on the proxies. If no contrary instructions are given,
each signed proxy received will be voted in favor of the Plan, in favor of the
adjournment of the Special Meeting and, in the discretion of the proxy holder,
as to any other matter which may properly come before the Special Meeting. Only
proxies that are returned can be counted and voted at the Special Meeting.
A stockholder who has given a proxy may revoke it at any time prior to its
exercise at the Special Meeting by (i) giving written notice of revocation to
the Secretary of Bancshares, (ii) properly submitting to Bancshares a
duly-executed proxy bearing a later date, or (iii) attending the Special Meeting
and voting in person. All written notices of revocation and other communications
with respect to revocation of proxies should be addressed as follows: Harbor
Florida Bancshares, Inc., 100 S. Second Street, Fort Pierce, Florida 34950,
Attention: Secretary. Proxies solicited hereby may be exercised only at the
Special Meeting and will not be used for any other meeting.
SOLICITATION OF PROXIES
All costs of the solicitation of proxies will be borne by Bancshares. In
addition to solicitation by mail, Kissel-Blake, Inc., a proxy solicitation firm,
will assist the Company in soliciting proxies for the Special Meeting and will
be paid a fee of $6,500 plus out-of-pocket expenses. In addition, directors,
officers and other employees of Bancshares or Harbor Federal Savings Bank (the
"Bank") may solicit proxies personally or by telephone or other means without
additional compensation. Bancshares will reimburse brokerage firms and other
custodians, nominees and fiduciaries for reasonable expenses incurred by them in
sending proxy materials to the beneficial owners of Common Stock.
VOTING SECURITIES
The securities that may be voted at the Special Meeting consists of shares
of Common Stock, with each share entitling its owner to one vote on all matters
to be voted on at the Special Meeting, except as described below. Only holders
of record of Common Stock at the close of business on July 24, 1998, (the
"Record Date") will be entitled to notice of and to vote at the Special Meeting.
On the Record Date there were 30,909,830 shares of Common Stock issued and
outstanding. Bancshares had no other class or securities outstanding at this
time.
1
<PAGE>
As provided in Bancshares' Certificate of Incorporation, holders of Common
Stock who beneficially own in excess of ten percent of the outstanding shares of
Common Stock (the "Limit") are not entitled to any vote with respect to shares
held in excess of the Limit. A person or entity is deemed to beneficially own
shares owned by an affiliate of, as well as by persons acting in concert with,
such person or entity. The Company's Certificate of Incorporation authorizes the
Board of Directors (i) to make all determinations necessary to implement and
apply the Limit, including determining whether persons or entities are acting in
concert and (ii) to demand that any person who is reasonably believed to
beneficially own stock in excess of the Limit supply information to the Company
to enable the Board of Directors to implement and apply the Limit.
The presence in person or by proxy of the holders of at least a majority of
the total number of shares of Common Stock entitled to vote (after subtracting
any shares in excess of the Limit) is necessary to constitute a quorum at the
Special Meeting. In the event there are not sufficient votes for a quorum or to
approve or ratify any proposal at the time of the Special Meeting, the Special
Meeting shall be adjourned in order to permit further solicitation of proxies.
VOTING PROCEDURES
The proposals described in the Proxy Statement require the affirmative vote
of a majority of the shares present or represented by proxy at the Special
Meeting. An abstention with respect to a proposal by a shareholder present or
represented at the Special Meeting will have the same effect as a vote against
that proposal. Broker non-votes, or votes in excess of the Limit, will not be
counted as present and entitled to vote, and have no effect on the vote on the
proposals.
Executed, unmarked proxies will be voted FOR all proposals.
For further information on the vote required to implement the proposal
during the first year following the conversion from the mutual holding company
form of organization to the stock form which was completed March 18, 1998 (the
"Conversion"), please see the discussion under Proposal I herein.
Proxies solicited hereby are to be returned to the Company's transfer
agent, American Stock Transfer & Trust Company. The Board of Directors has
designated Peabody & Brown, the Company's special counsel, to act as Inspector
of Election and tabulate votes at the Special Meeting. After the final
adjournment of the Special Meeting, the proxies will be returned to the Company.
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth information as of June 30, 1998, with
respect to ownership of the Company's Common Stock by: (i) the Harbor Federal
Savings Bank Employee Stock Ownership Plan (the "ESOP"); (ii) the executive
officers and directors of the Company; and (iii) all the directors and executive
officers of the Company as a group. Except for those listed below, and based on
the absence of any filings under Regulation 13D-G with the Securities and
Exchange Commission, Bancshares 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 the Common Stock.
2
<PAGE>
<TABLE>
<CAPTION>
Common Stock
Beneficially Owned(1)
-----------------------------
Name Title Number(2) Percent
---- ----- --------- -------
<S> <S> <C> <C>
Harbor Federal Savings Bank Employee
Stock Ownership Plan N/A 2,238,594 7.28
Bruce R. Abernethy, Sr. Vice Chairman of the Board 324,849(3)(12) 1.06
Richard N. Bird Director 112,687(8) *
Michael J. Brown, Sr. Director, President and Chief
Executive Officer 578,759(4) 1.88
Richard K. Davis Director 256,389(3)(5) *
Edward G. Enns Chairman of the Board 64,594(6) *
Frank H. Fee III Director 360,156(3)(13) 1.17
Richard B. Hellstrom Director 136,953(7) *
Don W. Bebber Senior Vice President 102,652(9) *
Robert W. Bluestone Senior Vice President 287,609 *
Albert L. Fort Senior Vice President 115,850(10) *
David C. Hankle Senior Vice President 187,054(11) *
Directors and Executive Officers as a
group (11 persons) N/A 2,527,552 8.22%
</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 Securities and Exchange Commission, and other information
known to Bancshares.
(3) Includes 131,804, 89,540 and 100,455 shares, respectively, held by the
Directors' Deferred Compensation Plan for the benefit of Messrs. Abernethy,
Davis and Fee.
3
<PAGE>
(4) Includes currently exercisable options to purchase 168,264 shares. Does not
include 33,745 shares held by spouse or 1,201 shares held in trust for the
benefit of grandchildren. Mr. Brown disclaims beneficial ownership of these
shares.
(5) Includes 65,634 shares held by Richard K. Davis Construction Corporation
Profit Sharing Fund and 2,000 shares held by Richard K. Davis Construction.
Does not include 22,292 shares owned by Nancy D. Davis, spouse. Mr. Davis
disclaims beneficial ownership of the 22,292 shares held by his spouse.
(6) Includes currently exercisable options to purchase 29,049 shares. Does not
include 36,211 shares held by spouse. Mr. Enns disclaims beneficial
ownership of the shares held by his spouse.
(7) Includes 12,018 shares held by spouse.
(8) Includes 25,557 shares held by spouse.
(9) Includes currently exercisable options to purchase 33,436 shares. Does not
include 2,002 shares held by spouse. Mr. Bebber disclaims beneficial
ownership of the shares held by his spouse.
(10) Does not include 22,574 shares held by spouse. Mr. Fort disclaims
beneficial ownership of the shares held by his spouse.
(11) Does not include 16,413 shares held by spouse and 24,433 shares held as
custodian for minor children. Mr. Hankle disclaims beneficial ownership of
all these shares.
(12) Includes currently exercisable options to purchase 59,192 shares. Does not
include 18,181 shares held by spouse. Mr. Abernethy disclaims beneficial
ownership of the shares held by his spouse.
(13) Does not include 9,004 shares held by spouse. Mr. Fee disclaims beneficial
ownership of the shares held by his spouse.
* Represents less than 1% of outstanding shares.
Board Meetings and Committees
The Board of Directors currently meets once a month and may have additional
special meetings. During the fiscal year ended September 30, 1997, the Board met
26 times. All Directors who served as directors during the fiscal year ended
September 30, 1997, attended at least 75% of Board meetings. All committee
members attended at least 75% of the meetings of their respective committees.
The standing committees include the following:
Audit Committee. The Audit Committee met three times during the fiscal year
ended September 30, 1997. The Audit Committee reviews the internal audit
department of the Bank as well as selecting the independent auditors for
Bancshares. It also has oversight of the Bank's internal control structure and
financial reporting as well as review of the Bank's annual audit plan. This
committee currently consists of Messrs. Bird, Davis, and Fee.
Nominating Committee. The Nominating Committee nominates candidates for
vacancies for the office of director. The Committee met once in fiscal 1997 and
consists of Messrs. Enns, Abernethy, Bird, Hellstrom and Brown.
4
<PAGE>
Compensation Committee. The Compensation Committee met four (4) times in
fiscal 1997. It reviews and discusses employee performance and prepares
recommendations for annual salary adjustments and bonuses. The Committee also
administers the Bank's stock benefit plans. It will administer the 1998 Stock
Incentive Plan if it is approved by stockholders pursuant to Proposal I, herein.
This committee consists of Messrs. Abernethy, Enns, and Hellstrom.
Credit Committee. The Credit Committee was established in November of 1997.
It was established to evaluate and take action on credit applications that
represent a total exposure over a certain threshold. The Committee meets on an
as-needed basis and consists of Directors Abernethy, Bird, Davis, Enns, Fee and
Hellstrom.
Directors' Fees
Directors receive a monthly fee of $1,855 for serving on the Board.
Directors Abernethy and Fee defer their compensation through the Directors'
Unfunded 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, Edward G. Enns, receives an additional $460 per month and
the Vice-Chairman, Bruce R. Abernethy, Sr., receives an additional $210 per
month. The Chairman and Vice-Chairman devote approximately 10% and 8%,
respectively, of their professional time to the affairs of the Company.
President Brown receives no fees for serving on the Board of Directors.
Director Retirement Plan
Bancshares 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). In 1996,
the Board discontinued this plan on a prospective basis. Directors who were
elected to the Board after 1996, such as Richard N. Bird, are not eligible to
participate in this plan.
Directors' Unfunded Deferred Compensation Plan
The Unfunded Deferred Compensation Plan for Directors (the "Directors'
Deferred Compensation Plan") provides that a director 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 ceases to be a director. 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. As of
June 30, 1998, the Directors' Deferred Compensation Plan held 131,804, 89,540,
and 100,445 shares of 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. Currently Directors Abernethy
and Fee are deferring director fees pursuant to the Directors' Deferred
Compensation Plan.
Interest of Certain Persons in Matters to be Acted Upon
Upon obtaining stockholder approval, non-employee directors, officers and
employees of Bancshares and the Bank will be eligible to receive, at no cost,
stock options ("Options") and restricted stock awards ("RRP
5
<PAGE>
Stock") in the form of shares of Common Stock, at no cost, under the Plan. As of
the date of this Proxy Statement no determination has been made regarding the
granting of Options and RRP Stock under the Plan.
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 in each of the last three fiscal years. No other executive
officer of the Company or the Bank served as President or earned a total salary
and bonus in excess of $100,000 during these three fiscal years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
All Other
Annual Compensation Long Term Compensation Compensation($)(2)
------------------- ---------------------- ------------------
Restricted
Name and Stock
Principal Position Year(1) Salary($) Bonus($) Awards($) Options(#)(3)
------------------ ------- --------- -------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
Michael J. Brown, Sr. 1997 $250,057 $23,804 $0 18,028 $127,709
President 1996 235,550 22,260 0 12,019 98,996
1995 220,833 25,440 0 0 55,453
Robert W. Bluestone 1997 $127,083 $12,250 $0 0 $8,375
Senior Vice President - 1996 121,717 11,780 0 3,005 10,510
Retail Banking 1995 116,950 11,270 0 0 10,347
David C. Hankle 1997 $126,083 $12,150 $0 0 $11,852
Senior Vice President - 1996 120,717 11,680 0 3,005 14,194
Credit Administration/ 1995 115,967 11,180 0 0 14,387
Commercial Lending
Don W. Bebber 1997 $110,333 $10,450 $0 0 $9,162
Senior Vice President- 1996 102,917 9,500 0 3,005 11,033
Chief Financial 1995 92,500 16,000 0 0 11,047
Officer
Albert L. Fort 1997 $100,283 $9,670 $0 0 $10,218
Senior Vice President- 1996 96,392 9,485 0 3,005 12,286
Marketing/Operations 1995 94,242 9,120 0 0 13,514
</TABLE>
- ----------
6
<PAGE>
(1) The Company and the Bank's fiscal years each end September 30.
(2) For fiscal 1997 consists of insurance payments of $6,113, $2,536, $4,155,
$4,173 and $4,082 and contributions to the ESOP in the equivalent amount of
$6,478, $5,839, $5,792, $4,989 and $4,669 for Messrs. Brown, Bluestone,
Hankle, Bebber and Fort, respectively. Additionally, the Bank contributed
$2,018, $1,905 and $1,467 to Messrs. Brown, Hankle and Fort, respectively,
pursuant to the Bank's 401(k) Profit Sharing Plan and Trust. The Bank also
contributed $113,100 to fund Mr. Brown's Supplemental Executive Retirement
Plan. Other personal benefits provided by the Company or the Bank 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.
(3) Includes options awarded pursuant to the Harbor Federal Savings Bank 1994
Incentive Stock Option Plan. All share awards have been restated to take
into account the Conversion, whereby each share of Harbor Florida Bancorp,
Inc. common stock was exchanged for 6.0094 shares of the Common Stock.
----------
Option Grants in Last Fiscal Year. The following table provides information
on option grants in fiscal 1997 to Mr. Brown. No other executive officer
received option grants during fiscal 1997.
<TABLE>
<CAPTION>
Potential Realizable Value
at Assumed Annualized
Rates of Stock Price
Appreciation
Individual Grants for Option Term(1)
------------------------------------------------------------ --------------------------
% of Total
Options
Date Number of Granted to Exercisable
of Options Employees in Price Per Expiration
Name Grant(2) Granted(3) Fiscal Year Share(4) Date 5% 10%
---- -------- ---------- ----------- -------- ---- -- ---
<S> <C> <C> <C> <C> <C> <C> <C>
Michael J. Brown, Sr. 1/6/97 18,028 66.67% $5.65 1/6/07 $64,360 $162,793
</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 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 the Common Stock or of the stock price. To lend perspective to the
illustrative potential realized value, if the Common Stock price adjusted
for the Conversion increased 5% per year for ten years from its closing
price on Monday, January 6, 1997, $5.65 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 $9.22 per
share for an increase of $3.57 per share; and if the stock increased 10%
per year over such period, the ending stock price would be $14.68 per share
for an increase of $9.03 per share. On August 7, 1998, the closing price of
the Common Stock was $12.125.
7
<PAGE>
(2) 17,487 of the options granted on January 6, 1997, first become exercisable
on January 6, 2002. The remaining 541 options first become exercisable on
January 6, 2003.
(3) Includes options awarded pursuant to the Harbor Federal Savings Bank 1994
Incentive Stock Option Plan. All share awards have been restated to take
into account the Conversion, whereby each share of Harbor Florida Bancorp,
Inc. common stock was exchanged for 6.0094 shares of the Common Stock.
(4) The exercise price is equal to the Conversion adjusted closing price on
Monday, January 6, 1997, or $5.65 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 1997 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, 1997, and the aggregate gains that would have been
realized had these options been exercised on September 30, 1997, even though
these options were not exercised, and the unexercised options could not have
been exercised, on September 30, 1997. All per share numbers are adjusted for
the Conversion whereby all existing shares of Harbor Florida Bancorp, Inc. were
exchanged for 6.0094 shares of Common Stock.
<TABLE>
<CAPTION>
Shares Acquired
On Exercise Number of Shares Value of Unexercised
During Fiscal Value Covered by Unexercised In-The-Money
Name 1997 Realized(1) Options on 9/30/97 Options As Of 9/30/97(2)
---- ---- ----------- ------------------ ------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Michael J. Brown, Sr. 24,037 $106,003 132,207 124,996 $1,012,706 $957,469
Don W. Bebber 0 0 19,086 31,706 146,199 242,868
Robert W. Bluestone 14,350 57,257 0 31,706 0 242,868
Albert L. Fort 14,350 83,087 0 31,706 0 242,868
David C. Hankle 6,009 26,500 28,028 31,706 214,694 242,868
</TABLE>
- ----------
(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 and then
adjusted for the Conversion. All options exercised had an adjusted exercise
price of $1.66 per share. Mr. Brown exercised 24,037 options on April 21,
1997, when the adjusted market price of the common stock was $6.07 per
share. Mr. Bluestone exercised 14,350 options on January 6, 1997, when the
adjusted market price of the common stock was $5.65 per share. Mr. Fort
exercised 14,350 options on July 24, 1997, when the adjusted market price
of the common stock was $7.45 per share. Mr. Hankle exercised 6,009 options
on April 15, 1997, when the adjusted market price of the common stock was
$6.07 per share.
8
<PAGE>
(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 Tuesday,
September 30, 1997, at which date the last sale of the common stock as
quoted on the NASDAQ National Market was at $56.00 per share or $9.32 after
adjustment pursuant to the Conversion.
----------
Employee Stock Ownership Plan. In 1994, the Bank established the ESOP for
employees age 21 or older who have at least one year of credited service with
the Bank. Following the creation of Bancshares, investments in the Harbor
Florida Bancorp, Inc., and previously the Bank's, common stock by the ESOP were
exchanged for Common Stock.
As of June 30, 1998, the ESOP held 2,238,594 shares of Common Stock. These
shares represent both those received by the ESOP in exchange for shares of
Harbor Florida Bancorp, Inc. common stock held before the Conversion and as well
as shares purchased by the ESOP in the Conversion. Shares of Common Stock
purchased by the ESOP were funded by borrowed funds from Bancshares in the
Conversion.
The ESOP is administered by an unaffiliated corporate trustee in
conjunction with the Compensation Committee of the Board. The ESOP trustee must
vote all allocated shares held by the ESOP in accordance with the instructions
of participating employees. Shares for which employees do not give instructions
will be voted by the ESOP trustee.
GAAP requires that any third party borrowing by the ESOP be reflected as a
liability on Bancshares' statement of financial condition. Since the ESOP is
borrowing from Bancshares, such obligation is eliminated in consolidation.
However, the cost of unallocated shares are treated as a reduction of
shareholders' equity. However, should the ESOP purchase new shares of Common
Stock from Bancshares, per share shareholders' equity and per share net earnings
would decrease because of the increase in the number of outstanding shares.
Contributions to the ESOP and shares released from the suspense account
will be allocated among ESOP participants on the basis of participants'
compensation as it relates to total participant compensation. Employees are
fully vested upon completion of five years of service. Benefits may be payable
upon retirement, early retirement, disability, death or separation from service.
The ESOP is subject to the requirements of ERISA and the regulation of IRS
and the Department of Labor.
Pension Plan. The Bank provides a noncontributory, defined benefit pension
plan through the Financial Institutions Retirement Fund of White Plains, New
York (the "Pension Plan") which covers all full-time 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 the Bank. 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.
9
<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 $160,000.
As of September 30, 1997, Messrs. Brown, Bebber, Bluestone, Fort and Hankle
have 21, 21, 19, 13 and 11 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
$113,100 in fiscal 1997.
Employment Agreement. The Board of Directors entered into a three-year
employment agreement with President Brown effective January 6, 1994. On November
26, 1997, the Board voted to approve an extension of this agreement effective
January 6, 1998, with a new initial term to continue through January 6, 2001.
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 the Company or the
Bank and certain other perquisites.
In the event the Company or the Bank 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 the
Bank, for the balance of the term of the agreement. Mr. Brown's agreement 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 the Bank's of Bancshares' assets and liabilities. Should
one of these events occur, the Bank'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 the Bank. 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
10
<PAGE>
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 canceled. Total amounts paid to Mr. Brown under this provision of the
agreement with the Bank 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.
Change In Control Agreements. As of March 18, 1998, Bancshares and the Bank
entered into Change in Control Agreements with each of Messrs. Bluestone,
Bebber, Hankle and Fort. These agreements provide that, should the officer be
terminated by Bancshares or the Bank within one year following a change in
control of Bancshares or the Bank (other than termination for cause as defined
these agreements), he will receive one year's salary and continue to participate
in the certain employee benefit programs of Bancshares and the Bank for 12
months following his termination. The aggregate payments under these agreements,
presuming a termination not for cause, are dependent upon the employees' salary
and level of benefits at the time of a change in control. If all four (4) senior
vice presidents were terminated not for cause during fiscal 1998, the total
payment would be $496,259. These agreements have an initial three year term and
may be extended by the Board of Directors.
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 the Bank or Bancshares.
None of the above are members of a compensation committee of the Board of
Directors of any company other than Bancshares and the Bank.
PROPOSAL I - APPROVAL OF HARBOR FLORIDA BANCSHARES
1998 STOCK INCENTIVE PLAN
The Harbor Florida Bancshares 1998 Stock Incentive Plan (the "Stock
Incentive Plan") authorizes up to 2,322,145 shares of Common Stock to be made
available to non-employee directors, officers and employees as options
(incentive or nonqualified) (collectively, "Options"), or restricted stock
("Recognition and Retention Plan Stock" or "RRP Stock") as described below.
Options under the Stock Incentive Plan are rights to purchase Common Stock at a
fixed price set forth in an option agreement, generally the fair market value at
the date of grant. RRP Stock is an award of actual stock subject to forfeiture
provisions if the recipient leaves the Company or the Bank before a specified
number of years. The purpose of the Stock Incentive Plan is to attract and
retain qualified personnel in key positions and provide officers, employees and
non-employee directors with a proprietary interest in Bancshares as an incentive
to contribute to the success of Bancshares. Additionally, the Stock Incentive
Plan serves to promote the attention of management to stockholders' concerns and
to reward employees for outstanding performance. The following is a summary of
the material terms of the Stock Incentive Plan, which is qualified in its
entirety by the complete provisions of the Stock Incentive Plan, attached hereto
as Exhibit A.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE HARBOR FLORIDA BANCSHARES
1998 STOCK INCENTIVE PLAN UNDER THIS PROPOSAL I
General. The Stock Incentive Plan authorizes the granting of options to
purchase Common Stock and awards of RRP Stock. The maximum number of shares
reserved for purchase pursuant to the exercise of options is 1,658,675 shares,
provided such number is not in excess of 5.40% of the outstanding shares of
Common Stock as of the effective date of the Stock Incentive Plan. The maximum
number of the shares reserved for the award of RRP Stock is 663,470 shares,
provided such number is not in excess of 2.16% of the outstanding shares of
Common Stock as of the effective date of the Stock Incentive Plan. All officers,
employees and non-employee
11
<PAGE>
directors of the Company and its affiliates are eligible to receive awards under
the Stock Incentive Plan. The Stock Incentive Plan will be administered by the
Compensation Committee of the Company (the "Committee"). Authorized but unissued
shares or shares previously issued and reacquired by the Company may be used to
satisfy the awards under the Stock Incentive Plan. If authorized but unissued
shares are utilized to fund the grant of RRP Stock or the exercise of options
granted under the Stock Incentive Plan, it will result in an increase in the
number of shares outstanding and will have a dilutive effect on the holdings of
existing stockholders. Management's current intention is to purchase Common
Stock from market sources in order to fund the grants to RRP Stock. However,
management's intention is based on current market conditions and is subject to
change.
Stock Option Awards. The Stock Incentive Plan permits the award of Options
to employees and officers of the Bank or the Company in the form of either
incentive options qualified under ss. 422 of the Code ("Incentive Stock Options"
or "ISO") or as nonqualified stock options. Non-employee directors are only
eligible to receive grants of non-qualified stock options. Under the Stock
Incentive Plan, the Committee will determine which non-employee directors,
officers and employees will be granted Options, whether such Options will be
ISOs or nonqualified stock options, and when such Options can be exercised.
Under the terms of the Stock Incentive Plan, any Option granted prior to March
18, 1999, may not vest in annual installments of greater than 20% of the number
of shares underlying the Option award. Vesting must not commence earlier than at
least one year from the date of the grant. Finally, the vesting of such Options
may not be accelerated, except in the case of death or disability. The exercise
price of all Incentive Stock Options must be on 100% of the fair market value of
the underlying Common Stock at the time of grant, except as provided below. The
criteria used for the award of Options will be determined by the Committee. The
Committee may take into account job duties and responsibilities, seniority, job
performance, and a comparison of similar awards by companies comparable to the
Company when granting Options to officers, employees and directors.
Incentive Stock Options may only be granted to officers and employees. In
order to qualify as Incentive Stock Options under Section 422 of the Code, the
exercise price must not be less than 100% of the fair market value of the
underlying Common Stock on the date of the grant and the term of the Option may
not exceed ten years from the date of grant. Incentive Stock Options granted to
any person who is the beneficial owner of more than 10% of the outstanding
Common Stock may be exercised only for a period of five years from the date of
grant and the exercise price must be at least equal to 110% of the fair market
value of the underlying Common Stock on the date of grant.
The Stock Incentive Plan permits the Committee to grant, in its discretion,
non-qualified options at fair market value to directors, as well as to officers
and employees. No awards of any nature are specifically contemplated at this
time. Unless sooner terminated, the Stock Incentive Plan will be in effect for a
period of ten years from the date of approval by Bancshares' stockholders.
Tax Treatment of Options. An recipient will generally not be deemed to have
recognized taxable income upon grant or exercise of any Incentive Stock Option,
provided that shares transferred in connection with the exercise are not
disposed of by the optionee for at least one year after the date the shares are
transferred in connection with the exercise of the option and two years after
the date of grant of the option. If certain holding periods are satisfied, upon
disposal of the Common Stock, the aggregate difference between the per share
option exercise price and the fair market value of the Common Stock is
recognized as income taxable at long-term capital gains rates. No compensation
deduction may be taken by the Company as a result of the grant or exercise of
Incentive Stock Options, assuming these holding periods are met.
For nonqualified stock options and, in the case of a disqualifying
disposition of an Incentive Stock Option, a recipient will be deemed to receive
ordinary income upon exercise of the stock option in an amount equal to the
amount by which the exercise price of the option is exceeded by the fair market
value of the Common Stock purchased by exercising an option on the date of
exercise. The amount of any ordinary income deemed to
12
<PAGE>
be received by an optionee upon the exercise of a nonqualified stock option, or
due to a disqualifying disposition of an Incentive Stock Option, would be a
deductible expense for tax purposes by Bancshares.
As of August 7, 1998 the closing price per share of the Common Stock as
reported on the NASDAQ National Market was $12.125.
Recognition and Retention Plan Stock Awards. The Stock Incentive Plan also
permits the use of Recognition and Retention Plan Stock awards ("RRP Stock").
Under the terms of the Stock Incentive Plan up to 663,470 of the shares
contained in the Stock Incentive Plan are available for awards as RRP Stock. The
terms of the RRP Stock awards shall be set by the Committee at the time of
grant; however, pursuant to OTS policy, any RRP Stock granted prior to March 18,
1999, may not vest at a rate greater than 20% per year nor begin to vest sooner
than one year from the date of grant. The vesting of any RRP Stock so granted
may not be accelerated, except in the case of death or disability. The use of
RRP Stock is intended to enable the Company and the Bank to retain personnel of
experience and ability in key positions of responsibility.
Restricted stock awards to officers, employees and non-employee directors
will be granted based upon a number of factors to be determined by the
Committee, including seniority, job duties and responsibilities, job
performance, and a comparison of similar awards by companies comparable to the
Company. Common Stock used for RRP Stock awards may be authorized but unissued
shares or previously issued shares of Common Stock repurchased by the Company.
Tax Treatment of RRP Stock. Recipients of the RRP Stock will recognize
income for the taxable years in which stock becomes vested without restriction,
unless the recipients elect to be taxed in an earlier year before the RRP Stock
is vested. The Company will receive a tax deduction for the fair market value of
the shares when included in income by recipients. Any increase in the value of
the Common Stock would increase the tax deduction taken by the Company. Likewise
a decrease in the value of the Common Stock would decrease the tax deduction
taken by the Company.
Amendment, Termination or Revision of the Stock Incentive Plan. The
Committee may amend or terminate the Stock Incentive Plan at any time. Such
amendments are required to be approved by stockholders in accordance with
applicable law and regulation if such approval is required to satisfy
requirements of the Securities and Exchange Commission under Rule 16b-3 under
the Securities Exchange Act of 1934 or other regulatory requirements. The Stock
Incentive Plan terminates ten years after its effective date. Options cannot be
revised unless, consistent with the terms of the Stock Incentive Plan, the
recipient consents. The Stock Incentive Plan also permits Options which expire
to be reissued. The Stock Incentive Plan permits adjustment by the Committee of
the number of shares to reflect reclassification, recapitalization or similar
capital change. The adjustments by the Committee shall be conclusive and binding
on the Company and any participants. The Committee's adjustments are designed to
maintain the same proportion for the number of shares which existed before the
event requiring adjustment.
Stockholder Approval. The Stock Incentive Plan complies with the
regulations of the Office of Thrift Supervision ("OTS"). The OTS has not
endorsed or approved of the Stock Incentive Plan. Pursuant to OTS regulations,
the Stock Incentive Plan may not be implemented prior to March 18, 1999, unless
it is approved by the affirmative vote of the holders of a majority of the total
votes eligible to be cast by the Company's stockholders at a duly called meeting
of stockholders held no earlier than six months after completion of the
Conversion.
The Stock Incentive Plan provides that it shall become effective upon the
earlier of: (i) the date that it is approved by a majority of votes eligible to
be cast by the Company's stockholders at a duly called meeting of stockholders;
or (ii) March 18, 1999. Accordingly, if the Stock Incentive Plan is not approved
by a majority of
13
<PAGE>
the votes eligible to be cast by stockholders at the Special Meeting, the Stock
Incentive Plan, and any grants thereunder, may become effective on March 18,
1999, without further stockholder approval, unless it is terminated by the Board
of Directors. However, in the absence of approval of the Stock Incentive Plan by
a majority of votes cast at the Special Meeting, the Board of Directors will
review applicable law before implementation of the Stock Incentive Plan. If the
Board determines to implement the Stock Incentive Plan under such circumstances,
the Options awarded under the Stock Incentive Plan would not qualify as
Incentive Stock Options under the Code, and the Company's qualification to have
the Common Stock traded on the Nasdaq National Market could be adversely
affected.
NEW PLAN BENEFITS
As of the date of this Proxy Statement, no determination has been made
regarding the granting of RRP Stock or Options under the Stock Incentive Plan.
However, under OTS regulations governing stock incentive plans adopted within
one year of conversion, or March 18, 1999, in the case of Bancshares, no
individual employee may receive more than 25% of the shares of any plan and
non-employee directors may not receive more than 5% of any plan individually or
30% in the aggregate for all directors. Any grants made under the Stock
Incentive Plan will comply with these limitations.
PROPOSAL II - APPROVAL OF ADJOURNMENT OF THE
SPECIAL MEETING
In the event that there are not sufficient votes to approve the foregoing
proposal at the time of the Special Meeting, such proposal could not be approved
unless the Special Meeting were adjourned in order to permit further
solicitation of proxies. In order to allow proxies that have been received by
the Company at the time of the Special Meeting to be voted for such adjournment,
if necessary, the Company has submitted as Proposal II the question of
adjournment under such circumstances to its stockholders as a separate matter
for their consideration. The Board of Directors recommends that stockholders
vote their proxies in favor of such adjournment under this Proposal II so that
their proxies may be used for such purpose in the event it should become
necessary. If it is necessary to adjourn the Special Meeting and the adjournment
is for a period of fewer than 30 days, no notice of the time and place of the
adjourned meeting or of the business to be transacted at the adjourned meeting
is required to be given to stockholders other than an announcement of such at
the Special Meeting.
Approval of adjournment, if necessary, under this Proposal II requires the
affirmative vote by the holders of a majority of the shares of common stock
represented at the Special Meeting and entitled to vote.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE
FOR THE ADJOURNMENT OF THE MEETING UNDER PROPOSAL II.
OTHER BUSINESS
As of the date of this Proxy Statement, the Board of Directors of the
Company knows of no matters to be brought before the Special Meeting other than
procedural matters incident to the conduct of the Special Meeting. If further
business is properly presented, the proxy holders will vote proxies, as
determined by a majority of the Board of Directors.
14
<PAGE>
STOCKHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
Since no annual meeting of stockholders at which a proxy statement was
distributed has been previously held by the Company, a stockholder proposal must
be received by a reasonable time before the proxy solicitation for such annual
meeting is made in order to be considered for inclusion in the Company's proxy
statement and form of proxy relating to the 1999 Annual Meeting of Stockholders.
Any such proposal will be subject to 17 C.F.R. ss. 240.14a-8 of the Rules and
Regulations under the Securities Exchange Act of 1934, as amended.
NOTICE OF BUSINESS TO BE CONDUCTED AT
A SPECIAL OR ANNUAL MEETING
The bylaws of the Company set forth the procedures by which a stockholder
may properly bring business before a meeting of stockholders. Pursuant to the
Bylaws, only business brought by or at the direction of the Board of Directors
may be conducted at a special meeting. The Bylaws of the Company provide an
advance notice procedure for a stockholder to properly bring business before an
annual meeting. The stockholder must give written advance notice to the
Secretary of the Company not less than one hundred twenty (120) days before the
date originally fixed for such meeting; provided, however, that in the event
that less than one hundred (100) days notice or prior public disclosure of the
date of the meeting is given or made to stockholders, notice by the stockholder
to be timely must be received not later than the close of business on the tenth
day following the date on which the Company's notice to stockholders of the
annual meeting date was mailed or such public disclosure was made. The advance
notice by stockholders must include the stockholder's name and address, as they
appear on the Company's record of stockholders, a brief description of the
proposed business, the reason for conducting such business at the annual
meeting, the class and number of shares of the Company's capital stock that are
beneficially owned by such stockholder and any material interest of such
stockholder in the proposed business. Nothing in this paragraph shall be deemed
to require the Company to include in its proxy statement or the proxy relating
to any annual meeting any stockholder proposal which does not meet all of the
requirements for inclusion established by the Securities and Exchange Commission
in effect at the time such proposal is received.
Whether or not you intend to be present at the Special Meeting, you are
urged to return your proxy card promptly. If you are then present at the Special
Meeting and wish to vote your shares in person, your original proxy may be
revoked by voting at the Special Meeting. However, if you are a stockholder
whose shares are not registered in your own name, you will need appropriate
documentation from your recordholder to vote personally at the Special Meeting.
By Order of the Board of Directors
/s/ Michael J. Brown, Sr.
Michael J. Brown, Sr.
President and CEO
Fort Pierce, Florida
August 12, 1998
15
<PAGE>
EXHIBIT A
HARBOR FLORIDA BANCSHARES, INC.
1998 Stock Incentive Plan for Directors, Officers and Employees
This 1998 Stock Incentive Plan (the "Plan") governs: (i) grants of options
to purchase shares of the common stock, $0.10 par value (the "Common Stock") of
Harbor Florida Bancshares, Inc. (the "Company" or "Bancshares") ("Options"), and
(ii) awards of restricted Common Stock ("Recognition and Retention Plan Stock"
or "RRP Stock") by the Company to directors, officers and employees of the
Company or Harbor Federal Savings Bank (the "Bank"). The Plan is intended to
provide additional incentives to promote the future success and growth of the
Company by providing participants with a direct stake in the Company and, in the
case of officers and employees, to encourage qualified persons to seek and
accept employment with the Company. The Plan will be effective on the earlier of
March 18, 1999, or the date that the Plan is approved by stockholders of
Bancshares (the "Effective Date").
I. Administration of the Plan.
(a) The Personnel Committee of Bancshares (the "Committee") shall
administer the Plan. The Committee shall at all times consist of two or more
disinterested directors of the Company, who shall be appointed by the Board of
Directors. A member of the Board of Directors shall be deemed to be
"disinterested" only if he satisfies (i) such requirements as the Securities and
Exchange Commission may establish for non-employee directors administering plans
intended to qualify for exemption under Rule 16b-3 (or its successor) under the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and (ii) such
requirement as the Internal Revenue Service may establish for outside directors
acting under plans intended to qualify for exemption under Section 162(m)(4)(C)
of the Internal Revenue Code of 1986, as amended (the "Code"). The Board of
Directors may also appoint one or more separate committees of the Board of
Directors, each composed of one or more directors of the Company who need not be
disinterested and who may grant awards and administer the Plan with respect to
employees and directors who are not considered officers or directors of the
Company under Section 16 of the Exchange Act or for whom awards are not intended
to satisfy the provisions of Section 162(m) of the Code.
(b) Within the limits of the Plan, the Committee shall determine the
individuals to whom, and the times at which, Options shall be granted and awards
made, the type of Option to be granted and the number of shares subject to each
Option or award. The Committee may establish such rules as it deems necessary
for the proper administration of the Plan, make such determinations and
interpretations with respect to the Plan and Options granted hereunder as may be
necessary or desirable and include such further provisions or conditions in such
Options as it deems advisable. Any determination or interpretation made by the
Committee hereunder shall be conclusive and binding upon both the Company and
the participant.
II. Shares Subject to the Plan.
(a) Subject to adjustment as provided in section (b), below, the maximum
number of shares reserved for RRP Stock under the Plan is 663,470, which number
shall not exceed 2.16% of the outstanding shares of the Common Stock determined
immediately as of the Effective Date. Subject to adjustment as provided in
section (b), below, the maximum number of shares reserved hereby for purchase
pursuant to the exercise of Options and option-related Awards granted under the
Plan is 1,658,675, which number shall not exceed 5.40% of the outstanding shares
of Common Stock as of the Effective Date. The shares of Common Stock issued
under the Plan may be either authorized but unissued shares or authorized shares
previously issued and reacquired by the Company. To the extent that Options and
RRP Stock are granted under the Plan, the shares underlying such awards will be
unavailable for any other use including future grants under the Plan except
that, to the extent that RRP Stock or Options terminate, expire, or are
forfeited without having vested or without having been exercised, new awards may
be made with respect to these shares.
A-1
<PAGE>
(b) In the event of a stock dividend, split, combination or
reclassification of shares, recapitalization or other similar capital change
relating to the Common Stock, the aggregate number and kind of shares or
securities of the Company that may be issued under the Plan and the price of
such shares, shall be appropriately adjusted by the Committee (whose
determination shall be conclusive and binding upon both the Company and the
participant) so that the proportionate number of shares or securities shall be
maintained as before the occurrence of such event.
(c) Whenever Options or RRP Stock under the Plan lapse or terminate or
otherwise become unexercisable, the shares of Common Stock that were subject to
such Options may again be made subject to Options under the Plan. The Company
shall at all times while the Plan is in force reserve such number of shares of
Common Stock as will be sufficient to satisfy the requirements of the Plan.
III. Participants.
Options and RRP Stock may be granted to directors, officers and other
employees provided that the Committee may exclude any individual from
eligibility under the Plan. The foregoing notwithstanding, Incentive Stock
Options may be awarded only to persons eligible under the Code.
IV. Options.
(a) Options may be granted under the Plan either as Incentive Stock Options
under Section 422 of the Code (or any successor section), or as non-statutory
stock options. Options may be granted from time to time by the Committee,
provided that no Incentive Stock Option shall be granted hereunder after 10
years from the Effective Date hereof, or if the limitation of $100,000 set forth
in the Code on the aggregate fair market value of Common Stock underlying
Incentive Stock Options exercisable for the first time by a participant in any
calendar year (or such other limitation as the Code may prescribe) would be
exceeded. The granting date for each Option shall be the date on which it is
approved by the Committee, or such later date as the Committee may specify.
Options granted hereunder shall be evidenced by stock option certificates in
such form not inconsistent with the Plan (which in the case of Incentive Stock
Options shall conform to the requirements for an Incentive Stock Option
contained in the Code) as the Committee may from time to time determine. The
form of such Options may vary among optionees.
(b) 1. In the case of Incentive Stock Options, the price per share at which
Common Stock may from time to time be optioned shall be determined by the
Committee at the time of grant, provided that such price shall not be less than
100 percent of the fair market value (110 percent in the case of employees who
own or are deemed to own more than 10 percent of the total combined voting power
of all classes of stock of the Company or any subsidiary of the Company) of a
share of Common Stock on the granting date as reasonably determined by the
Committee in good faith (or such other minimum price as the Committee may
prescribe).
2. In the case of non-statutory stock options the price per share at which
Common Stock may from time to time be optioned shall be determined by the
Committee at the time of grant provided that such price shall not be less than
100 percent of the fair market value of a share of Common Stock on the granting
date as reasonably determined by the Committee in good faith (or such other
minimum price as the Committee may prescribe).
3. Common 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 (i) cash or (ii) 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 Bancshares shall deliver to the optionee (or other person
entitled to exercise the Option) a certificate or certificates for such shares.
A-2
<PAGE>
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 Bancshares' obligation to issue or transfer Common Stock upon the exercise of
an Option that the optionee pay, or make provision satisfactory to Bancshares
for the payment of, any taxes (other than stock transfer taxes) which Bancshares
is obligated to collect with respect to the issue or transfer of Common Stock
upon such exercise.
(c) The Committee shall determine the term of all Options (provided in the
case of an Incentive Stock Option that the term shall not be greater than the
term prescribed by the Code, which is currently by 5 years in the case of
employees who own or are deemed to own more than 10 percent of the total
combined voting power of all classes of stock of the Company or any subsidiary
of the Company and 10 years in the case of other employees), the time or times
that Options are exercisable and whether they are exercisable in installments.
Such determination shall be made in compliance with Section IX hereof.
V. Other Provisions Relating to Options.
(a) Incentive Stock Options granted under the Plan shall not be
transferable by the holder thereof otherwise than by will or the laws of descent
and distribution. Each Incentive Stock Option shall be exercisable, during a
participant's lifetime, only by him or her. Non-statutory stock options shall
not be transferable by the holder thereof except that non-statutory stock
options that are vested may be transferred without exercise to members of the
recipient's "immediate family," as such term is defined in Rule 16a-1(e) of the
Exchange Act rules. After a participant's death, an Option shall be exercisable
only by the executor, administrator or other legal representative of the estate
of the participant (the "Representative").
(b) In the event of a consolidation or merger of the Company or the Bank
with another corporation, the sale or exchange of all or substantially all the
assets of the Company or the Bank or a reorganization or liquidation of the
Company or the Bank, each holder of any outstanding and vested Option shall be
entitled to receive upon exercise and payment in accordance with the terms of
the Option the same shares, securities or property that such holder would have
been entitled to receive upon the occurrence of such event if such holder had
been, immediately prior to such event, the holder of the number of shares of
Common Stock purchasable under his or her Option or, if another corporation
shall be the survivor, such corporation shall substitute therefor substantially
equivalent shares, securities or property of such other corporation.
(c) In the event that the Committee shall at any time prior to the exercise
in full by a participant of Options held by him or her (and regardless of
whether such participant is then in the employ of or is a director of the
Company or the Bank) determine that such participant either before or after the
termination of his or her employment or directorship with the Company or the
Bank has committed an act of misconduct for which such participant (if the
participant had been an employee) could have been discharged for cause by the
Company or the Bank or has participated or engaged in any business activity
determined by the Committee to be in any way harmful or prejudicial to the
interests of the Company or the Bank, such Options shall forthwith terminate,
and notwithstanding any other provisions hereof, such participant shall not
thereafter be entitled to exercise such Options in whole or in part. Any
determination made by the Committee hereunder shall be conclusive and binding
upon both the Company and the participant.
(d) In the case of a participant who is a director and who terminates
service as a director for any reason before having exercised all granted
Options, such Options may be exercised in whole or in part within one year of
the date of termination to the extent exercisable on the date of termination. If
a participant's employment with the Company or the Bank or any subsidiary
corporation, or a corporation (or parent or subsidiary corporation of such
corporation) issuing or assuming a stock option in a transaction to which
Section 424(a) of the Code (or
A-3
<PAGE>
any successor section) applies, is terminated for any reason otherwise than by
his or her death or disability (within the meaning of Section 22(e)(3) of the
Code (or any successor section)), he or she may exercise the Options that he or
she had been granted hereunder to the extent exercisable at the time of such
termination only within 90 days from the date of termination. If a participant's
employment is terminated by reason of disability, such Options may be exercised
within one year from the date of termination to the extent exercisable on the
date of termination. Upon the death of a participant, the participant's
Representative shall have the right, at any time within two years after the date
of death, to exercise in whole or in part any Options that were available to the
participant at the time of his or her death. If a Participant's employment is
terminated by reason of disability or death, all options awarded to the
Participant but not yet vested or exercisable shall be become immediately vested
and exercisable. Notwithstanding the foregoing, no Option shall be exercisable
after the expiration of the applicable exercise period.
(e) The Committee may modify or extend, subject to the terms and conditions
and within the limitations of the Plan, and subject to the Code in the case of
Incentive Stock Options, outstanding Options (to the extent unexercised) and
authorize the granting of new Options in substitution therefor. Without limiting
the generality of the foregoing, the Committee may grant to a participant, if he
or she is otherwise eligible and consents thereto, a new or modified Option in
lieu of an outstanding Option for a number of shares at an exercise price and
for a term that are greater or less than under the earlier Option and may do so
by cancellation and re-grant, amendment, substitution or otherwise, subject only
to the general limitations and conditions of the Plan. No modification of an
Option shall, without the consent of the participant, adversely affect his or
her rights under any Option theretofore granted under the Plan.
(f) Options may be granted under the Plan in substitution for Options held
by employees of a corporation who become employees of the Company or the Bank or
any subsidiary corporation of the Company or the Bank eligible to receive
options under the Plan as a result of an acquisition transaction. The terms and
conditions of the substitute Options granted may vary from those set forth in
the Plan to the extent deemed appropriate by the Committee to conform to the
provisions of the Options for which they are substituted.
VI. Recognition and Retention Plan Stock.
(a) Notice. The Committee shall promptly provide each director, officer or
other employee designated by the Committee to receive RRP Stock ("Recipient")
with written notice setting forth the amount of the award, the vesting schedule
of the award, and such other terms and conditions of the award as may be
considered appropriate by the Committee.
(b) Restrictions. The shares of Common Stock transferred pursuant to an
award of RRP Stock shall be subject to the following restrictions:
1. No shares of Common Stock subject to awards granted under the Plan
may be sold, transferred, assigned, pledged, encumbered or otherwise
alienated or hypothecated unless, until and then only to the extent that
the restrictions set forth in this paragraph VI(b) shall have lapsed in
accordance with paragraph VI(c).
2. The Committee may provide either that
(i) Stock certificates evidencing shares of Common Stock
transferred pursuant to an award of RRP Stock shall be issued in the
sole name of the Recipient (but shall be held by the Company until the
restrictions shall have lapsed in accordance with the terms of the
award and the Plan) and shall bear a legend which, in part, shall
provide that:
A-4
<PAGE>
"The shares of Common Stock of Harbor Florida Bancshares, Inc.,
evidenced by this certificate are subject to the terms and
restrictions of the Harbor Florida Bancshares, Inc. 1998 Stock
Incentive Plan. Such shares are subject to forfeiture or cancellation
under the terms of said Plan, and such shares shall not be sold,
transferred, assigned, pledged, encumbered or otherwise alienated or
hypothecated except pursuant to the provisions of said Plan, a copy of
which is available from Harbor Florida Bancshares, Inc. upon request."
or
(ii) Stock certificates evidencing shares of Common Stock that
are the subject of an award of RRP Stock shall be issued in the name
of the Company. The Company shall hold such Common Stock for the
benefit of the Recipient until the restrictions have lapsed in
accordance with the terms of the award and the Plan. In such instance,
whenever shares of Common Stock underlying an award of RRP Stock are
distributed to a Recipient or beneficiary thereof under the Plan, such
Recipient or beneficiary shall also be entitled to receive with
respect to each such share distributed, a payment equal to any cash
dividends or distributions (other than distributions in shares of
Common Stock) and the number of shares of Common Stock equal to any
stock dividends, declared and paid with respect to a share of Common
Stock if the record date for determining shareholders entitled to
receives such dividends falls between the date of the relevant award
was granted and the date the relevant award or installment thereof is
distributed. If the Committee determines to establish a trust in
connection with this Plan to hold Plan assets for the purposes set
forth herein, there shall also be distributed an appropriate amount of
net earnings, if any, of the trust with respect to any dividends paid
out.
(c) Lapse of Restrictions. The restrictions set forth in paragraph
VI(b) shall lapse as follows:
1. Such restrictions shall lapse with respect to the shares of
Common Stock awarded pursuant to a specific award of RRP Stock at the
times determined by the Committee and on the terms stated in the
notice of the award. Such restrictions shall lapse only if on the date
restrictions are to lapse, the Recipient has been an officer, director
or employee continuously from the time of the award to such date of
lapse. The purpose of the restrictions is to provide an incentive to
each Recipient to remain with the Company or the Bank and to perform
assigned tasks and responsibilities in a manner consistent with the
best interests of the Company or the Bank and its stockholders.
2. In the event of the termination of employment of a Recipient,
except as specified in paragraph VI(c)(3) below, all shares of Common
Stock still subject to restrictions shall be returned to or canceled
by the Company and shall be deemed to have been forfeited by the
Recipient.
3. In the event of the termination of employment of a Recipient
by reason of death or permanent and total disability within the
meaning of Section 22(e)(3) of the Code, any outstanding restrictions
in respect to any RRP Stock awarded to such Recipient will
automatically lapse, and the shares of Common Stock subject to the
award shall be distributed to the Recipient or, in the case of death,
to his or her estate.
(d) Rights as a Shareholder. Upon issuance of the stock certificates
evidencing an award of RRP Stock and subject to the restrictions set out in
paragraph VI(b), the Recipient of an award shall have all of the rights of
a shareholder of the Company with respect to the shares of Common Stock
represented by such award, including the right to vote the shares and
receive all dividends and other distributions paid or made with respect to
such shares, provided that any stock dividends received on shares of
restricted stock shall be subject to the same restrictions as such
underlying shares until the restrictions on such underlying shares lapse.
A-5
<PAGE>
VII. Withholding Taxes.
(a) Upon the exercise of non-statutory stock options, the participant shall
be required to pay to the Company or authorize the Company to deduct from other
amounts payable to the participant the amount of any taxes that the Company is
required to withhold with respect to such exercise. The participant may elect to
satisfy such withholding obligation by (i) delivering to the Company, Common
Stock owned by such individual having a fair market value equal to such
withholding obligation or (ii) requesting that the Company withhold from the
shares of Common Stock to be delivered a number of shares of Common Stock having
a fair market value equal to such withholding obligation.
(b) In the case of an Incentive Stock Option, the participant shall be
required (i) to inform the Company promptly of any disposition (within the
meaning of Section 424(c) of the Code (or any successor section) and the rules
thereunder) of Common Stock received upon exercise, and (ii) to pay to the
Company or authorize the Company to deduct from other amounts payable to the
participant the amount of any taxes that the Company is required to withhold
with respect to such disposition.
(c) In the case of RRP Stock, the Company shall have the right to withhold
the amount of taxes the Company is required to withhold from the amount awarded,
or from the amount paid, or from other amounts payable to the participant.
VIII. Amendment or Termination.
The Committee may amend or terminate the Plan at any time, provided that any
such amendment shall be subject to the approval of the stockholders of the
Company in accordance with applicable law and regulations if such approval is
necessary to satisfy the requirements of Rule 16b-3 (or any successor rule)
under the Exchange Act or other regulatory requirements. Unless hereafter
amended to provide for a different termination date, the Plan shall terminate
ten years after the Effective Date. Options terminate the later of ten years
from the Effective Date or the term expiration date of the Option.
IX. Compliance With OTS Conversion Regulations.
Notwithstanding any other provision contained in this Plan:
(a) No award or Option under the Plan shall be made which would be
prohibited by 12 C.F.R.ss. 563b.3(g)(4).
(b) Unless the Plan is approved by a majority vote of the outstanding
shares of the total votes eligible to be cast at duly called meeting of
stockholders to consider the Plan, as required by 12 C.F.R. ss.
563b.3(g)(4)(vii), the Plan shall not become effective or implemented prior to
one year from the date of the Company's reorganization, or March 18, 1999;
(c) No award or Option granted prior to one year from the date of the
Company's reorganization, or March 18, 1999, shall become vested or exercisable
at a rate in excess of 20% per year of the total number of Restricted Stock
Awards or Options (whichever may be the case) granted to such Participant,
provided, that awards or Options shall become fully vested or immediately
exercisable in the event of a Participant's termination of service due to death
or disability;
(d) No award or Options granted to any individual Employee prior to one
year from the date of the Company's reorganization, or March 18, 1999, may
exceed 25% of the total amount of awards or Options, respectively, which may be
granted under the Plan;
A-6
<PAGE>
(e) No award or Options granted to any individual non-employee director
prior to one year from the date of the Company's reorganization, or March 18,
1999, may exceed 5% of the total amount of awards or Options, respectively,
which may be granted under the Plan;
(f) The aggregate amount of awards or Options granted to all non-employee
directors prior to one year from the date of the Company's reorganization, or
March 18, 1999, may not exceed 30% of the total amount of awards or Options,
respectively, which may be granted under the Plan; and
(g) Any change or amendment to the Plan which eliminates the restrictions
required by 12 C.F.R. ss. 563b.3(g)(4) shall require prior approval of the
Company's stockholders.
A-7
<PAGE>
REVOCABLE PROXY REVOCABLE PROXY
HARBOR FLORIDA BANCSHARES, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
HARBOR FLORIDA BANCSHARES, INC. TO BE USED AT THE SPECIAL
MEETING OF STOCKHOLDERS ON SEPTEMBER 18, 1998
The undersigned being a stockholder of Harbor Florida Bancshares, Inc.
hereby appoints Michael J. Brown, Sr. and Frank H. Fee, III, or each of them,
with full power of substitution in each, as proxies to cast all votes which the
undersigned stockholder is entitled to cast at the Special Meeting of
Stockholders to be held at 10:30 a.m., Florida Time, on September 18, 1998, Old
City Hall Annex, 315 Avenue A, Fort Pierce, Florida 34950, and any adjournments
thereof. The undersigned stockholder hereby revokes any proxy or proxies
heretofore given.
If you receive more than one proxy card, please sign and return all cards
in the accompanying envelope. Please check your mailing address as it appears on
this Revocable Proxy. If it is inaccurate, please include your correct address
below.
This proxy will be voted as directed or, if no direction is given, will be
voted FOR the 1998 Stock Incentive Plan for Directors, Officer and Employees
under PROPOSAL I and FOR the adjournment of the Special Meeting under PROPOSAL
II.
NEW ADDRESS:
-----------------------------
-----------------------------
-----------------------------
<PAGE>
The Board of Directors recommends a vote FOR PROPOSAL I and PROPOSAL II.
I. Adoption of the Harbor Florida Bancshares, Inc. 1998 Stock Incentive
Plan for Directors, Officers and Employees.
[_] FOR [_] AGAINST [_] ABSTAIN
II. Approval of adjournment of the Special Meeting, if necessary, to
permit solicitation of proxies in the event there are not sufficient
votes at the time of Special Meeting of stockholders to approve the
Plan.
[_] FOR [_] AGAINST [_] ABSTAIN
In their discretion the proxies are authorized to vote with respect to
approval of the minutes of the last meeting of stockholders, matters incident to
the conduct of the meeting, and upon such other matters as may properly come
before the meeting.
[ ] Dated: ________, 1998
______________________
[ ] ______________________
(Signature)
Please date this Revocable Proxy
and sign, exactly as your name(s)
appears on your stock certificate.
If signing as a fiduciary, please
give your full title.
MARK HERE IF YOU PLAN TO ATTEND THE MEETING: [_]
2
