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
Commission Only (as permitted by
Rule 14a-6(e)(2))
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| 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)(a) 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:
- --------------------------------------------------------------------------------
<PAGE>
(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 this filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement no.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
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2
<PAGE>
HARBOR FLORIDA BANCSHARES, INC.
100 S. Second Street
Fort Pierce, FL 34950
(561) 461-2414
February 5, 1999
Dear Stockholder:
You are invited to attend the Annual Meeting of Stockholders (the "Annual
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 Annual Meeting is to consider the election of two (2) directors
of the Company for three year terms, to ratify the appointment by the Company's
Board of Directors of the firm of KPMG LLP as independent public accountants for
the Company for the fiscal year ending September 30, 1999, and to approve an
amendment to the Harbor Florida Bancshares, Inc. 1998 Stock Incentive Plan for
Directors, Officers and Employees (the "Plan"). The Annual Meeting is scheduled
to be held on Friday, March 19, 1999, at 10:00 a.m., Florida time, at Old City
Hall Annex, 315 Avenue A, Fort Pierce, Florida.
The attached Notice of Annual Meeting and Proxy Statement describes the
proposals in detail. Directors and officers of the Company will be present at
the Annual Meeting to respond to any questions that you may have regarding the
agenda for the Annual Meeting.
PLEASE SIGN AND RETURN THE ENCLOSED PROXY CARD PROMPTLY. YOUR COOPERATION
IS APPRECIATED SINCE A MAJORITY OF THE COMMON STOCK OUTSTANDING MUST BE
REPRESENTED EITHER IN PERSON OR BY PROXY TO CONSTITUTE A QUORUM FOR THE CONDUCT
OF BUSINESS AT THE ANNUAL 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 Annual Meeting.
Sincerely yours,
/s/ Michael J. Brown, Sr.
------------------------------------
Michael J. Brown, Sr.
President and CEO
HARBOR FLORIDA BANCSHARES, INC. IS THE
HOLDING COMPANY FOR HARBOR FEDERAL SAVINGS BANK
<PAGE>
HARBOR FLORIDA BANCSHARES, INC.
100 S. Second Street
Fort Pierce, Florida 34950
(561) 461-2414
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MARCH 19, 1999
NOTICE IS HEREBY GIVEN that an Annual 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, March
19, 1999, at 10:00 a.m. Florida time, for the following purposes, as more
completely set forth in the accompanying Proxy Statement:
1. To elect two (2) directors of the Company for three year terms.
2. To ratify the appointment by the Company's Board of Directors of the
firm of KPMG LLP as independent public accountants for the Company for the
fiscal year ending September 30, 1999.
3. To approve an amendment to the Harbor Florida Bancshares, Inc. 1998
Stock Incentive Plan for directors, officers and employees (the "Plan").
4. To approve the adjournment of the Annual Meeting, if necessary, to
permit solicitation of proxies in the event there are not sufficient votes at
the time of the Annual Meeting to approve one or more of the preceding
proposals.
5. 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 January 22, 1999, as the
voting record date for the determination of stockholders entitled to notice of
and to vote at the Annual Meeting. Only those stockholders of record as of the
close of business on that date will be entitled to vote at the Annual Meeting.
BY ORDER OF THE BOARD OF
DIRECTORS
/s/ Michael J. Brown, Sr.
---------------------------------
Michael J. Brown, Sr.
President & CEO
February 5, 1999
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
ANNUAL 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
------------------
ANNUAL MEETING OF STOCKHOLDERS
MARCH 19, 1999
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 Annual Meeting of Stockholders ("Annual
Meeting") to be held on Friday, March 19, 1999, at Old City Hall Annex located
at 315 Avenue A, Fort Pierce, Florida at 10:00 a.m. Florida time, for the
purposes set forth in the attached Notice of Annual Meeting of Stockholders.
This Proxy Statement is first being mailed to stockholders on or about February
8, 1999.
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 election of Messrs.
Enns and Abernethy, in favor of the ratification of KPMG LLP, in favor of an
amendment to the Plan, in favor of the adjournment of the Annual Meeting and, in
the discretion of the proxy holder, as to any other matter which may properly
come before the Annual Meeting. Only proxies that are returned can be counted
and voted at the Annual 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 Annual Meeting and will be
paid a fee of $4,500 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.
REVOCATION OF PROXIES
A stockholder who has given a proxy may revoke it at any time prior to its
exercise at the Annual 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 Annual 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 Annual Meeting
and will not be used for any other meeting.
VOTING SECURITIES
The securities that may be voted at the Annual 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 Annual Meeting, except as described below. Only holders of
record of Common Stock at the close of business on January 22, 1999, (the
"Record Date") will be entitled to notice of and to vote at the Annual Meeting.
On the Record Date there were 31,013,779
1
<PAGE>
shares of Common Stock issued and outstanding. Bancshares had no other class or
securities outstanding at this time.
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
Annual Meeting. With respect to any matter, any shares for which a broker
indicates on the proxy that it does not have discretionary authority as to such
shares to vote on such matter ("Broker Non-Votes") will be considered present
for the purposes of determining whether a quorum is present. In the event there
are not sufficient votes for a quorum or to approve or ratify any proposal at
the time of the Annual Meeting, the Annual Meeting shall be adjourned in order
to permit further solicitation of proxies.
VOTING PROCEDURES
Once a quorum has been established, the affirmative vote of a majority of
the outstanding shares of Common Stock present or represented in 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.
Stockholders are not permitted to accumulate their votes for the election of
directors or any other purpose. Votes may be cast for or withheld from each
nominee for election as directors. Votes that are withheld and Broker Non-Votes
will have no effect on the outcome of the election for directors because
directors will be elected by a plurality of votes cast.
With respect to the other proposals to be voted upon at the Annual Meeting,
stockholders may vote for or against a proposal and may abstain from voting.
Adoption of the amendment to the Plan and ratification of KPMG LLP as
independent auditors for the fiscal year ending September 30, 1999, will each
require the affirmative vote of a majority of the outstanding shares of Common
Stock present in person or by proxy at the Annual Meeting and entitled to vote.
Abstentions will have the same effect as a vote against each of these proposals.
Broker Non-Votes, however, are not counted as presented and entitled to vote on
the proposals, and have no effect on such vote.
The Company's annual report to stockholders for its fiscal year ended
September 30, 1998 (the "Annual Report"), was previously mailed to stockholders.
The Company has filed with the Securities and Exchange Commission (the "SEC")
and an Annual Report on Form 10-K for the fiscal year ended September 30, 1998.
Stockholders may obtain, free of charge, either an additional copy of the Annual
Report or a copy of the Annual Report on Form 10-K by requesting it by telephone
or in writing from Bonnie Forrest, Harbor Florida Bancshares, Inc., 100 S.
Second Street, Fort Pierce, FL 34950, (561) 460-7046.
Executed, unmarked proxies will be voted FOR all proposals.
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 Annual Meeting. After the final
adjournment of the Annual Meeting, the proxies will be returned to the Company.
2
<PAGE>
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth information as of December 31, 1998, except
as specifically noted, with respect to ownership of the Company's Common Stock
by: (i) the Harbor Federal Savings Bank Employee Stock Ownership Plan (the
"ESOP"); (ii) Thomson Horstmann & Bryant, Inc.; (iii) the executive officers and
directors of the Company; and (iv) 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 other 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.
Common Stock Beneficially Owned(1)
<TABLE>
<CAPTION>
Name Title or Address Number(2) Percent
---- ---------------- --------- -------
<S> <C> <C> <C>
Harbor Federal Savings Bank Employee 100 S. Second Street
Stock Ownership Plan Fort Pierce, FL 34950 2,233,527 7.20%
Thomson Horstmann & Bryant, Inc. Park 80 West, Plaza Two
Saddle Brook, NJ 07663 1,631,400(16) 5.26%
Bruce R. Abernethy, Sr Vice Chairman of the Board 355,025(3)(12)(14) 1.14%
Richard N. Bird Director 145,941(8)(14) *
Michael J. Brown, Sr Director, President and Chief
Executive Officer 739,582(4)(15) 2.38%
Richard K. Davis Director 277,520(3)(5)(14) *
Edward G. Enns Chairman of the Board 93,459(6)(14) *
Frank H. Fee III Director 392,324(3)(13)(14) 1.26%
Richard B. Hellstrom Director 161,724(7)(14) *
Don W. Bebber Senior Vice President 142,045(9)(15) *
Robert W. Bluestone Senior Vice President 327,503(15) 1.06%
Albert L. Fort Senior Vice President 155,243(10)(15) *
David C. Hankle Senior Vice President 227,448(11)(15) *
Directors and Executive Officers as a
group (11 persons) N/A 3,017,814 9.73%
</TABLE>
3
<PAGE>
- ----------
(1) Except as otherwise noted, all beneficial ownership by directors and
officers is direct and each director or officer 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 134,404, 89,540 and 102,555 shares, respectively, held by the
Directors' Deferred Compensation Plan for the benefit of Messrs. Abernethy,
Davis and Fee.
(4) 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 27,000 shares. Does not
include 36,376 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 25,429 shares held by spouse, of which 8,115 shares are unvested
shares of RRP Stock awarded pursuant to the Plan.
(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
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 12,304 shares held by spouse. Mr. Fee disclaims beneficial
ownership of the shares held by his spouse.
(14) Includes 27,576, 24,771, 24,771, 30,914, 24,771 and 24,771 restricted
shares of Common Stock awarded, respectively, to Messrs. Abernethy, Bird,
Davis, Enns, Fee and Hellstrom under the Plan. These awards of RRP Stock
will vest in annual installments of 20% of the total award, beginning on
September 18, 1999.
(15) Includes 157,574, 39,393, 39,394, 39,393 and 39,394 restricted shares of
Common Stock awarded, respectively, to Messrs. Brown, Bebber, Bluestone,
Fort and Hankle under the Plan. These awards of RRP Stock will vest in
annual installments of 10% of the total award, beginning on September 18,
1999.
(16) Based on a Schedule 13G, dated January 22, 1999, filed with the Securities
and Exchange Commission.
* Represents less than 1% of outstanding shares.
4
<PAGE>
PROPOSAL I - ELECTION OF DIRECTORS
The Company's Certificate of Incorporation 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.
Two directors will be elected at the Annual Meeting. The Board of Directors
has nominated current directors Edward G. Enns and Bruce R. Abernethy for
re-election. If elected, Messrs. Enns and Abernethy will each serve as director
for a three year term expiring at the Annual Meeting to be held in 2002.
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 the Company not
fewer than ninety (90) days prior to the date of the Annual Meeting. No
stockholder nominations have been received by the Company. 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 December 31,
1998, with respect to each nominee, and each director continuing in office.
<TABLE>
<CAPTION>
Name Age Director Since(1) New or Current Term to Expire(2)
---- --- ----------------- --------------------------------
<S> <C> <C> <C>
BOARD NOMINEES
Bruce R. Abernethy 63 1983 2002
Edward G. Enns 65 1977 2002
DIRECTORS CONTINUING IN OFFICE
Richard N. Bird 58 1997 2000
Michael J. Brown, Sr. 57 1977 2001
Richard K. Davis 68 1978 2000
Frank H. Fee 55 1987 2000
Richard B. Hellstrom 62 1988 2001
</TABLE>
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<PAGE>
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(1) Includes prior service on the Board of Directors of the Bank.
(2) All terms expire on the date of the Annual Meeting.
The principal occupation for the last five years for each nominee and
director of the Company 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. He
currently resides in St. Lucie County,
Florida, and is retired.
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 office after
serving sixteen years on the Indian River
County Commission. Mr. Bird assisted the
Bank in forming the Indian River County
Advisory Board and served as a member of
that Board in 1996. He conducts his business
in Indian River County, Florida.
Michael J. Brown, Sr. Mr. Brown has served as President and Chief
Executive Officer of the Bank since 1976. He
was elected to the Board in 1977. Prior to
joining the Bank, 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., located
in St. Lucie County, Florida.
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
located in Fort Pierce, Florida. 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.
6
<PAGE>
Frank H. Fee, III Mr. Fee has served as a Director since 1987.
He is an attorney and President of the law
firm of Fee & Koblegard, P.A. which does
business under the registered name of Fee,
Koblegard & DeRoss, a general practice law
firm located in Fort Pierce, Florida. 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.
He conducts his business in St. Lucie and
Martin Counties, Florida.
Board Meetings and Committees
The Board of Directors currently meets once a month and may have additional
meetings. During the fiscal year ended September 30, 1998, the Board met 19
times. All Directors who served as directors during the fiscal year ended
September 30, 1998, 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 four times during the fiscal year
ended September 30, 1998. 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 and reviews the Bank's annual audit plan. This committee
currently consists of Messrs. Bird, Davis, and Fee.
Compensation Committee. The Compensation Committee met four times in fiscal
1998. It reviews and discusses employee performance and prepares recommendations
for annual salary adjustments and bonuses. The Committee also administers the
Bank and the Company's stock benefit plans. This committee consists of Messrs.
Abernethy, Enns, and Hellstrom.
Credit Committee. The Credit Committee met 11 times in fiscal 1998. It
evaluates and takes 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. The
Committee requires a quorum of three (3) members in order to conduct business.
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.
7
<PAGE>
Director Retirement Plan
The Bank 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
December 31, 1998, the Directors' Deferred Compensation Plan held 134,404,
89,540, and 102,555 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.
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 $100,000 during these three fiscal years.
8
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
All Other
Annual Compensation Long Term Compensation Compensation($)(2)
----------------------- ------------------------------ ------------------
Restricted
Name and Stock
Principal Position Year(1) Salary($) Bonus($) Awards($)(3) Options(#)(4)
------------------ ------- --------- -------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Michael J. Brown, Sr. 1998 $265,057 $25,244 $1,684,466 262,623 $153,370
President 1997 250,057 23,804 0 18,028 127,709
1996 235,550 22,260 0 12,019 98,996
Robert W. Bluestone 1998 $132,800 $12,800 $421,122 65,656 $39,526
Senior Vice President - 1997 127,083 12,250 0 0 8,375
Retail Banking 1996 121,717 11,780 0 3,005 10,510
David C. Hankle 1998 $131,792 $12,700 $421,122 65,656 $42,192
Senior Vice President - 1997 126,083 12,150 0 0 11,852
Credit Administration/ 1996 120,717 11,680 0 3,005 14,194
Commercial Lending
Don W. Bebber 1998 $120,792 $11,150 $421,111 65,656 $36,074
Senior Vice President- 1997 110,333 10,450 0 0 9,162
Chief Financial Officer 1996 102,917 9,500 0 3,005 11,033
Albert L. Fort 1998 $106,083 $10,100 $421,111 65,655 $34,313
Senior Vice President- 1997 100,283 9,670 0 0 10,218
Marketing/Operations 1996 96,392 9,485 0 3,005 12,286
</TABLE>
- ----------
(1) The Company and the Bank's fiscal years each end September 30.
(2) For fiscal 1998 consists of insurance payments of $7,245, $3,355, $4,457,
$4,435 and $4,206 and contributions to the ESOP in the equivalent amount of
$38,403, $36,171, $35,889, $31,639 and $28,574 for Messrs. Brown,
Bluestone, Hankle, Bebber and Fort, respectively. Additionally, the Bank
contributed $1,171, $1,846 and $1,532 to Messrs. Brown, Hankle and Fort,
respectively, pursuant to the Bank's 401(k) Profit Sharing Plan and Trust.
The Bank also contributed $106,550 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) Represents restricted shares of Common Stock awarded by the Compensation
Committee pursuant to the Plan. Awards were granted on September 18, 1998,
the date the Plan was approved by stockholders. Common Stock granted to
Messrs. Brown, Bluestone, Hankle, Bebber and Fort as restricted stock
9
<PAGE>
awards pursuant to the Plan vest in annual installments of 10% of the total
award, beginning on September 18, 1999. The value of such shares, when
awarded, was determined by multiplying the number of shares awarded by the
price of the Common Stock on September 18, 1998, the date of grant or
$10.69 per share. At September 30, 1998, none of the shares had vested. The
fair market value of such restricted stock, based on the last sale reported
on the NASDAQ National Market on Wednesday, September 30, 1998, or $10.313
per share, was approximately $1,625,061, $406,270, $406,270, $406,260 and
$406,260 for Messrs. Brown, Bluestone, Hankle, Bebber and Fort,
respectively.
(4) Options awarded in fiscal 1997 and 1996 were awarded pursuant to the Harbor
Federal Savings Bank 1994 Incentive Stock Option Plan. All share awards
from those years 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. Options awarded in fiscal
1998 were awarded pursuant to the Plan.
----------
Option Grants in Last Fiscal Year. The following table provides information
on option grants in fiscal 1998 to Messrs. Brown, Bluestone, Hankle, Bebber and
Fort:
<TABLE>
<CAPTION>
Potential Realizable Value
at Assumed Annualized
Rates of Stock Price
Appreciation for
Individual Grants 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. 9/18/98 262,623 21.25% $10.69 9/18/08 $1,764,827 $4,475,096
Don W. Bebber 9/18/98 65,656 5.31 10.69 9/18/08 441,208 1,118,778
Robert W. Bluestone 9/18/98 65,656 5.31 10.69 9/18/08 441,208 1,118,778
David C. Hankle 9/18/98 65,656 5.31 10.69 9/18/08 441,208 1,118,778
Albert L. Fort 9/18/98 65,655 5.31 10.69 9/18/08 441,202 1,118,761
</TABLE>
- ----------
(1) "Potential Realized Value" is disclosed in response to the SEC's 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 increased 5% per year
for ten years from its closing price on Friday, September 18, 1998, $10.69
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 $17.41 per share for an increase of $6.72 per
share; and if the stock increased 10% per year over such period, the ending
stock price would be $27.73 per share for an increase of $17.04 per share.
(2) All options granted on September 18, 1998, become exercisable in annual
installments of 10% of the total grant, beginning on September 18, 1999.
(3) The exercise price is equal to the closing price on September 18, 1998.
10
<PAGE>
----------
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 1998 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, 1998, and the aggregate gains that would have been
realized had these options been exercised on September 30, 1998, even though
these options were not exercised, and the unexercised options could not have
been exercised, on September 30, 1998. Certain 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 Value Covered by Unexercised In-The-Money
Name Fiscal 1998 Realized(1) Options on 9/30/98 Options As Of 9/30/98(2)
---- ----------- ----------- ----------------------------- ------------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Michael J. Brown, Sr. 192,300 $1,979,368 0 327,524 $0 $455,326
Don W. Bebber 0 0 33,436 83,010 289,188 141,597
Robert W. Bluestone 14,350 136,167 0 83,010 0 141,597
Albert L. Fort 14,350 136,167 0 83,009 0 141,597
David C. Hankle 42,377 427,248 0 83,011 0 141,597
</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, if
necessary, 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 23, 1998, when the adjusted market price of the Common
Stock was $12.50 per share and 168,263 options on July 7, 1998, when the
market price of the Common Stock was $11.875 per share. Mr. Bluestone
exercised 14,350 options on January 6, 1998, when the adjusted market price
of the Common Stock was $11.149 per share. Mr. Fort exercised 14,350
options on January 20, 1998, when the adjusted market price of the Common
Stock was $11.149 per share. Mr. Hankle exercised 28,028 options on October
15, 1997, when the adjusted market price of the Common Stock was $11.61 per
share and 14,349 options on April 13, 1998, when the market price of the
Common Stock was $12.00 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 Wednesday,
September 30, 1998, at which date the last sale of the Common Stock as
quoted on the NASDAQ National Market was at $10.313 per share.
----------
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.
11
<PAGE>
As of September 30, 1998, the ESOP held 2,233,527 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. Shares purchased in the Conversion by the ESOP will be allocated to
participants' accounts over 20 years.
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.
Contributions to the ESOP and shares released from the suspense account are
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 United States 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.
<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, 1998, Messrs. Brown, Bebber, Bluestone, Fort and Hankle
have 22, 22, 20, 14 and 12 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.
12
<PAGE>
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 the Bank to fund the SERP were $106,550
in fiscal 1998.
Employment Agreement. The Board of Directors entered into a three-year
employment agreement with President Brown effective January 6, 1994. On November
12, 1998, the Board voted to approve an extension of this agreement effective
January 6, 1999, with a new initial term to continue through January 6, 2002.
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 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.
13
<PAGE>
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 1998 the Committee consisted of Messrs. Abernethy, Enns and
Hellstrom. All are outside directors of the Company.
The Company'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, the Company'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.
President Brown's compensation and related benefits are based principally
on his rights under his employment agreement with the Bank, which is described
elsewhere in this Proxy Statement. However, the Committee also considers the
performance of the Company as well as the performance of the Common Stock.
Pursuant to the employment contract, Mr. Brown's salary was $265,057 for fiscal
1998. Mr. Brown's present salary is $279,620. Mr. Brown's salary is based on
many factors, including , the Company's Return on Assets ("ROA"), the Company's
Return on Equity ("ROE"), the price of the Common Stock throughout fiscal 1998
as well as the successful consummation of the Conversion on March 18, 1998,
which resulted in the formation of the Company as a publicly traded entity. The
Committee noted that the Company's return on average assets for fiscal 1998 was
1.40%.
In addition to reviewing this information in determining Mr. Brown's
compensation, the Committee reviewed the Bank's prior year's financial
performance and prevailing market rates of compensation for Mr. Brown's
position. In particular, the Committee took note of the Bank's historical net
income.
Richard B. Hellstrom, Chairman
Bruce R. Abernethy, Sr.
Edward G. Enns
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 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 the Bank'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.
In addition, Frank H. Fee, III, a director of the Company, is also
President of the law firm of Fee & Koblegard, P.A. which does business under the
registered firm name of Fee, Koblegard & DeRoss, a general practice law firm.
The Company paid approximately $122,000 in legal fees in the year ended
September 30, 1998 to this law firm.
Richard K. Davis, a director of the Company, is also chairman of Richard K.
Davis Construction Corp. ("Davis Construction"). In the year ended September 30,
1998, the Company paid Davis Construction a total of $106,668 for a roof on a
new branch facility and re-roofing of existing branch facilities. Additionally,
Davis Construction constructed a new office and drive-in facility for the
Company. This contract for $926,984 was awarded June 25, 1997. The contract was
put out for competitive bid and was awarded to Davis Construction because it
submitted the lowest bid for the contract. In the year ended September 30, 1998,
total payments
14
<PAGE>
relating to this contract were $853,990. Additional payments made during 1998
for tenant improvements in the new office totaled $102,938.
Prior to Richard N. Bird's nomination and subsequent election to the Board
of Directors of the Company, Bird Realty Group, Inc. entered into a listing
agreement with the Company on property listed at $3,895,000. Commissions of
$30,833 were paid to Bird Realty in the year ended September 30, 1998, with
regard to the sale of a portion of the property. The remaining properties are no
longer listed with Bird Realty.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCES
To the knowledge of the Board and based upon a review of Forms 3 and 4 and
amendments thereto furnished to the Company pursuant to Rule 16a-3(e) during the
fiscal year ended September 30, 1998, no person who is a director, officer or
beneficial owner of 10% of the Common Stock failed to file on a timely basis
reports required by Section 16(a) of the Securities Exchange Act.
PERFORMANCE GRAPH
The following graph shows a 57 month comparison of cumulative total return
on the 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 the Bank's common stock began trading, through September 30,
1998. The price of the Common Stock, as reflected in the graph, has been
adjusted for the Conversion, whereby all existing shares of Harbor Florida
Bancorp, Inc. were exchanged for 6.0094 shares of Common Stock. The graph was
derived from a limited period of time and, in part, reflects the market's
reaction to the initial public offering of the Harbor Federal's common stock, as
well as the Conversion. As a result, is not necessarily indicative of possible
future performance of the Common Stock.
[THE FOLLOWING TABLE WAS REPRESENTED BY A GRAPH IN THE PRINTED MATERIALS.]
<TABLE>
<CAPTION>
1/6/94 9/30/94 9/30/95 9/30/96 9/30/97 9/30/98
------ ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Harbor Federal 100.000 192.934 237.796 326.117 637.298 718.285
Nasdaq Index 100.000 98.441 135.987 161.329 221.449 226.355
Nasdaq Bank Index 100.000 108.739 137.101 174.966 291.488 289.269
</TABLE>
15
<PAGE>
PROPOSAL II - RATIFICATION OF APPOINTMENT
OF INDEPENDENT AUDITORS
The Board of Directors of the Company has appointed the firm of KPMG LLP,
Certified Public Accountants, to continue as independent auditors for the
Company for the fiscal year ending September 30, 1999, subject to ratification
of such appointment by the stockholders. A representative of KPMG 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 LLP AS THE COMPANY'S INDEPENDENT AUDITORS FOR FISCAL 1999
UNDER THIS PROPOSAL II.
PROPOSAL III - APPROVAL OF AN AMENDMENT TO THE
HARBOR FLORIDA BANCSHARES
1998 STOCK INCENTIVE PLAN
The Company's Board of Directors adopted the 1998 Stock Incentive Plan (the
"Stock Incentive Plan" or the "Plan") and the stockholders approved the Plan on
September 18, 1998, (the "Effective Date"). Pursuant to the Plan, up to
1,658,675 shares of Common Stock are reserved for issuance by the Company upon
the exercise of stock options to be granted to officers, directors, and
employees from time to time. The Plan also provides for the maximum 663,470
shares to be reserved for the award of restricted stock (the "RRP Stock"). The
Company is now submitting an amendment to the stockholders for approval (the
"Plan Amendments"). The full text of the Plan Amendment is set forth as Appendix
A to this proxy statement and the summary of the Plan Amendments provided below
is qualified in its entirety by such reference.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE AMENDMENT TO THE
HARBOR FLORIDA BANCSHARES 1998 STOCK INCENTIVE PLAN UNDER THIS PROPOSAL III
General. The Stock Incentive Plan authorizes the granting of options to
purchase Common Stock and awards of RRP Stock. All officers, employees and
non-employee directors of the Company and its affiliates are eligible to receive
awards under the Stock Incentive Plan. The Stock Incentive Plan is 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 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 of RRP Stock. However, management's
intention is based on current market conditions and is subject to change.
As of December 31, 1998, 1,498,615 options had been granted and 630,296
shares of RRP Stock had been awarded pursuant to the Plan. See "Beneficial
Ownership of Common Stock" and "Proposal I - Election of Directors -- Executive
Compensation."
Purpose of Amendment. Pursuant to regulations of the Office of Thrift
Supervision (the "OTS") applicable to stock benefit plans established or
implemented within one year following the completion of a mutual-to-stock
conversion of a federally chartered savings institution or mutual holding
company, the Plan contains certain restrictions and limitations, including among
others, provisions requiring the vesting of options and RRP Stock granted to
occur no more rapidly than ratably over a five year period and the resultant
prohibition against accelerated vesting of option and RRP Stock grants upon the
occurrence of an event other than the death or
16
<PAGE>
disability of the option holder, such as in the case of a change in control of
the Company or retirement of an optionee.
OTS interpretive letters permit amendment of stock benefit plans to
eliminate the provisions of the Plan which reflect the restrictions and
limitations described above, provided that stockholder ratification of such
amendments is obtained more than one year following the completion of the
mutual-to-stock conversion. The Board of Directors has proposed the Plan
Amendments, subject to approval by stockholders of the Company, for the purpose
of eliminating such restrictions and limitations. The Company does not have any
present intention to engage in any transaction that would result in the
accelerated vesting of options or RRP Stock as permitted by the Plan Amendments
and there can be no assurances that any such transaction will occur.
Nevertheless, the Board has determined that the implementation of the Plan
Amendments is in the best interests of the stockholders of the Company, as well
as the officers, directors and employees of the Company.
The Plan Amendments do not increase the number of shares of Common Stock
reserved for issuance under the Plan or alter the classes of individuals
eligible to participate in the Plan. In the event that the Plan Amendments are
not ratified by stockholders at the Annual Meeting, the Plan Amendments will not
take effect, but the Plan will remain in effect. The principal provisions of the
Plan, as amended by the Plan Amendments, are described below.
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 determines 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 award unless accelerated upon a change in control. Vesting must
not commence earlier than at least one year from the date of the grant. 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 is 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. Unless sooner terminated, the Stock Incentive Plan will be in
effect until September 18, 2008.
Tax Treatment of Options. A 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.
17
<PAGE>
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 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 February 2, 1999, the closing price per share of the Common Stock as
reported on the NASDAQ National Market was $11.031.
Recognition and Retention Plan Stock Awards. The Stock Incentive Plan also
permits the use of Recognition and Retention Plan Stock awards ("RRP Stock").
The terms of the RRP Stock awards shall be set by the Committee at the time of
grant; however, any RRP Stock granted prior to March 18, 1999 may not vest at a
rate greater than 20% per year unless accelerated upon a change in control nor
begin to vest sooner than one year from the date of grant. 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 are 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.
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 SEC under Rule 16b-3 under the Securities Exchange Act of
1934 or other regulatory requirements. The Stock Incentive Plan terminates ten
years after the 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.
Accelerated Vesting Upon a Change in Control or Retirement . Currently, the
Plan requires that options and RRP Stock granted to directors or employees
become first exercisable no more rapidly than ratably over a five-year period
(with acceleration upon death or disability). As permitted by OTS interpretive
letters, the Plan Amendments will specifically authorize the acceleration of
vesting of options and RRP Stock upon either (i) a Change in Control (as such
term is defined in the Plan Amendments, attached hereto as Exhibit A); or (ii)
retirement, provided that such amendments are approved by the stockholders. Such
Plan Amendments will affect previously awarded options and RRP Stock and any
options and RRP Stock that may be granted in the future. Pursuant to the Plan,
as amended by the Plan Amendments, upon a Change in Control, all options and RRP
Stock that is outstanding as of the date of a Change in Control will
automatically become exercisable and non-forfeitable.
18
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PROPOSAL IV - APPROVAL OF ADJOURNMENT OF THE
ANNUAL MEETING
In the event that there are not sufficient votes to approve any of the
foregoing proposals at the time of the Annual Meeting, such proposal could not
be approved unless the Annual 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 Annual Meeting to be voted for such adjournment,
if necessary, the Company has submitted as Proposal IV 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 IV so that
their proxies may be used for such purpose in the event it should become
necessary. If it is necessary to adjourn the Annual 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 Annual Meeting.
Approval of adjournment, if necessary, under this Proposal IV requires the
affirmative vote by the holders of a majority of the shares of Common Stock
represented at the Annual Meeting and entitled to vote.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE
FOR THE ADJOURNMENT OF THE MEETING UNDER PROPOSAL IV.
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 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.
STOCKHOLDER PROPOSALS FOR 2000 ANNUAL MEETING
Pursuant to the proxy solicitation regulations of the Securities and
Exchange Commission (the "SEC"), any shareholder proposal intended for inclusion
in the Company's proxy statement and form of proxy related to the Company's 2000
Annual Meeting of stockholders must be received by the Company by September 23,
1999, pursuant to the proxy solicitation regulations of the SEC. Nothing in this
paragraph shall be deemed to require the Company to include in its proxy
statement and form of proxy any stockholder proposal which does not meet the
requirements of the SEC in effect at that time.
19
<PAGE>
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. 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 Annual Meeting, you are
urged to return your proxy card promptly. If you are then present at the Annual
Meeting and wish to vote your shares in person, your original proxy may be
revoked by voting at the Annual 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 Annual Meeting.
By Order of the Board of Directors
/s/ Michael J. Brown, Sr.
------------------------------------
Michael J. Brown, Sr.
President and CEO
Fort Pierce, Florida
February 5, 1999
20
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EXHIBIT A
Amendment to the
Harbor Florida Bancshares, Inc.
1998 Stock Incentive Plan for Directors, Officers and Employees
1. Revision to the Plan by addition of the following Section X in its
entirety as follows:
X. Plan Provisions Effective as of March 19, 1999.
(a) Notwithstanding anything herein to the contrary, upon a Change in
Control of the Company or the Bank, all outstanding awards of RRP Stock and
options shall be immediately 100% exercisable and non-forfeitable.
(b) "Change in Control" shall mean: (i) the sale of all, or a material
portion, of the assets of the Company or the Bank; (ii) the merger or
recapitalization of the Company or the Bank whereby the Company or the Bank is
not the surviving entity; (iii) a change in control of the Company or the Bank,
as otherwise defined or determined by the Office of Thrift Supervision ("OTS")
or regulations promulgated by it; or (iv) the acquisition, directly or
indirectly, of the beneficial ownership (within the meaning of that term as it
is used in Section 13(d) of the Securities and Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder) of twenty-five percent
(25%) or more of the outstanding voting securities of the Company or the Bank by
any person, trust, entity or group. This limitation shall not apply to the
purchase of shares of up to 25% of any class of securities of the Company or the
Bank by a tax-qualified employee stock benefit plan which is exempt from the
approval requirements, set forth under 12 C.F.R. Section 574.3(c)(1)(vi) as now
in effect or as may hereafter be amended. The term "person" refers to an
individual or a corporation, partnership, trust, association, joint venture,
pool, syndicate, sole proprietorship, unincorporated organization or any other
form of entity not specifically listed herein. The decision of the Committee as
to whether a Change in Control has occurred shall be conclusive and binding.
(c) Notwithstanding anything herein to the contrary, upon the retirement,
as such term is defined by the Committee from time to time, pursuant to the
policies of the Company, of a Participant, all outstanding awards of RRP Stock
and options held by the retiring Participant, shall be immediately 100%
exercisable and non-forfeitable to the same extent as if the Participant's
employment had been terminated by reason of disability.
A-1
<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 ANNUAL
MEETING OF STOCKHOLDERS ON MARCH 19, 1999
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 Annual Meeting of
Stockholders to be held at 10:00 a.m., Florida Time, on March 19, 1999, 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 nominees under PROPOSAL I, FOR the auditors under PROPOSAL II, FOR
the amendment to the 1998 Stock Incentive Plan for Directors, Officers and
Employees under PROPOSAL III and FOR the adjournment of the Annual Meeting under
PROPOSAL IV.
NEW ADDRESS:
-----------------------------
-----------------------------
-----------------------------
<PAGE>
The Board of Directors recommends a vote FOR PROPOSALS I, II, III and IV.
I. Election of two directors for three year terms each.
Nominees: Bruce R. Abernethy and Edward G. Enns
___ FOR all nominees. ___ WITHHELD from all nominees.
___ FOR, except vote withheld from the following:
Nominee: _______________
(INSTRUCTION: To withhold authority to vote for any individual
nominee, write that nominee's name on the space provided above.)
II. Ratification of the appointment of KPMG LLP, Certified Public
Accountants, as Harbor Florida Bancshares' independent auditors for
the fiscal year ending September 30, 1999.
___ FOR ___ AGAINST ___ ABSTAIN
III. Adoption of an amendment to the Harbor Florida Bancshares, Inc. 1998
Stock Incentive Plan for Directors, Officers and Employees.
___ FOR ___ AGAINST ___ ABSTAIN
IV. Approval of adjournment of the Annual Meeting, if necessary, to permit
solicitation of proxies in the event there are not sufficient votes at
the time of the Annual Meeting of stockholders to approve one or more
of the Proposals.
___ FOR ___ AGAINST ___ ABSTAIN
2
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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: _________________, 1999
---------------------------------
---------------------------------
[ ] (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 ANNUAL MEETING: ____
