=================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For Quarterly Period ended June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to ______________
Commission file no. 2-26080
CAPITAL BANCORP
------------------------------------------------------
(Exact name of registrant as specified in its charter)
FLORIDA 59-2160717
- ------------------------------ ---------------------
(State or other Jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1221 Brickell Avenue, Miami, Florida 33131
- -------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(305) 536-1500
----------------------------------------------------
(Registrant's telephone number, including area code)
-----------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days.
____X___ Yes ______ No
As of August 7, 1996, there were 7,470,192 shares of the
registrant's Common Stock outstanding.
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<TABLE>
ITEM 1. PART I. FINANCIAL INFORMATION
CAPITAL BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION
(In Thousands of Dollars)
<CAPTION>
June 30, December 31,
1996 1995
----------- ------------
(Unaudited) (Audited)
<S> <C> <C>
ASSETS
Cash and due from banks $ 97,617 $ 138,903
Federal funds sold and
securities purchased
under agreement to resell 90,000 75,000
---------- ----------
Cash and cash equivalents 187,617 213,903
---------- ----------
Securities held to maturity
(market value 6/30/96 - $31,404,
12/31/95 - $ 24,173) 31,356 23,496
Securities available for sale
(at market value) 200,687 217,008
---------- ----------
Total securities 232,043 240,504
---------- ----------
Loans 748,693 728,679
Less allowance for loan losses (8,949) (11,789)
Less unearned income (2,718) (2,636)
---------- ----------
Loans, net 737,026 714,254
---------- ----------
Accounts receivable -
factoring subsidiary, net 374,671 316,506
Premises and equipment, net 32,864 33,558
Due from customers on acceptances 31,412 32,413
Other real estate 4,056 6,837
Accrued interest and other assets 34,835 31,740
---------- ----------
Total assets $1,634,524 $1,589,715
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non-interest bearing deposits $ 297,084 $ 336,202
Savings and money market deposits 282,224 283,893
Time deposits 454,923 418,660
---------- ----------
Total deposits 1,034,231 1,038,755
---------- ----------
Funds purchased and securities sold
under agreements to repurchase 87,110 86,133
Bank acceptances outstanding 31,412 32,413
Due to clients - factoring subsidiary 139,577 128,578
Long-term debt 205,620 176,650
Other liabilities 16,166 13,461
---------- ----------
Total liabilities 1,514,116 1,475,990
---------- ----------
Stockholders' equity:
Common stock, $1.00 par value
Authorized - 20,000,000 shares
Issued and outstanding -
7,469,781 shares - 6/30/96,
7,453,080 shares - 12/31/95 7,470 7,453
Capital surplus 8,282 8,151
Retained earnings 106,442 98,119
Unrealized (loss) gain on
securities available for sale (1,786) 2
---------- ----------
Total stockholders' equity 120,408 113,725
---------- ----------
Total liabilities and
stockholders' equity $1,634,524 $1,589,715
========== ==========
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
CAPITAL BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands of Dollars Except Per Share Data)
(Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------- ------------------
1996 1995 1996 1995
------- ------- ------- -------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Loans $17,588 $16,477 $34,897 $32,267
Advances-factoring
clients 6,860 5,795 12,892 11,183
Taxable securities 3,716 3,169 7,290 6,365
Tax-exempt securities 53 58 107 121
Federal funds sold and
other short-term
investments 1,463 690 2,439 1,042
------- ------- ------- -------
Total interest income 29,680 26,189 57,625 50,978
------- ------- ------- -------
INTEREST EXPENSE:
Savings and money
market deposits 1,751 1,677 3,462 3,410
Time deposits 5,977 4,484 11,596 7,829
Short-term borrowings 933 1,190 1,838 2,475
Long-term debt 3,613 2,504 6,745 4,934
------- ------- ------- -------
Total interest expense 12,274 9,855 23,641 18,648
------- ------- ------- -------
Net interest income 17,406 16,334 33,984 32,330
Provision for loan losses 1,700 375 2,300 750
Provision for doubtful
accounts-factoring
subsidiary 1,000 500 2,100 950
------- ------- ------- -------
Net interest income
after provisions 14,706 15,459 29,584 30,630
------- ------- ------- -------
OTHER INCOME:
Factoring revenues 7,284 5,529 13,764 10,724
Service charges on
deposits 3,166 3,199 6,128 6,560
Fees on letters of credit 1,037 1,099 2,180 2,010
Securities gains -- 12 -- 12
Other operating income 1,966 1,349 3,159 2,711
------- ------- ------- -------
Total other income 13,453 11,188 25,231 22,017
------- ------- ------- -------
OTHER EXPENSES:
Salaries and employee
benefits 10,003 9,511 20,029 18,801
Occupancy expense, net 2,073 1,871 4,089 3,690
Other operating
expenses, net 7,481 8,918 15,014 17,903
------- ------- ------- -------
Total other expenses 19,557 20,300 39,132 40,394
------- ------- ------- -------
Income before
income taxes 8,602 6,347 15,683 12,253
Provision for income taxes 3,437 2,375 6,116 4,592
------- ------- ------- -------
Net income $ 5,165 $ 3,972 $ 9,567 $ 7,661
======= ======= ======= =======
Earnings per common and common
equivalent share:
Primary $ .64 $ .53 $ 1.18 $ 1.03
======= ======= ======= =======
Fully diluted $ .64 $ .53 $ 1.18 $ 1.03
======= ======= ======= =======
Cash dividends declared per
share of common stock $ .0833 $ .0833 $ .1666 $ .1666
======= ======= ======= =======
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
CAPITAL BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands of Dollars)
(Unaudited)
<CAPTION>
Six Months Ended
June 30,
----------------------
1996 1995
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 9,567 $ 7,661
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for loan losses 2,300 750
Provision for doubtful
accounts-factoring subsidiary 2,100 950
Depreciation and amortization 2,405 1,922
Net (gains) losses on other real estate (327) 819
Securities gains -- (12)
Loss (gain) on disposal of premises
and equipment 16 (33)
Increase in accrued interest
and other assets (2,038) (943)
Increase in other liabilities 2,703 3,165
-------- --------
Net cash provided by
operating activities 16,726 14,279
-------- --------
Cash flows from investing activities:
Proceeds from maturities of securities
held to maturity 6,096 16,620
Purchase of securities held to maturity (14,000) --
Proceeds from maturities of securities
available for sale 58,027 14,107
Purchase of securities available for sale (44,539) (7,000)
Net increase in loans (25,669) (36,732)
Proceeds from sale of premises
and equipment 9 76
Purchase of premises and equipment (1,704) (3,492)
Proceeds from sale of other real estate 4,364 3,553
Improvements to other real estate (571) (889)
Increase in accounts receivable-factoring
subsidiary (net of due to clients) (49,354) (9,488)
-------- --------
Net cash used in investing activities (67,341) (23,245)
-------- --------
Cash flows from financing activities:
Net (decrease) increase in deposits (4,524) 70,142
Net increase (decrease) in Federal funds
purchased and securities sold under
agreements to repurchase 977 (783)
Proceeds from issuance of long-term debt 29,300 --
Repayment of long-term debt (330) (330)
Cash dividends paid (1,242) (1,189)
Proceeds from exercise of stock options 148 561
Redemption of fractional shares after
3-for-2 stock split -- (2)
-------- --------
Net cash provided by
financing activities 24,329 68,399
-------- --------
Net (decrease) increase in cash
and cash equivalents (26,286) 59,433
Cash and cash equivalents at
beginning of period 213,903 106,712
-------- --------
Cash and cash equivalents at end of period $187,617 $166,145
======== ========
Supplemental Disclosures
Cash paid during the period for:
Interest $ 23,753 $ 18,150
======== ========
Income taxes $ 5,530 $ 5,287
======== ========
Non-cash activities:
Decrease (increase) in the unrealized
loss on securities available for sale,
net of applicable taxes (benefits) in
1996 - $(1,057) and in 1995 - $1,419 $ (1,788) $ 2,401
======== ========
Loans and advances transferred
to other real estate $ 685 $ 1,104
======== ========
See accompanying notes to consolidated financial statements.
</TABLE>
CAPITAL BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1996
NOTE 1: Basis of Presentation
- ------------------------------
The Consolidated Statements of Condition for Capital Bancorp and
Subsidiaries (the "Company") as of June 30, 1996 and December 31,
1995, the Consolidated Statements of Income for the three- and six-
month periods ended June 30, 1996 and 1995 and the Consolidated
Statements of Cash Flows for the six-month periods ended June 30,
1996 and 1995 included in this Form 10-Q have been prepared by the
Company in conformity with the instructions to Form 10-Q and
Article 10 of Regulation S-X and, therefore, do not include all of
the information and footnotes required by generally accepted
accounting principles for complete financial statements. The
statements are unaudited except for the Consolidated Statement of
Condition as of December 31, 1995. Certain amounts in the December
31, 1995 Consolidated Statement of Condition have been reclassified
to conform with the June 30, 1996 consolidated financial statement
presentation.
The accounting policies followed for interim financial reporting
are consistent with the accounting policies set forth in Note 1 to
the Consolidated Financial Statements appearing in the Company's
Annual Report on Form 10-K for the year ended December 31, 1995 as
filed with the Securities and Exchange Commission.
The consolidated financial statements include the accounts of
Capital Bancorp ("Bancorp"), Capital Bank (the "Bank") and its
subsidiaries, and Capital Factors Holding, Inc. and its
subsidiaries ("Capital Factors"). All significant inter-company
transactions and balances have been eliminated in consolidation.
In the opinion of management, the interim consolidated financial
statements reflect all adjustments (which include only normal
recurring adjustments) necessary for a fair presentation of the
information contained therein. The interim results of operations
are not necessarily indicative of the results which may be expected
for the full year.
In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ("SFAS") No. 123,
"Accounting for Stock Based Compensation." This statement requires
certain disclosures about stock-based employee compensation
regardless of the method used to account for it, defines a fair
value based method of accounting for an employee stock option or
similar equity instrument and encourages all entities to adopt that
method of accounting for all of their employee stock compensation
plans. However, it also allows an entity to continue to measure
compensation cost for stock-based compensation plans using the
intrinsic value method of accounting prescribed by Accounting
Principles Board ("APB") Opinion No. 25, "Accounting for Stock
Issued to Employees." Entities electing to remain with the
accounting method set forth in APB Opinion No. 25 must make pro
forma disclosures of net income and, if presented, earnings per
share as if the fair value method of accounting defined in SFAS No.
123 had been applied. Under the fair value method, compensation
cost is measured at the grant date based on the value of the award
and is recognized over the service period, which is usually the
vesting period. Under the intrinsic value method, compensation
cost is the excess, if any, of the quoted market price of the stock
at grant date, or other measurement date, over the amount an
employee must pay to acquire the stock. The disclosure
requirements of SFAS No. 123 are effective for financial statements
for fiscal years beginning after December 15, 1995. Pro forma
disclosures required for entities that elect to continue to measure
compensation cost using APB No. 25 must include the effects of all
awards granted in fiscal years that begin after December 15, 1994.
The Company has decided to continue to measure compensation cost
for stock-based compensation as prescribed by APB No. 25.
NOTE 2: Risk Elements - Loans and Advances
- ------------------------------------------
Foreign Outstandings
- --------------------
Foreign outstandings included in the loan portfolio consisted of
the following (in thousands of dollars):
June 30, December 31,
1996 1995
-------------- ----------------
Performing trade credits $115,930 $124,501
Other performing loans 3,083 1,050
Non-accrual loans 123 2,072
-------- --------
$119,136 $127,623
======== ========
Performing trade credits consist primarily of refinanced letters of
credit, acceptances purchased and pre-export financings principally
to banks that are located in foreign countries. Cash collateral
maintained at the Bank as offsets to outstanding foreign loans
totaled $22.9 million at June 30, 1996 compared to $19.2 million at
year end 1995. In addition to the outstanding foreign loans, at
June 30, 1996 and December 31, 1995 there were $14.3 million and
$29.6 million, respectively, due primarily from foreign customers
on acceptances, offset by $1.5 million and $4.3 million,
respectively, of cash collateral maintained at the Bank.
Cross border outstandings include loans, acceptances, acceptances
purchased, pre-export financings and other interest bearing assets.
The following is a list of cross border outstandings at June 30,
1996 and December 31, 1995 for those countries for which the total
amount of outstandings, net of (a) any written guarantees of
principal or interest by domestic or other non-local third parties
(other than the foreign government) and (b) the value of any
tangible liquid collateral that may be netted against the
outstandings, that exceeded 1% of consolidated total assets (in
thousands of dollars):
June 30, December 31,
1996 1995
----------- -----------
Brazil $21,345 Argentina $16,350
Peru 21,094 Brazil 23,187
Guatemala 18,114
Peru 18,510
------- -------
$42,439 $76,161
======= =======
At June 30, 1996, the Bank had cross border outstandings to El
Salvador and Guatemala aggregating $13.2 million and $10.4 million,
respectively, which exceeded .75%, but were less than 1% of
consolidated total assets. At December 31, 1995, the Bank had
cross border outstandings to Ecuador and El Salvador aggregating
$14.4 million and $13.6 million, respectively, which exceeded .75%,
but were less than 1% of consolidated total assets.
At June 30, 1996 and December 31, 1995, the Bank held other
interest earning assets totaling $7.2 million issued by debtors
located in foreign countries.
Impaired Loans
- --------------
Effective June 30, 1996, the Company revised its definition of
"impaired" loans to include all loans that are on non-accrual
status (excluding consumer loans, which are collectively
evaluated). In addition, one loan for $4.6 million previously
categorized as impaired, but which was not on non-accrual status,
was removed from the impaired category. Prior period information
has been revised to conform with the current definition. This
revision did not have an impact on the provision for loan losses
although a reclassification of the allocation of the allowance for
impaired loans was required.
At June 30, 1996 and December 31, 1995, the recorded investment in
loans that were considered impaired under SFAS No. 114 was $5.1
million and $5.9 million, respectively. Measurement for impairment
of $372,000 and $2.4 million at June 30, 1996 and December 31,
1995, respectively, of these loans was based on the present value
of projected cash flows, and the remainder was measured based on
the estimated value of collateral. These loans required a SFAS No.
114 reserve for possible credit losses of $1.5 million and $2.2
million, which is included within the overall allowance for loan
losses at June 30, 1996 and December 31, 1995, respectively. The
average recorded investment in impaired loans during the six months
ended June 30, 1996 and 1995 was $7.6 million and $5.3 million,
respectively. For the six months ended June 30, 1996 and 1995, the
Company recognized interest income on these loans of $50,000 and
$18,000, respectively, all of which related to accrual basis loans.
At June 30, 1996 and December 31, 1995, the recorded investment in
client advances that were considered impaired under SFAS No. 114
was $766,000 and $2,184,000, respectively, all of which were on
non-accrual status at the respective dates. Measurement for
impairment was based on the estimated value of collateral. These
advances required a SFAS No. 114 reserve for possible credit losses
of $25,000 and $134,000 at June 30, 1996 and December 31, 1995,
respectively, which is included within the overall allowance for
doubtful accounts.
Non-accrual and Past Due Loans and Advances
- -------------------------------------------
Management evaluates past due and non-accrual loans and advances
regularly in connection with estimating the provisions and the
allowances for loan losses and doubtful accounts, taking into
consideration the value of collateral and the prospects for
repayment of principal and collectibility of interest. Loans and
advances are classified on a non-accrual basis when management
deems that collectibility of interest is doubtful, which is
generally after 90 days of past due status, unless the loan or
advance is well secured and in the process of collection. Charge
offs to the allowances are made when a loss is deemed probable.
At June 30, 1996 there were $788,000 of loans that were over 90
days past due and still accruing interest, as compared to $1.1
million at December 31, 1995. Included in loans 90 days past due
and still accruing interest were commercial and consumer loans of
$767,000 and $21,000, respectively, at June 30, 1996 as compared to
real estate, commercial and consumer loans of $689,000, $281,000
and $162,000, respectively, at December 31, 1995. There were no
real estate loans 90 days past due and still accruing interest at
June 30, 1996. Loans which are over 90 days past due and still
accruing interest are in the process of collection and are deemed
to be well secured.
Following is a summary of non-accrual loans and advances (in
thousands of dollars):
June 30, December 31,
1996 1995
----------- ------------
Commercial loans $ 1,185 $ 1,164
Foreign loans 123 2,072
Real estate loans 2,510 1,664
Consumer loans 1,242 1,990
------- -------
Total 5,060 6,890
Advances 766 2,184
------- -------
Total non-accrual loans
and advances $ 5,826 $ 9,074
======= =======
The decrease in non-accrual loans is primarily the result of the
charge off of $1.9 million in foreign loans, the transfer to other
real estate of two loans totaling $773,000 and charge offs of
consumer loans in excess of new consumer loan transferred to non-
accrual status. The decrease in non-accrual loans was offset by
the transfer of three real estate loans totaling $1.6 million from
accrual status to non-accrual status. Also charged off in the
second quarter were several loans totaling $1.4 million with a
Panamanian bank that had been transferred to non-accrual status in
the first quarter of 1996. The decrease in non-accrual advances is
the result of the repayment of $1.2 million of advances that were
on non-accrual at year end. Management has instituted collection
procedures in connection with non-accrual loans and advances and
has established allowances for loan losses and doubtful accounts
deemed adequate to absorb potential losses, based on information
currently available. Many of the factors considered in
management's determination as to the adequacy of the allowances
involve a significant degree of estimation and are subject to rapid
changes that may be unforeseen by management. Changes to these
factors could result in future adjustments to the allowance for
loan losses.
NOTE 3: Litigation
- -------------------
The Company and certain of its present and former directors and
officers are defendants in two lawsuits, one of which is a
shareholder derivative suit. Such suits allege that certain of the
defendants engaged in a number of allegedly improper and illegal
activities. No monetary relief is sought from the Company other
than costs in the derivative action. The Company does not believe
that the outcome of the foregoing litigation will have a material
adverse effect on the consolidated financial condition, results of
operations or liquidity of the Company.
In addition to these lawsuits, various legal actions and
proceedings are pending or are threatened against the Company, the
Bank and Capital Factors, some of which seek relief or damages in
amounts that are substantial. Unlike the aforementioned matters,
however, these actions or proceedings arose in the ordinary course
of business. Due to the complex nature of some of these matters,
it may be a number of years before they are ultimately resolved.
After consultation with legal counsel, management believes the
aggregate liability, if any, to the Company, the Bank and/or
Capital Factors resulting from such pending or threatened actions
and proceedings will not have a material adverse effect on the
Company's consolidated financial condition, results of operations
or liquidity.
NOTE 4: Subsequent Event
- -------------------------
On July 16, 1996, Capital Factors Holding, Inc. completed an
initial public offering of 2,000,000 shares of its Common Stock at
a public offering price of $8.50 per share. Prior to this
offering, all of the Common Stock was owned by the Bank. On August
2, 1996, the underwriting syndicate exercised its option to acquire
an additional 300,000 shares of Common Stock. The net proceeds
from the offering, which totaled approximately $17.7 million, were
used to reduce Capital Factors Holding, Inc.'s indebtedness to the
Bank under an outstanding line of credit. As a result of the
offering, the Bank's ownership of Capital Factors Holding, Inc. has
been reduced to approximately 81% of the outstanding Common Stock.
The Common Stock is listed for trading on the Nasdaq National
Market under the symbol "CAPF."
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CAPITAL BANCORP AND SUBSIDIARIES
INTRODUCTION
- ------------
Capital Bancorp ("Bancorp") is a bank holding company which
conducts operations principally through Capital Bank (the "Bank"),
a wholly-owned subsidiary, and Capital Factors Holding, Inc., a
subsidiary of the Bank. The Bank operates a commercial banking
franchise through 28 offices located in the South Florida area.
Capital Factors Holding, Inc. and its subsidiaries ("Capital
Factors") are principally engaged in providing receivables-based
commercial financing and related fee-based credit, collection and
management information services through offices located in Ft.
Lauderdale, Florida, New York, New York, Los Angeles, California
and Charlotte, North Carolina. Subsequent to June 30, 1996,
Capital Factors Holding, Inc. issued 2,300,000 shares of its Common
Stock in an initial public offering, reducing the Bank's ownership
percentage from 100% to approximately 81%.
Throughout this discussion, Bancorp and its subsidiaries are
collectively referred to as the "Company."
FINANCIAL CONDITION - JUNE 30, 1996 VS. DECEMBER 31, 1995
- ---------------------------------------------------------
Overview
- --------
Total consolidated assets increased $44.8 million, or 3%, during
the first six months of 1996, which included an increase of $62.0
million in interest earning assets offset by a decrease of $17.2
million in non-interest earning assets. The increase in total
consolidated assets was comprised primarily of increases of $58.2
million in net accounts receivable - factoring subsidiary and $22.8
million in net loans offset by decreases of $26.3 million in cash
and cash equivalents and $8.5 million in total securities. The
increases in accounts receivable and loans were primarily funded by
additional borrowings of Capital Factors. Total consolidated
liabilities increased $38.1 million and included an increase of
$64.5 million in interest bearing balances offset by a decrease of
$26.4 million in non-interest bearing balances. Total
stockholders' equity increased $6.7 million, to $120.4 million,
primarily as a result of earnings in excess of dividends declared.
Securities
- ----------
The decrease in total securities consisted primarily of maturities
and paydowns during the first six months of 1996 totaling $64.1
million and an increase in the unrealized loss on securities
available for sale of $2.8 million. Proceeds from these maturities
and paydowns were primarily used to purchase $58.5 million of
securities.
Loans
- -----
During the first six months of 1996, total loans increased $20.0
million, or nearly 3%, with increases primarily in commercial,
installment and real estate loans offset by a decrease in foreign
loans.
At June 30, 1996, commercial loans totaled $217.5 million, $44.4
million of which were asset-based loans at Capital Factors.
Commercial loans increased $10.1 million, or 5%, reflecting
primarily an increase of $6.1 million in asset-based loans. Such
loans are collateralized primarily by receivables owned by the
borrowers. The risks associated with asset-based lending are
similar to those involved in Capital Factors' traditional factoring
activities and primarily involve the credit quality of the
receivables accepted as collateral. The experience in monitoring
receivables that Capital Factors has gained through its traditional
factoring activities is beneficial in managing this activity.
Consumer loans include installment loans, home equity and other
consumer credit lines, and credit cards. Installment financing,
primarily of automobiles, represents the largest portion of these
loans, which totaled $134.8 million and $124.1 million at June 30,
1996 and December 31, 1995, respectively. Consumer loans totaled
$168.5 million and $159.5 million at June 30, 1996 and December 31,
1995, respectively.
Substantially all of the Company's real estate lending is
commercial in nature, including construction financing for new
residential developments and short-term (5-7 years) first mortgages
on income producing properties. Real estate construction loans
increased $12.7 million, or 15%, during the first six months of
1996 as a result of new home demand in the Company's South Florida
market area. Real estate construction loans totaled $97.1 million
and $84.4 million at June 30, 1996 and December 31, 1995,
respectively, while real estate mortgage loans aggregated $143.4
million and $147.1 million at June 30, 1996 and December 31, 1995,
respectively.
Foreign loans decreased $8.5 million, or nearly 7%, to $119.1
million, primarily due to the sale of several international loans
in connection with risk management strategies and the charge off of
several loans with an Argentine and Panamanian bank. (See ASSET
QUALITY REVIEW). Loans to foreign banks are derived primarily from
the Company's short-term trade finance activities in Central and
South America.
Accounts Receivable - Factoring Subsidiary
- ------------------------------------------
Accounts receivable - factoring subsidiary, net increased $58.2
million, or nearly 18%, to $374.7 million as a result of an overall
increase in factoring volume. Capital Factors purchases
receivables from its clients and records a liability payable to the
clients at the time of such purchase. From time to time, the
liability is reduced by advance payments by Capital Factors to the
clients, prior to the contractual payment date for the receivables
purchased. Such advance payments are interest earning balances of
Capital Factors. Interest earning advances, net of client interest
bearing credit balances, amounted to $241.6 million at June 30,
1996, compared to $194.3 million at December 31, 1995. Balances
due to factoring clients for receivables purchased amounted to
$139.6 million and $128.6 million at June 30, 1996 and December 31,
1995, respectively. Non-accrual advances amounted to $766,000 and
$2.2 million at June 30, 1996 and December 31, 1995, respectively,
and are considered in the assessment of the allowance for doubtful
accounts for adequacy (see "Provision for Doubtful Accounts -
Factoring Subsidiary" below).
Cash and Cash Equivalents
- -------------------------
The decrease in cash and cash equivalents was composed of a
decrease of $41.3 million in cash and due from banks offset by an
increase of $15.0 million in federal funds sold and securities
purchased under agreements to resell. The decrease in cash and due
from banks was primarily due to the investment of cash on hand in
advances and loans, and a net outflow of deposits.
Deposits
- --------
Total deposits amounted to $1,034.2 million at June 30, 1996 and
$1,038.8 million at December 31, 1995. The decrease in total
deposits consisted primarily of a decrease of $39.1 million in non-
interest bearing deposits offset by an increase of $36.3 million in
time deposits. Domestic deposits decreased by $27.2 million
primarily as a result of the repayment of $21.0 million in U.S.
Treasury demand deposits and $15.0 million in brokered time
deposits in January 1996. Such deposits were received and repaid
in the normal course of business and this activity is not
indicative of any known trends. The remaining decrease in non-
interest bearing deposits is the result of deposit outflows in the
normal course of business. The increase in time deposit balances
reflects the combined effects of internal marketing efforts to
increase overall deposits and increased customer demand for time
deposits due to higher rates offered.
The Company does not operate any foreign offices; however, as a
result of the activities of the International Division of the
Company, foreign customers maintain deposit accounts with the Bank.
Deposits by foreign customers amounted to $192.9 million at June
30, 1996 and $170.2 million at December 31, 1995, representing 19%
and 16% of total deposits, respectively. The level of these
deposits is, in part, related to the level of trade finance
activity conducted by the Company, and is also affected by economic
trends in foreign countries.
Short-Term Borrowings
- ---------------------
The Company's short-term borrowings primarily represent securities
sold under agreements to repurchase on an overnight basis involving
retail customers. From time to time, the Company may also access
wholesale repurchase sources for seven to 90 day periods for short-
term liquidity management purposes. Retail repurchase agreements
increased $977,000 to $87.1 million during the first six months of
1996.
Long-Term Debt
- --------------
During the second quarter of 1996, Capital Factors established a
$40 million revolving credit facility with an unaffiliated lender.
Borrowings under this facility bear interest at LIBOR plus 2.15%
and mature in March 1999. At June 30, 1996, $19.3 million was
outstanding under this line. Also during the second quarter,
Capital Factors privately placed a $10 million subordinated note
with an unaffiliated lender. The note bears interest at a fixed
rate of 7.95% and matures in July 2001.
CAPITAL RESOURCES
- -----------------
Stockholders' equity increased $6.7 million during the first six
months of 1996 as a result of net income of $9.6 million offset by
an increase in the unrealized loss on securities available for sale
of $1.8 million (net of tax) and dividends declared of $1.2
million.
The Florida Department of Banking and Finance (the "FDBF"), the
Federal Deposit Insurance Corporation ("FDIC") and the Board of
Governors of the Federal Reserve System ("Federal Reserve") utilize
guidelines in assessing the adequacy of capital of financial
institutions under their supervision. These guidelines, which
include required minimum leverage, tier one risk-based and total
risk-based capital ratios, are considered in regulators'
examinations and are reviewed periodically for potential
adjustments based upon changes in the economy, financial markets
and banking practices. Regulators can take a variety of actions if
capital guidelines are not met. Bancorp is supervised by the
Federal Reserve. The Bank is supervised by the FDIC and the FDBF.
At June 30, 1996 and December 31, 1995, the regulatory capital
ratios of the Company and the Bank were as follows:
Minimum
Company Bank Requirement of
------------------- ----------------- --------------
6/30/96 12/31/95 6/30/96 12/31/95
------- -------- ------- --------
Leverage ratio 7.50% 7.25% 7.19% 6.97% 3%*
Tier One ratio 9.89% 9.99% 9.47% 9.58% 4%
Total ratio 10.85% 11.24% 10.42% 10.83% 8%
- --------------------
*Banking regulators expect institutions to maintain an excess
of 1 to 2% above the minimum.
The Company's management continuously reviews capital adequacy.
The various alternatives for generating equity from internal and
external sources are constantly under review to ascertain the most
effective approach for the Company. The Company has traditionally
provided most of its capital through retained earnings. For the
first six months of 1996 and 1995, the Company's annualized
internal capital generation ratio was 14.72% and 14.27%,
respectively.
Bancorp currently pays stockholder dividends of 8.33 cents per
share per quarter. This dividend policy is dependent upon the
ability of the Bank and its subsidiaries to continue the payment of
dividends to Bancorp. Unforeseen changes in the financial
condition of the Bank and its subsidiaries, or actions by
regulatory authorities, could result in changes in the dividend
policy.
LIQUIDITY AND ASSET/LIABILITY MANAGEMENT
- ----------------------------------------
Liquidity
- ---------
Liquidity represents the Company's ability to meet customers'
borrowing needs, take advantage of investment opportunities, fund
deposit withdrawals and maintain reserve requirements. On the
asset side, the primary sources of liquidity are cash and due from
banks, interest bearing deposits with banks, Federal funds sold and
other short-term investments, scheduled maturities and paydowns of
securities held to maturity, securities available for sale and
scheduled repayments on outstanding loans and receivables. The
liquidity available from any of the foregoing sources is reduced to
the extent they are pledged against any liabilities or otherwise
restricted. On the liability side, the principal source of
liquidity is growth in deposits and other borrowings. These
primary sources of liquidity are supplemented by cash flows from
the Company's operating activities.
The liquidity position is monitored daily by management to maintain
a level of liquidity conducive to efficient operations and is
continuously evaluated as part of the asset/liability management
process (as discussed further in the next section) to maintain
liquidity levels conducive to efficient operations. Considerations
in managing the Company's liquidity position include scheduled cash
flows from existing assets and liabilities, as well as projected
liquidity needs arising from commitments to lend.
Cash and cash equivalents totaled $187.6 million and $213.9 million
at June 30, 1996 and December 31, 1995, respectively. During the
first half of 1996, the Company utilized $67.3 million in investing
activities while generating $24.3 million and $16.7 million from
financing and operating activities, respectively.
During the first six months of 1996, net new advances by Capital
Factors amounted to $49.4 million, and net new loans amounted to
$25.7 million. Maturities and paydowns of securities in excess of
purchases generated $5.6 million of liquidity. The Company
generated net cash flows of $24.3 million from its financing
activities, including $29.3 million from borrowings by Capital
Factors offset by $4.5 million in deposit outflows. Capital
Factors entered into a revolving credit facility with an
unaffiliated lender which provides for maximum borrowings of $40.0
million ($19.3 million of which was outstanding at June 30, 1996)
and issued a subordinated note in the amount of $10.0 million to
another unaffiliated lender. Deposit outflows occurred in the
normal course of business and are not indicative of any known
trends. Deposits are expected to remain a primary source of
liquidity.
In the normal course of business, the Company utilizes various
financial instruments with off-balance sheet risk to meet the
financing needs of its customers. These off-balance sheet
activities include commitments to extend credit, commercial letters
of credit and standby letters of credit. The liquidity, credit and
market risks associated with these financial instruments are
generally managed in conjunction with the Company's balance sheet
activities and are subject to normal credit policies, financial
controls and risk limiting and monitoring procedures. At June 30,
1996, the Company had outstanding commitments to extend credit,
commercial letters of credit and standby letters of credit
amounting to $223.5 million, $85.9 million and $16.6 million,
respectively. In the normal course of business, some of these
commitments may expire without being drawn upon. The Company
expects to meet funding requirements resulting from these
commitments by using its traditional sources of liquidity.
Liquidity is also necessary at the Bancorp level. The ability of
Bancorp to meet debt service requirements, pay dividends to
stockholders and satisfy other liquidity needs is primarily
dependent on the Bank's ability to continue the payment of
dividends. The ability of the Bank to pay dividends is governed by
Florida statutes. At periodic intervals, state or federal
regulatory agencies routinely examine Bancorp and the Bank as part
of their legally prescribed oversight of the banking industry and
may further restrict the payment of dividends or other activities
by regulatory action. At June 30, 1996, the Bank was not subject
to any restrictions on the payment of dividends other than
statutory.
For the remainder of 1996, Bancorp's estimated debt service and
stockholder dividend requirements total approximately $1.3 million.
At June 30, 1996, Bancorp had available cash balances of $6.2
million and management believes liquidity at June 30, 1996 was
satisfactory.
Asset/Liability Management and Interest Rate Risk
- -------------------------------------------------
The Company's exposure to interest rate changes is managed by a
review of the maturity and repricing characteristics of assets and
liabilities, as well as the composition of these items. Attention
is directed primarily to assets and liabilities that mature or can
be repriced within a period of 30 to 365 days. The Company matches
the maturities of a significant portion of its assets and
liabilities to minimize variability in net interest income within
a 12 to 18 month period. This practice serves to minimize both
liquidity and interest rate risks. Prudent risks are taken,
however, by leaving certain assets and liabilities unmatched in an
effort to benefit from the interest rate sensitivity created. The
Company currently does not use off-balance sheet derivative
instruments to manage interest rate risk.
Maintenance of satisfactory funding levels allows the Company to
position itself so that the risks of interest rate fluctuations are
decreased. This, together with a high percentage of variable rate
assets, provides a more consistent margin between interest earning
assets and interest bearing liabilities. For the first six months
of 1996, the average yield on interest earning assets was 9.18%.
For the first six months of 1996, the average rate paid on interest
bearing deposit liabilities was 4.28%, while the average rate paid
for other interest bearing liabilities was 6.41%. To the extent
that non-deposit liabilities grow faster than deposits, the
Company's overall cost of funds will likely rise, contributing to
a decrease in net interest income. At this time, management does
not believe these factors will have a significant adverse impact on
net interest income.
The following table provides a summary analysis of maturity and
repricing characteristics of the Company's interest earning assets
and interest bearing liabilities at June 30, 1996. For purposes of
this analysis, regular passbook savings and NOW and money market
accounts are included as repricing in 90 days or less. The
difference between the maturities and repricing intervals
applicable to interest earning assets and interest bearing
liabilities is commonly referred to as the "gap."
<TABLE>
INTEREST RATE SENSITIVITY BY MATURITY
OR REPRICING DATES
(In Millions of Dollars)
<CAPTION>
90 days 91-180 181-365 Over
or less days days one year Total
------- ------ ------- -------- -----
<S> <C> <C> <C> <C> <C>
Interest earning
assets:
Securities $ 16.5 $ 29.0 $ 24.5 $ 162.0 $ 232.0
Loans(1) 392.1 59.5 38.4 253.6 743.6
Other earning
assets(2) 340.2 -- -- -- 340.2
------ ------ ------ ------- -------
Total interest
earning assets 748.8 88.5 62.9 415.6 1,315.8
------ ------ ------ ------- -------
Interest bearing liabilities:
Interest bearing
deposits 464.3 92.0 121.1 59.7 737.1
Short-term
borrowings 87.1 -- -- -- 87.1
Long-term debt 195.6 -- -- 10.0 205.6
------ ------ ------ ------- -------
Total interest bearing
liabilities 747.0 92.0 121.1 69.7 1,029.8
------ ------ ------ ------- -------
Gap 1.8 (3.5) (58.2) 345.9 $ 286.0
------ ------ ------ ------- =======
Cumulative Gap $ 1.8 $ (1.7) $(59.9) $ 286.0
====== ====== ====== =======
- -------------------------
(1) Excludes non-accrual loans of $5.1 million.
(2) Excludes non-accrual advances of $766,000.
</TABLE>
Interest rates earned and paid on interest bearing assets and
liabilities are influenced both by factors outside the control of
management, such as current market interest rates (e.g., prime,
LIBOR) and factors controlled by management (e.g., rates paid on
deposits). Management can further influence net interest income by
adjusting the mix of assets and liabilities between fixed and
floating rate instruments, or adjusting the duration of these
items. To an extent, management's ability to control these factors
is contingent upon customer demand or acceptance of the products
offered by the Company. At June 30, 1996, the Company's cumulative
one-year gap was negative $59.9 million, or approximately 5% of
total earning assets. Management does not believe the Company's
operating results will be significantly impacted by changes in
interest rates over the next year.
RESULTS OF OPERATIONS - SIX MONTHS ENDED JUNE 30, 1996 AND 1995
- ---------------------------------------------------------------
General
- -------
The Company recorded net income of $9.6 million for the six months
ended June 30, 1996, as compared to $7.7 million for the six months
ended June 30, 1995, which was primarily a result of higher
factoring revenue, improved net interest income and lower operating
expenses (primarily at the Bank) offset by higher provisions for
credit losses and higher provisions for income taxes. Primary and
fully diluted earnings per share both were $1.18 for the six months
ended June 30, 1996 compared to $1.03 for the same period in 1995.
For the six months ended June 30, 1996, the Company's annualized
return on average assets was 1.22% compared to 1.15% for the same
period in 1995. The annualized return on average stockholders'
equity was 16.45% in 1996 compared to 15.97% in 1995.
Lines of Business
- --------------------
Set forth below is a summary of operating results for the Company's
domestic and international banking activities, as well as its
factoring activities. Revenues and expenses relating to factoring
activities are generally segregated and are easily identifiable.
Non-interest revenues and expenses associated with banking
activities include allocations of certain items based on
management's assumptions, some of which are subjective in nature.
Furthermore, interest income and expense of banking activities
reflect funds transfer pricing which, while based on the Bank's
actual external costs, may not reflect actual results which may be
achieved on a stand-alone basis.
BUSINESS SEGMENT DATA
(In Thousands of Dollars)
Six Months Ended
June 30,
-----------------------------
1996 1995
---------- ----------
Interest income and
non-interest income:
Domestic banking activities $ 48,891 $ 44,820
Foreign banking activities 7,043 7,385
---------- ----------
Total banking activities 55,934 52,205
Factoring activities 29,416 23,128
Inter-company (2,494)(1) (2,338)(1)
---------- ----------
Total $ 82,856 72,995
========== ==========
Income before income taxes:
Domestic banking activities $ 11,925 $ 4,379
Foreign banking activities (123) 4,475
---------- ----------
Total banking activities 11,802 8,854
Factoring activities 7,343 6,416
Corporate and other (3,462)(2) (3,017)(2)
---------- ----------
Total $ 15,683 $ 12,253
========== ==========
- -------------------------
(1) Inter-company revenues primarily reflects the related interest
income on loan balances payable by Capital Factors to the
Bank.
(2) Corporate and other includes costs associated with various
activities and functions, including the operations of Bancorp
(parent only), certain senior management of the Bank and other
administrative costs.
Interest income derived from domestic banking activities totaled
$39.8 million and $35.7 million for the six months ended June 30,
1996 and 1995, respectively. Net interest income totaled $24.8
million and $23.8 million in the respective periods. The increase
in net interest income in 1996 compared to 1995 was due primarily
to higher levels of average interest earning assets offset by a
decline in the net interest margin due to higher funding costs.
Non-interest income from domestic banking activities amounted to
$9.1 million in 1996 and 1995. Operating results from domestic
activities were higher primarily as a result of lower operating
expenses and lower provisions for domestic loan losses. Operating
expenses were lower primarily as a result of higher overdraft
losses in the first half of 1995 relating to the $2.7 million
provision for potential losses with one customer. Additionally,
based on management's assessment of the allowance for loan losses,
a credit of $403,000 was recorded to the allowance for domestic
loan losses in 1996 compared to a provision of $2.3 million in
1995. The improved credit quality of the portfolio resulted in a
credit to the allowance in 1996.
The Company does not operate any foreign offices. Foreign banking
operations principally arise from the Company's trade finance
lending to and issuance of letters of credit on behalf of banks and
financial institutions located in Central and South America.
Interest income from foreign banking activities totaled $4.8
million and $5.2 million in 1996 and 1995, respectively. Net
interest income totaled $2.7 million and $3.2 million in 1996 and
1995, respectively. Net interest income reflects a decrease in
1996 compared to 1995 primarily as a result of a decrease in the
net interest margin due to higher funding costs. Non-interest
income from foreign banking activities primarily represents letter
of credit fees and amounted to $2.3 million and $2.2 million in
1996 and 1995, respectively. Operating results from foreign
banking activities were also affected by provisions for loan
losses, which amounted to $2.7 million in 1996 and a credit of $1.6
million to the allowance for foreign loan losses in 1995. The 1996
provision reflects approximately $1.4 million for certain exposures
in connection with several loans to a Panamanian bank for which the
Panamanian government suspended operations during the first
quarter, and $1.0 million for certain exposures in connection with
several loans to an Argentine bank. These loans were charged off
in June 1996. The 1995 credit reflects approximately $1.6 million
in recoveries of 1994 charge offs and the improvement of other
potential problem foreign loans.
The Company's factoring activities continued to grow in 1996, due
primarily to the acquisition of new clients. Total revenues, which
includes interest income and non-interest income, increased 27%
over the first six months in 1995 to $29.4 million for the six
months ended June 30, 1996, while operating profits increased
approximately $1.0 million. Non-interest income, which primarily
represents factoring commissions, amounted to $13.9 million and
$10.7 million in 1996 and 1995, respectively, reflecting increased
factored accounts receivable from $901.6 million in 1995 to $1.2
billion in 1996. Interest income was $15.5 million and $12.4
million, while net interest income was $6.4 million and $5.3
million in 1996 and 1995, respectively. Growth in average interest
earning assets, primarily in advances due to business development,
gave rise to these increases. The increases in net interest income
and non-interest income were substantially offset by increases in
operating expenses and the provision for doubtful accounts. The
increase in operating expenses was primarily the result of the
expansion of factoring activities. The increase in the provision
in 1996 was the result of greater charge offs resulting partially
from growth in factoring activities.
Net Interest Income
- -------------------
Net interest income is the difference between interest, fees and
dividends earned on loans and investments and interest paid on
deposits and other sources of funds. Net interest income totaled
$34.0 million and $32.3 million for the six months ended June 30,
1996 and 1995, respectively. Loan fees included in net interest
income amounted to $983,000 and $780,000 in 1996 and 1995,
respectively. Net interest income on a fully tax-equivalent basis,
including loan fees, totaled $34.5 million in 1996 compared to
$33.0 million in 1995.
Net interest income in the first six months of 1996 increased $1.7
million over the same period in 1995 and was comprised of an
increase of $6.7 million in interest income offset by an increase
of $5.0 million in interest expense. The increase in net interest
income was due to an increase in average interest earning assets to
$1.273 billion in 1996 from $1.088 billion in 1995, offset by a
decline in the net interest margin to 5.45% in 1996 from 6.11% in
1995. Average interest bearing liabilities increased to $977.3
million in 1996 from $827.4 million in 1995. The increase in
average interest bearing liabilities occurred primarily in time
deposits and long-term borrowings at Capital Factors. While
average interest earning assets and average interest bearing
liabilities increased 17% and 18%, respectively, the decline in the
net interest margin primarily reflects an increase in interest
rates paid on deposits. Average time deposits increased $120.0
million, or approximately 39%, for the first six months of 1996 to
$424.7 million and represented approximately 60% of average total
interest bearing deposits. Average time deposits for the first six
months of 1995 totaled $304.7 million and represented approximately
50% of average total interest bearing deposits. Also, contributing
to the decline in the net interest margin was the increase in rates
paid for interest bearing deposits; approximately 76% of the
increase in interest expense was attributable to interest expense
on deposits.
See Asset/Liability Management and Interest Rate Risk above for a
discussion of factors that may affect net interest income.
The following table sets forth information on yields earned and
rates paid by the Company for the six month periods ended June 30,
1996 and 1995, and should be reviewed when reading the following
net interest income analysis. Yield and interest on tax-exempt
loans and securities have been adjusted to reflect tax-equivalent
basis using the Federal tax rate of 35%. Loans and accounts
receivable on non-accrual status have been included in average
balances for purposes of computing average yield or rate. Yields
on securities available for sale have been computed based on
amortized cost.
<PAGE>
<TABLE>
YIELDS EARNED AND RATES PAID
(All Dollar Amounts in Thousands)
<CAPTION>
FOR THE SIX MONTHS ENDED JUNE 30,
--------------------------------------------------------------------------
1996 1995
----------------------------- -------------------------------
Average Average
Average Yield Average Yield
Balance Interest Or Rate Balance Interest Or Rate
---------- -------- ------- ----------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest earning assets:
Loans, net of unearned income:
U.S. Borrowers $ 585,385 $ 29,330 10.08% $ 522,422 $ 26,153 10.10%
Foreign Borrowers 128,521 4,710 7.37 122,560 5,036 8.29
Tax Exempt 16,353 1,317 16.19 20,333 1,658 16.44
---------- --------- ----- ---------- -------- -----
Total loans 730,259 35,357 9.74 665,315 32,847 9.96
Accounts receivable
advances - factoring
subsidiary 216,595 12,892 11.97 173,141 11,183 13.02
Securities:
Securities held to maturity:
Taxable 24,430 1,039 8.55 79,427 2,471 6.27
Tax-exempt 3,093 165 10.73 3,511 186 10.71
Securities available for sale:
Taxable 206,837 6,252 6.08 131,911 3,894 5.95
Federal funds sold
and other interest earning
assets 92,275 2,439 5.32 35,171 1,043 5.98
---------- --------- ----- ---------- -------- -----
Total interest earning
assets 1,273,489 58,144 9.18 1,088,476 51,624 9.56
--------- --------
Less allowance for loan losses
and doubtful accounts (14,474) (12,282)
Cash and due from banks 88,992 83,743
Due from customers on
acceptances 28,868 26,780
Other real estate 5,784 12,823
Other assets 192,803 143,158
---------- ----------
Total $1,575,462 $1,342,698
========== ==========
</TABLE>
<TABLE>
YIELDS EARNED AND RATES PAID
(All Dollar Amounts in Thousands)
<CAPTION>
FOR THE SIX MONTHS ENDED JUNE 30,
--------------------------------------------------------------------------
1996 1995
----------------------------- -------------------------------
Average Average
Average Yield Average Yield
Balance Interest Or Rate Balance Interest Or Rate
---------- -------- ------- ---------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
LIABILITIES AND STOCKHOLDERS'
EQUITY
Interest bearing liabilities:
Deposits:
Savings and Money Market $ 283,275 $ 3,462 2.46% $ 302,340 $ 3,411 2.27%
Time 424,737 11,596 5.49 304,703 7,829 5.18
---------- --------- ----- ---------- -------- -----
Total interest bearing
deposits 708,012 15,058 4.28 607,043 11,240 3.73
Short-term borrowings 81,293 1,838 4.55 93,395 2,475 5.34
Long-term borrowings 187,973 6,745 7.22 126,933 4,934 7.84
---------- --------- ----- ---------- -------- -----
Total interest bearing
liabilities 977,278 23,641 4.86 827,371 18,649 4.55
---------- --------- ----- ---------- -------- -----
Non-interest bearing
deposits 305,601 289,027
Bank acceptances outstanding 28,868 26,780
Other liabilities 146,742 102,930
Stockholders' equity 116,973 96,590
---------- ----------
Total liabilities and
stockholders' equity $1,575,462 $1,342,698
========== ==========
Net interest earnings/
yield $ 34,503 5.45% $ 32,975 6.11%
========= ===== ======== =====
Net interest spread 4.32% 5.01%
===== =====
Utilization rate 80.83% 81.07%
===== =====
</TABLE>
<PAGE>
Provision for Loan Losses
- -------------------------
For the first six months of 1996, the provision for loan losses
increased $1.6 million to $2.3 million as compared to $750,000
during the same period in 1995. The higher provision in 1996
primarily reflects higher levels of provisions associated with $3.4
million of foreign loans which were charged off in the second
quarter of 1996. The assessment of the adequacy of the provision
involves a significant degree of estimation and is subject to
change. See "Allowance for Loan Losses" for additional discussion.
Provision for Doubtful Accounts - Factoring Subsidiary
- ------------------------------------------------------
The adequacy of the provision for credit losses recorded by Capital
Factors is assessed by management based in part on the level of net
charge offs relative to accounts receivable purchased. These
statistics are believed to be significant indicators of inherent
losses because the receivables portfolio turns over approximately
seven times each year. Accounts receivable which are past due are
charged off when, in the opinion of management, collection from the
customer, client or collateral realization, if any, is unlikely.
In making this determination, management considers the quality of
the collateral, the creditworthiness of the customer and client,
economic conditions and other factors which may be relevant. This
statistical assessment is supplemented by a review of the recorded
allowance for credit losses at each month end relative to total
accounts receivable at month end, taking into consideration
specific potential problem accounts, accounts purchased with
recourse where payment has not been made by Capital Factors to its
client, and other factors which may be relevant.
For the first six months in 1996, the provision for doubtful
accounts amounted to $2.1 million compared to $950,000 for the same
period in 1995. This increase is primarily due to greater charge
offs resulting partially from growth in factoring activities. See
"Allowance for Doubtful Accounts - Factoring Subsidiary" for
additional discussion. For the six months ended June 30, 1996 and
1995, net charge offs as a percentage of accounts receivable
purchased was .19% and .06%, respectively. For the same periods,
the percentage of provision for doubtful accounts to accounts
receivable purchased was .18% and .11%, respectively. Based on
these relationships, and a review of the recorded allowance and
accounts receivable at each period end, management believes the
provisions and allowance to be adequate to absorb known and
inherent losses in the accounts receivable portfolio. Because the
assessment of the adequacy of the allowance and provisions for
credit losses involves a significant degree of estimation and is
subject to change, future provisions for credit losses may be
greater or less than actual charge offs.
Other Income
- ------------
Other income increased $3.2 million, or approximately 15% for the
six months ended June 30, 1996 compared to the same period in 1995.
The increase in other income consisted primarily of an increase of
$3.0 million in factoring revenues. The Company, through Capital
Factors, operates factoring offices in Fort Lauderdale, Florida,
Los Angeles, California, New York, New York and Charlotte, North
Carolina. Capital Factors is a specialized financial services
company principally engaged in providing receivables-based
commercial financing and related fee-based credit, collection and
management information services. Capital Factors' clients are
primarily small to medium size companies in various industries,
including textile, apparel and furniture manufacturing and,
recently, entities involved in the health care industry.
Total accounts receivable factored amounted to $1.179 billion and
$901.6 million during the first six months of 1996 and 1995,
respectively, representing an increase of 31%. Factoring
commissions amounted to $11.6 million or 46% of total other income
for the six months ended June 30, 1996 compared to $9.2 million or
42% of total other income for the same period in 1995. The growth
in factoring commissions is attributable to overall expansion of
factoring activities. Although Capital Factors experienced
increased commission income as a result of increased factored
accounts receivable, commission income as a percentage of factored
accounts receivable declined slightly from 1.02% in 1995 to .99% in
1996. This decline was primarily the result of lower factoring
fees charged to high volume clients in the New York market and a
lower fee structure, partly due to high volume clients in the
Charlotte market. Capital Factors typically receives lower
factoring fees from high volume customers because, among other
reasons, high volume clients do not have the same servicing needs
as smaller clients, requiring less labor intensive services to be
performed by Capital Factors, and because there is increased
competition for such clients' business.
Other Expenses
- --------------
Other expenses decreased $1.3 million, or 3%, consisting primarily
of a decrease of $2.9 million in other operating expenses offset by
an increase of $1.2 million in salaries and employee benefits. The
decrease in other operating expenses primarily reflects $2.7
million in provisions to reserve for potential losses resulting
from overdrafts related to one customer in 1995 (see further
discussion below). The increase in salaries and employee benefits
primarily reflects increases at Capital Factors due to expansion of
factoring activities.
For the first six months of 1996, provisions for losses on
overdrafts totaled $241,000, compared to $3.1 million for the
comparable period of 1995. The increased provision for the six
months of 1995 primarily resulted from one customer who created net
overdrafts of approximately $2.7 million in connection with
transactions occurring over a period of approximately two weeks.
To mitigate the risk that similar losses may occur in the future,
internal review and approval procedures were strengthened by
management. At June 30, 1996 and December 31, 1995, total
overdraft balances amounted to $3.1 million and $3.2 million,
respectively, and were included in loans in the consolidated
balance sheet. Management does not anticipate any material losses
associated with overdraft balances at June 30, 1996.
Provision (Benefit) for Income Taxes
- ------------------------------------
The Company's effective tax rate varies with changes primarily in
the derivation of pre-tax income by state, in the proportion of tax
exempt income and in corporate tax rates. The provision for income
taxes aggregated 39% and 37% of pre-tax income for the six months
ended June 30, 1996 and 1995, respectively.
RESULTS OF OPERATIONS - THREE MONTHS ENDED JUNE 30, 1996 AND 1995
- -----------------------------------------------------------------
General
- -------
The Company recorded net income of $5.2 million or $.64 per share,
for the three months ended June 30, 1995, compared to $4.0 million
or $.53 per share for the same period in 1995. The annualized
return on average assets was 1.28% for the three months ended June
30, 1996, compared to 1.17% for the three months ended June 30,
1995. The annualized return on average stockholders' equity was
17.55% for the three months ended June 30, 1996 compared to 16.13%
for the same period in 1995. The increase in income was primarily
a result of higher factoring revenue, improved net interest income
and lower other operating expenses offset by higher provisions for
credit losses and income taxes.
Lines of Business
- --------------------
Set forth below is a summary of operating results for the Company's
domestic and international banking activities, as well as its
factoring activities. Revenues and expenses relating to factoring
activities are generally segregated and are easily identifiable.
Non-interest revenues and expenses associated with banking
activities include allocations of certain items based on
management's assumptions, some of which are subjective in nature.
Furthermore, interest income and expense of banking activities
reflect funds transfer pricing which, while based on the Bank's
actual external costs, may not reflect actual results which may be
achieved on a stand-alone basis.
BUSINESS SEGMENT DATA
(In Thousands of Dollars)
Three Months Ended
June 30,
------------------------
1996 1995
---------- ----------
Interest income and
non-interest income:
Domestic banking activities $ 25,373 $ 22,765
Foreign banking activities 3,498 3,838
---------- ----------
Total banking activities 28,871 26,603
Factoring activities 15,490 12,022
Inter-company (1,228)(1) (1,248)(1)
---------- ----------
Total $ 43,133 $ 37,377
========== ==========
Income (loss) before income taxes:
Domestic banking activities $ 6,241 $ 2,462
Foreign banking activities (145) 2,049
---------- ----------
Total banking activities 6,096 4,511
Factoring activities 4,214 3,346
General corporate expenses (1,708)(2) (1,510)(2)
---------- ----------
Total $ 8,602 $ 6,347
========== ==========
- ------------------------------------
(1) Inter-company revenues primarily reflects the related interest
income on loan balances payable by Capital Factors to the
Bank.
(2) Corporate and other includes costs associated with various
activities and functions, including the operations of Bancorp
(parent only), certain senior management of the Bank and other
administrative costs.
Net interest income derived from domestic banking activities
increased $690,000 to $12.6 million primarily due to an increase in
average interest earning assets. Non-interest income increased by
$551,000 due to the sale of drainage rights at one of the Bank's
real estate properties. The provision for domestic loan losses
decreased $662,000 to $197,000 for the second quarter of 1996 as
compared to the second quarter of 1995 due to management's
assessment of the allowance at the respective period ends. Non-
interest expense decreased by approximately $1.9 million, $1.3
million of which related to the 1995 second quarter provision for
potential losses resulting from overdrafts from one customer.
The decrease in operating results for the Bank's foreign activities
is the result of increased provisions for foreign loan losses which
amounted to approximately $1.5 million, compared to a credit of
$484,000 for the same period of 1995. This increase was the result
of fully providing for losses relating to certain Argentine and
Panamanian loans. See "Allowance for Loan Losses" below for
additional discussion.
Net interest income derived from factoring activities increased
primarily due to higher levels of average earning assets.
Factoring commissions, which amounted to $7.2 million and $5.5
million for the second quarter of 1996 and 1995, respectively, also
contributed to higher factoring revenues. The higher levels of
revenues were offset by higher operating expenses and an increase
in the provision for doubtful accounts.
Net Interest Income
- -------------------
Net interest income for the three months ended June 30, 1996
increased $1.1 million over the comparable period in 1995, as a
result of an increase of $3.5 million in interest income (primarily
in interest and fees on loans and interest on advances to factoring
clients) offset by an increase of $2.4 million in interest expense
(primarily in time deposits and long-term borrowings). The
increase in interest income is primarily due to higher average
balances of interest earning assets partially offset by lower
average yields on these assets. Interest expense was higher
primarily due to higher average interest bearing liabilities and
higher average rates paid. The increase in average interest
bearing liabilities occurred primarily in time deposits and
borrowings at Capital Factors. The net interest margin for the
three months ended June 30, 1996 decreased to 5.43% from 6.03% for
the three months ended June 30, 1995.
Provisions for Credit Losses
- ----------------------------
For the three months ended June 30, 1996, the provision for loan
losses increased $1,325,000 to $1.7 million primarily as a result
of higher levels of provisions associated with $3.4 million of
foreign loans charged off during the period. The provision for
doubtful account-factoring subsidiary increased $500,000 to $1.0
million as compared to the same period in 1995, as the result of
greater charge offs resulting partially from growth in factoring
activities. The provisions reflect management's judgment as to the
amount deemed adequate to absorb potential loan and receivable
losses in the respective portfolios after evaluating the
portfolios, current economic conditions, changes in the nature and
volume of the portfolios, past loss experience and other pertinent
factors.
Other Income and Expense
- ------------------------
Other income increased $2.3 million, or 20% for the three months
ended June 30, 1996 compared to the same period in 1995. The
increase in other income primarily consisted of increases of $1.8
million in factoring revenues and $617,000 in other operating
income. Factoring revenue increased due to expansion of factoring
activities. The increase in other operating income primarily
consisted of a $663,000 gain on the sale of drainage rights on an
other real estate property.
Other expenses decreased $743,000, or 4%, consisting primarily of
a decrease of $1.4 million in other operating expenses offset by an
increase of $492,000 in salaries and employee benefits. The
decrease in other operating expenses primarily reflects the $1.3
million provision to reserve for potential losses resulting from
overdrafts related to one customer in June 1995. The increase in
salaries and employee benefits primarily reflects increases at
Capital Factors due to expansion of factoring activities.
Impact of Inflation and Changing Prices
- ---------------------------------------
The impact of inflation on the Company is reflected primarily in
the increased costs of operations. These increased costs are
generally passed on to customers in the form of increased service
fees. Since the primary assets and liabilities of the Company are
monetary in nature, the impact of inflation on interest rates has,
and is expected to continue to have, an effect on net income.
In structuring fees, negotiating loan margins and developing
customer relationships, management concentrates its efforts on
maximizing earnings capacity while attempting to contain increases
in operating expenses. In addition, management continually reviews
the feasibility of new and additional fee-generating services to
offset the effects of inflation and changing prices with an
objective of increased earnings.
New Accounting Pronouncements
- -----------------------------
In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ("SFAS") No. 123,
"Accounting for Stock Based Compensation." This statement requires
certain disclosures about stock-based employee compensation
regardless of the method used to account for it, defines a fair
value based method of accounting for an employee stock option or
similar equity instrument and encourages all entities to adopt that
method of accounting for all of their employee stock compensation
plans. However, it also allows an entity to continue to measure
compensation cost for stock-based compensation plans using the
intrinsic value method of accounting prescribed by Accounting
Principles Board ("APB") Opinion No. 25, "Accounting for Stock
Issued to Employees." Entities electing to remain with the
accounting method set forth in APB Opinion No. 25 must make pro
forma disclosures of net income and, if presented, earnings per
share as if the fair value method of accounting defined in SFAS No.
123 had been applied. Under the fair value method, compensation
cost is measured at the grant date based on the value of the award
and is recognized over the service period, which is usually the
vesting period. Under the intrinsic value method, compensation
cost is the excess, if any, of the quoted market price of the stock
at grant date, or other measurement date, over the amount an
employee must pay to acquire the stock. The disclosure
requirements of SFAS No. 123 are effective for financial statements
for fiscal years beginning after December 15, 1995. Pro forma
disclosures required for entities that elect to continue to measure
compensation cost using APB No. 25 must include the effects of all
awards granted in fiscal years that begin after December 15, 1994.
The Company has decided to continue to measure compensation cost
for stock-based compensation as prescribed by APB No. 25.
ASSET QUALITY REVIEW
- --------------------
The following table summarizes the Company's non-accrual loans and
advances, past due loans, other potential problem loans and
restructured loans and assets as of the dates indicated (in
thousands of dollars):
June 30, December 31,
1996 1995
--------- ------------
Non-accrual
loans:
Domestic $ 4,937 $ 4,818
Foreign 123 2,072
90 days past due
or more:
Domestic 788 1,132
Foreign -- --
-------- --------
Sub total 5,848 8,022
Non-accrual advances 766 2,184
-------- --------
Total $ 6,614 $ 10,206
======== ========
Other potential
problem loans $ 6,436 $ 7,697
======== ========
Restructured
loans (1) $ 8,362 $ 8,433
======== ========
Restructured
assets (2) $ 3,159 $ 3,137
======== ========
- -------------------------
(1) Represents troubled debt restructurings as defined by
Statement of Financial Accounting Standards No. 15. These
loans were in compliance with terms at June 30, 1996.
(2) Represents securities available for sale (at market value)
received in connection with restructured foreign loans. These
bonds were in compliance with terms at June 30, 1996.
Domestic non-accrual loans aggregated $4.9 million at June 30,
1996, compared to $4.8 million at year end 1995. Domestic non-
accrual loans aggregated .8% of total domestic loans at June 30,
1996 and December 31, 1995. The increase in domestic non-accrual
loans resulted primarily from the transfer of three real estate
mortgage loans from accrual status to non-accrual status offset by
two real estate mortgage loans that were foreclosed upon and
transferred to other real estate and charge offs of consumer loans
in excess of new consumer loans transferred to non-accrual status.
Foreign non-accrual loans aggregated $123,000 and $2.1 million at
June 30, 1996 and December 31, 1995, respectively. Foreign non-
accrual loans represented .1% and 1.6% of total foreign loans at
June 30, 1996 and December 31, 1995, respectively. The decrease in
foreign non-accrual loans is primarily the result of the charge off
in the second quarter of $2.0 million and $1.4 million of loans
with an Argentine and a Panamanian bank, respectively. The loans
with the Panamanian bank were transferred from accrual status to
non-accrual status in the first quarter of 1996. See "Allowance
for Loan Losses" below for additional discussion.
Impaired loans aggregated $5.1 million and $5.9 million at June 30,
1996 and December 31, 1995, respectively. Included in impaired
loans at June 30, 1996 and December 31, 1995 were $3.8 million and
$4.9 million, respectively, of non-accrual loans and one loan of
$1.3 million and $956,000, respectively, which was still accruing
interest. The impaired loan that was accruing interest income is
included in other potential problems loans in the above table.
Subsequent to June 30, 1996 this loan was placed on non-accrual
status. See "Allowance for Loan Losses" for additional discussion.
Impaired advances totaled $766,000 and $2.2 million at June 30,
1996 and December 31, 1995, respectively.
Advances made by Capital Factors are placed on non-accrual status
when the loan balance, including interest, is considered impaired
and exceeds the estimated value of the underlying receivables or
collateral. Non-accrual advances amounted to $766,000 at June 30,
1996, compared to $2.2 million at December 31, 1995. The decrease
at June 30, 1996 is primarily the result of the repayment in early
1996 of $1.2 million of advances that were on non-accrual at year
end. See "Provision for Doubtful Accounts - Factoring Subsidiary"
above and "Allowance for Doubtful Accounts - Factoring Subsidiary"
below for additional information.
Allowance for Loan Losses
- -------------------------
The allowance for loan losses is maintained at a level deemed
adequate by management to absorb potential loan losses in the
portfolio after evaluating the loan portfolio, the financial
condition of borrowers, current economic conditions, changes in the
nature and volume of the portfolio, past loan loss experience and
other pertinent factors. Many of these factors involve a
significant degree of estimation and are subject to rapid changes
which could be unforeseen by management. As a consequence, the
possibility exists that management's evaluation of the adequacy of
the allowance could change, and such change could be material, as
additional information becomes known. While the Company considers
the allowance for loan losses to be adequate at June 30, 1996,
management is unable to predict the amount, if any, of future
provisions to the allowance.
The following table summarizes the activity in the allowance for
loan losses for the periods indicated (dollar amounts in
thousands):
Six Months Ended
June 30,
---------------------------
1996 1995
-------- --------
Allowance for loan
losses at January 1 $ 11,789 $ 9,210
Loans charged off:
Real estate - mortgage -- (17)
Commercial and financial (417) (647)
Consumer (1,795) (677)
Foreign (3,391) --
-------- --------
Total loans charged off (5,603) (1,341)
-------- --------
Recoveries on loans
previously charged off:
Real estate - mortgage 37 14
Commercial and financial 179 692
Consumer 247 261
Foreign -- 1,632
-------- --------
Total recoveries 463 2,599
-------- --------
Net loans (charged off)
recovered (5,140) 1,258
-------- --------
Additions to allowance
charged to operating
expense 2,300 750
-------- --------
Allowance for loan
losses at June 30 $ 8,949 $ 11,218
======== ========
Average amount of
loans outstanding
for the year $730,259 $665,315
======== ========
Ratio of net loans
charged off (recovered) to average
loans outstanding for
the period (1) (2) 1.41% (.38)%
======== ========
- ---------------------
(1) Before deduction of allowance for loan losses.
(2) Annualized.
During the first half of 1996, domestic loan charge offs generally
increased compared to the same period in 1995 as a result of
increases in consumer loan charge offs. The Company's consumer
lending activities primarily involve installment loans and lines of
credit. The increase in consumer loan charge offs is generally
reflective of the increase in the consumer loan portfolio and a
nationwide increase in defaults on consumer debt. To a lesser
extent, recoveries of previously charged off domestic loans
decreased.
In the second quarter of 1996, the Company charged off $2.0 million
and $1.4 million of loans with an Argentine and a Panamanian bank,
respectively. Both banks have ceased normal operations. The
allowance allocated for these loans at the time of charge off was
$3.4 million. These Argentine and Panamanian bank loans arose from
trade-related transactions, as do substantially all of the
Company's foreign loans. In the first quarter of 1995, the Company
received bonds issued by the government of Ecuador in connection
with a restructuring of that country's foreign debt. These bonds
had a face amount of $6.6 million and were received in exchange for
$3.9 million in loans (plus several years past due interest), $3.5
million of which was previously charged off. In the first quarter
of 1995, a portion of these bonds was sold. Proceeds in excess of
the remaining loan balance were recorded as loan recoveries at the
time of receipt. The Company has not conducted non-trade foreign
lending of the type which gave rise to these loans since the 1980s
and currently has no plans to do so. At June 30, 1996, the Company
had no restructured or non-performing non-trade foreign loans. Due
to the foreign charge offs in 1996 and the foreign recoveries in
1995, the ratio of net charge offs to average loans is
significantly impacted. Excluding this foreign loan activity, the
ratios would have been .48% in 1996 compared to .11% in 1995.
The allowance for loan losses totaled $8.9 million and $11.8
million at June 30, 1996 and December 31, 1995, respectively,
representing 1.2% and 1.6% of outstanding loans at June 30, 1996
and December 31, 1995, respectively. The ratio of the allowance
for loan losses to non-accrual loans was 177% at June 30, 1996
compared to 171% at December 31, 1995. The ratio of the allowance
to total non-performing loans (non-accrual loans and loans past due
90 days or more) was 153% and 147% at June 30, 1996 and December
31, 1995, respectively. The slight increase in these ratios
reflects the charge off of foreign loans in the second quarter. At
June 30, 1996 the total allowance included $400,000 allocated for
foreign loans, $8.1 million allocated for domestic exposure and
$499,000 unallocated. At December 31, 1995, the foreign allocation
was $1.4 million, domestic was $9.9 million and $489,000 was
unallocated.
The allowance allocated for foreign loans decreased as a result of
the charge offs in the second quarter. Based on an assessment of
the information currently available, management believes the
allowance allocated for foreign loans at June 30, 1996 to be
adequate. It is possible, however, that future deterioration in
the repayment capacity of foreign borrowers could result in
additional non-performing loans and additions to the allowance for
loan losses in amounts not determinable at this time.
The allowance allocated for domestic loans decreased as a result of
management's evaluation of potential problem loans in the
commercial and real estate mortgage portfolio at June 30, 1996.
Management does not believe the composition of domestic potential
problem loans represents deteriorating trends, but are isolated to
specific borrowers.
Allowance for Doubtful Accounts - Factoring Subsidiary
- ------------------------------------------------------
The allowance for credit losses at Capital Factors is maintained at
a level deemed adequate by management to absorb losses in the
portfolio after evaluating the portfolio, current economic
conditions, changes in the nature and volume of the portfolio, past
loss experience and other pertinent factors. Many of these factors
involve a significant degree of estimation and are subject to rapid
change which may be unforeseen by management. Changes in these
factors could result in material adjustments to the allowance in
the near term.
The following table summarizes the activity in the allowance for
doubtful accounts for the periods indicated (in thousands of
dollars).
Six Months Ended
June 30,
----------------------------
1996 1995
--------- ---------
Allowance for doubtful accounts
at January 1 $ 2,981 $ 1,774
Provision for credit losses 2,100 950
Charge offs (2,548) (907)
Recoveries 270 370
--------- --------
Allowance for doubtful accounts
at June 30 $ 2,803 $ 2,187
========= ========
The accounts receivable portfolio turns over approximately seven
times each year. Due to charge off policies and the frequency of
this turnover, actual losses are believed to bear a direct
relationship to accounts receivable purchased volume. Charge offs,
as well as the provision, increased in the first half of 1996 as
compared to the same period in 1995 primarily as a result of
increased volume and the bankruptcy of a customer of a factoring
client, which resulted in a $600,000 charge off for the period.
See "Provision for Doubtful Accounts - Factoring Subsidiary" above
for additional discussion.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
- --------------------------
NATHAN J. ESFORMES, STANLEY I. WORTON, M.D., AND LEONARD WIEN, AS
INDIVIDUAL SHAREHOLDERS AND ON BEHALF OF ALL OTHER SHAREHOLDERS OF
CAPITAL BANCORP V. ABEL HOLTZ, FANA HOLTZ, DANIEL M. HOLTZ, JAVIER
J. HOLTZ, CAPITAL BANK AND CAPITAL BANCORP, CIRCUIT COURT FOR THE
11TH JUDICIAL DISTRICT IN AND FOR DADE COUNTY, FLORIDA CASE NO. 95-
02515.
The Independent Committee (the "Committee"), which was appointed to
review the allegations in the derivative action, recently issued a
report dated May 29, 1996 concluding, based on its investigation
and the investigation of its counsel and accounting firm, that no
legal basis for pursuing the derivative action exists and that the
derivative action is not in the best interest of Bancorp or the
Bank and, as such, should be dismissed. The Company recently filed
a motion to lift the stay entered by the court with respect to the
derivative action and intends to move to dismiss the derivative
action. The Company expects the plaintiffs in the derivative
action to strongly oppose this motion.
The Chairman of the Committee, and two companies in which he is a
principal and a director (neither of which are affiliates of the
Company or the Bank), were recently named as defendants in a
complaint filed in the United States District Court for the
Southern District of Florida by a former female employee of such
companies, alleging sex discrimination, sexual harassment and
exposure to a sexually hostile work environment through the actions
of such director as the managing director of the defendant
companies. The complaint also alleges intentional infliction of
emotional distress and violation of the Florida Whistleblower
Statute. In connection with the latter claim, the employee
alleges, among other things, that in 1995, the director requested
that she provide perjured testimony in connection with "private
civil litigation and an investigation by the Federal Deposit
Insurance Corporation involving Capital Bancorp," which testimony
would have included, but not been limited to, "the fact that
certain shares of stock of the Company were being fraudulently held
in trust for (the director) under the names of certain other third
parties." The employee also alleges that the director requested
that she assist the law firm hired by the Company to conduct a
purportedly "independent investigation." The plaintiff alleges
that the director made this request even though he was named as a
defendant in the lawsuit and that he promised her a large bonus if
she became involved and provided him with details of any findings
of wrongdoing before officially reported. Although no answer is
yet due or has been filed, the director has advised the Company
that in his judgement, there is no substance to any of the
allegations. No other allegations in this complaint relate to
Bancorp or the Bank.
The director has filed an action against the former employee in the
Circuit Court for the Eleventh Judicial Circuit in and for Dade
County, Florida, seeking permanent injunctive relief and damages
for conspiracy and extortion, as well as defamation and intentional
infliction of emotional distress. The director alleges that the
former employee schemed to extort $1.2 million from the director by
the use of defamation and blackmail.
In addition to the matter set forth above, various legal actions
and proceedings are pending or are threatened against Bancorp, the
Bank and Capital Factors, some of which seek relief or damages in
amounts that are substantial. Unlike the aforementioned matters,
however, these actions or proceedings arose in the ordinary course
of business. Due to the complex nature of some of these matters,
it may be a number of years before they are ultimately resolved.
After consultation with legal counsel, management believes the
aggregate liability, if any, to Bancorp, the Bank and/or Capital
Factors resulting from such pending or threatened actions and
proceedings will not have a material adverse effect on the
Company's consolidated financial condition, results of operations
or liquidity.
Item 5. Other Information
- ---------------------------
On July 16, 1996, Capital Factors Holding, Inc. completed an
initial public offering of 2,000,000 shares of its Common Stock at
a public offering price of $8.50 per share. Prior to this
offering, all of the Common Stock was owned by the Bank. On August
2, 1996, the underwriting syndicate exercised its option to acquire
an additional 300,000 shares of Common Stock. The net proceeds
from the offering, which totaled approximately $17.7 million, were
used to reduce Capital Factors Holding, Inc.'s indebtedness to the
Bank under an outstanding line of credit. As a result of the
offering, the Bank's ownership of Capital Factors Holding, Inc. has
been reduced to approximately 81% of the outstanding Common Stock.
The Common Stock is listed for trading on the Nasdaq National
Market under the symbol "CAPF."
On August 9, 1996, Capital Factors completed the acquisition of
substantially all of the assets of TempFunds America, Inc. and its
affiliate, TempFunds America Funding Corporation of South Carolina,
Inc., which are specialized financial service companies that
provide receivables-based commercial financing and related fee-
based credit, collection and management information services to
temporary employment and home healthcare agencies. The purchase
price paid by Capital Factors was approximately $5.9 million,
subject to certain post-closing adjustments. An additional
$900,000 is payable by Capital Factors over a three year period if
certain contingencies are met.
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) Exhibit 10.1 - Amendment to 1992 Stock Option Plan*
Exhibit 10.2 - Employment Agreement dated as of January 1, 1996
by and between Capital Bank and Daniel M. Holtz*
Exhibit 10.3 - Employment Agreement dated as of January 1, 1996
by and between Capital Bank and Thomas J.
Flood.*
Exhibit 10.4 - Employment Agreement dated as of January 1, 1996
by and between Capital Bank and Timothy E.
Kish.*
Exhibit 10.5 - Employment Agreement dated as of January 1, 1996
by and between Capital Bank and Javier J.
Holtz.*
Exhibit 10.6 - Employment Agreement dated as of January 1, 1996
by and between Capital Bank and Lucious T.
Harris.*
Exhibit 10.7 - Employment Agreement dated as of January 1, 1996
by and between Capital Bank and David Konfino.*
Exhibit 10.8 - Employment Agreement dated as of January 1, 1996
by and between Capital Bank and Charles R.
Boyce.*
Exhibit 10.9 - Employment Agreement dated as of January 1, 1996
by and between Capital Factors Holding, Inc.,
Capital Factors, Inc. and John W. Kiefer.*
Exhibit 10.10 - Amendment No. 1 to Employment Agreeement dated
as of January 1, 1996 by and between Capital
Factors Holding, Inc., Capital Factors and John
W. Kiefer.*
Exhibit 11 - Calculation of Earnings Per Share
Exhibit 27 - Financial Data Schedule - This exhibit is
incorporated by reference to Exhibit 27 set
forth in the June 30, 1996 Form 10-Q
electronically filed on August 14, 1996.
- -------------------------
* Exhibits 10.1 to 10.10 are management contracts or compensatory
plans or arrangements.
(b) No Current Reports on Form 8-K were filed by the Company during
the quarter ended June 30, 1996.
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
Date: August 14, 1996 By: /s/ Lucious T. Harris
-------------------------
LUCIOUS T. HARRIS
Senior Vice President and
Treasurer
(Principal Financial and
Accounting Officer)
EXHIBIT 11
CAPITAL BANCORP AND SUBSIDIARIES
CALCULATION OF EARNINGS PER SHARE
Six Months Ended
June 30,
-------------------------------
Primary 1996 1995
- ------- ----------- -----------
Weighted average number of
common shares outstanding 7,461,725 7,157,854
Common equivalent shares
outstanding - options 656,585 271,797
----------- -----------
Total common and common
equivalent shares outstanding 8,118,310 7,429,651
=========== ===========
Net income $ 9,567,000 $ 7,661,000
=========== ===========
Primary earnings per share $ 1.18 $ 1.03
=========== ===========
Fully diluted
- -------------
Weighted average number of
common shares outstanding 7,461,725 7,157,854
Common equivalent shares
outstanding - options 656,585 271,797
----------- -----------
Total common and common
equivalent shares outstanding 8,118,310 7,429,651
=========== ===========
Net income $ 9,567,000 $ 7,661,000
=========== ===========
Fully diluted earnings per share $ 1.18 $ 1.03
=========== ===========
Three Months Ended
June 30,
-------------------------------
Primary 1996 1995
- ------- ----------- -----------
Weighted average number of
common shares outstanding 7,465,568 7,162,876
Common equivalent shares
outstanding - options 651,670 267,174
----------- -----------
Total common and common
equivalent shares outstanding 8,117,238 7,430,050
=========== ===========
Net income $ 5,165,000 $ 3,972,000
=========== ===========
Primary earnings per share $ .64 $ .53
=========== ===========
Fully diluted
- -------------
Weighted average number of
common shares outstanding 7,465,568 7,162,876
Common equivalent shares
outstanding - options 651,670 267,174
----------- -----------
Total common and common
equivalent shares outstanding 8,117,238 7,430,050
=========== ===========
Net income $ 5,165,000 $ 3,972,000
=========== ===========
Fully diluted earnings per share $ .64 $ .53
=========== ===========
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1996
<CASH> 97,617
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 90,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 200,687
<INVESTMENTS-CARRYING> 31,356
<INVESTMENTS-MARKET> 31,404
<LOANS> 745,975
<ALLOWANCE> 8,949
<TOTAL-ASSETS> 1,634,524
<DEPOSITS> 1,034,231
<SHORT-TERM> 87,110
<LIABILITIES-OTHER> 16,166
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0
0
<COMMON> 7,470
<OTHER-SE> 112,938
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Exhibit 10.1
AMENDMENT TO 1992 STOCK OPTION PLAN
This amendment to the Capital Bancorp 1992 Stock Option Plan is
made effective this 28th day of June, 1996
W I T N E S S E T H:
WHEREAS, as of May 27, 1992, Capital Bancorp (the "Company")
adopted the Capital Bancorp 1992 Stock Option Plan (the "Plan");
WHEREAS, pursuant to Section 19 of the Plan, the Committee has the
authority to make certain amendments to the Plan;
WHEREAS, Section 9(a)(i) of the Plan provides that an Optionee who
terminates his or her employment has a period of "three months"
after the date of termination to exercise his or her outstanding
stock options (the "Option Exercise Period");
WHEREAS, Section 15(b) of the Plan provides that the Company has
the right to repurchase (the "Repurchase Right") any shares of
Company stock owned by the Employee that were acquired by the
exercise of stock options granted within the five year period prior
to the termination of employment and that such Repurchase Right is
exercisable by the Company for a period of "90 days" after the date
of termination;
WHEREAS, Section 9(a)(i) and Section 15(b) of the Plan together may
not, under certain circumstances, provide the Company with
sufficient time to exercise its Repurchase Right with respect to
options exercised on the last day of the Option Exercise Period;
NOW, THEREFORE, BE IT RESOLVED, that the Plan is hereby amended to
provide for a period of 90 days for the Optionee to purchase
options upon his or her termination as set forth in Section 9(a)(i)
of the Plan;
FURTHER RESOLVED, in order the provide the Company with a
sufficient amount of time to repurchase shares that have been
acquired by an Optionee, the Plan is hereby amended to provide a
Repurchase Period (as defined in Section 15(b) of the Plan) of 95
days.
FURTHER RESOLVED, except as otherwise specifically amended hereby,
all other terms and conditions of the Plan shall remain in full
force and effect, and unless otherwise expressly stated herein to
the contrary, all capitalized terms used herein have the meanings
ascribed to them in the Plan.<PAGE>
Exhibit 10.2
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is made and entered into on
this 12th day of June, 1996 as of January 1, 1996 by and between
CAPITAL BANK, a Florida corporation (the "Company"), and DANIEL M.
HOLTZ (hereinafter called the "Executive").
R E C I T A L S
A. The Executive is currently employed as the Chairman, Chief
Executive Officer and President of the Company.
B. The Executive possesses intimate knowledge of the business and
affairs of the Company, its policies, methods and personnel.
C. The Board of Directors of the Company (the "Board") recognizes
that the Executive has contributed to the growth and success of the
Company, and desires to assure the Company of the Executive's
continued employment and to compensate him therefor.
D. The Board has determined that this Agreement will reinforce and
encourage the Executive's continued attention and dedication to the
Company.
E. The Executive is willing to make his services available to the
Company and on the terms and conditions hereinafter set forth.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and mutual
covenants set forth herein, the parties agree as follows:
1. Employment.
1.1 Employment and Term. The Company hereby agrees to employ
the Executive and the Executive hereby agrees to serve the Company
on the terms and conditions set forth herein.
1.2 Duties of Executive. During the term of this Agreement,
the Executive shall serve as the Chairman, President and Chief
Executive Officer of the Company, shall diligently perform all
services as may be assigned to him by the Board, (provided that,
such services shall not materially differ from the services
currently provided by the Executive), and shall exercise such power
and authority as may from time to time be delegated to him by the
Board. The Executive shall devote his full time and attention to
the business and affairs of the Company, render such services to
the best of his ability, and use his best efforts to promote the
interests of the Company; provided, however that nothing in this
Agreement shall preclude the Executive from providing services to,
and receiving compensation from, Capital Bancorp., the parent
company of the Company, or any direct or indirect subsidiary of
Capital Bancorp.
2. Term.
2.1 Initial Term. The initial term of this Agreement, and the
employment of the Executive hereunder, shall commence on January 1,
1996 (the "Commencement Date") and shall expire on May 31, 1998
(the "Expiration Date"), unless sooner terminated in accordance
with the terms and conditions hereof (the "Initial Term").
2.2 Renewal Terms. The Initial Term of this Agreement, and
the employment of the Executive hereunder, may be renewed and/or
extended for such period or periods as may be mutually agreed to by
the Company and the Executive in a written supplement to this
Agreement signed by the Executive and the Company ("Written
Supplement"). If this Agreement is not so renewed and/or extended
prior to the expiration of the Initial Term, this Agreement, and
the employment of the Executive hereunder, shall automatically
terminate on the Expiration Date.
3. Compensation.
3.1 Base Salary. The Executive shall receive a base salary at
the annual rate of $300,307 (the "Base Salary") during the term of
this Agreement, with such Base Salary payable in installments
consistent with the Company's normal payroll schedule, subject to
applicable withholding and other taxes. The Base Salary also shall
be reviewed, at least annually, for merit increases and may, by
action and in the discretion of the Board, be increased at any time
or from time to time. If the term of this Agreement shall be
renewed and/or extended as provided in Section 2.2 hereof, then
during such renewal term of his employment hereunder, the Executive
shall be paid a base salary as set forth in the Written Supplement.
3.2 Incentive Compensation. The Executive shall be entitled
to receive incentive compensation ("Incentive Compensation") during
each year of the Initial Term of this Agreement equal to the amount
of incentive compensation for such year determined pursuant to the
Incentive Bonus Plan attached hereto as Exhibit "B" and made a part
hereof, as amended from time to time (the "Incentive Compensation
Plan"). In the event that this Agreement terminates on the
Expiration Date by reason of the expiration of the term of this
Agreement, then the Company shall pay the Executive Incentive
Compensation for the period from January 1, 1998 through May 31,
1998, equal to five-twelfths of the Incentive Compensation, if any,
for calendar year calendar year 1998; provided, however, that the
Company's goals under the Incentive Compensation Plan for 1998
shall be based on (1) the period from January 1, 1998 through May
31, 1998, and (2) unaudited financial information prepared in
accordance with generally accepted accounting principles, applied
consistently with prior periods, as approved and reviewed by the
Board.
3.3 Section 162(m) Limits. Notwithstanding any other
provision of this Agreement to the contrary, if and to the extent
that any remuneration payable by the Company to the Executive for
any year would exceed the maximum amount of remuneration that the
Company may deduct for that year under Section 162(m) ("Section
162(m)") of the Internal Revenue Code of 1986, as amended (the
"Code"), payment of the portion of the remuneration for that year
that would not be so deductible under Section 162(m) shall, in the
sole discretion of the Board, be deferred and become payable at
such time or times as the Board determines that it first would be
deductible by the Company under Section 162(m), with interest at
the "short-term applicable federal rate" as such term is defined in
Section 1274(d) of the Code. The limitation set forth under this
Section 3.3 shall not apply with respect to any amounts payable to
the Executive pursuant to Section 5.6 hereof.
4. Expense Reimbursement and Other Benefits.
4.1 Reimbursement of Expenses. During the term of Executive's
employment hereunder, the Company, upon the submission of proper
substantiation by the Executive, shall reimburse the Executive for
all reasonable expenses actually paid or incurred by the Executive
in the course of and pursuant to the business of the Company. The
Executive shall account to the Company in writing for all expenses
for which reimbursement is sought and shall supply to the Company
copies of all relevant invoices, receipts or other evidence
reasonably requested by the Company.
4.2 Compensation/Benefit Programs. During the term of this
Agreement, the Executive shall be entitled to participate in all
medical, dental, hospitalization, accidental death and
dismemberment, disability, travel and life insurance plans, and any
and all other plans as are presently and hereinafter offered by the
Company to its executives, including savings, pension, profit-
sharing and deferred compensation plans.
4.3 Working Facilities. The Company shall furnish the
Executive with an office, secretarial help and such other
facilities and services suitable to his position and adequate for
the performance of his duties hereunder.
4.4 Automobile. The Company shall continue to provide the
Executive an automobile comparable to the existing automobile
provided to Executive, together with reimbursement of the operating
expenses thereof.
4.5 Stock Options. During the term of this Agreement, the
Executive shall be eligible to be granted options to purchase
common stock (the "Common Stock") of Bancorp under (and therefore
subject to all terms and conditions of) the Capital Bancorp Stock
Option Plan as amended, and any successor plan thereto (the "Stock
Option Plan") and all rules of regulation of the Securities and
Exchange Commission applicable to stock option plans then in
effect. The number of options and terms and conditions of options
shall be determined by the Stock Option Committee of Bancorp in its
discretion and pursuant to the Stock Option Plan.
4.6 Other Benefits. The Executive shall be entitled to six
weeks of vacation every year. The Executive shall receive such
additional benefits, consistent with prior practices, as the Board
shall from time to time determine.
5. Termination.
5.1 Termination for Cause. The Company shall at all times
have the right, upon written notice to the Executive, to terminate
the Executive's employment hereunder, for cause. For purposes of
this Agreement, the term "cause" shall mean (i) an action or
omission of the Executive which constitutes a willful and material
breach of this Agreement which is not cured within fifteen (15)
days after receipt by the Executive of written notice of same, (ii)
fraud, embezzlement, misappropriation of funds or breach of trust,
(iii) conviction of any crime which involves dishonesty or a breach
of trust, (iv) gross negligence in connection with the performance
of the Executive's duties hereunder, (v) material and willful or
knowing failure or refusal (other than as a result of a disability)
by the Executive to perform his duties hereunder, or (vi) the
formal written request addressed to the Board of Directors of the
Company by any regulatory agency that regulates Capital Bank or
Capital Bancorp that the Executive be removed from his duties
hereunder and setting forth the basis for such request. Any
termination for cause shall be made in writing to the Executive,
which notice shall set forth in detail all acts or omissions upon
which the Company is relying for such termination. The Executive
shall have the right to address the Company's Board regarding the
acts set forth in the notice of termination. Upon any termination
pursuant to this Section 5.1, the Executive shall be entitled to be
paid his Base Salary to the date of termination and the Company
shall have no further liability hereunder (other than for (x)
reimbursement for reasonable business expenses incurred prior to
the date of termination, subject, however, to the provisions of
Section 4.1, and (y) payment of compensation for unused vacation
days that have accumulated during the calendar year in which such
termination occurs).
5.2 Disability. The Company shall at all times have the
right, upon written notice to the Executive, to terminate the
Executive's employment hereunder, if the Executive shall, as the
result of mental or physical incapacity, illness or disability,
become unable to perform his obligations hereunder for a period of
90 consecutive days. Upon any termination pursuant to this Section
5.2, the Company shall (i) pay to the Executive any unpaid Base
Salary through the effective date of termination specified in such
notice, (ii) pay to the Executive the Incentive Compensation, if
any, not yet paid to the Executive for any year prior to such
termination, at such times as the Incentive Compensation otherwise
would have been payable to the Executive, (iii) pay to the
Executive a severance payment equal to three (3) months of the
Executive's Base Salary at the time of such disability, and (iv)
pay to the Executive (within 45 days after the end of the calendar
quarter in which such termination occurs) a prorata portion (based
upon the period ending on the date of termination of the
Executive's employment hereunder) of the Incentive Compensation, if
any, for the year in which such termination occurs, as calculated
pursuant to the terms of Section 3.3 hereof and the Incentive
Compensation Plan; provided that the goals under the Incentive
Compensation Plan for each period used in the calculation of the
Executive's Incentive Compensation, shall be based on (1) the
portion of the year through the end of the calendar quarter in
which such termination occurs and (2) unaudited financial
information prepared in accordance with generally accepted
accounting principles, applied consistently with prior periods, as
approved and reviewed by the Board. The Company shall have no
further liability hereunder (other than for (x) reimbursement for
reasonable business expenses incurred prior to the date of
termination, subject, however to the provisions of Section 4.1, and
(y) payment of compensation for unused vacation days that have
accumulated during the calendar year in which such termination
occurs).
5.3 Death. In the event of the death of the Executive during
the term of his employment hereunder, the Company shall (i) pay to
the estate of the deceased Executive any unpaid Base Salary through
the Executive's date of death, (ii) pay to the estate of the
deceased Executive the Incentive Compensation, if any, not yet paid
to the Executive for any year prior to the date of death, at such
time as the Incentive Compensation otherwise would have been
payable to the Executive, and (iii) pay to the estate of the
deceased Executive (within 45 days after the end of the calendar
quarter in which his death, occurs) a prorata portion (based upon
the period ending on the date of death) of the Incentive
Compensation, if any, for the year in which his death occurs, as
calculated pursuant to the terms of Section 3.3 and the Incentive
Compensation Plan; provided that, the goals under the Incentive
Compensation Plan for each period used in the calculation of the
Executive's Incentive Compensation shall be based on (1) the
portion of the year through the end of the calendar quarter in
which the Executive's death occurs, and (2) unaudited financial
information prepared in accordance with generally accepted
accounting principles, applied consistently with prior periods, as
approved and reviewed by the Board. The Company shall have no
further liability hereunder (other than for (x) reimbursement for
reasonable business expenses incurred prior to the date of the
Executive's death, subject, however to the provisions of Section
4.1, and (y) payment of compensation for unused vacation days that
have accumulated during the calendar year in which such termination
occurs).
5.4 Termination Without Cause. At any time the Company shall
have the right to terminate the Executive's employment hereunder by
written notice to the Executive. Upon any termination pursuant to
this Section 5.4 (that is not a termination under any of Sections
5.1, 5.2, 5.3, 5.5 or 5.6(a)), the Company shall (i) pay to the
Executive any unpaid Base Salary through the effective date of
termination specified in such notice, (ii) pay to the Executive the
Incentive Compensation, if any, not yet paid to the Executive for
any year prior to such termination, at such time as the Incentive
Compensation otherwise would have been payable to the Executive,
(iii) continue to pay the Executive's Base Salary through the
Expiration Date, in the manner and at such time as the Base Salary
otherwise would have been payable to the Executive, (iv) continue
to pay the Executive Incentive Compensation and continue to provide
the Executive with the benefits he was receiving under Sections
4.2, 4.4 and 4.6 hereof, through the Expiration Date, in the manner
and at such times as the compensation or benefits otherwise would
have been payable or provided to the Executive, and (v) pay to the
Executive as a single lump sum payment, within 30 days of the
termination of his employment hereunder, a lump sum benefit equal
to the value of the portion of his benefits under any savings,
pension, profit sharing or deferred compensation plans that are
forfeited under such plans by reason of the termination of his
employment hereunder. In the event that the termination of
Executive's employment hereunder shall occur on or before December
31, 1996, then the Incentive Compensation and benefits payable
under clause (iv) of this Section 5.4 shall be equal to the amounts
that would have been paid or provided to the Executive for the year
ended December 31, 1996. In the event that termination of
Executive's employment hereunder shall occur after December 31,
1996, then the Incentive Compensation and other benefits payable
under clause (iv) of this Section 5.4 shall be equal to the amounts
of such compensation and benefits payable or provided to the
Executive for the calendar year immediately preceding the
termination of Executive's employment hereunder. In the event that
the Company is unable to provide the Executive with a continuation
of any savings, pension, profit-sharing or deferred compensation
plans required hereunder by reason of the termination of the
Executive's employment pursuant to this Section 5.4, then the
Company shall pay the Executive cash equal to the value of the
benefit that otherwise would have accrued for the Executive's
benefit under the plan, for the period during which such benefits
could not be provided under the plans, said cash payments to be
made within 45 days after the end of the year for which such
contributions would have been made or would have accrued. The
Company's good faith determination of the amount that would have
been contributed or the value of any benefits that would have
accrued under any plan shall be binding and conclusive on the
Executive. Further, the Executive shall continue to vest in the
Executive's Stock Options through the Expiration Date in the same
manner and to the same extent as if his employment hereunder
terminated on the Expiration Date. The Company shall have no
further liability hereunder (other than for (x) reimbursement for
reasonable business expenses incurred prior to the date of
termination, subject, however, to the provisions of Section 4.1,
(y) payment of compensation for unused vacation days that have
accumulated during the calendar year in which such termination
occurs, and (z) any amounts payable to the Executive pursuant to
Section 5.6 hereof by reason of Section 5.6(c)).
5.5 Resignation by Executive. The Executive shall at all
times have the right, upon ninety (90) days written notice to the
Company, to terminate the Executive's employment hereunder. Upon
any termination pursuant to this Section 5.5, the Company shall (i)
pay to the Executive any unpaid Base Salary through the effective
date of termination specified in such notice and (ii) pay to the
Executive the Incentive Compensation, if any, not yet paid to the
Executive for any year prior to such termination, at such time as
the Incentive Compensation otherwise would have been payable to the
Executive. The Company shall have no further liability hereunder
(other than for (x) reimbursement for reasonable business expenses
incurred prior to the date of termination, subject, however, to the
provisions of Section 4.1, (y) payment of compensation for unused
vacation days that have accumulated during the calendar year in
which such termination occurs, and (z) any amounts payable to the
Executive pursuant to Section 5.6 hereof by reason of Section
5.6(c)).
5.6 Change in Control of the Company.
(a) In the event that (x) a Change in Control (as defined
in paragraph (b) of this Section 5.6) in the Company shall occur
during the Initial Term, and (y) within one year after the date of
the Change in Control, the Executive is (i) assigned any position,
duties or responsibilities that are significantly diminished or
changed when compared with the position, duties or responsibilities
of the Executive prior to such Change in Control or (ii) forced to
relocate to another location more than 25 miles from his location
prior to the Change in Control, (iii) no longer provided coverage
under benefit programs in existence prior to the Change in Control
(unless a comparable substitute is offered); then the Executive, by
written notice to the Company at any time within the thirty (30)
day period following the occurrence of an event described in
clauses (i) through (iii) of this Section 5.6(a), shall have the
right to terminate his employment hereunder. Upon the voluntary
termination by the Executive pursuant to this Section 5.6(a), or
the involuntary termination of the Executive by the Company within
one year after the date of a Change in Control, the Company shall
(v) pay to the Executive any unpaid Base Salary through the
effective date of termination, (w) pay to the Executive the
Incentive Compensation, if any, not yet paid to the Executive for
any year prior to such termination, at such time as the Incentive
Compensation otherwise would have been payable to the Executive,
(x) pay to the Executive (within 30 days after the end of the
calendar quarter in which such termination occurs) a prorata
portion (based upon the period ending on the date of termination of
the Executive's employment hereunder) of the Incentive
Compensation, if any, for the year in which such termination
occurs, as calculated pursuant to the terms of Section 3.3 hereof
and the Incentive Compensation Plan; provided that the Company's
goals under the Incentive Compensation Plan for each period used in
the calculation of the Executive's Incentive Compensation, shall be
based on (1) the portion of the year through the end of the
calendar quarter in which such termination occurs, and (2)
unaudited financial information prepared in accordance with
generally accepted accounting principles, applied consistently with
prior periods, as approved and reviewed by the Board, and (y) pay
to the Executive as a single lump sum payment, within 30 days of
the termination of his employment hereunder, a lump sum payment
equal to the sum of (a) two times the sum of Executive's annual
Base Salary, Incentive Compensation, and the value of the annual
fringe benefits required to be provided to the Executive under
Sections 4.2 and 4.4 hereof, for the year immediately preceding the
year in which his employment terminates, plus (b) the value of the
portion of his benefits under any savings, pension, profit sharing
or deferred compensation plans that are forfeited under those plans
by reason of the termination of his employment hereunder. Further,
upon the Change in Control, the Executive's Stock Options shall
immediately vest. The Company shall have no further liability
hereunder (other than for (1) reimbursement for reasonable business
expenses incurred prior to the date of termination, subject,
however, to the provisions of Section 4.1, and (2) payment of
compensation for unused vacation days that have accumulated during
the calendar year in which such termination occurs).
(b) For purposes of this Agreement, a "Change in Control"
shall be deemed to have occurred if:
(i) an event which would be required to be reported
in response to Item (a) of the current report on Form 8-K, as in
effect on the date hereof, pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 (the "Exchange Act") occurs and the
transaction required to be reported is consummated;
(ii) an event occurs which results in a change in
control of the Company or Capital Bancorp within the meaning of the
Federal Change in Bank Control Act and/or applicable sections of
the Florida Banking Code and/or the rules and regulations
promulgated by the Board of Governors of the Federal Reserve System
or the Florida Department of Banking as in effect on the date
hereof;
(iii) individuals who constitute the Board of
Directors of each of the Company or Capital Bancorp on the date
hereof (the "Incumbent Board") cease for any reason to constitute
at least a majority thereof, provided that any person becoming a
director subsequent to the date hereof whose election was approved
by a vote of at least three-quarters of the directors comprising
the Incumbent Board, or whose nomination for election by the
Company's stockholders was approved by a majority of the Incumbent
Board, shall be, for purposes of this clause (iii), considered as
though he or she were a member of the Incumbent Board;
(iv) Capital Bancorp ceases to own at least 80% of
the voting stock of the Company;
(v) there occurs any transaction (which shall
include a series of transactions occurring within 60 days or
occurring pursuant to a plan) that has the result that shareholders
of Capital Bancorp immediately before such transaction cease to own
at least 51% of the voting stock of Capital Bancorp or of any
entity that results from the participation of Capital Bancorp in a
reorganization, consolidation, merger, liquidation or other form of
corporate transaction;
(vi) any person or group of persons (other than
those persons who own or control as a group not less than 40% of
the outstanding stock of the Company on the date of this Agreement
(the "Present Control Group")) acting in concert acquire in excess
of both (a) 25% of the outstanding voting stock of Capital Bancorp,
and (b) the number of shares of Capital Bancorp with respect to
which the Present Control Group, in the aggregate, have voting
rights to after such acquisition;
(vii) Capital Bancorp or the Company liquidate or
dissolve; or
(viii) the Company or Capital Bancorp sells, leases,
exchanges or otherwise disposes of all or substantially all of its
property or assets.
(c) In the event that:
(i) the Company enters into a letter of intent or a
definitive agreement for the Company to enter into a transaction
that would constitute a Change in Control (the letter of intent or
definitive agreement being hereinafter referred to as a "Change in
Control Agreement"), and discussions relating to the transaction
reflected in the Change in Control Agreement had commenced while
the Executive was employed by the Company;
(ii) the Change in Control Agreement is entered into
(a) while the Executive is employed by the Company prior to the
Expiration Date, (b) within 90 days after the Company's termination
of the Executive's employment without Cause, or (c) within 90 days
after the Expiration Date if the Executive was employed by the
Company on the Expiration Date;
(iii) the transaction contemplated by the Change in
Control Agreement is effectuated and results in a Change in
Control; and
(iv) within the period that begins on the date on
which the Change in Control Agreement is executed by the Company
and ends one year after the date of the Change in Control, either
(a) the Executive voluntarily terminates his employment hereunder
after one of the events described in clause (i), (ii) or (iii) of
paragraph (a) of this Section 5.6 occurs, or (b) the Executive's
employment with the Company is involuntarily terminated by the
Company;
then the Company shall pay to the Executive the amounts provided in
paragraph 5.6(a), reduced by any amounts paid by the Company to the
Executive under Section 5.4 or 5.5 hereof, and the Executive's
rights to receive any additional amounts under Section 5.4 or 5.5
shall cease.
5.7 Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any
payment, distribution or other action by the Company to or for the
benefit of the Executive (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise,
but determined without regard to any additional payments required
under this Section 5.7) (a "Payment") would be subject to an excise
tax imposed by Section 4999 of the Internal Revenue Code of 1986,
as amended (the "Code"), or any interest or penalties are incurred
by the Executive with respect to any such excise tax (such excise
tax, together with any such interest and penalties, are hereinafter
collectively referred to as the "Excise Tax"), the Company or
Bancorp shall make a payment to the Executive (a "Gross-Up
Payment") in an amount equal to the Excise Tax imposed upon the
Payments.
(b) Subject to the provisions of Section 5.7(c), all
determinations required to be made under this Section 5.7,
including whether and when a Gross-Up Payment is required and the
amount of such Gross-Up Payment and the assumptions to be utilized
in arriving at such determination, shall be made by Deloitte Touche
LLP (the "Accounting Firm") which shall provide detailed supporting
calculations both to the Company and the Executive within 15
business days of the receipt of notice from the Executive that
there has been a Payment, or such earlier time as is requested by
the Company. In the event that the Accounting Firm is serving as
accountant or auditor for the individual, entity or group effecting
the Change of Control, the Executive shall appoint another
nationally recognized accounting firm to make the determinations
required hereunder (which accounting firm shall then be referred to
as the Accounting Firm hereunder). All fees and expenses of the
Accounting Firm shall be borne solely by the Company. Any Gross-Up
Payment, as determined pursuant to this Section 5.7, shall be paid
by the Company to the Executive within five days of the receipt of
the Accounting Firm's determination. If the Accounting Firm
determines that no Excise Tax is payable by the Executive, it shall
furnish the Executive with a written opinion that failure to report
the Excise Tax on the Executive's applicable federal income tax
return would not result in the imposition of a negligence or
similar penalty. Any determination by the Accounting Firm shall be
binding upon the Company and the Executive. As a result of the
uncertainty in the application of Section 4999 of the Code at the
time of the initial determination by the Accounting Firm hereunder,
it is possible that Gross-Up Payments which will not have been made
by the Company should have been made ("Underpayment"), consistent
with the calculations required to be made hereunder. In the event
that the Company exhausts its remedies pursuant to Section 5.7(c)
and the Executive thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall determine the amount of the
Underpayment that has occurred and any such Underpayment shall be
promptly paid by the Company to or for the benefit of the
Executive.
(c) The Executive shall notify the Company in writing of
any claim by the Internal Revenue Service that, if successful,
would require the payment by the Company of the Gross-Up Payment.
Such notification shall be given as soon as practicable but no
later than ten business days after the Executive is informed in
writing of such claim and shall apprise the Company of the nature
of such claim and the date on which such claim is requested to be
paid. The Executive shall not pay such claim prior to the
expiration of the 30-day period following the date on which it
gives such notice to the Company (or such shorter period ending on
the date that any payment of taxes with respect to such claim is
due). If the Company notifies the Executive in writing prior to
the expiration of such period that it desires to contest such
claim, the Executive shall:
(i) give the Company any information reasonably
requested by the Company relating to such claim,
(ii) take such action in connection with contesting
such claim as the Company shall reasonably request in writing from
time to time, including, without limitation, accepting legal
representation with respect to such claim by an attorney reasonably
selected by the Company,
(iii) cooperate with the Company in good faith in
order effectively to contest such claim, and
(iv) permit the Company to participate in any
proceedings relating to such claim;
provided, however, that the Company shall bear and pay directly all
costs and expenses (including additional interest and penalties)
incurred in connection with such contest and shall indemnify and
hold the Executive harmless, on an after-tax basis, for any Excise
Tax or income tax (including interest and penalties with respect
thereto) imposed as a result of such representation and payment of
costs and expenses. Without limitation on the foregoing provisions
of this Section 5.7(c), the Company shall control all proceedings
taken in connection with such contest and, at its sole option, may
pursue or forego any and all administrative appeals, proceedings,
hearings and conferences with the taxing authority in respect of
such claim and may, at its sole option, either direct the Executive
to pay the tax claimed and sue for a refund or contest the claim in
any permissible manner, and the Executive agrees to prosecute such
contest to a determination before any administrative tribunal, in
a court of initial jurisdiction and in one or more appellate
courts, as the Company shall determine; provided, however, that if
the Company directs the Executive to pay such claim and sue for a
refund, the Company shall advance the amount of such payment to the
Executive, on an interest-free basis and shall indemnify and hold
the Executive harmless, on an after-tax basis, from any Excise Tax
or income tax (including interest or penalties with respect
thereto) imposed with respect to such advance or with respect to
any imputed income with respect to such advance; and further
provided that any extension of the statute of limitations relating
to payment of taxes for the taxable year of the Executive with
respect to which such contested amount is claimed to be due is
limited solely to such contested amount. Furthermore, the
Company's control of the contest shall be limited to issues with
respect to which a Gross-Up Payment would be payable hereunder and
the Executive shall be entitled to settle or contest, as the case
may be, any other issue raised by the Internal Revenue Service or
any other taxing authority.
(d) If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 5.7(c), the Executive
becomes entitled to receive any refund with respect to such claim,
the Executive shall (subject to the Company's complying with the
requirements of Section 5.7(c)) promptly pay to the Company the
amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by
the Executive of an amount advanced by the Company pursuant to
Section 5.7(c), a determination is made that the Executive shall
not be entitled to any refund with respect to such claim and the
Company does not notify the Executive in writing of its intent to
contest such denial of refund prior to the expiration of 30 days
after such determination, then such advance shall be forgiven and
shall not be required to be repaid and the amount of such advance
shall offset, to the extent thereof, the amount of Gross-Up Payment
required to be paid.
5.8 Survival. The provisions of this Article 5 shall survive
the termination of this Agreement, as applicable.
6. Restrictive Covenants.
6.1 Non-competition. For the period through the Expiration
Date and at all times while the Executive is employed by the
Company; the Executive shall not, directly or indirectly, engage in
or have any interest in any sole proprietorship, partnership,
corporation or business or any other person or entity (whether as
an employee, officer, director, partner, agent, security holder,
creditor, consultant or otherwise) that directly or indirectly (or
through any affiliated entity) engages in competition with the
Company in any domestic or foreign market (for this purpose, any
financial institution with offices in any city or county in which
the Company has an office will be deemed to be in competition with
the Company); provided that such provision shall not apply to the
Executive's ownership of Common Stock of Bancorp or the acquisition
by the Executive, solely as an investment, of securities of any
issuer that is registered under Section 12(b) or 12(g) of the
Securities Exchange Act of 1934, as amended, and that are listed or
admitted for trading on any United States national securities
exchange or that are quoted on the National Association of
Securities Dealers Automated Quotations System, or any similar
system or automated dissemination of quotations of securities
prices in common use, so long as the Executive is not a member of
any control group (within the meaning of the rules and regulations
of the Securities and Exchange Commission) of any such issuer.
6.2 Nondisclosure. The Executive shall not divulge,
communicate, use to the detriment of the Company or for the benefit
of any other person or persons, or misuse in any way, any confiden-
tial information pertaining to the business of the Company. Any
confidential information or data now or hereafter acquired by the
Executive with respect to the business of the Company (which shall
include, but not be limited to, information concerning the
Company's financial condition, prospects, customers, sources of
leads and methods of doing business) shall be deemed a valuable,
special and unique asset of the Company that is received by the
Executive in confidence and as a fiduciary, and Executive shall
remain a fiduciary to the Company with respect to all of such
information.
6.3 Nonsolicitation of Employees and Clients. For the period
ending on the earlier of (i) termination of Executive's employment
with the Company pursuant to Section 5.6 hereof following a Change
in Control, and (ii) two years following the Expiration Date
(except that, the period shall be six months after the Expiration
Date if (1) the Executive is employed by the Company on the
Expiration Date, and (2) the Company has not offered, at or prior
to the Expiration Date, to employ the Executive after the
Expiration Date on terms that provide for payment of (x) a base
salary equal to or greater than the Base Salary (adjusted for cost-
of-living increases) being paid to the Executive on the Expiration
Date, and (y) incentive compensation on terms equal to or greater
than the Incentive Compensation terms in effect as of the
Expiration Date); the Executive shall not, directly or indirectly,
for himself or for any other person, firm, corporation,
partnership, association or other entity (a) employ or attempt to
employ or enter into any contractual arrangement with any employee
or former employee of the Company, unless such employee or former
employee has not been employed by the Company for a period in
excess of six months, and/or (b) call on or solicit any of the
actual or targeted prospective clients of the Company on behalf of
any person or entity in connection with any business competitive
with the business of the Company, nor shall the Executive make
known the names and addresses of such clients or any information
relating in any manner to the Company's trade or business
relationships with such customers, other than in connection with
the performance of Executive's duties under this Agreement.
6.4 Books and Records. All books, records, and accounts
relating in any manner to the customers or clients of the Company,
whether prepared by the Executive or otherwise coming into the
Executive's possession, shall be the exclusive property of the
Company and shall be returned immediately to the Company on
termination of the Executive's employment hereunder or on the
Company's request at any time.
6.5 Definition of Company. Solely for purposes of this
Section 6, the term "Company" also shall include any future
subsidiaries of the Company that are operating during the time
periods described herein and any other entities that directly or
indirectly, through one or more intermediaries, control, are
controlled by or are under common control with the Company during
the periods described herein.
6.6 Acknowledgment by Executive. The Executive acknowledges
and confirms that the length of the term of the provisions of this
Section 6 and the geographical restrictions contained in Section
6.1 are fair and reasonable and not the result of overreaching,
duress or coercion of any kind. The Executive further acknowledges
and confirms that his full, uninhibited and faithful observance of
each of the covenants contained in this Section 6 will not cause
him any undue hardship, financial or otherwise, and that
enforcement of each of the covenants contained herein will not
impair his ability to obtain employment commensurate with his
abilities and on terms fully acceptable to him or otherwise to
obtain income required for the comfortable support of him and his
family and the satisfaction of the needs of his creditors. The
Executive acknowledges and confirms that his special knowledge of
the business of the Company is such as would cause the Company
serious injury or loss if he were to use such ability and knowledge
to the benefit of a competitor or were to compete with the Company
in violation of the terms of this Section 6.
6.7 Survival. The provisions of this Section 6 shall survive
the termination of this Agreement, as applicable.
7. Injunction. It is recognized and hereby acknowledged by the
parties hereto that a breach by the Executive of any of the
covenants contained in Section 6 of this Agreement will cause
irreparable harm and damage to the Company, the monetary amount of
which may be virtually impossible to ascertain. As a result, the
Executive recognizes and hereby acknowledges that the Company shall
be entitled to an injunction from any court of competent
jurisdiction enjoining and restraining any violation of any or all
of the covenants contained in Section 6 of this Agreement by the
Executive or any of his affiliates, associates, partners or agents,
either directly or indirectly, and that such right to injunction
shall be cumulative and in addition to whatever other remedies the
Company may possess.
8. Assignment. Neither party shall have the right to assign or
delegate his rights or obligations hereunder, or any portion
thereof, to any other person.
9. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Florida.
10. Entire Agreement. This Agreement constitutes the entire
agreement between the parties hereto with respect to the subject
matter hereof and, upon its effectiveness, shall supersede all
prior agreements, understandings and arrangements, both oral and
written, between the Executive and the Company (or any of its
affiliates) with respect to such subject matter. This Agreement
may not be modified in any way unless by a written instrument
signed by both the Company and the Executive.
11. Notices: Any notice required or permitted to be given
hereunder shall be deemed given when delivered by hand or when
deposited in the United States mail, by registered or certified
mail, return receipt requested, postage prepaid, (i) if to the
Company, addressed to Capital Bank, 1221 Brickell Avenue, Miami,
Florida 33133, Attention: General Counsel, and (ii) if to the
Executive, to his address as reflected on the payroll records of
the Company, or to such other address as either party hereto may
from time to time give notice of to the other.
12. Benefits; Binding Effect. This Agreement shall be for the
benefit of and binding upon the parties hereto and their respective
heirs, personal representatives, legal representatives, successors
and, where applicable, assigns, including, without limitation, any
successor to the Company, whether by merger, consolidation, sale of
stock, sale of assets or otherwise.
13. Severability. The invalidity of any one or more of the words,
phrases, sentences, clauses or sections contained in this Agreement
shall not affect the enforceability of the remaining portions of
this Agreement or any part thereof, all of which are inserted
conditionally on their being valid in law, and, in the event that
any one or more of the words, phrases, sentences, clauses or
sections contained in this Agreement shall be declared invalid,
this Agreement shall be construed as if such invalid word or words,
phrase or phrases, sentence or sentences, clause or clauses, or
section or sections had not been inserted. If such invalidity is
caused by length of time or size of area, or both, the otherwise
invalid provision will be considered to be reduced to a period or
area which would cure such invalidity.
14. Waivers. The waiver by either party hereto of a breach or
violation of any term or provision of this Agreement shall not
operate nor be construed as a waiver of any subsequent breach or
violation.
15. Damages. Nothing contained herein shall be construed to
prevent the Company or the Executive from seeking and recovering
from the other damages sustained by either or both of them as a
result of its or his breach of any term or provision of this
Agreement. In the event that either party hereto brings suit for
the collection of any damages resulting from, or the injunction of
any action constituting, a breach of any of the terms or provisions
of this Agreement, then the party found to be at fault shall pay
all reasonable court costs and attorneys' fees of the other.
16. Section Headings. The section headings contained in this
Agreement are for reference purposes only and shall not affect in
any way the meaning or interpretation of this Agreement.
17. No Third Party Beneficiary. Nothing expressed or implied in
this Agreement is intended, or shall be construed, to confer upon
or give any person other than the Company, the parties hereto and
their respective heirs, personal representatives, legal
representatives, successors and assigns, any rights or remedies
under or by reason of this Agreement.
18. Indemnification.
(a) Subject to limitations imposed by law, the Company shall
indemnify and hold harmless the Executive to the fullest extent
permitted by law from and against any and all claims, damages,
expenses (including attorneys' fees), judgments, penalties, fines,
settlements, and all other liabilities incurred or paid by him in
connection with the investigation, defense, prosecution, settlement
or appeal of any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or
investigative and to which the Executive was or is a party or is
threatened to be made a party by reason of the fact that the
Executive is or was an officer, employee or agent of the Company,
or by reason of anything done or not done by the Executive in any
such capacity or capacities, provided that the Executive acted in
good faith, in a manner that was not grossly negligent or
constituted wilful misconduct and in a manner he reasonably
believed to be in or not opposed to the best interests of the
Company, and, with respect to any criminal action or proceeding,
had no reasonable cause to believe his conduct was unlawful. The
Company also shall pay any and all expenses (including attorney's
fees) incurred by the Executive as a result of the Executive being
called as a witness in connection with any matter involving the
Company and/or any of its officers or directors.
(b) The Company shall pay any expenses (including attorneys'
fees), judgments, penalties, fines, settlements, and other
liabilities incurred by the Executive in investigating, defending,
settling or appealing any action, suit or proceeding described in
this Section 18 in advance of the final disposition of such action,
suit or proceeding. The Company shall promptly pay the amount of
such expenses to the Executive, but in no event later than 10 days
following the Executive's delivery to the Company of a written
request for an advance pursuant to this Section 18, together with
a reasonable accounting of such expenses.
(c) The Executive hereby undertakes and agrees to repay to the
Company any advances made pursuant to this Section 18 if and to the
extent that it shall ultimately be found that the Executive is not
entitled to be indemnified by the Company for such amounts.
(d) The Company shall make the advances contemplated by this
Section 18 regardless of the Executive's financial ability to make
repayment, and regardless whether indemnification of the Indemnitee
by the Company will ultimately be required. Any advances and
undertakings to repay pursuant to this Section 18 shall be
unsecured and interest-free.
(e) The provisions of this Section 18 shall survive the
termination of this Agreement.
19. Regulatory Limitations. Notwithstanding anything else
contained herein, no payment shall be made hereunder that
constitutes a golden parachute payment or prohibited
indemnification payment in violation of 12 CFR Part 359.
20. Waiver of Jury Trial. The undersigned expressly (i) waive any
right to a trial by jury of any claim, demand, action or cause of
action arising out of this Agreement or in any way related or
incidental to the performance of the parties' obligations
hereunder, and (ii) agree that the Company or the Executive may
file an original counterpart or copy of this Section 20 with any
court as written evidence of the consent to the waiver of the right
to trial by jury.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as
of the date first above written.
COMPANY:
CAPITAL BANK
By: /s/ RUSSELL GALBUT
------------------------
Russell Galbut, Chairman,
Compensation Committee
EXECUTIVE:
/s/ DANIEL M. HOLTZ
-------------------------
DANIEL M. HOLTZ<PAGE>
Exhibit 10.3
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is made and entered into on
this 11th day of June, 1996 as of January 1, 1996 by and between
CAPITAL BANK, a Florida corporation (the "Company"), and THOMAS J.
FLOOD (hereinafter called the "Executive").
R E C I T A L S
A. The Executive is currently employed as the Chief Retail
Officer of the Company.
B. The Executive possesses intimate knowledge of the business and
affairs of the Company, its policies, methods and personnel.
C. The Board of Directors of the Company (the "Board") recognizes
that the Executive has contributed to the growth and success of the
Company, and desires to assure the Company of the Executive's
continued employment and to compensate him therefor.
D. The Board has determined that this Agreement will reinforce
and encourage the Executive's continued attention and dedication to
the Company.
E. The Executive is willing to make his services available to the
Company and on the terms and conditions hereinafter set forth.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and mutual
covenants set forth herein, the parties agree as follows:
1. Employment.
1.1 Employment and Term. The Company hereby agrees to employ
the Executive and the Executive hereby agrees to serve the Company
on the terms and conditions set forth herein.
1.2 Duties of Executive. During the term of this Agreement,
the Executive shall serve as the Chief Retail Officer of the
Company, shall diligently perform all services as may be assigned
to him by the Board or the Chief Executive Officer of the Company
(provided that, such services shall not materially differ from the
services currently provided by the Executive), and shall exercise
such power and authority as may from time to time be delegated to
him by the Board or the Chief Executive Officer of the Company.
The Executive shall devote his full time and attention to the
business and affairs of the Company, render such services to the
best of his ability, and use his best efforts to promote the
interests of the Company; provided, however that nothing in this
Agreement shall preclude the Executive from providing services to,
and receiving compensation from, Capital Bancorp., the parent
company of the Company, or any direct or indirect subsidiary of
Capital Bancorp.
2. Term.
2.1 Initial Term. The initial term of this Agreement, and the
employment of the Executive hereunder, shall commence on January 1,
1996 (the "Commencement Date") and shall expire on May 31, 1998
(the "Expiration Date"), unless sooner terminated in accordance
with the terms and conditions hereof (the "Initial Term").
2.2 Renewal Terms. The Initial Term of this Agreement, and
the employment of the Executive hereunder, may be renewed and/or
extended for such period or periods as may be mutually agreed to by
the Company and the Executive in a written supplement to this
Agreement signed by the Executive and the Company ("Written
Supplement"). If this Agreement is not so renewed and/or extended
prior to the expiration of the Initial Term, this Agreement, and
the employment of the Executive hereunder, shall automatically
terminate on the Expiration Date.
3. Compensation.
3.1 Base Salary. The Executive shall receive a base salary at
the annual rate of $170,095 (the "Base Salary") during the term of
this Agreement, with such Base Salary payable in installments
consistent with the Company's normal payroll schedule, subject to
applicable withholding and other taxes. The Base Salary also shall
be reviewed, at least annually, for merit increases and may, by
action and in the discretion of the Board, be increased at any time
or from time to time. If the term of this Agreement shall be
renewed and/or extended as provided in Section 2.2 hereof, then
during such renewal term of his employment hereunder, the Executive
shall be paid a base salary as set forth in the Written Supplement.
3.2 Signing Loan and Bonuses.
(a) Upon execution of this Agreement, Capital Bancorp
("Bancorp") shall loan $50,000 to the Executive (the "Signing
Loan"). The Signing Loan shall bear interest at the "mid-term
applicable federal rate" as such term is defined in Section 1274(d)
of the Internal Revenue Code, with principal and interest being
payable in five (5) equal annual installments. The Signing Loan
shall be evidenced by and payable in accordance with a promissory
note in the form attached hereto as Exhibit "A" and made a part
hereof.
(b) On June 1, 1997, and on June 1 of each of the
succeeding four (4) years during the term of this Agreement, the
Company shall pay an annual bonus (the "Signing Loan Bonus") to the
Executive equal to the quotient obtained by dividing (i) the
payment due on that date under the Signing Loan, by (ii) 100% minus
the highest marginal federal income tax rate applicable to
compensation paid by the Company to the Executive for the year
(excluding any other income or expenses of the Executive). The
portion of the Signing Loan Bonuses that is equal to the payment
due under the Signing Loan shall be paid directly to Bancorp on
behalf of the Executive at such time as the payment is due under
the Signing Loan. The remaining portion of the Signing Loan Bonus,
less applicable withholding taxes on the entire Signing Loan Bonus,
shall be paid to the Executive.
(c) In the event that the Executive's employment with the
Company terminates by reason of the Executive's death or disability
as described under Section 5.2 hereof, is terminated by the Company
without Cause under Section 5.4 hereof, is terminated under Section
5.6 hereof after a Change in Control, or terminates at any time
after the Expiration Date if the Company has not offered the
Executive to renew the term of this Agreement for a period of three
(3) years beyond the Expiration Date on terms substantially the
same as those in effect during the Initial Term, then the Company
shall pay to the Executive, within 45 days of such termination, a
bonus (the "Final Signing Loan Bonus") equal to the quotient
obtained by dividing (i) the amount necessary to repay in full the
outstanding principal and accrued interest on the Signing Loan, by
(ii) 100% minus the highest marginal federal income tax rate
applicable to compensation paid by the Company to the Executive for
the immediately preceding year (excluding any other income or
expenses of the Executive). The portion of the Final Signing Loan
Bonus that is equal to the outstanding principal and accrued
interest on the Signing Loan shall be paid directly to Bancorp, on
behalf of the Executive. The remaining portion of the Final
Signing Loan Bonus, less applicable withholding taxes, shall be
paid to the Executive (or the Executive's estate in the case of the
Executive's death).
3.3 Incentive Compensation. The Executive shall be entitled
to receive incentive compensation ("Incentive Compensation") during
each year of the Initial Term of this Agreement equal to the amount
of incentive compensation for such year determined pursuant to the
Incentive Bonus Plan attached hereto as Exhibit "B" and made a part
hereof, as amended from time to time (the "Incentive Compensation
Plan"). In the event that this Agreement terminates on the
Expiration Date by reason of the expiration of the term of this
Agreement, then the Company shall pay the Executive Incentive
Compensation for the period from January 1, 1998 through May 31,
1998, equal to five-twelfths of the Incentive Compensation, if any,
for calendar year 1998; provided, however, that the Company's goals
under the Incentive Compensation Plan for calendar year 1998 shall
be based on (1) the period from January 1, 1998 through May 31,
1998, and (2) unaudited financial information prepared in
accordance with generally accepted accounting principles, applied
consistently with prior periods, as approved and reviewed by the
Board.
3.4 Section 162(m) Limits. Notwithstanding any other
provision of this Agreement to the contrary, if and to the extent
that any remuneration payable by the Company to the Executive for
any year would exceed the maximum amount of remuneration that the
Company may deduct for that year under Section 162(m) ("Section
162(m)") of the Internal Revenue Code of 1986, as amended (the
"Code"), payment of the portion of the remuneration for that year
that would not be so deductible under Section 162(m) shall, in the
sole discretion of the Board, be deferred and become payable at
such time or times as the Board determines that it first would be
deductible by the Company under Section 162(m), with interest at
the "short-term applicable federal rate" as such term is defined in
Section 1274(d) of the Code. The limitation set forth under this
Section 3.4 shall not apply with respect to any amounts payable to
the Executive pursuant to Section 5.6 hereof.
4. Expense Reimbursement and Other Benefits.
4.1 Reimbursement of Expenses. During the term of Executive's
employment hereunder, the Company, upon the submission of proper
substantiation by the Executive, shall reimburse the Executive for
all reasonable expenses actually paid or incurred by the Executive
in the course of and pursuant to the business of the Company. The
Executive shall account to the Company in writing for all expenses
for which reimbursement is sought and shall supply to the Company
copies of all relevant invoices, receipts or other evidence
reasonably requested by the Company.
4.2 Compensation/Benefit Programs. During the term of this
Agreement, the Executive shall be entitled to participate in all
medical, dental, hospitalization, accidental death and
dismemberment, disability, travel and life insurance plans, and any
and all other plans as are presently and hereinafter offered by the
Company to its executives, including savings, pension, profit-
sharing and deferred compensation plans.
4.3 Working Facilities. The Company shall furnish the
Executive with an office, secretarial help and such other
facilities and services suitable to his position and adequate for
the performance of his duties hereunder.
4.4 Automobile. The Company shall continue to provide the
Executive an automobile comparable to the existing automobile
provided to Executive, together with reimbursement of the operating
expenses thereof.
4.5 Stock Options. During the term of this Agreement, the
Executive shall be eligible to be granted options to purchase
common stock (the "Common Stock") of Bancorp under (and therefore
subject to all terms and conditions of) the Capital Bancorp Stock
Option Plan as amended, and any successor plan thereto (the "Stock
Option Plan") and all rules of regulation of the Securities and
Exchange Commission applicable to stock option plans then in
effect. The number of options and terms and conditions of options
shall be determined by the Stock Option Committee of Bancorp in its
discretion and pursuant to the Stock Option Plan.
4.6 Other Benefits. The Executive shall be entitled to four
weeks of vacation every year. The Executive shall receive such
additional benefits, if any, as the Chief Executive Officer of the
Company shall from time to time determine.
5. Termination.
5.1 Termination for Cause. The Company shall at all times
have the right, upon written notice to the Executive, to terminate
the Executive's employment hereunder, for cause. For purposes of
this Agreement, the term "cause" shall mean (i) an action or
omission of the Executive which constitutes a willful and material
breach of this Agreement which is not cured within fifteen (15)
days after receipt by the Executive of written notice of same, (ii)
fraud, embezzlement, misappropriation of funds or breach of trust,
(iii) conviction of any crime which involves dishonesty or a breach
of trust, (iv) gross negligence in connection with the performance
of the Executive's duties hereunder, (v) material and willful or
knowing failure or refusal (other than as a result of a disability)
by the Executive to perform his duties hereunder, or (vi) the
formal written request addressed to the Board of Directors of the
Company by any regulatory agency that regulates Capital Bank or
Capital Bancorp that the Executive be removed from his duties
hereunder and setting forth the basis for such request. Any
termination for cause shall be made in writing to the Executive,
which notice shall set forth in detail all acts or omissions upon
which the Company is relying for such termination. The Executive
shall have the right to address the Company's Board regarding the
acts set forth in the notice of termination. Upon any termination
pursuant to this Section 5.1, the Executive shall be entitled to be
paid his Base Salary to the date of termination and the Company
shall have no further liability hereunder (other than for (x)
reimbursement for reasonable business expenses incurred prior to
the date of termination, subject, however, to the provisions of
Section 4.1, and (y) payment of compensation for unused vacation
days that have accumulated during the calendar year in which such
termination occurs).
5.2 Disability. The Company shall at all times have the
right, upon written notice to the Executive, to terminate the
Executive's employment hereunder, if the Executive shall, as the
result of mental or physical incapacity, illness or disability,
become unable to perform his obligations hereunder for a period of
90 consecutive days. Upon any termination pursuant to this Section
5.2, the Company shall (i) pay to the Executive any unpaid Base
Salary through the effective date of termination specified in such
notice, (ii) pay to the Executive the Incentive Compensation, if
any, and Signing Loan Bonus not yet paid to the Executive for any
year prior to such termination, at such times as the Incentive
Compensation and Signing Loan Bonus otherwise would have been
payable to the Executive, (iii) pay to the Executive a severance
payment equal to three (3) months of the Executive's Base Salary at
the time of such disability, (iv) pay to the Executive (within 45
days after the end of the calendar quarter in which such
termination occurs) a prorata portion (based upon the period ending
on the date of termination of the Executive's employment hereunder)
of the Incentive Compensation, if any, for the year in which such
termination occurs, as calculated pursuant to the terms of Section
3.3 hereof and the Incentive Compensation Plan; provided that the
goals under the Incentive Compensation Plan for each period used in
the calculation of the Executive's Incentive Compensation, shall be
based on (1) the portion of the year through the end of the
calendar quarter in which such termination occurs and (2) unaudited
financial information prepared in accordance with generally
accepted accounting principles, applied consistently with prior
periods, as approved and reviewed by the Board, and (v) pay the
Final Signing Loan Bonus pursuant to Section 3.2(c) hereof. The
Company shall have no further liability hereunder (other than for
(x) reimbursement for reasonable business expenses incurred prior
to the date of termination, subject, however to the provisions of
Section 4.1, and (y) payment of compensation for unused vacation
days that have accumulated during the calendar year in which such
termination occurs).
5.3 Death. In the event of the death of the Executive during
the term of his employment hereunder, the Company shall (i) pay to
the estate of the deceased Executive any unpaid Base Salary through
the Executive's date of death, (ii) pay to the estate of the
deceased Executive the Incentive Compensation, if any, and Signing
Loan Bonus not yet paid to the Executive for any year prior to the
date of death, at such time as the Incentive Compensation and
Signing Loan Bonus otherwise would have been payable to the
Executive, (iii) pay to the estate of the deceased Executive
(within 45 days after the end of the calendar quarter in which his
death occurs) a prorata portion (based upon the period ending on
the date of death) of the Incentive Compensation, if any, for the
year in which his death occurs, as calculated pursuant to the terms
of Section 3.3 and the Incentive Compensation Plan; provided that,
the goals under the Incentive Compensation Plan for each period
used in the calculation of the Executive's Incentive Compensation
shall be based on (1) the portion of the year through the end of
the calendar quarter in which the Executive's death occurs, and (2)
unaudited financial information prepared in accordance with
generally accepted accounting principles, applied consistently with
prior periods, as approved and reviewed by the Board, and (iv) pay
the Final Signing Loan Bonus pursuant to Section 3.2(c) hereof.
The Company shall have no further liability hereunder (other than
for (x) reimbursement for reasonable business expenses incurred
prior to the date of the Executive's death, subject, however to the
provisions of Section 4.1, and (y) payment of compensation for
unused vacation days that have accumulated during the calendar year
in which such termination occurs).
5.4 Termination Without Cause. At any time the Company shall
have the right to terminate the Executive's employment hereunder by
written notice to the Executive. Upon any termination pursuant to
this Section 5.4 (that is not a termination under any of Sections
5.1, 5.2, 5.3, 5.5 or 5.6(a)), the Company shall (i) pay to the
Executive any unpaid Base Salary through the effective date of
termination specified in such notice, (ii) pay to the Executive the
Incentive Compensation, if any, and Signing Loan Bonus, not yet
paid to the Executive for any year prior to such termination, at
such time as the Incentive Compensation and Signing Loan Bonus
otherwise would have been payable to the Executive, (iii) continue
to pay the Executive's Base Salary through the Expiration Date, in
the manner and at such time as the Base Salary otherwise would have
been payable to the Executive, (iv) continue to pay the Executive
Incentive Compensation and continue to provide the Executive with
the benefits he was receiving under Sections 4.2, 4.4 and 4.6
hereof, through the Expiration Date, in the manner and at such
times as the compensation or benefits otherwise would have been
payable or provided to the Executive, (v) pay to the Executive as
a single lump sum payment, within 30 days of the termination of his
employment hereunder, a lump sum benefit equal to the value of the
portion of his benefits under any savings, pension, profit sharing
or deferred compensation plans that are forfeited under such plans
by reason of the termination of his employment hereunder, and (vi)
pay the Final Signing Loan Bonus pursuant to Section 3.2(c) hereof.
In the event that the termination of Executive's employment
hereunder shall occur on or before December 31, 1996, then the
Incentive Compensation and benefits payable under clause (iv) of
this Section 5.4 shall be equal to the amounts that would have been
paid or provided to the Executive for the year ended December 31,
1996. In the event that termination of Executive's employment
hereunder shall occur after December 31, 1996, then the Incentive
Compensation, Signing Loan Bonuses and other benefits payable under
clause (iv) of this Section 5.4 shall be equal to the amounts of
such compensation and benefits payable or provided to the Executive
for the calendar year immediately preceding the termination of
Executive's employment hereunder. In the event that the Company is
unable to provide the Executive with a continuation of any savings,
pension, profit-sharing or deferred compensation plans required
hereunder by reason of the termination of the Executive's
employment pursuant to this Section 5.4, then the Company shall pay
the Executive cash equal to the value of the benefit that otherwise
would have accrued for the Executive's benefit under the plan, for
the period during which such benefits could not be provided under
the plans, said cash payments to be made within 45 days after the
end of the year for which such contributions would have been made
or would have accrued. The Company's good faith determination of
the amount that would have been contributed or the value of any
benefits that would have accrued under any plan shall be binding
and conclusive on the Executive. Further, the Executive shall
continue to vest in the Executive's Stock Options through the
Expiration Date in the same manner and to the same extent as if his
employment hereunder terminated on the Expiration Date. The
Company shall have no further liability hereunder (other than for
(x) reimbursement for reasonable business expenses incurred prior
to the date of termination, subject, however, to the provisions of
Section 4.1, (y) payment of compensation for unused vacation days
that have accumulated during the calendar year in which such
termination occurs, and (z) any amounts payable to the Executive
pursuant to Section 5.6 hereof by reason of Section 5.6(c)).
5.5 Resignation by Executive. The Executive shall at all
times have the right, upon ninety (90) days written notice to the
Company, to terminate the Executive's employment hereunder. Upon
any termination pursuant to this Section 5.5, the Company shall (i)
pay to the Executive any unpaid Base Salary through the effective
date of termination specified in such notice and (ii) pay to the
Executive the Incentive Compensation, if any, and Signing Loan
Bonus not yet paid to the Executive for any year prior to such
termination, at such time as the Incentive Compensation and Signing
Loan Bonus otherwise would have been payable to the Executive.
The Company shall have no further liability hereunder (other than
for (x) reimbursement for reasonable business expenses incurred
prior to the date of termination, subject, however, to the
provisions of Section 4.1, (y) payment of compensation for unused
vacation days that have accumulated during the calendar year in
which such termination occurs, and (z) any amounts payable to the
Executive pursuant to Section 5.6 hereof by reason of Section
5.6(c)).
5.6 Change in Control of the Company.
(a) In the event that (x) a Change in Control (as defined
in paragraph (b) of this Section 5.6) in the Company shall occur
during the Initial Term, and (y) within one year after the date of
the Change in Control, the Executive is (i) assigned any position,
duties or responsibilities that are significantly diminished or
changed when compared with the position, duties or responsibilities
of the Executive prior to such Change in Control, (ii) forced to
relocate to another location more than 25 miles from his location
prior to the Change in Control, or (iii) no longer provided
coverage under benefit programs in existence prior to the Change in
Control (unless a comparable substitute is offered); then the
Executive, by written notice to the Company at any time within the
thirty (30) day period following the occurrence of an event
described in clauses (i) through (iii) of this Section 5.6(a),
shall have the right to terminate his employment hereunder. Upon
the voluntary termination by the Executive pursuant to this Section
5.6(a), or the involuntary termination of the Executive by the
Company within one year after the date of a Change in Control, the
Company shall (v) pay to the Executive any unpaid Base Salary
through the effective date of termination, (w) pay to the Executive
the Incentive Compensation, if any, not yet paid to the Executive
for any year prior to such termination, at such time as the
Incentive Compensation otherwise would have been payable to the
Executive, (x) pay to the Executive (within 45 days after the end
of the calendar quarter in which such termination occurs) a prorata
portion (based upon the period ending on the date of termination of
the Executive's employment hereunder) of the Incentive
Compensation, if any, for the year in which such termination
occurs, as calculated pursuant to the terms of Section 3.3 hereof
and the Incentive Compensation Plan; provided that the Company's
goals under the Incentive Compensation Plan for each period used in
the calculation of the Executive's Incentive Compensation, shall be
based on (1) the portion of the year through the end of the
calendar quarter in which such termination occurs, and (2)
unaudited financial information prepared in accordance with
generally accepted accounting principles, applied consistently with
prior periods, as approved and reviewed by the Board, (y) pay the
Final Signing Loan Bonus pursuant to Section 3.2(c) hereof, and (z)
pay to the Executive as a single lump sum payment, within 45 days
of the termination of his employment hereunder, a lump sum payment
equal to the sum of (a) the product of (i) an amount which shall
not be less than one, equal to the number of days between the date
of the Executive's termination of employment with the Company and
the Expiration Date, divided by 365 days, and (ii) his annual Base
Salary, Incentive Compensation, and the value of the annual fringe
benefits required to be provided to the Executive under Sections
4.2 and 4.4 hereof, for the year immediately preceding the year in
which his employment terminates, plus (b) the value of the portion
of his benefits under any savings, pension, profit sharing or
deferred compensation plans that are forfeited under those plans by
reason of the termination of his employment hereunder. Further,
upon the Change in Control, the Executive's Stock Options shall
immediately vest. The Company shall have no further liability
hereunder (other than for (1) reimbursement for reasonable business
expenses incurred prior to the date of termination, subject,
however, to the provisions of Section 4.1, and (2) payment of
compensation for unused vacation days that have accumulated during
the calendar year in which such termination occurs).
(b) For purposes of this Agreement, a "Change in Control"
shall be deemed to have occurred if:
(i) an event which would be required to be reported
in response to Item (a) of the current report on Form 8-K, as in
effect on the date hereof, pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 (the "Exchange Act") occurs and the
transaction required to be reported is consummated;
(ii) an event occurs which results in a change in
control of the Company or Capital Bancorp within the meaning of the
Federal Change in Bank Control Act and/or applicable sections of
the Florida Banking Code and/or the rules and regulations
promulgated by the Board of Governors of the Federal Reserve System
or the Florida Department of Banking as in effect on the date
hereof;
(iii) individuals who constitute the Board of
Directors of each of the Company or Capital Bancorp on the date
hereof (the "Incumbent Board") cease for any reason to constitute
at least a majority thereof, provided that any person becoming a
director subsequent to the date hereof whose election was approved
by a vote of at least three-quarters of the directors comprising
the Incumbent Board, or whose nomination for election by the
Company's stockholders was approved by a majority of the Incumbent
Board, shall be, for purposes of this clause (iii), considered as
though he or she were a member of the Incumbent Board;
(iv) Capital Bancorp ceases to own at least 80% of
the voting stock of the Company;
(v) there occurs any transaction (which shall
include a series of transactions occurring within 60 days or
occurring pursuant to a plan) that has the result that shareholders
of Capital Bancorp immediately before such transaction cease to own
at least 51% of the voting stock of Capital Bancorp or of any
entity that results from the participation of Capital Bancorp in a
reorganization, consolidation, merger, liquidation or other form of
corporate transaction;
(vi) any person or group of persons (other than
those persons who own or control as a group not less than 40% of
the outstanding stock of the Company on the date of this Agreement
(the "Present Control Group")) acting in concert acquire in excess
of both (a) 25% of the outstanding voting stock of Capital Bancorp,
and (b) the number of shares of Capital Bancorp with respect to
which the Present Control Group, in the aggregate, have voting
rights to after such acquisition;
(vii) Capital Bancorp or the Company liquidate or
dissolve; or
(viii) the Company or Capital Bancorp sells, leases,
exchanges or otherwise disposes of all or substantially all of its
property or assets.
(c) In the event that:
(i) the Company enters into a letter of intent or a
definitive agreement for the Company to enter into a transaction
that would constitute a Change in Control (the letter of intent or
definitive agreement being hereinafter referred to as a "Change in
Control Agreement"), and discussions relating to the transaction
reflected in the Change in Control Agreement had commenced while
the Executive was employed by the Company;
(ii) the Change in Control Agreement is entered into
(a) while the Executive is employed by the Company prior to the
Expiration Date, (b) within 90 days after the Company's termination
of the Executive's employment without Cause, or (c) within 90 days
after the Expiration Date if the Executive was employed by the
Company on the Expiration Date;
(iii) the transaction contemplated by the Change in
Control Agreement is effectuated and results in a Change in
Control; and
(iv) within the period that begins on the date on
which the Change in Control Agreement is executed by the Company
and ends one year after the date of the Change in Control, either
(a) the Executive voluntarily terminates his employment hereunder
after one of the events described in clause (i), (ii) or (iii) of
paragraph (a) of this Section 5.6 occurs, or (b) the Executive's
employment with the Company is involuntarily terminated by the
Company;
then the Company shall pay to the Executive the amounts provided in
paragraph 5.6(a), reduced by any amounts paid by the Company to the
Executive under Section 5.4 or 5.5 hereof, and the Executive's
rights to receive any additional amounts under Section 5.4 or 5.5
shall cease.
5.7 Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any
payment, distribution or other action by the Company to or for the
benefit of the Executive (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise,
but determined without regard to any additional payments required
under this Section 5.7) (a "Payment") would be subject to an excise
tax imposed by Section 4999 of the Internal Revenue Code of 1986,
as amended (the "Code"), or any interest or penalties are incurred
by the Executive with respect to any such excise tax (such excise
tax, together with any such interest and penalties, are hereinafter
collectively referred to as the "Excise Tax"), the Company or
Bancorp shall make a payment to the Executive (a "Gross-Up
Payment") in an amount equal to the Excise Tax imposed upon the
Payments.
(b) Subject to the provisions of Section 5.7(c), all
determinations required to be made under this Section 5.7,
including whether and when a Gross-Up Payment is required and the
amount of such Gross-Up Payment and the assumptions to be utilized
in arriving at such determination, shall be made by Deloitte Touche
LLP (the "Accounting Firm") which shall provide detailed supporting
calculations both to the Company and the Executive within 15
business days of the receipt of notice from the Executive that
there has been a Payment, or such earlier time as is requested by
the Company. In the event that the Accounting Firm is serving as
accountant or auditor for the individual, entity or group effecting
the Change of Control, the Executive shall appoint another
nationally recognized accounting firm to make the determinations
required hereunder (which accounting firm shall then be referred to
as the Accounting Firm hereunder). All fees and expenses of the
Accounting Firm shall be borne solely by the Company. Any Gross-Up
Payment, as determined pursuant to this Section 5.7, shall be paid
by the Company to the Executive within five days of the receipt of
the Accounting Firm's determination. If the Accounting Firm
determines that no Excise Tax is payable by the Executive, it shall
furnish the Executive with a written opinion that failure to report
the Excise Tax on the Executive's applicable federal income tax
return would not result in the imposition of a negligence or
similar penalty. Any determination by the Accounting Firm shall be
binding upon the Company and the Executive. As a result of the
uncertainty in the application of Section 4999 of the Code at the
time of the initial determination by the Accounting Firm hereunder,
it is possible that Gross-Up Payments which will not have been made
by the Company should have been made ("Underpayment"), consistent
with the calculations required to be made hereunder. In the event
that the Company exhausts its remedies pursuant to Section 5.7(c)
and the Executive thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall determine the amount of the
Underpayment that has occurred and any such Underpayment shall be
promptly paid by the Company to or for the benefit of the
Executive.
(c) The Executive shall notify the Company in writing of
any claim by the Internal Revenue Service that, if successful,
would require the payment by the Company of the Gross-Up Payment.
Such notification shall be given as soon as practicable but no
later than ten business days after the Executive is informed in
writing of such claim and shall apprise the Company of the nature
of such claim and the date on which such claim is requested to be
paid. The Executive shall not pay such claim prior to the
expiration of the 30-day period following the date on which it
gives such notice to the Company (or such shorter period ending on
the date that any payment of taxes with respect to such claim is
due). If the Company notifies the Executive in writing prior to
the expiration of such period that it desires to contest such
claim, the Executive shall:
(i) give the Company any information reasonably
requested by the Company relating to such claim,
(ii) take such action in connection with contesting
such claim as the Company shall reasonably request in writing from
time to time, including, without limitation, accepting legal
representation with respect to such claim by an attorney reasonably
selected by the Company,
(iii) cooperate with the Company in good faith in
order effectively to contest such claim, and
(iv) permit the Company to participate in any
proceedings relating to such claim;
provided, however, that the Company shall bear and pay directly all
costs and expenses (including additional interest and penalties)
incurred in connection with such contest and shall indemnify and
hold the Executive harmless, on an after-tax basis, for any Excise
Tax or income tax (including interest and penalties with respect
thereto) imposed as a result of such representation and payment of
costs and expenses. Without limitation on the foregoing provisions
of this Section 5.7(c), the Company shall control all proceedings
taken in connection with such contest and, at its sole option, may
pursue or forego any and all administrative appeals, proceedings,
hearings and conferences with the taxing authority in respect of
such claim and may, at its sole option, either direct the Executive
to pay the tax claimed and sue for a refund or contest the claim in
any permissible manner, and the Executive agrees to prosecute such
contest to a determination before any administrative tribunal, in
a court of initial jurisdiction and in one or more appellate
courts, as the Company shall determine; provided, however, that if
the Company directs the Executive to pay such claim and sue for a
refund, the Company shall advance the amount of such payment to the
Executive, on an interest-free basis and shall indemnify and hold
the Executive harmless, on an after-tax basis, from any Excise Tax
or income tax (including interest or penalties with respect
thereto) imposed with respect to such advance or with respect to
any imputed income with respect to such advance; and further
provided that any extension of the statute of limitations relating
to payment of taxes for the taxable year of the Executive with
respect to which such contested amount is claimed to be due is
limited solely to such contested amount. Furthermore, the
Company's control of the contest shall be limited to issues with
respect to which a Gross-Up Payment would be payable hereunder and
the Executive shall be entitled to settle or contest, as the case
may be, any other issue raised by the Internal Revenue Service or
any other taxing authority.
(d) If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 5.7(c), the Executive
becomes entitled to receive any refund with respect to such claim,
the Executive shall (subject to the Company's complying with the
requirements of Section 5.7(c)) promptly pay to the Company the
amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by
the Executive of an amount advanced by the Company pursuant to
Section 5.7(c), a determination is made that the Executive shall
not be entitled to any refund with respect to such claim and the
Company does not notify the Executive in writing of its intent to
contest such denial of refund prior to the expiration of 30 days
after such determination, then such advance shall be forgiven and
shall not be required to be repaid and the amount of such advance
shall offset, to the extent thereof, the amount of Gross-Up Payment
required to be paid.
5.8 Survival. The provisions of this Article 5 shall survive
the termination of this Agreement, as applicable.
6. Restrictive Covenants.
6.1 Non-competition. For the period through the Expiration
Date and at all times while the Executive is employed by the
Company; the Executive shall not, directly or indirectly, engage in
or have any interest in any sole proprietorship, partnership,
corporation or business or any other person or entity (whether as
an employee, officer, director, partner, agent, security holder,
creditor, consultant or otherwise) that directly or indirectly (or
through any affiliated entity) engages in competition with the
Company in any domestic or foreign market (for this purpose, any
financial institution with offices in any city or county in which
the Company has an office will be deemed to be in competition with
the Company); provided that such provision shall not apply to the
Executive's ownership of Common Stock of Bancorp or the acquisition
by the Executive, solely as an investment, of securities of any
issuer that is registered under Section 12(b) or 12(g) of the
Securities Exchange Act of 1934, as amended, and that are listed or
admitted for trading on any United States national securities
exchange or that are quoted on the National Association of
Securities Dealers Automated Quotations System, or any similar
system or automated dissemination of quotations of securities
prices in common use, so long as the Executive is not a member of
any control group (within the meaning of the rules and regulations
of the Securities and Exchange Commission) of any such issuer.
6.2 Nondisclosure. The Executive shall not divulge,
communicate, use to the detriment of the Company or for the benefit
of any other person or persons, or misuse in any way, any
confidential information pertaining to the business of the Company.
Any confidential information or data now or hereafter acquired by
the Executive with respect to the business of the Company (which
shall include, but not be limited to, information concerning the
Company's financial condition, prospects, customers, sources of
leads and methods of doing business) shall be deemed a valuable,
special and unique asset of the Company that is received by the
Executive in confidence and as a fiduciary, and Executive shall
remain a fiduciary to the Company with respect to all of such
information.
6.3 Nonsolicitation of Employees and Clients. For the period
ending on the earlier of (i) termination of Executive's employment
with the Company pursuant to Section 5.6 hereof following a Change
in Control, and (ii) two years following the Expiration Date
(except that, the period shall be six months after the Expiration
Date if (1) the Executive is employed by the Company on the
Expiration Date, and (2) the Company has not offered, at or prior
to the Expiration Date, to employ the Executive after the
Expiration Date on terms that provide for payment of (x) a base
salary equal to or greater than the Base Salary (adjusted for cost-
of-living increases) being paid to the Executive on the Expiration
Date, and (y) incentive compensation on terms equal to or greater
than the Incentive Compensation terms in effect as of the
Expiration Date); the Executive shall not, directly or indirectly,
for himself or for any other person, firm, corporation,
partnership, association or other entity (a) employ or attempt to
employ or enter into any contractual arrangement with any employee
or former employee of the Company, unless such employee or former
employee has not been employed by the Company for a period in
excess of six months, and/or (b) call on or solicit any of the
actual or targeted prospective clients of the Company on behalf of
any person or entity in connection with any business competitive
with the business of the Company, nor shall the Executive make
known the names and addresses of such clients or any information
relating in any manner to the Company's trade or business
relationships with such customers, other than in connection with
the performance of Executive's duties under this Agreement.
6.4 Books and Records. All books, records, and accounts
relating in any manner to the customers or clients of the Company,
whether prepared by the Executive or otherwise coming into the
Executive's possession, shall be the exclusive property of the
Company and shall be returned immediately to the Company on
termination of the Executive's employment hereunder or on the
Company's request at any time.
6.5 Definition of Company. Solely for purposes of this
Section 6, the term "Company" also shall include any future
subsidiaries of the Company that are operating during the time
periods described herein and any other entities that directly or
indirectly, through one or more intermediaries, control, are
controlled by or are under common control with the Company during
the periods described herein.
6.6 Acknowledgment by Executive. The Executive acknowledges
and confirms that the length of the term of the provisions of this
Section 6 and the geographical restrictions contained in Section
6.1 are fair and reasonable and not the result of overreaching,
duress or coercion of any kind. The Executive further acknowledges
and confirms that his full, uninhibited and faithful observance of
each of the covenants contained in this Section 6 will not cause
him any undue hardship, financial or otherwise, and that
enforcement of each of the covenants contained herein will not
impair his ability to obtain employment commensurate with his
abilities and on terms fully acceptable to him or otherwise to
obtain income required for the comfortable support of him and his
family and the satisfaction of the needs of his creditors. The
Executive acknowledges and confirms that his special knowledge of
the business of the Company is such as would cause the Company
serious injury or loss if he were to use such ability and knowledge
to the benefit of a competitor or were to compete with the Company
in violation of the terms of this Section 6.
6.7 Survival. The provisions of this Section 6 shall survive
the termination of this Agreement, as applicable.
7. Injunction. It is recognized and hereby acknowledged by the
parties hereto that a breach by the Executive of any of the
covenants contained in Section 6 of this Agreement will cause
irreparable harm and damage to the Company, the monetary amount of
which may be virtually impossible to ascertain. As a result, the
Executive recognizes and hereby acknowledges that the Company shall
be entitled to an injunction from any court of competent juris-
diction enjoining and restraining any violation of any or all of
the covenants contained in Section 6 of this Agreement by the
Executive or any of his affiliates, associates, partners or agents,
either directly or indirectly, and that such right to injunction
shall be cumulative and in addition to whatever other remedies the
Company may possess.
8. Assignment. Neither party shall have the right to assign or
delegate his rights or obligations hereunder, or any portion
thereof, to any other person.
9. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Florida.
10. Entire Agreement. This Agreement constitutes the entire
agreement between the parties hereto with respect to the subject
matter hereof and, upon its effectiveness, shall supersede all
prior agreements, understandings and arrangements, both oral and
written, between the Executive and the Company (or any of its
affiliates) with respect to such subject matter. This Agreement
may not be modified in any way unless by a written instrument
signed by both the Company and the Executive.
11. Notices: Any notice required or permitted to be given
hereunder shall be deemed given when delivered by hand or when
deposited in the United States mail, by registered or certified
mail, return receipt requested, postage prepaid, (i) if to the
Company, addressed to Capital Bank, 1221 Brickell Avenue, Miami,
Florida 33133, Attention: President, and (ii) if to the Executive,
to his address as reflected on the payroll records of the Company,
or to such other address as either party hereto may from time to
time give notice of to the other.
12. Benefits; Binding Effect. This Agreement shall be for the
benefit of and binding upon the parties hereto and their respective
heirs, personal representatives, legal representatives, successors
and, where applicable, assigns, including, without limitation, any
successor to the Company, whether by merger, consolidation, sale of
stock, sale of assets or otherwise.
13. Severability. The invalidity of any one or more of the words,
phrases, sentences, clauses or sections contained in this Agreement
shall not affect the enforceability of the remaining portions of
this Agreement or any part thereof, all of which are inserted
conditionally on their being valid in law, and, in the event that
any one or more of the words, phrases, sentences, clauses or
sections contained in this Agreement shall be declared invalid,
this Agreement shall be construed as if such invalid word or words,
phrase or phrases, sentence or sentences, clause or clauses, or
section or sections had not been inserted. If such invalidity is
caused by length of time or size of area, or both, the otherwise
invalid provision will be considered to be reduced to a period or
area which would cure such invalidity.
14. Waivers. The waiver by either party hereto of a breach or
violation of any term or provision of this Agreement shall not
operate nor be construed as a waiver of any subsequent breach or
violation.
15. Damages. Nothing contained herein shall be construed to
prevent the Company or the Executive from seeking and recovering
from the other damages sustained by either or both of them as a
result of its or his breach of any term or provision of this
Agreement. In the event that either party hereto brings suit for
the collection of any damages resulting from, or the injunction of
any action constituting, a breach of any of the terms or provisions
of this Agreement, then the party found to be at fault shall pay
all reasonable court costs and attorneys' fees of the other.
16. Section Headings. The section headings contained in this
Agreement are for reference purposes only and shall not affect in
any way the meaning or interpretation of this Agreement.
17. No Third Party Beneficiary. Nothing expressed or implied in
this Agreement is intended, or shall be construed, to confer upon
or give any person other than the Company, the parties hereto and
their respective heirs, personal representatives, legal
representatives, successors and assigns, any rights or remedies
under or by reason of this Agreement.
18. Indemnification.
(a) Subject to limitations imposed by law, the Company shall
indemnify and hold harmless the Executive to the fullest extent
permitted by law from and against any and all claims, damages,
expenses (including attorneys' fees), judgments, penalties, fines,
settlements, and all other liabilities incurred or paid by him in
connection with the investigation, defense, prosecution, settlement
or appeal of any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investiga-
tive and to which the Executive was or is a party or is threatened
to be made a party by reason of the fact that the Executive is or
was an officer, employee or agent of the Company, or by reason of
anything done or not done by the Executive in any such capacity or
capacities, provided that the Executive acted in good faith, in a
manner that was not grossly negligent or constituted wilful
misconduct and in a manner he reasonably believed to be in or not
opposed to the best interests of the Company, and, with respect to
any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful. The Company also shall pay any
and all expenses (including attorney's fees) incurred by the
Executive as a result of the Executive being called as a witness in
connection with any matter involving the Company and/or any of its
officers or directors. The Company shall advance.
(b) The Company shall pay any expenses (including attorneys'
fees), judgments, penalties, fines, settlements, and other
liabilities incurred by the Executive in investigating, defending,
settling or appealing any action, suit or proceeding described in
this Section 18 in advance of the final disposition of such action,
suit or proceeding. The Company shall promptly pay the amount of
such expenses to the Executive, but in no event later than 10 days
following the Executive's delivery to the Company of a written
request for an advance pursuant to this Section 18, together with
a reasonable accounting of such expenses.
(c) The Executive hereby undertakes and agrees to repay to
the Company any advances made pursuant to this Section 18 if and to
the extent that it shall ultimately be found that the Executive is
not entitled to be indemnified by the Company for such amounts.
(d) The Company shall make the advances contemplated by this
Section 18 regardless of the Executive's financial ability to make
repayment, and regardless whether indemnification of the Indemnitee
by the Company will ultimately be required. Any advances and
undertakings to repay pursuant to this Section 18 shall be
unsecured and interest-free.
(e) The provisions of this Section 18 shall survive the
termination of this Agreement.
19. Regulatory Limitations. Notwithstanding anything else
contained herein, no payment shall be made hereunder that
constitutes a golden parachute payment or prohibited
indemnification payment in violation of 12 CFR Part 359.
20. Waiver of Jury Trial. The undersigned expressly (i) waive any
right to a trial by jury of any claim, demand, action or cause of
action arising out of this Agreement or in any way related or
incidental to the performance of the parties' obligations
hereunder, and (ii) agree that the Company or the Executive may
file an original counterpart or copy of this Section 20 with any
court as written evidence of the consent to the waiver of the right
to trial by jury.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as
of the date first above written.
COMPANY:
CAPITAL BANK
By: /s/ DANIEL M. HOLTZ
------------------------
Chief Executive Officer
EXECUTIVE:
/s/ THOMAS J. FLOOD
-------------------------
THOMAS J. FLOOD<PAGE>
Exhibit 10.4
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is made and entered into on
this 1st day of June, 1996 as of January 1, 1996 by and between
CAPITAL BANK, a Florida corporation (the "Company"), and TIMOTHY E.
KISH (hereinafter called the "Executive").
R E C I T A L S
A. The Executive is currently employed as the General Counsel of
the Company.
B. The Executive possesses intimate knowledge of the business and
affairs of the Company, its policies, methods and personnel.
C. The Board of Directors of the Company (the "Board") recognizes
that the Executive has contributed to the growth and success of the
Company, and desires to assure the Company of the Executive's
continued employment and to compensate him therefor.
D. The Board has determined that this Agreement will reinforce and
encourage the Executive's continued attention and dedication to the
Company.
E. The Executive is willing to make his services available to the
Company and on the terms and conditions hereinafter set forth.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and mutual
covenants set forth herein, the parties agree as follows:
1. Employment.
1.1 Employment and Term. The Company hereby agrees to employ
the Executive and the Executive hereby agrees to serve the Company
on the terms and conditions set forth herein.
1.2 Duties of Executive. During the term of this Agreement,
the Executive shall serve as the General Counsel of the Company,
shall diligently perform all services as may be assigned to him by
the Board or the Chief Executive Officer of the Company (provided
that, such services shall not materially differ from the services
currently provided by the Executive), and shall exercise such power
and authority as may from time to time be delegated to him by the
Board or the Chief Executive Officer of the Company. The Executive
shall devote his full time and attention to the business and
affairs of the Company, render such services to the best of his
ability, and use his best efforts to promote the interests of the
Company; provided, however that nothing in this Agreement shall
preclude the Executive from providing services to, and receiving
compensation from, Capital Bancorp., the parent company of the
Company, or any direct or indirect subsidiary of Capital Bancorp.
2. Term.
2.1 Initial Term. The initial term of this Agreement, and the
employment of the Executive hereunder, shall commence on January 1,
1996 (the "Commencement Date") and shall expire on May 31, 1998
(the "Expiration Date"), unless sooner terminated in accordance
with the terms and conditions hereof (the "Initial Term").
2.2 Renewal Terms. The Initial Term of this Agreement, and
the employment of the Executive hereunder, may be renewed and/or
extended for such period or periods as may be mutually agreed to by
the Company and the Executive in a written supplement to this
Agreement signed by the Executive and the Company ("Written
Supplement"). If this Agreement is not so renewed and/or extended
prior to the expiration of the Initial Term, this Agreement, and
the employment of the Executive hereunder, shall automatically
terminate on the Expiration Date.
3. Compensation.
3.1 Base Salary. The Executive shall receive a base salary at
the annual rate of $156,380 (the "Base Salary") during the term of
this Agreement, with such Base Salary payable in installments
consistent with the Company's normal payroll schedule, subject to
applicable withholding and other taxes. The Base Salary also shall
be reviewed, at least annually, for merit increases and may, by
action and in the discretion of the Board, be increased at any time
or from time to time. If the term of this Agreement shall be
renewed and/or extended as provided in Section 2.2 hereof, then
during such renewal term of his employment hereunder, the Executive
shall be paid a base salary as set forth in the Written Supplement.
3.2 Signing Loan and Bonuses.
(a) Upon execution of this Agreement, Capital Bancorp
("Bancorp") shall loan $50,000 to the Executive (the "Signing
Loan"). The Signing Loan shall bear interest at the "mid-term
applicable federal rate" as such term is defined in Section 1274(d)
of the Internal Revenue Code, with principal and interest being
payable in five (5) equal annual installments. The Signing Loan
shall be evidenced by and payable in accordance with a promissory
note in the form attached hereto as Exhibit "A" and made a part
hereof.
(b) On June 1, 1997, and on June 1 of each of the
succeeding four (4) years during the term of this Agreement, the
Company shall pay an annual bonus (the "Signing Loan Bonus") to the
Executive equal to the quotient obtained by dividing (i) the
payment due on that date under the Signing Loan, by (ii) 100% minus
the highest marginal federal income tax rate applicable to
compensation paid by the Company to the Executive for the year
(excluding any other income or expenses of the Executive). The
portion of the Signing Loan Bonuses that is equal to the payment
due under the Signing Loan shall be paid directly to Bancorp on
behalf of the Executive at such time as the payment is due under
the Signing Loan. The remaining portion of the Signing Loan Bonus,
less applicable withholding taxes on the entire Signing Loan Bonus,
shall be paid to the Executive.
(c) In the event that the Executive's employment with the
Company terminates by reason of the Executive's death or disability
as described under Section 5.2 hereof, is terminated by the Company
without Cause under Section 5.4 hereof, is terminated under Section
5.6 hereof after a Change in Control, or terminates at any time
after the Expiration Date if the Company has not offered the
Executive to renew the term of this Agreement for a period of three
(3) years beyond the Expiration Date on terms substantially the
same as those in effect during the Initial Term, then the Company
shall pay to the Executive, within 45 days of such termination, a
bonus (the "Final Signing Loan Bonus") equal to the quotient
obtained by dividing (i) the amount necessary to repay in full the
outstanding principal and accrued interest on the Signing Loan, by
(ii) 100% minus the highest marginal federal income tax rate
applicable to compensation paid by the Company to the Executive for
the immediately preceding year (excluding any other income or
expenses of the Executive). The portion of the Final Signing Loan
Bonus that is equal to the outstanding principal and accrued
interest on the Signing Loan shall be paid directly to Bancorp, on
behalf of the Executive. The remaining portion of the Final
Signing Loan Bonus, less applicable withholding taxes, shall be
paid to the Executive (or the Executive's estate in the case of the
Executive's death).
3.3 Incentive Compensation.The Executive shall be entitled to
receive incentive compensation ("Incentive Compensation") during
each year of the Initial Term of this Agreement equal to the amount
of incentive compensation for such year determined pursuant to the
Incentive Bonus Plan attached hereto as Exhibit "B" and made a part
hereof, as amended from time to time (the "Incentive Compensation
Plan"). In the event that this Agreement terminates on the
Expiration Date by reason of the expiration of the term of this
Agreement, then the Company shall pay the Executive Incentive
Compensation for the period from January 1, 1998 through May 31,
1998, equal to five-twelfths of the Incentive Compensation, if any,
for calendar year 1998; provided, however, that the Company's goals
under the Incentive Compensation Plan for calendar year 1998 shall
be based on (1) the period from January 1, 1998 through May 31,
1998, and (2) unaudited financial information prepared in
accordance with generally accepted accounting principles, applied
consistently with prior periods, as approved and reviewed by the
Board.
3.4 Section 162(m) Limits. Notwithstanding any other
provision of this Agreement to the contrary, if and to the extent
that any remuneration payable by the Company to the Executive for
any year would exceed the maximum amount of remuneration that the
Company may deduct for that year under Section 162(m) ("Section
162(m)") of the Internal Revenue Code of 1986, as amended (the
"Code"), payment of the portion of the remuneration for that year
that would not be so deductible under Section 162(m) shall, in the
sole discretion of the Board, be deferred and become payable at
such time or times as the Board determines that it first would be
deductible by the Company under Section 162(m), with interest at
the "short-term applicable federal rate" as such term is defined in
Section 1274(d) of the Code. The limitation set forth under this
Section 3.4 shall not apply with respect to any amounts payable to
the Executive pursuant to Section 5.6 hereof.
4. Expense Reimbursement and Other Benefits.
4.1 Reimbursement of Expenses. During the term of Executive's
employment hereunder, the Company, upon the submission of proper
substantiation by the Executive, shall reimburse the Executive for
all reasonable expenses actually paid or incurred by the Executive
in the course of and pursuant to the business of the Company. The
Executive shall account to the Company in writing for all expenses
for which reimbursement is sought and shall supply to the Company
copies of all relevant invoices, receipts or other evidence
reasonably requested by the Company.
4.2 Compensation/Benefit Programs. During the term of this
Agreement, the Executive shall be entitled to participate in all
medical, dental, hospitalization, accidental death and
dismemberment, disability, travel and life insurance plans, and any
and all other plans as are presently and hereinafter offered by the
Company to its executives, including savings, pension, profit-
sharing and deferred compensation plans.
4.3 Working Facilities. The Company shall furnish the
Executive with an office, secretarial help and such other
facilities and services suitable to his position and adequate for
the performance of his duties hereunder.
4.4 Automobile. The Company shall continue to provide the
Executive an automobile comparable to the existing automobile
provided to Executive, together with reimbursement of the operating
expenses thereof.
4.5 Stock Options. During the term of this Agreement, the
Executive shall be eligible to be granted options to purchase
common stock (the "Common Stock") of Bancorp under (and therefore
subject to all terms and conditions of) the Capital Bancorp Stock
Option Plan as amended, and any successor plan thereto (the "Stock
Option Plan") and all rules of regulation of the Securities and
Exchange Commission applicable to stock option plans then in
effect. The number of options and terms and conditions of options
shall be determined by the Stock Option Committee of Bancorp in its
discretion and pursuant to the Stock Option Plan.
4.6 Other Benefits. The Executive shall be entitled to four
weeks of vacation every year. The Executive shall receive such
additional benefits, if any, as the Chief Executive Officer of the
Company shall from time to time determine.
5. Termination.
5.1 Termination for Cause. The Company shall at all times
have the right, upon written notice to the Executive, to terminate
the Executive's employment hereunder, for cause. For purposes of
this Agreement, the term "cause" shall mean (i) an action or
omission of the Executive which constitutes a willful and material
breach of this Agreement which is not cured within fifteen (15)
days after receipt by the Executive of written notice of same, (ii)
fraud, embezzlement, misappropriation of funds or breach of trust,
(iii) conviction of any crime which involves dishonesty or a breach
of trust, (iv) gross negligence in connection with the performance
of the Executive's duties hereunder, (v) material and willful or
knowing failure or refusal (other than as a result of a disability)
by the Executive to perform his duties hereunder, or (vi) the
formal written request addressed to the Board of Directors of the
Company by any regulatory agency that regulates Capital Bank or
Capital Bancorp that the Executive be removed from his duties
hereunder and setting forth the basis for such request. Any
termination for cause shall be made in writing to the Executive,
which notice shall set forth in detail all acts or omissions upon
which the Company is relying for such termination. The Executive
shall have the right to address the Company's Board regarding the
acts set forth in the notice of termination. Upon any termination
pursuant to this Section 5.1, the Executive shall be entitled to be
paid his Base Salary to the date of termination and the Company
shall have no further liability hereunder (other than for (x)
reimbursement for reasonable business expenses incurred prior to
the date of termination, subject, however, to the provisions of
Section 4.1, and (y) payment of compensation for unused vacation
days that have accumulated during the calendar year in which such
termination occurs).
5.2 Disability. The Company shall at all times have the
right, upon written notice to the Executive, to terminate the
Executive's employment hereunder, if the Executive shall, as the
result of mental or physical incapacity, illness or disability,
become unable to perform his obligations hereunder for a period of
90 consecutive days. Upon any termination pursuant to this Section
5.2, the Company shall (i) pay to the Executive any unpaid Base
Salary through the effective date of termination specified in such
notice, (ii) pay to the Executive the Incentive Compensation, if
any, and Signing Loan Bonus not yet paid to the Executive for any
year prior to such termination, at such times as the Incentive
Compensation and Signing Loan Bonus otherwise would have been
payable to the Executive, (iii) pay to the Executive a severance
payment equal to three (3) months of the Executive's Base Salary at
the time of such disability, (iv) pay to the Executive (within 45
days after the end of the calendar quarter in which such
termination occurs) a prorata portion (based upon the period ending
on the date of termination of the Executive's employment hereunder)
of the Incentive Compensation, if any, for the year in which such
termination occurs, as calculated pursuant to the terms of Section
3.3 hereof and the Incentive Compensation Plan; provided that the
goals under the Incentive Compensation Plan for each period used in
the calculation of the Executive's Incentive Compensation, shall be
based on (1) the portion of the year through the end of the
calendar quarter in which such termination occurs and (2) unaudited
financial information prepared in accordance with generally
accepted accounting principles, applied consistently with prior
periods, as approved and reviewed by the Board, and (v) pay the
Final Signing Loan Bonus pursuant to Section 3.2(c) hereof. The
Company shall have no further liability hereunder (other than for
(x) reimbursement for reasonable business expenses incurred prior
to the date of termination, subject, however to the provisions of
Section 4.1, and (y) payment of compensation for unused vacation
days that have accumulated during the calendar year in which such
termination occurs).
5.3 Death. In the event of the death of the Executive during
the term of his employment hereunder, the Company shall (i) pay to
the estate of the deceased Executive any unpaid Base Salary through
the Executive's date of death, (ii) pay to the estate of the
deceased Executive the Incentive Compensation, if any, and Signing
Loan Bonus not yet paid to the Executive for any year prior to the
date of death, at such time as the Incentive Compensation and
Signing Loan Bonus otherwise would have been payable to the
Executive, (iii) pay to the estate of the deceased Executive
(within 45 days after the end of the calendar quarter in which his
death occurs) a prorata portion (based upon the period ending on
the date of death) of the Incentive Compensation, if any, for the
year in which his death occurs, as calculated pursuant to the terms
of Section 3.3 and the Incentive Compensation Plan; provided that,
the goals under the Incentive Compensation Plan for each period
used in the calculation of the Executive's Incentive Compensation
shall be based on (1) the portion of the year through the end of
the calendar quarter in which the Executive's death occurs, and (2)
unaudited financial information prepared in accordance with
generally accepted accounting principles, applied consistently with
prior periods, as approved and reviewed by the Board, and (iv) pay
the Final Signing Loan Bonus pursuant to Section 3.2(c) hereof.
The Company shall have no further liability hereunder (other than
for (x) reimbursement for reasonable business expenses incurred
prior to the date of the Executive's death, subject, however to the
provisions of Section 4.1, and (y) payment of compensation for
unused vacation days that have accumulated during the calendar year
in which such termination occurs).
5.4 Termination Without Cause. At any time the Company shall
have the right to terminate the Executive's employment hereunder by
written notice to the Executive. Upon any termination pursuant to
this Section 5.4 (that is not a termination under any of Sections
5.1, 5.2, 5.3, 5.5 or 5.6(a)), the Company shall (i) pay to the
Executive any unpaid Base Salary through the effective date of
termination specified in such notice, (ii) pay to the Executive the
Incentive Compensation, if any, and Signing Loan Bonus, not yet
paid to the Executive for any year prior to such termination, at
such time as the Incentive Compensation and Signing Loan Bonus
otherwise would have been payable to the Executive, (iii) continue
to pay the Executive's Base Salary through the Expiration Date, in
the manner and at such time as the Base Salary otherwise would have
been payable to the Executive, (iv) continue to pay the Executive
Incentive Compensation and continue to provide the Executive with
the benefits he was receiving under Sections 4.2, 4.4 and 4.6
hereof, through the Expiration Date, in the manner and at such
times as the compensation or benefits otherwise would have been
payable or provided to the Executive, (v) pay to the Executive as
a single lump sum payment, within 30 days of the termination of his
employment hereunder, a lump sum benefit equal to the value of the
portion of his benefits under any savings, pension, profit sharing
or deferred compensation plans that are forfeited under such plans
by reason of the termination of his employment hereunder, and (vi)
pay the Final Signing Loan Bonus pursuant to Section 3.2(c) hereof.
In the event that the termination of Executive's employment
hereunder shall occur on or before December 31, 1996, then the
Incentive Compensation and benefits payable under clause (iv) of
this Section 5.4 shall be equal to the amounts that would have been
paid or provided to the Executive for the year ended December 31,
1996. In the event that termination of Executive's employment
hereunder shall occur after December 31, 1996, then the Incentive
Compensation, Signing Loan Bonuses and other benefits payable under
clause (iv) of this Section 5.4 shall be equal to the amounts of
such compensation and benefits payable or provided to the Executive
for the calendar year immediately preceding the termination of
Executive's employment hereunder. In the event that the Company is
unable to provide the Executive with a continuation of any savings,
pension, profit-sharing or deferred compensation plans required
hereunder by reason of the termination of the Executive's
employment pursuant to this Section 5.4, then the Company shall pay
the Executive cash equal to the value of the benefit that otherwise
would have accrued for the Executive's benefit under the plan, for
the period during which such benefits could not be provided under
the plans, said cash payments to be made within 45 days after the
end of the year for which such contributions would have been made
or would have accrued. The Company's good faith determination of
the amount that would have been contributed or the value of any
benefits that would have accrued under any plan shall be binding
and conclusive on the Executive. Further, the Executive shall
continue to vest in the Executive's Stock Options through the
Expiration Date in the same manner and to the same extent as if his
employment hereunder terminated on the Expiration Date. The
Company shall have no further liability hereunder (other than for
(x) reimbursement for reasonable business expenses incurred prior
to the date of termination, subject, however, to the provisions of
Section 4.1, (y) payment of compensation for unused vacation days
that have accumulated during the calendar year in which such
termination occurs, and (z) any amounts payable to the Executive
pursuant to Section 5.6 hereof by reason of Section 5.6(c)).
5.5 Resignation by Executive. The Executive shall at all
times have the right, upon ninety (90) days written notice to the
Company, to terminate the Executive's employment hereunder. Upon
any termination pursuant to this Section 5.5, the Company shall (i)
pay to the Executive any unpaid Base Salary through the effective
date of termination specified in such notice and (ii) pay to the
Executive the Incentive Compensation, if any, and Signing Loan
Bonus not yet paid to the Executive for any year prior to such
termination, at such time as the Incentive Compensation and Signing
Loan Bonus otherwise would have been payable to the Executive.
The Company shall have no further liability hereunder (other than
for (x) reimbursement for reasonable business expenses incurred
prior to the date of termination, subject, however, to the
provisions of Section 4.1, (y) payment of compensation for unused
vacation days that have accumulated during the calendar year in
which such termination occurs, and (z) any amounts payable to the
Executive pursuant to Section 5.6 hereof by reason of Section
5.6(c)).
5.6 Change in Control of the Company.
(a) In the event that (x) a Change in Control (as defined
in paragraph (b) of this Section 5.6) in the Company shall occur
during the Initial Term, and (y) within one year after the date of
the Change in Control, the Executive is (i) assigned any position,
duties or responsibilities that are significantly diminished or
changed when compared with the position, duties or responsibilities
of the Executive prior to such Change in Control, (ii) forced to
relocate to another location more than 25 miles from his location
prior to the Change in Control, or (iii) no longer provided
coverage under benefit programs in existence prior to the Change in
Control (unless a comparable substitute is offered); then the
Executive, by written notice to the Company at any time within the
thirty (30) day period following the occurrence of an event
described in clauses (i) through (iii) of this Section 5.6(a),
shall have the right to terminate his employment hereunder. Upon
the voluntary termination by the Executive pursuant to this Section
5.6(a), or the involuntary termination of the Executive by the
Company within one year after the date of a Change in Control, the
Company shall (v) pay to the Executive any unpaid Base Salary
through the effective date of termination, (w) pay to the Executive
the Incentive Compensation, if any, not yet paid to the Executive
for any year prior to such termination, at such time as the
Incentive Compensation otherwise would have been payable to the
Executive, (x) pay to the Executive (within 45 days after the end
of the calendar quarter in which such termination occurs) a prorata
portion (based upon the period ending on the date of termination of
the Executive's employment hereunder) of the Incentive
Compensation, if any, for the year in which such termination
occurs, as calculated pursuant to the terms of Section 3.3 hereof
and the Incentive Compensation Plan; provided that the Company's
goals under the Incentive Compensation Plan for each period used in
the calculation of the Executive's Incentive Compensation, shall be
based on (1) the portion of the year through the end of the
calendar quarter in which such termination occurs, and (2)
unaudited financial information prepared in accordance with
generally accepted accounting principles, applied consistently with
prior periods, as approved and reviewed by the Board, (y) pay the
Final Signing Loan Bonus pursuant to Section 3.2(c) hereof, and (z)
pay to the Executive as a single lump sum payment, within 45 days
of the termination of his employment hereunder, a lump sum payment
equal to the sum of (a) the product of (i) an amount which shall
not be less than one, equal to the number of days between the date
of the Executive's termination of employment with the Company and
the Expiration Date, divided by 365 days, and (ii) his annual Base
Salary, Incentive Compensation, and the value of the annual fringe
benefits required to be provided to the Executive under Sections
4.2 and 4.4 hereof, for the year immediately preceding the year in
which his employment terminates, plus (b) the value of the portion
of his benefits under any savings, pension, profit sharing or
deferred compensation plans that are forfeited under those plans by
reason of the termination of his employment hereunder. Further,
upon the Change in Control, the Executive's Stock Options shall
immediately vest. The Company shall have no further liability
hereunder (other than for (1) reimbursement for reasonable business
expenses incurred prior to the date of termination, subject,
however, to the provisions of Section 4.1, and (2) payment of
compensation for unused vacation days that have accumulated during
the calendar year in which such termination occurs).
(b) For purposes of this Agreement, a "Change in Control"
shall be deemed to have occurred if:
(i) an event which would be required to be reported
in response to Item (a) of the current report on Form 8-K, as in
effect on the date hereof, pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 (the "Exchange Act") occurs and the
transaction required to be reported is consummated;
(ii) an event occurs which results in a change in
control of the Company or Capital Bancorp within the meaning of the
Federal Change in Bank Control Act and/or applicable sections of
the Florida Banking Code and/or the rules and regulations
promulgated by the Board of Governors of the Federal Reserve System
or the Florida Department of Banking as in effect on the date
hereof;
(iii) individuals who constitute the Board of
Directors of each of the Company or Capital Bancorp on the date
hereof (the "Incumbent Board") cease for any reason to constitute
at least a majority thereof, provided that any person becoming a
director subsequent to the date hereof whose election was approved
by a vote of at least three-quarters of the directors comprising
the Incumbent Board, or whose nomination for election by the
Company's stockholders was approved by a majority of the Incumbent
Board, shall be, for purposes of this clause (iii), considered as
though he or she were a member of the Incumbent Board;
(iv) Capital Bancorp ceases to own at least 80% of
the voting stock of the Company;
(v) there occurs any transaction (which shall
include a series of transactions occurring within 60 days or
occurring pursuant to a plan) that has the result that shareholders
of Capital Bancorp immediately before such transaction cease to own
at least 51% of the voting stock of Capital Bancorp or of any
entity that results from the participation of Capital Bancorp in a
reorganization, consolidation, merger, liquidation or other form of
corporate transaction;
(vi) (any person or group of persons (other than
those persons who own or control as a group not less than 40% of
the outstanding stock of the Company on the date of this Agreement
(the "Present Control Group")) acting in concert acquire in excess
of both (a) 25% of the outstanding voting stock of Capital Bancorp,
and (b) the number of shares of Capital Bancorp with respect to
which the Present Control Group, in the aggregate, have voting
rights to after such acquisition;
(vii) Capital Bancorp or the Company liquidate or
dissolve; or
(viii) the Company or Capital Bancorp sells, leases,
exchanges or otherwise disposes of all or substantially all of its
property or assets.
(c) In the event that:
(i) the Company enters into a letter of intent or a
definitive agreement for the Company to enter into a transaction
that would constitute a Change in Control (the letter of intent or
definitive agreement being hereinafter referred to as a "Change in
Control Agreement"), and discussions relating to the transaction
reflected in the Change in Control Agreement had commenced while
the Executive was employed by the Company;
(ii) the Change in Control Agreement is entered into
(a) while the Executive is employed by the Company prior to the
Expiration Date, (b) within 90 days after the Company's termination
of the Executive's employment without Cause, or (c) within 90 days
after the Expiration Date if the Executive was employed by the
Company on the Expiration Date;
(iii) the transaction contemplated by the Change in
Control Agreement is effectuated and results in a Change in
Control; and
(iv) within the period that begins on the date on
which the Change in Control Agreement is executed by the Company
and ends one year after the date of the Change in Control, either
(a) the Executive voluntarily terminates his employment hereunder
after one of the events described in clause (i), (ii) or (iii) of
paragraph (a) of this Section 5.6 occurs, or (b) the Executive's
employment with the Company is involuntarily terminated by the
Company;
then the Company shall pay to the Executive the amounts provided in
paragraph 5.6(a), reduced by any amounts paid by the Company to the
Executive under Section 5.4 or 5.5 hereof, and the Executive's
rights to receive any additional amounts under Section 5.4 or 5.5
shall cease.
5.7 Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any
payment, distribution or other action by the Company to or for the
benefit of the Executive (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise,
but determined without regard to any additional payments required
under this Section 5.7) (a "Payment") would be subject to an excise
tax imposed by Section 4999 of the Internal Revenue Code of 1986,
as amended (the "Code"), or any interest or penalties are incurred
by the Executive with respect to any such excise tax (such excise
tax, together with any such interest and penalties, are hereinafter
collectively referred to as the "Excise Tax"), the Company or
Bancorp shall make a payment to the Executive (a "Gross-Up
Payment") in an amount equal to the Excise Tax imposed upon the
Payments.
(b) Subject to the provisions of Section 5.7(c), all
determinations required to be made under this Section 5.7,
including whether and when a Gross-Up Payment is required and the
amount of such Gross-Up Payment and the assumptions to be utilized
in arriving at such determination, shall be made by Deloitte Touche
LLP (the "Accounting Firm") which shall provide detailed supporting
calculations both to the Company and the Executive within 15
business days of the receipt of notice from the Executive that
there has been a Payment, or such earlier time as is requested by
the Company. In the event that the Accounting Firm is serving as
accountant or auditor for the individual, entity or group effecting
the Change of Control, the Executive shall appoint another
nationally recognized accounting firm to make the determinations
required hereunder (which accounting firm shall then be referred to
as the Accounting Firm hereunder). All fees and expenses of the
Accounting Firm shall be borne solely by the Company. Any Gross-Up
Payment, as determined pursuant to this Section 5.7, shall be paid
by the Company to the Executive within five days of the receipt of
the Accounting Firm's determination. If the Accounting Firm
determines that no Excise Tax is payable by the Executive, it shall
furnish the Executive with a written opinion that failure to report
the Excise Tax on the Executive's applicable federal income tax
return would not result in the imposition of a negligence or
similar penalty. Any determination by the Accounting Firm shall be
binding upon the Company and the Executive. As a result of the
uncertainty in the application of Section 4999 of the Code at the
time of the initial determination by the Accounting Firm hereunder,
it is possible that Gross-Up Payments which will not have been made
by the Company should have been made ("Underpayment"), consistent
with the calculations required to be made hereunder. In the event
that the Company exhausts its remedies pursuant to Section 5.7(c)
and the Executive thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall determine the amount of the
Underpayment that has occurred and any such Underpayment shall be
promptly paid by the Company to or for the benefit of the
Executive.
(c) The Executive shall notify the Company in writing of
any claim by the Internal Revenue Service that, if successful,
would require the payment by the Company of the Gross-Up Payment.
Such notification shall be given as soon as practicable but no
later than ten business days after the Executive is informed in
writing of such claim and shall apprise the Company of the nature
of such claim and the date on which such claim is requested to be
paid. The Executive shall not pay such claim prior to the
expiration of the 30-day period following the date on which it
gives such notice to the Company (or such shorter period ending on
the date that any payment of taxes with respect to such claim is
due). If the Company notifies the Executive in writing prior to
the expiration of such period that it desires to contest such
claim, the Executive shall:
(i) give the Company any information reasonably
requested by the Company relating to such claim,
(ii) take such action in connection with contesting
such claim as the Company shall reasonably request in writing from
time to time, including, without limitation, accepting legal
representation with respect to such claim by an attorney reasonably
selected by the Company,
(iii) cooperate with the Company in good faith in
order effectively to contest such claim, and
(iv) permit the Company to participate in any
proceedings relating to such claim;
provided, however, that the Company shall bear and pay directly all
costs and expenses (including additional interest and penalties)
incurred in connection with such contest and shall indemnify and
hold the Executive harmless, on an after-tax basis, for any Excise
Tax or income tax (including interest and penalties with respect
thereto) imposed as a result of such representation and payment of
costs and expenses. Without limitation on the foregoing provisions
of this Section 5.7(c), the Company shall control all proceedings
taken in connection with such contest and, at its sole option, may
pursue or forego any and all administrative appeals, proceedings,
hearings and conferences with the taxing authority in respect of
such claim and may, at its sole option, either direct the Executive
to pay the tax claimed and sue for a refund or contest the claim in
any permissible manner, and the Executive agrees to prosecute such
contest to a determination before any administrative tribunal, in
a court of initial jurisdiction and in one or more appellate
courts, as the Company shall determine; provided, however, that if
the Company directs the Executive to pay such claim and sue for a
refund, the Company shall advance the amount of such payment to the
Executive, on an interest-free basis and shall indemnify and hold
the Executive harmless, on an after-tax basis, from any Excise Tax
or income tax (including interest or penalties with respect
thereto) imposed with respect to such advance or with respect to
any imputed income with respect to such advance; and further
provided that any extension of the statute of limitations relating
to payment of taxes for the taxable year of the Executive with
respect to which such contested amount is claimed to be due is
limited solely to such contested amount. Furthermore, the
Company's control of the contest shall be limited to issues with
respect to which a Gross-Up Payment would be payable hereunder and
the Executive shall be entitled to settle or contest, as the case
may be, any other issue raised by the Internal Revenue Service or
any other taxing authority.
(d) If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 5.7(c), the Executive
becomes entitled to receive any refund with respect to such claim,
the Executive shall (subject to the Company's complying with the
requirements of Section 5.7(c)) promptly pay to the Company the
amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by
the Executive of an amount advanced by the Company pursuant to
Section 5.7(c), a determination is made that the Executive shall
not be entitled to any refund with respect to such claim and the
Company does not notify the Executive in writing of its intent to
contest such denial of refund prior to the expiration of 30 days
after such determination, then such advance shall be forgiven and
shall not be required to be repaid and the amount of such advance
shall offset, to the extent thereof, the amount of Gross-Up Payment
required to be paid.
5.8 Survival. The provisions of this Article 5 shall survive
the termination of this Agreement, as applicable.
6. Restrictive Covenants.
6.1 Non-competition. For the period through the Expiration
Date and at all times while the Executive is employed by the
Company; the Executive shall not, directly or indirectly, engage in
or have any interest in any sole proprietorship, partnership,
corporation or business or any other person or entity (whether as
an employee, officer, director, partner, agent, security holder,
creditor, consultant or otherwise) that directly or indirectly (or
through any affiliated entity) engages in competition with the
Company in any domestic or foreign market (for this purpose, any
financial institution with offices in any city or county in which
the Company has an office will be deemed to be in competition with
the Company); provided that such provision shall not apply to the
Executive's ownership of Common Stock of Bancorp or the acquisition
by the Executive, solely as an investment, of securities of any
issuer that is registered under Section 12(b) or 12(g) of the
Securities Exchange Act of 1934, as amended, and that are listed or
admitted for trading on any United States national securities
exchange or that are quoted on the National Association of
Securities Dealers Automated Quotations System, or any similar
system or automated dissemination of quotations of securities
prices in common use, so long as the Executive is not a member of
any control group (within the meaning of the rules and regulations
of the Securities and Exchange Commission) of any such issuer.
6.2 Nondisclosure. The Executive shall not divulge, communi-
cate, use to the detriment of the Company or for the benefit of any
other person or persons, or misuse in any way, any confidential
information pertaining to the business of the Company. Any
confidential information or data now or hereafter acquired by the
Executive with respect to the business of the Company (which shall
include, but not be limited to, information concerning the
Company's financial condition, prospects, customers, sources of
leads and methods of doing business) shall be deemed a valuable,
special and unique asset of the Company that is received by the
Executive in confidence and as a fiduciary, and Executive shall
remain a fiduciary to the Company with respect to all of such
information.
6.3 Nonsolicitation of Employees and Clients. For the period
ending on the earlier of (i) termination of Executive's employment
with the Company pursuant to Section 5.6 hereof following a Change
in Control, and (ii) two years following the Expiration Date
(except that, the period shall be six months after the Expiration
Date if (1) the Executive is employed by the Company on the
Expiration Date, and (2) the Company has not offered, at or prior
to the Expiration Date, to employ the Executive after the
Expiration Date on terms that provide for payment of (x) a base
salary equal to or greater than the Base Salary (adjusted for cost-
of-living increases) being paid to the Executive on the Expiration
Date, and (y) incentive compensation on terms equal to or greater
than the Incentive Compensation terms in effect as of the
Expiration Date); the Executive shall not, directly or indirectly,
for himself or for any other person, firm, corporation,
partnership, association or other entity (a) employ or attempt to
employ or enter into any contractual arrangement with any employee
or former employee of the Company, unless such employee or former
employee has not been employed by the Company for a period in
excess of six months, and/or (b) call on or solicit any of the
actual or targeted prospective clients of the Company on behalf of
any person or entity in connection with any business competitive
with the business of the Company, nor shall the Executive make
known the names and addresses of such clients or any information
relating in any manner to the Company's trade or business
relationships with such customers, other than in connection with
the performance of Executive's duties under this Agreement.
6.4 Books and Records. All books, records, and accounts
relating in any manner to the customers or clients of the Company,
whether prepared by the Executive or otherwise coming into the
Executive's possession, shall be the exclusive property of the
Company and shall be returned immediately to the Company on
termination of the Executive's employment hereunder or on the
Company's request at any time.
6.5 Definition of Company. Solely for purposes of this
Section 6, the term "Company" also shall include any future
subsidiaries of the Company that are operating during the time
periods described herein and any other entities that directly or
indirectly, through one or more intermediaries, control, are
controlled by or are under common control with the Company during
the periods described herein.
6.6 Acknowledgment by Executive. The Executive acknowledges
and confirms that the length of the term of the provisions of this
Section 6 and the geographical restrictions contained in Section
6.1 are fair and reasonable and not the result of overreaching,
duress or coercion of any kind. The Executive further acknowledges
and confirms that his full, uninhibited and faithful observance of
each of the covenants contained in this Section 6 will not cause
him any undue hardship, financial or otherwise, and that
enforcement of each of the covenants contained herein will not
impair his ability to obtain employment commensurate with his
abilities and on terms fully acceptable to him or otherwise to
obtain income required for the comfortable support of him and his
family and the satisfaction of the needs of his creditors. The
Executive acknowledges and confirms that his special knowledge of
the business of the Company is such as would cause the Company
serious injury or loss if he were to use such ability and knowledge
to the benefit of a competitor or were to compete with the Company
in violation of the terms of this Section 6.
6.7 Survival. The provisions of this Section 6 shall survive
the termination of this Agreement, as applicable.
7. Injunction. It is recognized and hereby acknowledged by the
parties hereto that a breach by the Executive of any of the
covenants contained in Section 6 of this Agreement will cause
irreparable harm and damage to the Company, the monetary amount of
which may be virtually impossible to ascertain. As a result, the
Executive recognizes and hereby acknowledges that the Company shall
be entitled to an injunction from any court of competent juris-
diction enjoining and restraining any violation of any or all of
the covenants contained in Section 6 of this Agreement by the
Executive or any of his affiliates, associates, partners or agents,
either directly or indirectly, and that such right to injunction
shall be cumulative and in addition to whatever other remedies the
Company may possess.
8. Assignment. Neither party shall have the right to assign or
delegate his rights or obligations hereunder, or any portion
thereof, to any other person.
9. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Florida.
10. Entire Agreement. This Agreement constitutes the entire
agreement between the parties hereto with respect to the subject
matter hereof and, upon its effectiveness, shall supersede all
prior agreements, understandings and arrangements, both oral and
written, between the Executive and the Company (or any of its
affiliates) with respect to such subject matter. This Agreement
may not be modified in any way unless by a written instrument
signed by both the Company and the Executive.
11. Notices: Any notice required or permitted to be given
hereunder shall be deemed given when delivered by hand or when
deposited in the United States mail, by registered or certified
mail, return receipt requested, postage prepaid, (i) if to the
Company, addressed to Capital Bank, 1221 Brickell Avenue, Miami,
Florida 33133, Attention: President, and (ii) if to the Executive,
to his address as reflected on the payroll records of the Company,
or to such other address as either party hereto may from time to
time give notice of to the other.
12. Benefits; Binding Effect. This Agreement shall be for the
benefit of and binding upon the parties hereto and their respective
heirs, personal representatives, legal representatives, successors
and, where applicable, assigns, including, without limitation, any
successor to the Company, whether by merger, consolidation, sale of
stock, sale of assets or otherwise.
13. Severability. The invalidity of any one or more of the words,
phrases, sentences, clauses or sections contained in this Agreement
shall not affect the enforceability of the remaining portions of
this Agreement or any part thereof, all of which are inserted
conditionally on their being valid in law, and, in the event that
any one or more of the words, phrases, sentences, clauses or
sections contained in this Agreement shall be declared invalid,
this Agreement shall be construed as if such invalid word or words,
phrase or phrases, sentence or sentences, clause or clauses, or
section or sections had not been inserted. If such invalidity is
caused by length of time or size of area, or both, the otherwise
invalid provision will be considered to be reduced to a period or
area which would cure such invalidity.
14. Waivers. The waiver by either party hereto of a breach or
violation of any term or provision of this Agreement shall not
operate nor be construed as a waiver of any subsequent breach or
violation.
15. Damages. Nothing contained herein shall be construed to
prevent the Company or the Executive from seeking and recovering
from the other damages sustained by either or both of them as a
result of its or his breach of any term or provision of this
Agreement. In the event that either party hereto brings suit for
the collection of any damages resulting from, or the injunction of
any action constituting, a breach of any of the terms or provisions
of this Agreement, then the party found to be at fault shall pay
all reasonable court costs and attorneys' fees of the other.
16. Section Headings. The section headings contained in this
Agreement are for reference purposes only and shall not affect in
any way the meaning or interpretation of this Agreement.
17. No Third Party Beneficiary. Nothing expressed or implied in
this Agreement is intended, or shall be construed, to confer upon
or give any person other than the Company, the parties hereto and
their respective heirs, personal representatives, legal
representatives, successors and assigns, any rights or remedies
under or by reason of this Agreement.
18. Indemnification.
(a) Subject to limitations imposed by law, the Company shall
indemnify and hold harmless the Executive to the fullest extent
permitted by law from and against any and all claims, damages,
expenses (including attorneys' fees), judgments, penalties, fines,
settlements, and all other liabilities incurred or paid by him in
connection with the investigation, defense, prosecution, settlement
or appeal of any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or
investigative and to which the Executive was or is a party or is
threatened to be made a party by reason of the fact that the
Executive is or was an officer, employee or agent of the Company,
or by reason of anything done or not done by the Executive in any
such capacity or capacities, provided that the Executive acted in
good faith, in a manner that was not grossly negligent or
constituted wilful misconduct and in a manner he reasonably
believed to be in or not opposed to the best interests of the
Company, and, with respect to any criminal action or proceeding,
had no reasonable cause to believe his conduct was unlawful. The
Company also shall pay any and all expenses (including attorney's
fees) incurred by the Executive as a result of the Executive being
called as a witness in connection with any matter involving the
Company and/or any of its officers or directors. The Company shall
advance.
(b) The Company shall pay any expenses (including attorneys'
fees), judgments, penalties, fines, settlements, and other
liabilities incurred by the Executive in investigating, defending,
settling or appealing any action, suit or proceeding described in
this Section 18 in advance of the final disposition of such action,
suit or proceeding. The Company shall promptly pay the amount of
such expenses to the Executive, but in no event later than 10 days
following the Executive's delivery to the Company of a written
request for an advance pursuant to this Section 18, together with
a reasonable accounting of such expenses.
(c) The Executive hereby undertakes and agrees to repay to the
Company any advances made pursuant to this Section 18 if and to the
extent that it shall ultimately be found that the Executive is not
entitled to be indemnified by the Company for such amounts.
(d) The Company shall make the advances contemplated by this
Section 18 regardless of the Executive's financial ability to make
repayment, and regardless whether indemnification of the Indemnitee
by the Company will ultimately be required. Any advances and
undertakings to repay pursuant to this Section 18 shall be
unsecured and interest-free.
(e) The provisions of this Section 18 shall survive the
termination of this Agreement.
19. Regulatory Limitations. Notwithstanding anything else
contained herein, no payment shall be made hereunder that
constitutes a golden parachute payment or prohibited
indemnification payment in violation of 12 CFR Part 359.
20. Waiver of Jury Trial. The undersigned expressly (i) waive any
right to a trial by jury of any claim, demand, action or cause of
action arising out of this Agreement or in any way related or
incidental to the performance of the parties' obligations
hereunder, and (ii) agree that the Company or the Executive may
file an original counterpart or copy of this Section 20 with any
court as written evidence of the consent to the waiver of the right
to trial by jury.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as
of the date first above written.
COMPANY:
CAPITAL BANK
By: /s/ DANIEL M. HOLTZ
----------------------------
Daniel M. Holtz
Chief Executive Officer
EXECUTIVE:
/s/ TIMOTHY E. KISH
-----------------------------
TIMOTHY E. KISH<PAGE>
Exhibit 10.5
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is made and entered into on
this 1st day of June, 1996 as of January 1, 1996 by and between
CAPITAL BANK, a Florida corporation (the "Company"), and JAVIER J.
HOLTZ (hereinafter called the "Executive").
R E C I T A L S
A. The Executive is currently employed as the Chief Credit Officer
of the Company.
B. The Executive possesses intimate knowledge of the business and
affairs of the Company, its policies, methods and personnel.
C. The Board of Directors of the Company (the "Board") recognizes
that the Executive has contributed to the growth and success of the
Company, and desires to assure the Company of the Executive's
continued employment and to compensate him therefor.
D. The Board has determined that this Agreement will reinforce and
encourage the Executive's continued attention and dedication to the
Company.
E. The Executive is willing to make his services available to the
Company and on the terms and conditions hereinafter set forth.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and mutual
covenants set forth herein, the parties agree as follows:
1. Employment.
1.1 Employment and Term. The Company hereby agrees to employ
the Executive and the Executive hereby agrees to serve the Company
on the terms and conditions set forth herein.
1.2 Duties of Executive. During the term of this Agreement,
the Executive shall serve as the Chief Credit Officer of the
Company, shall diligently perform all services as may be assigned
to him by the Board or the Chief Executive Officer of the Company
(provided that, such services shall not materially differ from the
services currently provided by the Executive), and shall exercise
such power and authority as may from time to time be delegated to
him by the Board or the Chief Executive Officer of the Company.
The Executive shall devote his full time and attention to the
business and affairs of the Company, render such services to the
best of his ability, and use his best efforts to promote the
interests of the Company; provided, however that nothing in this
Agreement shall preclude the Executive from providing services to,
and receiving compensation from, Capital Bancorp., the parent
company of the Company, or any direct or indirect subsidiary of
Capital Bancorp.
2. Term.
2.1 Initial Term. The initial term of this Agreement, and the
employment of the Executive hereunder, shall commence on January 1,
1996 (the "Commencement Date") and shall expire on May 31, 1998
(the "Expiration Date"), unless sooner terminated in accordance
with the terms and conditions hereof (the "Initial Term").
2.2 Renewal Terms. The Initial Term of this Agreement, and
the employment of the Executive hereunder, may be renewed and/or
extended for such period or periods as may be mutually agreed to by
the Company and the Executive in a written supplement to this
Agreement signed by the Executive and the Company ("Written
Supplement"). If this Agreement is not so renewed and/or extended
prior to the expiration of the Initial Term, this Agreement, and
the employment of the Executive hereunder, shall automatically
terminate on the Expiration Date.
3. Compensation.
3.1 Base Salary. The Executive shall receive a base salary at
the annual rate of $158,000 (the "Base Salary") during the term of
this Agreement, with such Base Salary payable in installments
consistent with the Company's normal payroll schedule, subject to
applicable withholding and other taxes. The Base Salary also shall
be reviewed, at least annually, for merit increases and may, by
action and in the discretion of the Board, be increased at any time
or from time to time. If the term of this Agreement shall be
renewed and/or extended as provided in Section 2.2 hereof, then
during such renewal term of his employment hereunder, the Executive
shall be paid a base salary as set forth in the Written Supplement.
3.2 Signing Loan and Bonuses.
(a) Upon execution of this Agreement, Capital Bancorp
("Bancorp") shall loan $50,000 to the Executive (the "Signing
Loan"). The Signing Loan shall bear interest at the "mid-term
applicable federal rate" as such term is defined in Section 1274(d)
of the Internal Revenue Code, with principal and interest being
payable in five (5) equal annual installments. The Signing Loan
shall be evidenced by and payable in accordance with a promissory
note in the form attached hereto as Exhibit "A" and made a part
hereof.
(b) On June 1, 1997, and on June 1 of each of the
succeeding four (4) years during the term of this Agreement, the
Company shall pay an annual bonus (the "Signing Loan Bonus") to the
Executive equal to the quotient obtained by dividing (i) the
payment due on that date under the Signing Loan, by (ii) 100% minus
the highest marginal federal income tax rate applicable to
compensation paid by the Company to the Executive for the year
(excluding any other income or expenses of the Executive). The
portion of the Signing Loan Bonuses that is equal to the payment
due under the Signing Loan shall be paid directly to Bancorp on
behalf of the Executive at such time as the payment is due under
the Signing Loan. The remaining portion of the Signing Loan Bonus,
less applicable withholding taxes on the entire Signing Loan Bonus,
shall be paid to the Executive.
(c) In the event that the Executive's employment with the
Company terminates by reason of the Executive's death or disability
as described under Section 5.2 hereof, is terminated by the Company
without Cause under Section 5.4 hereof, is terminated under Section
5.6 hereof after a Change in Control, or terminates at any time
after the Expiration Date if the Company has not offered the
Executive to renew the term of this Agreement for a period of three
(3) years beyond the Expiration Date on terms substantially the
same as those in effect during the Initial Term, then the Company
shall pay to the Executive, within 45 days of such termination, a
bonus (the "Final Signing Loan Bonus") equal to the quotient
obtained by dividing (i) the amount necessary to repay in full the
outstanding principal and accrued interest on the Signing Loan, by
(ii) 100% minus the highest marginal federal income tax rate
applicable to compensation paid by the Company to the Executive for
the immediately preceding year (excluding any other income or
expenses of the Executive). The portion of the Final Signing Loan
Bonus that is equal to the outstanding principal and accrued
interest on the Signing Loan shall be paid directly to Bancorp, on
behalf of the Executive. The remaining portion of the Final
Signing Loan Bonus, less applicable withholding taxes, shall be
paid to the Executive (or the Executive's estate in the case of the
Executive's death).
3.3 Incentive Compensation.The Executive shall be entitled to
receive incentive compensation ("Incentive Compensation") during
each year of the Initial Term of this Agreement equal to the amount
of incentive compensation for such year determined pursuant to the
Incentive Bonus Plan attached hereto as Exhibit "B" and made a part
hereof, as amended from time to time (the "Incentive Compensation
Plan"). In the event that this Agreement terminates on the
Expiration Date by reason of the expiration of the term of this
Agreement, then the Company shall pay the Executive Incentive
Compensation for the period from January 1, 1998 through May 31,
1998, equal to five-twelfths of the Incentive Compensation, if any,
for calendar year 1998; provided, however, that the Company's goals
under the Incentive Compensation Plan for calendar year 1998 shall
be based on (1) the period from January 1, 1998 through May 31,
1998, and (2) unaudited financial information prepared in
accordance with generally accepted accounting principles, applied
consistently with prior periods, as approved and reviewed by the
Board.
3.4 Section 162(m) Limits. Notwithstanding any other
provision of this Agreement to the contrary, if and to the extent
that any remuneration payable by the Company to the Executive for
any year would exceed the maximum amount of remuneration that the
Company may deduct for that year under Section 162(m) ("Section
162(m)") of the Internal Revenue Code of 1986, as amended (the
"Code"), payment of the portion of the remuneration for that year
that would not be so deductible under Section 162(m) shall, in the
sole discretion of the Board, be deferred and become payable at
such time or times as the Board determines that it first would be
deductible by the Company under Section 162(m), with interest at
the "short-term applicable federal rate" as such term is defined in
Section 1274(d) of the Code. The limitation set forth under this
Section 3.4 shall not apply with respect to any amounts payable to
the Executive pursuant to Section 5.6 hereof.
4. Expense Reimbursement and Other Benefits.
4.1 Reimbursement of Expenses. During the term of Executive's
employment hereunder, the Company, upon the submission of proper
substantiation by the Executive, shall reimburse the Executive for
all reasonable expenses actually paid or incurred by the Executive
in the course of and pursuant to the business of the Company. The
Executive shall account to the Company in writing for all expenses
for which reimbursement is sought and shall supply to the Company
copies of all relevant invoices, receipts or other evidence
reasonably requested by the Company.
4.2 Compensation/Benefit Programs. During the term of this
Agreement, the Executive shall be entitled to participate in all
medical, dental, hospitalization, accidental death and
dismemberment, disability, travel and life insurance plans, and any
and all other plans as are presently and hereinafter offered by the
Company to its executives, including savings, pension, profit-
sharing and deferred compensation plans.
4.3 Working Facilities. The Company shall furnish the
Executive with an office, secretarial help and such other
facilities and services suitable to his position and adequate for
the performance of his duties hereunder.
4.4 Automobile. The Company shall continue to provide the
Executive an automobile comparable to the existing automobile
provided to Executive, together with reimbursement of the operating
expenses thereof.
4.5 Stock Options. During the term of this Agreement, the
Executive shall be eligible to be granted options to purchase
common stock (the "Common Stock") of Bancorp under (and therefore
subject to all terms and conditions of) the Capital Bancorp Stock
Option Plan as amended, and any successor plan thereto (the "Stock
Option Plan") and all rules of regulation of the Securities and
Exchange Commission applicable to stock option plans then in
effect. The number of options and terms and conditions of options
shall be determined by the Stock Option Committee of Bancorp in its
discretion and pursuant to the Stock Option Plan.
4.6 Other Benefits. The Executive shall be entitled to four
weeks of vacation every year. The Executive shall receive such
additional benefits, if any, as the Chief Executive Officer of the
Company shall from time to time determine.
5. Termination.
5.1 Termination for Cause. The Company shall at all times
have the right, upon written notice to the Executive, to terminate
the Executive's employment hereunder, for cause. For purposes of
this Agreement, the term "cause" shall mean (i) an action or
omission of the Executive which constitutes a willful and material
breach of this Agreement which is not cured within fifteen (15)
days after receipt by the Executive of written notice of same, (ii)
fraud, embezzlement, misappropriation of funds or breach of trust,
(iii) conviction of any crime which involves dishonesty or a breach
of trust, (iv) gross negligence in connection with the performance
of the Executive's duties hereunder, (v) material and willful or
knowing failure or refusal (other than as a result of a disability)
by the Executive to perform his duties hereunder, or (vi) the
formal written request addressed to the Board of Directors of the
Company by any regulatory agency that regulates Capital Bank or
Capital Bancorp that the Executive be removed from his duties
hereunder and setting forth the basis for such request. Any
termination for cause shall be made in writing to the Executive,
which notice shall set forth in detail all acts or omissions upon
which the Company is relying for such termination. The Executive
shall have the right to address the Company's Board regarding the
acts set forth in the notice of termination. Upon any termination
pursuant to this Section 5.1, the Executive shall be entitled to be
paid his Base Salary to the date of termination and the Company
shall have no further liability hereunder (other than for (x)
reimbursement for reasonable business expenses incurred prior to
the date of termination, subject, however, to the provisions of
Section 4.1, and (y) payment of compensation for unused vacation
days that have accumulated during the calendar year in which such
termination occurs).
5.2 Disability. The Company shall at all times have the
right, upon written notice to the Executive, to terminate the
Executive's employment hereunder, if the Executive shall, as the
result of mental or physical incapacity, illness or disability,
become unable to perform his obligations hereunder for a period of
90 consecutive days. Upon any termination pursuant to this Section
5.2, the Company shall (i) pay to the Executive any unpaid Base
Salary through the effective date of termination specified in such
notice, (ii) pay to the Executive the Incentive Compensation, if
any, and Signing Loan Bonus not yet paid to the Executive for any
year prior to such termination, at such times as the Incentive
Compensation and Signing Loan Bonus otherwise would have been
payable to the Executive, (iii) pay to the Executive a severance
payment equal to three (3) months of the Executive's Base Salary at
the time of such disability, (iv) pay to the Executive (within 45
days after the end of the calendar quarter in which such
termination occurs) a prorata portion (based upon the period ending
on the date of termination of the Executive's employment hereunder)
of the Incentive Compensation, if any, for the year in which such
termination occurs, as calculated pursuant to the terms of Section
3.3 hereof and the Incentive Compensation Plan; provided that the
goals under the Incentive Compensation Plan for each period used in
the calculation of the Executive's Incentive Compensation, shall be
based on (1) the portion of the year through the end of the
calendar quarter in which such termination occurs and (2) unaudited
financial information prepared in accordance with generally
accepted accounting principles, applied consistently with prior
periods, as approved and reviewed by the Board, and (v) pay the
Final Signing Loan Bonus pursuant to Section 3.2(c) hereof. The
Company shall have no further liability hereunder (other than for
(x) reimbursement for reasonable business expenses incurred prior
to the date of termination, subject, however to the provisions of
Section 4.1, and (y) payment of compensation for unused vacation
days that have accumulated during the calendar year in which such
termination occurs).
5.3 Death. In the event of the death of the Executive during
the term of his employment hereunder, the Company shall (i) pay to
the estate of the deceased Executive any unpaid Base Salary through
the Executive's date of death, (ii) pay to the estate of the
deceased Executive the Incentive Compensation, if any, and Signing
Loan Bonus not yet paid to the Executive for any year prior to the
date of death, at such time as the Incentive Compensation and
Signing Loan Bonus otherwise would have been payable to the
Executive, (iii) pay to the estate of the deceased Executive
(within 45 days after the end of the calendar quarter in which his
death occurs) a prorata portion (based upon the period ending on
the date of death) of the Incentive Compensation, if any, for the
year in which his death occurs, as calculated pursuant to the terms
of Section 3.3 and the Incentive Compensation Plan; provided that,
the goals under the Incentive Compensation Plan for each period
used in the calculation of the Executive's Incentive Compensation
shall be based on (1) the portion of the year through the end of
the calendar quarter in which the Executive's death occurs, and (2)
unaudited financial information prepared in accordance with
generally accepted accounting principles, applied consistently with
prior periods, as approved and reviewed by the Board, and (iv) pay
the Final Signing Loan Bonus pursuant to Section 3.2(c) hereof.
The Company shall have no further liability hereunder (other than
for (x) reimbursement for reasonable business expenses incurred
prior to the date of the Executive's death, subject, however to the
provisions of Section 4.1, and (y) payment of compensation for
unused vacation days that have accumulated during the calendar year
in which such termination occurs).
5.4 Termination Without Cause. At any time the Company shall
have the right to terminate the Executive's employment hereunder by
written notice to the Executive. Upon any termination pursuant to
this Section 5.4 (that is not a termination under any of Sections
5.1, 5.2, 5.3, 5.5 or 5.6(a)), the Company shall (i) pay to the
Executive any unpaid Base Salary through the effective date of
termination specified in such notice, (ii) pay to the Executive the
Incentive Compensation, if any, and Signing Loan Bonus, not yet
paid to the Executive for any year prior to such termination, at
such time as the Incentive Compensation and Signing Loan Bonus
otherwise would have been payable to the Executive, (iii) continue
to pay the Executive's Base Salary through the Expiration Date, in
the manner and at such time as the Base Salary otherwise would have
been payable to the Executive, (iv) continue to pay the Executive
Incentive Compensation and continue to provide the Executive with
the benefits he was receiving under Sections 4.2, 4.4 and 4.6
hereof, through the Expiration Date, in the manner and at such
times as the compensation or benefits otherwise would have been
payable or provided to the Executive, (v) pay to the Executive as
a single lump sum payment, within 30 days of the termination of his
employment hereunder, a lump sum benefit equal to the value of the
portion of his benefits under any savings, pension, profit sharing
or deferred compensation plans that are forfeited under such plans
by reason of the termination of his employment hereunder, and (vi)
pay the Final Signing Loan Bonus pursuant to Section 3.2(c) hereof.
In the event that the termination of Executive's employment
hereunder shall occur on or before December 31, 1996, then the
Incentive Compensation and benefits payable under clause (iv) of
this Section 5.4 shall be equal to the amounts that would have been
paid or provided to the Executive for the year ended December 31,
1996. In the event that termination of Executive's employment
hereunder shall occur after December 31, 1996, then the Incentive
Compensation, Signing Loan Bonuses and other benefits payable under
clause (iv) of this Section 5.4 shall be equal to the amounts of
such compensation and benefits payable or provided to the Executive
for the calendar year immediately preceding the termination of
Executive's employment hereunder. In the event that the Company is
unable to provide the Executive with a continuation of any savings,
pension, profit-sharing or deferred compensation plans required
hereunder by reason of the termination of the Executive's
employment pursuant to this Section 5.4, then the Company shall pay
the Executive cash equal to the value of the benefit that otherwise
would have accrued for the Executive's benefit under the plan, for
the period during which such benefits could not be provided under
the plans, said cash payments to be made within 45 days after the
end of the year for which such contributions would have been made
or would have accrued. The Company's good faith determination of
the amount that would have been contributed or the value of any
benefits that would have accrued under any plan shall be binding
and conclusive on the Executive. Further, the Executive shall
continue to vest in the Executive's Stock Options through the
Expiration Date in the same manner and to the same extent as if his
employment hereunder terminated on the Expiration Date. The
Company shall have no further liability hereunder (other than for
(x) reimbursement for reasonable business expenses incurred prior
to the date of termination, subject, however, to the provisions of
Section 4.1, (y) payment of compensation for unused vacation days
that have accumulated during the calendar year in which such
termination occurs, and (z) any amounts payable to the Executive
pursuant to Section 5.6 hereof by reason of Section 5.6(c)).
5.5 Resignation by Executive. The Executive shall at all
times have the right, upon ninety (90) days written notice to the
Company, to terminate the Executive's employment hereunder. Upon
any termination pursuant to this Section 5.5, the Company shall (i)
pay to the Executive any unpaid Base Salary through the effective
date of termination specified in such notice and (ii) pay to the
Executive the Incentive Compensation, if any, and Signing Loan
Bonus not yet paid to the Executive for any year prior to such
termination, at such time as the Incentive Compensation and Signing
Loan Bonus otherwise would have been payable to the Executive.
The Company shall have no further liability hereunder (other than
for (x) reimbursement for reasonable business expenses incurred
prior to the date of termination, subject, however, to the
provisions of Section 4.1, (y) payment of compensation for unused
vacation days that have accumulated during the calendar year in
which such termination occurs, and (z) any amounts payable to the
Executive pursuant to Section 5.6 hereof by reason of Section
5.6(c)).
5.6 Change in Control of the Company.
(a) In the event that (x) a Change in Control (as defined
in paragraph (b) of this Section 5.6) in the Company shall occur
during the Initial Term, and (y) within one year after the date of
the Change in Control, the Executive is (i) assigned any position,
duties or responsibilities that are significantly diminished or
changed when compared with the position, duties or responsibilities
of the Executive prior to such Change in Control, (ii) forced to
relocate to another location more than 25 miles from his location
prior to the Change in Control, or (iii) no longer provided
coverage under benefit programs in existence prior to the Change in
Control (unless a comparable substitute is offered); then the
Executive, by written notice to the Company at any time within the
thirty (30) day period following the occurrence of an event
described in clauses (i) through (iii) of this Section 5.6(a),
shall have the right to terminate his employment hereunder. Upon
the voluntary termination by the Executive pursuant to this Section
5.6(a), or the involuntary termination of the Executive by the
Company within one year after the date of a Change in Control, the
Company shall (v) pay to the Executive any unpaid Base Salary
through the effective date of termination, (w) pay to the Executive
the Incentive Compensation, if any, not yet paid to the Executive
for any year prior to such termination, at such time as the
Incentive Compensation otherwise would have been payable to the
Executive, (x) pay to the Executive (within 45 days after the end
of the calendar quarter in which such termination occurs) a prorata
portion (based upon the period ending on the date of termination of
the Executive's employment hereunder) of the Incentive
Compensation, if any, for the year in which such termination
occurs, as calculated pursuant to the terms of Section 3.3 hereof
and the Incentive Compensation Plan; provided that the Company's
goals under the Incentive Compensation Plan for each period used in
the calculation of the Executive's Incentive Compensation, shall be
based on (1) the portion of the year through the end of the
calendar quarter in which such termination occurs, and (2)
unaudited financial information prepared in accordance with
generally accepted accounting principles, applied consistently with
prior periods, as approved and reviewed by the Board, (y) pay the
Final Signing Loan Bonus pursuant to Section 3.2(c) hereof, and (z)
pay to the Executive as a single lump sum payment, within 45 days
of the termination of his employment hereunder, a lump sum payment
equal to the sum of (a) the product of (i) an amount which shall
not be less than one, equal to the number of days between the date
of the Executive's termination of employment with the Company and
the Expiration Date, divided by 365 days, and (ii) his annual Base
Salary, Incentive Compensation, and the value of the annual fringe
benefits required to be provided to the Executive under Sections
4.2 and 4.4 hereof, for the year immediately preceding the year in
which his employment terminates, plus (b) the value of the portion
of his benefits under any savings, pension, profit sharing or
deferred compensation plans that are forfeited under those plans by
reason of the termination of his employment hereunder. Further,
upon the Change in Control, the Executive's Stock Options shall
immediately vest. The Company shall have no further liability
hereunder (other than for (1) reimbursement for reasonable business
expenses incurred prior to the date of termination, subject,
however, to the provisions of Section 4.1, and (2) payment of
compensation for unused vacation days that have accumulated during
the calendar year in which such termination occurs).
(b) For purposes of this Agreement, a "Change in Control"
shall be deemed to have occurred if:
(i) an event which would be required to be reported
in response to Item (a) of the current report on Form 8-K, as in
effect on the date hereof, pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 (the "Exchange Act") occurs and the
transaction required to be reported is consummated;
(ii) an event occurs which results in a change in
control of the Company or Capital Bancorp within the meaning of the
Federal Change in Bank Control Act and/or applicable sections of
the Florida Banking Code and/or the rules and regulations
promulgated by the Board of Governors of the Federal Reserve System
or the Florida Department of Banking as in effect on the date
hereof;
(iii) individuals who constitute the Board of
Directors of each of the Company or Capital Bancorp on the date
hereof (the "Incumbent Board") cease for any reason to constitute
at least a majority thereof, provided that any person becoming a
director subsequent to the date hereof whose election was approved
by a vote of at least three-quarters of the directors comprising
the Incumbent Board, or whose nomination for election by the
Company's stockholders was approved by a majority of the Incumbent
Board, shall be, for purposes of this clause (iii), considered as
though he or she were a member of the Incumbent Board;
(iv) Capital Bancorp ceases to own at least 80% of
the voting stock of the Company;
(v) there occurs any transaction (which shall
include a series of transactions occurring within 60 days or
occurring pursuant to a plan) that has the result that shareholders
of Capital Bancorp immediately before such transaction cease to own
at least 51% of the voting stock of Capital Bancorp or of any
entity that results from the participation of Capital Bancorp in a
reorganization, consolidation, merger, liquidation or other form of
corporate transaction;
(vi) any person or group of persons (other than
those persons who own or control as a group not less than 40% of
the outstanding stock of the Company on the date of this Agreement
(the "Present Control Group")) acting in concert acquire in excess
of both (a) 25% of the outstanding voting stock of Capital Bancorp,
and (b) the number of shares of Capital Bancorp with respect to
which the Present Control Group, in the aggregate, have voting
rights to after such acquisition;
(vii) Capital Bancorp or the Company liquidate or
dissolve; or
(viii) the Company or Capital Bancorp sells, leases,
exchanges or otherwise disposes of all or substantially all of its
property or assets.
(c) In the event that:
(i) the Company enters into a letter of intent or a
definitive agreement for the Company to enter into a transaction
that would constitute a Change in Control (the letter of intent or
definitive agreement being hereinafter referred to as a "Change in
Control Agreement"), and discussions relating to the transaction
reflected in the Change in Control Agreement had commenced while
the Executive was employed by the Company;
(ii) the Change in Control Agreement is entered into
(a) while the Executive is employed by the Company prior to the
Expiration Date, (b) within 90 days after the Company's termination
of the Executive's employment without Cause, or (c) within 90 days
after the Expiration Date if the Executive was employed by the
Company on the Expiration Date;
(iii) the transaction contemplated by the Change in
Control Agreement is effectuated and results in a Change in
Control; and
(iv) within the period that begins on the date on
which the Change in Control Agreement is executed by the Company
and ends one year after the date of the Change in Control, either
(a) the Executive voluntarily terminates his employment hereunder
after one of the events described in clause (i), (ii) or (iii) of
paragraph (a) of this Section 5.6 occurs, or (b) the Executive's
employment with the Company is involuntarily terminated by the
Company;
then the Company shall pay to the Executive the amounts provided in
paragraph 5.6(a), reduced by any amounts paid by the Company to the
Executive under Section 5.4 or 5.5 hereof, and the Executive's
rights to receive any additional amounts under Section 5.4 or 5.5
shall cease.
5.7 Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any
payment, distribution or other action by the Company to or for the
benefit of the Executive (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise,
but determined without regard to any additional payments required
under this Section 5.7) (a "Payment") would be subject to an excise
tax imposed by Section 4999 of the Internal Revenue Code of 1986,
as amended (the "Code"), or any interest or penalties are incurred
by the Executive with respect to any such excise tax (such excise
tax, together with any such interest and penalties, are hereinafter
collectively referred to as the "Excise Tax"), the Company or
Bancorp shall make a payment to the Executive (a "Gross-Up
Payment") in an amount equal to the Excise Tax imposed upon the
Payments.
(b) Subject to the provisions of Section 5.7(c), all
determinations required to be made under this Section 5.7,
including whether and when a Gross-Up Payment is required and the
amount of such Gross-Up Payment and the assumptions to be utilized
in arriving at such determination, shall be made by Deloitte Touche
LLP (the "Accounting Firm") which shall provide detailed supporting
calculations both to the Company and the Executive within 15
business days of the receipt of notice from the Executive that
there has been a Payment, or such earlier time as is requested by
the Company. In the event that the Accounting Firm is serving as
accountant or auditor for the individual, entity or group effecting
the Change of Control, the Executive shall appoint another
nationally recognized accounting firm to make the determinations
required hereunder (which accounting firm shall then be referred to
as the Accounting Firm hereunder). All fees and expenses of the
Accounting Firm shall be borne solely by the Company. Any Gross-Up
Payment, as determined pursuant to this Section 5.7, shall be paid
by the Company to the Executive within five days of the receipt of
the Accounting Firm's determination. If the Accounting Firm
determines that no Excise Tax is payable by the Executive, it shall
furnish the Executive with a written opinion that failure to report
the Excise Tax on the Executive's applicable federal income tax
return would not result in the imposition of a negligence or
similar penalty. Any determination by the Accounting Firm shall be
binding upon the Company and the Executive. As a result of the
uncertainty in the application of Section 4999 of the Code at the
time of the initial determination by the Accounting Firm hereunder,
it is possible that Gross-Up Payments which will not have been made
by the Company should have been made ("Underpayment"), consistent
with the calculations required to be made hereunder. In the event
that the Company exhausts its remedies pursuant to Section 5.7(c)
and the Executive thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall determine the amount of the
Underpayment that has occurred and any such Underpayment shall be
promptly paid by the Company to or for the benefit of the
Executive.
(c) The Executive shall notify the Company in writing of
any claim by the Internal Revenue Service that, if successful,
would require the payment by the Company of the Gross-Up Payment.
Such notification shall be given as soon as practicable but no
later than ten business days after the Executive is informed in
writing of such claim and shall apprise the Company of the nature
of such claim and the date on which such claim is requested to be
paid. The Executive shall not pay such claim prior to the
expiration of the 30-day period following the date on which it
gives such notice to the Company (or such shorter period ending on
the date that any payment of taxes with respect to such claim is
due). If the Company notifies the Executive in writing prior to
the expiration of such period that it desires to contest such
claim, the Executive shall:
(i) give the Company any information reasonably
requested by the Company relating to such claim,
(ii) take such action in connection with contesting
such claim as the Company shall reasonably request in writing from
time to time, including, without limitation, accepting legal
representation with respect to such claim by an attorney reasonably
selected by the Company,
(iii) cooperate with the Company in good faith in
order effectively to contest such claim, and
(iv) permit the Company to participate in any
proceedings relating to such claim;
provided, however, that the Company shall bear and pay directly all
costs and expenses (including additional interest and penalties)
incurred in connection with such contest and shall indemnify and
hold the Executive harmless, on an after-tax basis, for any Excise
Tax or income tax (including interest and penalties with respect
thereto) imposed as a result of such representation and payment of
costs and expenses. Without limitation on the foregoing provisions
of this Section 5.7(c), the Company shall control all proceedings
taken in connection with such contest and, at its sole option, may
pursue or forego any and all administrative appeals, proceedings,
hearings and conferences with the taxing authority in respect of
such claim and may, at its sole option, either direct the Executive
to pay the tax claimed and sue for a refund or contest the claim in
any permissible manner, and the Executive agrees to prosecute such
contest to a determination before any administrative tribunal, in
a court of initial jurisdiction and in one or more appellate
courts, as the Company shall determine; provided, however, that if
the Company directs the Executive to pay such claim and sue for a
refund, the Company shall advance the amount of such payment to the
Executive, on an interest-free basis and shall indemnify and hold
the Executive harmless, on an after-tax basis, from any Excise Tax
or income tax (including interest or penalties with respect
thereto) imposed with respect to such advance or with respect to
any imputed income with respect to such advance; and further
provided that any extension of the statute of limitations relating
to payment of taxes for the taxable year of the Executive with
respect to which such contested amount is claimed to be due is
limited solely to such contested amount. Furthermore, the
Company's control of the contest shall be limited to issues with
respect to which a Gross-Up Payment would be payable hereunder and
the Executive shall be entitled to settle or contest, as the case
may be, any other issue raised by the Internal Revenue Service or
any other taxing authority.
(d) If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 5.7(c), the Executive
becomes entitled to receive any refund with respect to such claim,
the Executive shall (subject to the Company's complying with the
requirements of Section 5.7(c)) promptly pay to the Company the
amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by
the Executive of an amount advanced by the Company pursuant to
Section 5.7(c), a determination is made that the Executive shall
not be entitled to any refund with respect to such claim and the
Company does not notify the Executive in writing of its intent to
contest such denial of refund prior to the expiration of 30 days
after such determination, then such advance shall be forgiven and
shall not be required to be repaid and the amount of such advance
shall offset, to the extent thereof, the amount of Gross-Up Payment
required to be paid.
5.8 Survival. The provisions of this Article 5 shall survive
the termination of this Agreement, as applicable.
6. Restrictive Covenants.
6.1 Non-competition. For the period through the Expiration
Date and at all times while the Executive is employed by the
Company; the Executive shall not, directly or indirectly, engage in
or have any interest in any sole proprietorship, partnership,
corporation or business or any other person or entity (whether as
an employee, officer, director, partner, agent, security holder,
creditor, consultant or otherwise) that directly or indirectly (or
through any affiliated entity) engages in competition with the
Company in any domestic or foreign market (for this purpose, any
financial institution with offices in any city or county in which
the Company has an office will be deemed to be in competition with
the Company); provided that such provision shall not apply to the
Executive's ownership of Common Stock of Bancorp or the acquisition
by the Executive, solely as an investment, of securities of any
issuer that is registered under Section 12(b) or 12(g) of the
Securities Exchange Act of 1934, as amended, and that are listed or
admitted for trading on any United States national securities
exchange or that are quoted on the National Association of
Securities Dealers Automated Quotations System, or any similar
system or automated dissemination of quotations of securities
prices in common use, so long as the Executive is not a member of
any control group (within the meaning of the rules and regulations
of the Securities and Exchange Commission) of any such issuer.
6.2 Nondisclosure. The Executive shall not divulge,
communicate, use to the detriment of the Company or for the benefit
of any other person or persons, or misuse in any way, any
confidential information pertaining to the business of the Company.
Any confidential information or data now or hereafter acquired by
the Executive with respect to the business of the Company (which
shall include, but not be limited to, information concerning the
Company's financial condition, prospects, customers, sources of
leads and methods of doing business) shall be deemed a valuable,
special and unique asset of the Company that is received by the
Executive in confidence and as a fiduciary, and Executive shall
remain a fiduciary to the Company with respect to all of such
information.
6.3 Nonsolicitation of Employees and Clients. For the period
ending on the earlier of (i) termination of Executive's employment
with the Company pursuant to Section 5.6 hereof following a Change
in Control, and (ii) two years following the Expiration Date
(except that, the period shall be six months after the Expiration
Date if (1) the Executive is employed by the Company on the
Expiration Date, and (2) the Company has not offered, at or prior
to the Expiration Date, to employ the Executive after the
Expiration Date on terms that provide for payment of (x) a base
salary equal to or greater than the Base Salary (adjusted for cost-
of-living increases) being paid to the Executive on the Expiration
Date, and (y) incentive compensation on terms equal to or greater
than the Incentive Compensation terms in effect as of the
Expiration Date); the Executive shall not, directly or indirectly,
for himself or for any other person, firm, corporation,
partnership, association or other entity (a) employ or attempt to
employ or enter into any contractual arrangement with any employee
or former employee of the Company, unless such employee or former
employee has not been employed by the Company for a period in
excess of six months, and/or (b) call on or solicit any of the
actual or targeted prospective clients of the Company on behalf of
any person or entity in connection with any business competitive
with the business of the Company, nor shall the Executive make
known the names and addresses of such clients or any information
relating in any manner to the Company's trade or business
relationships with such customers, other than in connection with
the performance of Executive's duties under this Agreement.
6.4 Books and Records. All books, records, and accounts
relating in any manner to the customers or clients of the Company,
whether prepared by the Executive or otherwise coming into the
Executive's possession, shall be the exclusive property of the
Company and shall be returned immediately to the Company on
termination of the Executive's employment hereunder or on the
Company's request at any time.
6.5 Definition of Company. Solely for purposes of this
Section 6, the term "Company" also shall include any future
subsidiaries of the Company that are operating during the time
periods described herein and any other entities that directly or
indirectly, through one or more intermediaries, control, are
controlled by or are under common control with the Company during
the periods described herein.
6.6 Acknowledgment by Executive. The Executive acknowledges
and confirms that the length of the term of the provisions of this
Section 6 and the geographical restrictions contained in Section
6.1 are fair and reasonable and not the result of overreaching,
duress or coercion of any kind. The Executive further acknowledges
and confirms that his full, uninhibited and faithful observance of
each of the covenants contained in this Section 6 will not cause
him any undue hardship, financial or otherwise, and that
enforcement of each of the covenants contained herein will not
impair his ability to obtain employment commensurate with his
abilities and on terms fully acceptable to him or otherwise to
obtain income required for the comfortable support of him and his
family and the satisfaction of the needs of his creditors. The
Executive acknowledges and confirms that his special knowledge of
the business of the Company is such as would cause the Company
serious injury or loss if he were to use such ability and knowledge
to the benefit of a competitor or were to compete with the Company
in violation of the terms of this Section 6.
6.7 Survival. The provisions of this Section 6 shall survive
the termination of this Agreement, as applicable.
7. Injunction. It is recognized and hereby acknowledged by the
parties hereto that a breach by the Executive of any of the
covenants contained in Section 6 of this Agreement will cause
irreparable harm and damage to the Company, the monetary amount of
which may be virtually impossible to ascertain. As a result, the
Executive recognizes and hereby acknowledges that the Company shall
be entitled to an injunction from any court of competent
jurisdiction enjoining and restraining any violation of any or all
of the covenants contained in Section 6 of this Agreement by the
Executive or any of his affiliates, associates, partners or agents,
either directly or indirectly, and that such right to injunction
shall be cumulative and in addition to whatever other remedies the
Company may possess.
8. Assignment. Neither party shall have the right to assign or
delegate his rights or obligations hereunder, or any portion
thereof, to any other person.
9. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Florida.
10. Entire Agreement. This Agreement constitutes the entire
agreement between the parties hereto with respect to the subject
matter hereof and, upon its effectiveness, shall supersede all
prior agreements, understandings and arrangements, both oral and
written, between the Executive and the Company (or any of its
affiliates) with respect to such subject matter. This Agreement
may not be modified in any way unless by a written instrument
signed by both the Company and the Executive.
11. Notices: Any notice required or permitted to be given
hereunder shall be deemed given when delivered by hand or when
deposited in the United States mail, by registered or certified
mail, return receipt requested, postage prepaid, (i) if to the
Company, addressed to Capital Bank, 1221 Brickell Avenue, Miami,
Florida 33133, Attention: President, and (ii) if to the Executive,
to his address as reflected on the payroll records of the Company,
or to such other address as either party hereto may from time to
time give notice of to the other.
12. Benefits; Binding Effect. This Agreement shall be for the
benefit of and binding upon the parties hereto and their respective
heirs, personal representatives, legal representatives, successors
and, where applicable, assigns, including, without limitation, any
successor to the Company, whether by merger, consolidation, sale of
stock, sale of assets or otherwise.
13. Severability. The invalidity of any one or more of the words,
phrases, sentences, clauses or sections contained in this Agreement
shall not affect the enforceability of the remaining portions of
this Agreement or any part thereof, all of which are inserted
conditionally on their being valid in law, and, in the event that
any one or more of the words, phrases, sentences, clauses or
sections contained in this Agreement shall be declared invalid,
this Agreement shall be construed as if such invalid word or words,
phrase or phrases, sentence or sentences, clause or clauses, or
section or sections had not been inserted. If such invalidity is
caused by length of time or size of area, or both, the otherwise
invalid provision will be considered to be reduced to a period or
area which would cure such invalidity.
14. Waivers. The waiver by either party hereto of a breach or
violation of any term or provision of this Agreement shall not
operate nor be construed as a waiver of any subsequent breach or
violation.
15. Damages. Nothing contained herein shall be construed to
prevent the Company or the Executive from seeking and recovering
from the other damages sustained by either or both of them as a
result of its or his breach of any term or provision of this
Agreement. In the event that either party hereto brings suit for
the collection of any damages resulting from, or the injunction of
any action constituting, a breach of any of the terms or provisions
of this Agreement, then the party found to be at fault shall pay
all reasonable court costs and attorneys' fees of the other.
16. Section Headings. The section headings contained in this
Agreement are for reference purposes only and shall not affect in
any way the meaning or interpretation of this Agreement.
17. No Third Party Beneficiary. Nothing expressed or implied in
this Agreement is intended, or shall be construed, to confer upon
or give any person other than the Company, the parties hereto and
their respective heirs, personal representatives, legal
representatives, successors and assigns, any rights or remedies
under or by reason of this Agreement.
18. Indemnification.
(a) Subject to limitations imposed by law, the Company shall
indemnify and hold harmless the Executive to the fullest extent
permitted by law from and against any and all claims, damages,
expenses (including attorneys' fees), judgments, penalties, fines,
settlements, and all other liabilities incurred or paid by him in
connection with the investigation, defense, prosecution, settlement
or appeal of any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or
investigative and to which the Executive was or is a party or is
threatened to be made a party by reason of the fact that the
Executive is or was an officer, employee or agent of the Company,
or by reason of anything done or not done by the Executive in any
such capacity or capacities, provided that the Executive acted in
good faith, in a manner that was not grossly negligent or
constituted wilful misconduct and in a manner he reasonably
believed to be in or not opposed to the best interests of the
Company, and, with respect to any criminal action or proceeding,
had no reasonable cause to believe his conduct was unlawful. The
Company also shall pay any and all expenses (including attorney's
fees) incurred by the Executive as a result of the Executive being
called as a witness in connection with any matter involving the
Company and/or any of its officers or directors. The Company shall
advance.
(b) The Company shall pay any expenses (including attorneys'
fees), judgments, penalties, fines, settlements, and other
liabilities incurred by the Executive in investigating, defending,
settling or appealing any action, suit or proceeding described in
this Section 18 in advance of the final disposition of such action,
suit or proceeding. The Company shall promptly pay the amount of
such expenses to the Executive, but in no event later than 10 days
following the Executive's delivery to the Company of a written
request for an advance pursuant to this Section 18, together with
a reasonable accounting of such expenses.
(c) The Executive hereby undertakes and agrees to repay to the
Company any advances made pursuant to this Section 18 if and to the
extent that it shall ultimately be found that the Executive is not
entitled to be indemnified by the Company for such amounts.
(d) The Company shall make the advances contemplated by this
Section 18 regardless of the Executive's financial ability to make
repayment, and regardless whether indemnification of the Indemnitee
by the Company will ultimately be required. Any advances and
undertakings to repay pursuant to this Section 18 shall be
unsecured and interest-free.
(e) The provisions of this Section 18 shall survive the
termination of this Agreement.
19. Regulatory Limitations. Notwithstanding anything else
contained herein, no payment shall be made hereunder that
constitutes a golden parachute payment or prohibited
indemnification payment in violation of 12 CFR Part 359.
20. Waiver of Jury Trial. The undersigned expressly (i) waive any
right to a trial by jury of any claim, demand, action or cause of
action arising out of this Agreement or in any way related or
incidental to the performance of the parties' obligations
hereunder, and (ii) agree that the Company or the Executive may
file an original counterpart or copy of this Section 20 with any
court as written evidence of the consent to the waiver of the right
to trial by jury.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as
of the date first above written.
COMPANY:
CAPITAL BANK
By: /s/ DANIEL M. HOLTZ
---------------------------------
Daniel M. Holtz
Chief Executive Officer
EXECUTIVE:
/s/ JAVIER J. HOLTZ
---------------------------------
JAVIER J. HOLTZ<PAGE>
Exhibit 10.6
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is made and entered into on
this 1st day of June, 1996 as of January 1, 1996 by and between
CAPITAL BANK, a Florida corporation (the "Company"), and LUCIOUS T.
HARRIS (hereinafter called the "Executive").
R E C I T A L S
A. The Executive is currently employed as the Chief Financial
Officer of the Company.
B. The Executive possesses intimate knowledge of the business and
affairs of the Company, its policies, methods and personnel.
C. The Board of Directors of the Company (the "Board") recognizes
that the Executive has contributed to the growth and success of the
Company, and desires to assure the Company of the Executive's
continued employment and to compensate him therefor.
D. The Board has determined that this Agreement will reinforce and
encourage the Executive's continued attention and dedication to the
Company.
E. The Executive is willing to make his services available to the
Company and on the terms and conditions hereinafter set forth.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and mutual
covenants set forth herein, the parties agree as follows:
1. Employment.
1.1 Employment and Term. The Company hereby agrees to employ
the Executive and the Executive hereby agrees to serve the Company
on the terms and conditions set forth herein.
1.2 Duties of Executive. During the term of this Agreement,
the Executive shall serve as the Chief Financial Officer of the
Company, shall diligently perform all services as may be assigned
to him by the Board or the Chief Executive Officer of the Company
(provided that, such services shall not materially differ from the
services currently provided by the Executive), and shall exercise
such power and authority as may from time to time be delegated to
him by the Board or the Chief Executive Officer of the Company.
The Executive shall devote his full time and attention to the
business and affairs of the Company, render such services to the
best of his ability, and use his best efforts to promote the
interests of the Company; provided, however that nothing in this
Agreement shall preclude the Executive from providing services to,
and receiving compensation from, Capital Bancorp., the parent
company of the Company, or any direct or indirect subsidiary of
Capital Bancorp.
2. Term.
2.1 Initial Term. The initial term of this Agreement, and the
employment of the Executive hereunder, shall commence on January 1,
1996 (the "Commencement Date") and shall expire on May 31, 1998
(the "Expiration Date"), unless sooner terminated in accordance
with the terms and conditions hereof (the "Initial Term").
2.2 Renewal Terms. The Initial Term of this Agreement, and
the employment of the Executive hereunder, may be renewed and/or
extended for such period or periods as may be mutually agreed to by
the Company and the Executive in a written supplement to this
Agreement signed by the Executive and the Company ("Written
Supplement"). If this Agreement is not so renewed and/or extended
prior to the expiration of the Initial Term, this Agreement, and
the employment of the Executive hereunder, shall automatically
terminate on the Expiration Date.
3. Compensation.
3.1 Base Salary. The Executive shall receive a base salary at
the annual rate of $138,300 (the "Base Salary") during the term of
this Agreement, with such Base Salary payable in installments
consistent with the Company's normal payroll schedule, subject to
applicable withholding and other taxes. The Base Salary also shall
be reviewed, at least annually, for merit increases and may, by
action and in the discretion of the Board, be increased at any time
or from time to time. If the term of this Agreement shall be
renewed and/or extended as provided in Section 2.2 hereof, then
during such renewal term of his employment hereunder, the Executive
shall be paid a base salary as set forth in the Written Supplement.
3.2 Signing Loan and Bonuses.
(a) Upon execution of this Agreement, Capital Bancorp
("Bancorp") shall loan $50,000 to the Executive (the "Signing
Loan"). The Signing Loan shall bear interest at the "mid-term
applicable federal rate" as such term is defined in Section 1274(d)
of the Internal Revenue Code, with principal and interest being
payable in five (5) equal annual installments. The Signing Loan
shall be evidenced by and payable in accordance with a promissory
note in the form attached hereto as Exhibit "A" and made a part
hereof.
(b) On June 1, 1997, and on June 1 of each of the
succeeding four (4) years during the term of this Agreement, the
Company shall pay an annual bonus (the "Signing Loan Bonus") to the
Executive equal to the quotient obtained by dividing (i) the
payment due on that date under the Signing Loan, by (ii) 100% minus
the highest marginal federal income tax rate applicable to
compensation paid by the Company to the Executive for the year
(excluding any other income or expenses of the Executive). The
portion of the Signing Loan Bonuses that is equal to the payment
due under the Signing Loan shall be paid directly to Bancorp on
behalf of the Executive at such time as the payment is due under
the Signing Loan. The remaining portion of the Signing Loan Bonus,
less applicable withholding taxes on the entire Signing Loan Bonus,
shall be paid to the Executive.
(c) In the event that the Executive's employment with the
Company terminates by reason of the Executive's death or disability
as described under Section 5.2 hereof, is terminated by the Company
without Cause under Section 5.4 hereof, is terminated under Section
5.6 hereof after a Change in Control, or terminates at any time
after the Expiration Date if the Company has not offered the
Executive to renew the term of this Agreement for a period of three
(3) years beyond the Expiration Date on terms substantially the
same as those in effect during the Initial Term, then the Company
shall pay to the Executive, within 45 days of such termination, a
bonus (the "Final Signing Loan Bonus") equal to the quotient
obtained by dividing (i) the amount necessary to repay in full the
outstanding principal and accrued interest on the Signing Loan, by
(ii) 100% minus the highest marginal federal income tax rate
applicable to compensation paid by the Company to the Executive for
the immediately preceding year (excluding any other income or
expenses of the Executive). The portion of the Final Signing Loan
Bonus that is equal to the outstanding principal and accrued
interest on the Signing Loan shall be paid directly to Bancorp, on
behalf of the Executive. The remaining portion of the Final
Signing Loan Bonus, less applicable withholding taxes, shall be
paid to the Executive (or the Executive's estate in the case of the
Executive's death).
3.3 Incentive Compensation.The Executive shall be entitled to
receive incentive compensation ("Incentive Compensation") during
each year of the Initial Term of this Agreement equal to the amount
of incentive compensation for such year determined pursuant to the
Incentive Bonus Plan attached hereto as Exhibit "B" and made a part
hereof, as amended from time to time (the "Incentive Compensation
Plan"). In the event that this Agreement terminates on the
Expiration Date by reason of the expiration of the term of this
Agreement, then the Company shall pay the Executive Incentive
Compensation for the period from January 1, 1998 through May 31,
1998, equal to five-twelfths of the Incentive Compensation, if any,
for calendar year 1998; provided, however, that the Company's goals
under the Incentive Compensation Plan for calendar year 1998 shall
be based on (1) the period from January 1, 1998 through May 31,
1998, and (2) unaudited financial information prepared in
accordance with generally accepted accounting principles, applied
consistently with prior periods, as approved and reviewed by the
Board.
3.4 Section 162(m) Limits. Notwithstanding any other
provision of this Agreement to the contrary, if and to the extent
that any remuneration payable by the Company to the Executive for
any year would exceed the maximum amount of remuneration that the
Company may deduct for that year under Section 162(m) ("Section
162(m)") of the Internal Revenue Code of 1986, as amended (the
"Code"), payment of the portion of the remuneration for that year
that would not be so deductible under Section 162(m) shall, in the
sole discretion of the Board, be deferred and become payable at
such time or times as the Board determines that it first would be
deductible by the Company under Section 162(m), with interest at
the "short-term applicable federal rate" as such term is defined in
Section 1274(d) of the Code. The limitation set forth under this
Section 3.4 shall not apply with respect to any amounts payable to
the Executive pursuant to Section 5.6 hereof.
4. Expense Reimbursement and Other Benefits.
4.1 Reimbursement of Expenses. During the term of Executive's
employment hereunder, the Company, upon the submission of proper
substantiation by the Executive, shall reimburse the Executive for
all reasonable expenses actually paid or incurred by the Executive
in the course of and pursuant to the business of the Company. The
Executive shall account to the Company in writing for all expenses
for which reimbursement is sought and shall supply to the Company
copies of all relevant invoices, receipts or other evidence
reasonably requested by the Company.
4.2 Compensation/Benefit Programs. During the term of this
Agreement, the Executive shall be entitled to participate in all
medical, dental, hospitalization, accidental death and
dismemberment, disability, travel and life insurance plans, and any
and all other plans as are presently and hereinafter offered by the
Company to its executives, including savings, pension, profit-
sharing and deferred compensation plans.
4.3 Working Facilities. The Company shall furnish the
Executive with an office, secretarial help and such other
facilities and services suitable to his position and adequate for
the performance of his duties hereunder.
4.4 Automobile. The Company shall continue to provide the
Executive an automobile comparable to the existing automobile
provided to Executive, together with reimbursement of the operating
expenses thereof.
4.5 Stock Options. During the term of this Agreement, the
Executive shall be eligible to be granted options to purchase
common stock (the "Common Stock") of Bancorp under (and therefore
subject to all terms and conditions of) the Capital Bancorp Stock
Option Plan as amended, and any successor plan thereto (the "Stock
Option Plan") and all rules of regulation of the Securities and
Exchange Commission applicable to stock option plans then in
effect. The number of options and terms and conditions of options
shall be determined by the Stock Option Committee of Bancorp in its
discretion and pursuant to the Stock Option Plan.
4.6 Other Benefits. The Executive shall be entitled to four
weeks of vacation every year. The Executive shall receive such
additional benefits, if any, as the Chief Executive Officer of the
Company shall from time to time determine.
5. Termination.
5.1 Termination for Cause. The Company shall at all times
have the right, upon written notice to the Executive, to terminate
the Executive's employment hereunder, for cause. For purposes of
this Agreement, the term "cause" shall mean (i) an action or
omission of the Executive which constitutes a willful and material
breach of this Agreement which is not cured within fifteen (15)
days after receipt by the Executive of written notice of same, (ii)
fraud, embezzlement, misappropriation of funds or breach of trust,
(iii) conviction of any crime which involves dishonesty or a breach
of trust, (iv) gross negligence in connection with the performance
of the Executive's duties hereunder, (v) material and willful or
knowing failure or refusal (other than as a result of a disability)
by the Executive to perform his duties hereunder, or (vi) the
formal written request addressed to the Board of Directors of the
Company by any regulatory agency that regulates Capital Bank or
Capital Bancorp that the Executive be removed from his duties
hereunder and setting forth the basis for such request. Any
termination for cause shall be made in writing to the Executive,
which notice shall set forth in detail all acts or omissions upon
which the Company is relying for such termination. The Executive
shall have the right to address the Company's Board regarding the
acts set forth in the notice of termination. Upon any termination
pursuant to this Section 5.1, the Executive shall be entitled to be
paid his Base Salary to the date of termination and the Company
shall have no further liability hereunder (other than for (x)
reimbursement for reasonable business expenses incurred prior to
the date of termination, subject, however, to the provisions of
Section 4.1, and (y) payment of compensation for unused vacation
days that have accumulated during the calendar year in which such
termination occurs).
5.2 Disability. The Company shall at all times have the
right, upon written notice to the Executive, to terminate the
Executive's employment hereunder, if the Executive shall, as the
result of mental or physical incapacity, illness or disability,
become unable to perform his obligations hereunder for a period of
90 consecutive days. Upon any termination pursuant to this Section
5.2, the Company shall (i) pay to the Executive any unpaid Base
Salary through the effective date of termination specified in such
notice, (ii) pay to the Executive the Incentive Compensation, if
any, and Signing Loan Bonus not yet paid to the Executive for any
year prior to such termination, at such times as the Incentive
Compensation and Signing Loan Bonus otherwise would have been
payable to the Executive, (iii) pay to the Executive a severance
payment equal to three (3) months of the Executive's Base Salary at
the time of such disability, (iv) pay to the Executive (within 45
days after the end of the calendar quarter in which such
termination occurs) a prorata portion (based upon the period ending
on the date of termination of the Executive's employment hereunder)
of the Incentive Compensation, if any, for the year in which such
termination occurs, as calculated pursuant to the terms of Section
3.3 hereof and the Incentive Compensation Plan; provided that the
goals under the Incentive Compensation Plan for each period used in
the calculation of the Executive's Incentive Compensation, shall be
based on (1) the portion of the year through the end of the
calendar quarter in which such termination occurs and (2) unaudited
financial information prepared in accordance with generally
accepted accounting principles, applied consistently with prior
periods, as approved and reviewed by the Board, and (v) pay the
Final Signing Loan Bonus pursuant to Section 3.2(c) hereof. The
Company shall have no further liability hereunder (other than for
(x) reimbursement for reasonable business expenses incurred prior
to the date of termination, subject, however to the provisions of
Section 4.1, and (y) payment of compensation for unused vacation
days that have accumulated during the calendar year in which such
termination occurs).
5.3 Death. In the event of the death of the Executive during
the term of his employment hereunder, the Company shall (i) pay to
the estate of the deceased Executive any unpaid Base Salary through
the Executive's date of death, (ii) pay to the estate of the
deceased Executive the Incentive Compensation, if any, and Signing
Loan Bonus not yet paid to the Executive for any year prior to the
date of death, at such time as the Incentive Compensation and
Signing Loan Bonus otherwise would have been payable to the
Executive, (iii) pay to the estate of the deceased Executive
(within 45 days after the end of the calendar quarter in which his
death occurs) a prorata portion (based upon the period ending on
the date of death) of the Incentive Compensation, if any, for the
year in which his death occurs, as calculated pursuant to the terms
of Section 3.3 and the Incentive Compensation Plan; provided that,
the goals under the Incentive Compensation Plan for each period
used in the calculation of the Executive's Incentive Compensation
shall be based on (1) the portion of the year through the end of
the calendar quarter in which the Executive's death occurs, and (2)
unaudited financial information prepared in accordance with
generally accepted accounting principles, applied consistently with
prior periods, as approved and reviewed by the Board, and (iv) pay
the Final Signing Loan Bonus pursuant to Section 3.2(c) hereof.
The Company shall have no further liability hereunder (other than
for (x) reimbursement for reasonable business expenses incurred
prior to the date of the Executive's death, subject, however to the
provisions of Section 4.1, and (y) payment of compensation for
unused vacation days that have accumulated during the calendar year
in which such termination occurs).
5.4 Termination Without Cause. At any time the Company shall
have the right to terminate the Executive's employment hereunder by
written notice to the Executive. Upon any termination pursuant to
this Section 5.4 (that is not a termination under any of Sections
5.1, 5.2, 5.3, 5.5 or 5.6(a)), the Company shall (i) pay to the
Executive any unpaid Base Salary through the effective date of
termination specified in such notice, (ii) pay to the Executive the
Incentive Compensation, if any, and Signing Loan Bonus, not yet
paid to the Executive for any year prior to such termination, at
such time as the Incentive Compensation and Signing Loan Bonus
otherwise would have been payable to the Executive, (iii) continue
to pay the Executive's Base Salary through the Expiration Date, in
the manner and at such time as the Base Salary otherwise would have
been payable to the Executive, (iv) continue to pay the Executive
Incentive Compensation and continue to provide the Executive with
the benefits he was receiving under Sections 4.2, 4.4 and 4.6
hereof, through the Expiration Date, in the manner and at such
times as the compensation or benefits otherwise would have been
payable or provided to the Executive, (v) pay to the Executive as
a single lump sum payment, within 30 days of the termination of his
employment hereunder, a lump sum benefit equal to the value of the
portion of his benefits under any savings, pension, profit sharing
or deferred compensation plans that are forfeited under such plans
by reason of the termination of his employment hereunder, and (vi)
pay the Final Signing Loan Bonus pursuant to Section 3.2(c) hereof.
In the event that the termination of Executive's employment
hereunder shall occur on or before December 31, 1996, then the
Incentive Compensation and benefits payable under clause (iv) of
this Section 5.4 shall be equal to the amounts that would have been
paid or provided to the Executive for the year ended December 31,
1996. In the event that termination of Executive's employment
hereunder shall occur after December 31, 1996, then the Incentive
Compensation, Signing Loan Bonuses and other benefits payable under
clause (iv) of this Section 5.4 shall be equal to the amounts of
such compensation and benefits payable or provided to the Executive
for the calendar year immediately preceding the termination of
Executive's employment hereunder. In the event that the Company is
unable to provide the Executive with a continuation of any savings,
pension, profit-sharing or deferred compensation plans required
hereunder by reason of the termination of the Executive's
employment pursuant to this Section 5.4, then the Company shall pay
the Executive cash equal to the value of the benefit that otherwise
would have accrued for the Executive's benefit under the plan, for
the period during which such benefits could not be provided under
the plans, said cash payments to be made within 45 days after the
end of the year for which such contributions would have been made
or would have accrued. The Company's good faith determination of
the amount that would have been contributed or the value of any
benefits that would have accrued under any plan shall be binding
and conclusive on the Executive. Further, the Executive shall
continue to vest in the Executive's Stock Options through the
Expiration Date in the same manner and to the same extent as if his
employment hereunder terminated on the Expiration Date. The
Company shall have no further liability hereunder (other than for
(x) reimbursement for reasonable business expenses incurred prior
to the date of termination, subject, however, to the provisions of
Section 4.1, (y) payment of compensation for unused vacation days
that have accumulated during the calendar year in which such
termination occurs, and (z) any amounts payable to the Executive
pursuant to Section 5.6 hereof by reason of Section 5.6(c)).
5.5 Resignation by Executive. The Executive shall at all
times have the right, upon ninety (90) days written notice to the
Company, to terminate the Executive's employment hereunder. Upon
any termination pursuant to this Section 5.5, the Company shall (i)
pay to the Executive any unpaid Base Salary through the effective
date of termination specified in such notice and (ii) pay to the
Executive the Incentive Compensation, if any, and Signing Loan
Bonus not yet paid to the Executive for any year prior to such
termination, at such time as the Incentive Compensation and Signing
Loan Bonus otherwise would have been payable to the Executive.
The Company shall have no further liability hereunder (other than
for (x) reimbursement for reasonable business expenses incurred
prior to the date of termination, subject, however, to the
provisions of Section 4.1, (y) payment of compensation for unused
vacation days that have accumulated during the calendar year in
which such termination occurs, and (z) any amounts payable to the
Executive pursuant to Section 5.6 hereof by reason of Section
5.6(c)).
5.6 Change in Control of the Company.
(a) In the event that (x) a Change in Control (as defined
in paragraph (b) of this Section 5.6) in the Company shall occur
during the Initial Term, and (y) within one year after the date of
the Change in Control, the Executive is (i) assigned any position,
duties or responsibilities that are significantly diminished or
changed when compared with the position, duties or responsibilities
of the Executive prior to such Change in Control, (ii) forced to
relocate to another location more than 25 miles from his location
prior to the Change in Control, or (iii) no longer provided
coverage under benefit programs in existence prior to the Change in
Control (unless a comparable substitute is offered); then the
Executive, by written notice to the Company at any time within the
thirty (30) day period following the occurrence of an event
described in clauses (i) through (iii) of this Section 5.6(a),
shall have the right to terminate his employment hereunder. Upon
the voluntary termination by the Executive pursuant to this Section
5.6(a), or the involuntary termination of the Executive by the
Company within one year after the date of a Change in Control, the
Company shall (v) pay to the Executive any unpaid Base Salary
through the effective date of termination, (w) pay to the Executive
the Incentive Compensation, if any, not yet paid to the Executive
for any year prior to such termination, at such time as the
Incentive Compensation otherwise would have been payable to the
Executive, (x) pay to the Executive (within 45 days after the end
of the calendar quarter in which such termination occurs) a prorata
portion (based upon the period ending on the date of termination of
the Executive's employment hereunder) of the Incentive
Compensation, if any, for the year in which such termination
occurs, as calculated pursuant to the terms of Section 3.3 hereof
and the Incentive Compensation Plan; provided that the Company's
goals under the Incentive Compensation Plan for each period used in
the calculation of the Executive's Incentive Compensation, shall be
based on (1) the portion of the year through the end of the
calendar quarter in which such termination occurs, and (2)
unaudited financial information prepared in accordance with
generally accepted accounting principles, applied consistently with
prior periods, as approved and reviewed by the Board, (y) pay the
Final Signing Loan Bonus pursuant to Section 3.2(c) hereof, and (z)
pay to the Executive as a single lump sum payment, within 45 days
of the termination of his employment hereunder, a lump sum payment
equal to the sum of (a) the product of (i) an amount which shall
not be less than one, equal to the number of days between the date
of the Executive's termination of employment with the Company and
the Expiration Date, divided by 365 days, and (ii) his annual Base
Salary, Incentive Compensation, and the value of the annual fringe
benefits required to be provided to the Executive under Sections
4.2 and 4.4 hereof, for the year immediately preceding the year in
which his employment terminates, plus (b) the value of the portion
of his benefits under any savings, pension, profit sharing or
deferred compensation plans that are forfeited under those plans by
reason of the termination of his employment hereunder. Further,
upon the Change in Control, the Executive's Stock Options shall
immediately vest. The Company shall have no further liability
hereunder (other than for (1) reimbursement for reasonable business
expenses incurred prior to the date of termination, subject,
however, to the provisions of Section 4.1, and (2) payment of
compensation for unused vacation days that have accumulated during
the calendar year in which such termination occurs).
(b) For purposes of this Agreement, a "Change in Control"
shall be deemed to have occurred if:
(i) an event which would be required to be reported
in response to Item (a) of the current report on Form 8-K, as in
effect on the date hereof, pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 (the "Exchange Act") occurs and the
transaction required to be reported is consummated;
(ii) an event occurs which results in a change in
control of the Company or Capital Bancorp within the meaning of the
Federal Change in Bank Control Act and/or applicable sections of
the Florida Banking Code and/or the rules and regulations
promulgated by the Board of Governors of the Federal Reserve System
or the Florida Department of Banking as in effect on the date
hereof;
(iii) individuals who constitute the Board of
Directors of each of the Company or Capital Bancorp on the date
hereof (the "Incumbent Board") cease for any reason to constitute
at least a majority thereof, provided that any person becoming a
director subsequent to the date hereof whose election was approved
by a vote of at least three-quarters of the directors comprising
the Incumbent Board, or whose nomination for election by the
Company's stockholders was approved by a majority of the Incumbent
Board, shall be, for purposes of this clause (iii), considered as
though he or she were a member of the Incumbent Board;
(iv) Capital Bancorp ceases to own at least 80% of
the voting stock of the Company;
(v) there occurs any transaction (which shall
include a series of transactions occurring within 60 days or
occurring pursuant to a plan) that has the result that shareholders
of Capital Bancorp immediately before such transaction cease to own
at least 51% of the voting stock of Capital Bancorp or of any
entity that results from the participation of Capital Bancorp in a
reorganization, consolidation, merger, liquidation or other form of
corporate transaction;
(vi) any person or group of persons (other than
those persons who own or control as a group not less than 40% of
the outstanding stock of the Company on the date of this Agreement
(the "Present Control Group")) acting in concert acquire in excess
of both (a) 25% of the outstanding voting stock of Capital Bancorp,
and (b) the number of shares of Capital Bancorp with respect to
which the Present Control Group, in the aggregate, have voting
rights to after such acquisition;
(vii) Capital Bancorp or the Company liquidate or
dissolve; or
(viii) the Company or Capital Bancorp sells, leases,
exchanges or otherwise disposes of all or substantially all of its
property or assets.
(c) In the event that:
(i) the Company enters into a letter of intent or a
definitive agreement for the Company to enter into a transaction
that would constitute a Change in Control (the letter of intent or
definitive agreement being hereinafter referred to as a "Change in
Control Agreement"), and discussions relating to the transaction
reflected in the Change in Control Agreement had commenced while
the Executive was employed by the Company;
(ii) the Change in Control Agreement is entered into
(a) while the Executive is employed by the Company prior to the
Expiration Date, (b) within 90 days after the Company's termination
of the Executive's employment without Cause, or (c) within 90 days
after the Expiration Date if the Executive was employed by the
Company on the Expiration Date;
(iii) the transaction contemplated by the Change in
Control Agreement is effectuated and results in a Change in
Control; and
(iv) within the period that begins on the date on
which the Change in Control Agreement is executed by the Company
and ends one year after the date of the Change in Control, either
(a) the Executive voluntarily terminates his employment hereunder
after one of the events described in clause (i), (ii) or (iii) of
paragraph (a) of this Section 5.6 occurs, or (b) the Executive's
employment with the Company is involuntarily terminated by the
Company;
then the Company shall pay to the Executive the amounts provided in
paragraph 5.6(a), reduced by any amounts paid by the Company to the
Executive under Section 5.4 or 5.5 hereof, and the Executive's
rights to receive any additional amounts under Section 5.4 or 5.5
shall cease.
5.7 Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any
payment, distribution or other action by the Company to or for the
benefit of the Executive (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise,
but determined without regard to any additional payments required
under this Section 5.7) (a "Payment") would be subject to an excise
tax imposed by Section 4999 of the Internal Revenue Code of 1986,
as amended (the "Code"), or any interest or penalties are incurred
by the Executive with respect to any such excise tax (such excise
tax, together with any such interest and penalties, are hereinafter
collectively referred to as the "Excise Tax"), the Company or
Bancorp shall make a payment to the Executive (a "Gross-Up
Payment") in an amount equal to the Excise Tax imposed upon the
Payments.
(b) Subject to the provisions of Section 5.7(c), all
determinations required to be made under this Section 5.7,
including whether and when a Gross-Up Payment is required and the
amount of such Gross-Up Payment and the assumptions to be utilized
in arriving at such determination, shall be made by Deloitte Touche
LLP (the "Accounting Firm") which shall provide detailed supporting
calculations both to the Company and the Executive within 15
business days of the receipt of notice from the Executive that
there has been a Payment, or such earlier time as is requested by
the Company. In the event that the Accounting Firm is serving as
accountant or auditor for the individual, entity or group effecting
the Change of Control, the Executive shall appoint another
nationally recognized accounting firm to make the determinations
required hereunder (which accounting firm shall then be referred to
as the Accounting Firm hereunder). All fees and expenses of the
Accounting Firm shall be borne solely by the Company. Any Gross-Up
Payment, as determined pursuant to this Section 5.7, shall be paid
by the Company to the Executive within five days of the receipt of
the Accounting Firm's determination. If the Accounting Firm
determines that no Excise Tax is payable by the Executive, it shall
furnish the Executive with a written opinion that failure to report
the Excise Tax on the Executive's applicable federal income tax
return would not result in the imposition of a negligence or
similar penalty. Any determination by the Accounting Firm shall be
binding upon the Company and the Executive. As a result of the
uncertainty in the application of Section 4999 of the Code at the
time of the initial determination by the Accounting Firm hereunder,
it is possible that Gross-Up Payments which will not have been made
by the Company should have been made ("Underpayment"), consistent
with the calculations required to be made hereunder. In the event
that the Company exhausts its remedies pursuant to Section 5.7(c)
and the Executive thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall determine the amount of the
Underpayment that has occurred and any such Underpayment shall be
promptly paid by the Company to or for the benefit of the
Executive.
(c) The Executive shall notify the Company in writing of
any claim by the Internal Revenue Service that, if successful,
would require the payment by the Company of the Gross-Up Payment.
Such notification shall be given as soon as practicable but no
later than ten business days after the Executive is informed in
writing of such claim and shall apprise the Company of the nature
of such claim and the date on which such claim is requested to be
paid. The Executive shall not pay such claim prior to the
expiration of the 30-day period following the date on which it
gives such notice to the Company (or such shorter period ending on
the date that any payment of taxes with respect to such claim is
due). If the Company notifies the Executive in writing prior to
the expiration of such period that it desires to contest such
claim, the Executive shall:
(i) give the Company any information reasonably
requested by the Company relating to such claim,
(ii) take such action in connection with contesting
such claim as the Company shall reasonably request in writing from
time to time, including, without limitation, accepting legal
representation with respect to such claim by an attorney reasonably
selected by the Company,
(iii) cooperate with the Company in good faith in
order effectively to contest such claim, and
(iv) permit the Company to participate in any
proceedings relating to such claim;
provided, however, that the Company shall bear and pay directly all
costs and expenses (including additional interest and penalties)
incurred in connection with such contest and shall indemnify and
hold the Executive harmless, on an after-tax basis, for any Excise
Tax or income tax (including interest and penalties with respect
thereto) imposed as a result of such representation and payment of
costs and expenses. Without limitation on the foregoing provisions
of this Section 5.7(c), the Company shall control all proceedings
taken in connection with such contest and, at its sole option, may
pursue or forego any and all administrative appeals, proceedings,
hearings and conferences with the taxing authority in respect of
such claim and may, at its sole option, either direct the Executive
to pay the tax claimed and sue for a refund or contest the claim in
any permissible manner, and the Executive agrees to prosecute such
contest to a determination before any administrative tribunal, in
a court of initial jurisdiction and in one or more appellate
courts, as the Company shall determine; provided, however, that if
the Company directs the Executive to pay such claim and sue for a
refund, the Company shall advance the amount of such payment to the
Executive, on an interest-free basis and shall indemnify and hold
the Executive harmless, on an after-tax basis, from any Excise Tax
or income tax (including interest or penalties with respect
thereto) imposed with respect to such advance or with respect to
any imputed income with respect to such advance; and further
provided that any extension of the statute of limitations relating
to payment of taxes for the taxable year of the Executive with
respect to which such contested amount is claimed to be due is
limited solely to such contested amount. Furthermore, the
Company's control of the contest shall be limited to issues with
respect to which a Gross-Up Payment would be payable hereunder and
the Executive shall be entitled to settle or contest, as the case
may be, any other issue raised by the Internal Revenue Service or
any other taxing authority.
(d) If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 5.7(c), the Executive
becomes entitled to receive any refund with respect to such claim,
the Executive shall (subject to the Company's complying with the
requirements of Section 5.7(c)) promptly pay to the Company the
amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by
the Executive of an amount advanced by the Company pursuant to
Section 5.7(c), a determination is made that the Executive shall
not be entitled to any refund with respect to such claim and the
Company does not notify the Executive in writing of its intent to
contest such denial of refund prior to the expiration of 30 days
after such determination, then such advance shall be forgiven and
shall not be required to be repaid and the amount of such advance
shall offset, to the extent thereof, the amount of Gross-Up Payment
required to be paid.
5.8 Survival. The provisions of this Article 5 shall survive
the termination of this Agreement, as applicable.
6. Restrictive Covenants.
6.1 Non-competition. For the period through the Expiration
Date and at all times while the Executive is employed by the
Company; the Executive shall not, directly or indirectly, engage in
or have any interest in any sole proprietorship, partnership,
corporation or business or any other person or entity (whether as
an employee, officer, director, partner, agent, security holder,
creditor, consultant or otherwise) that directly or indirectly (or
through any affiliated entity) engages in competition with the
Company in any domestic or foreign market (for this purpose, any
financial institution with offices in any city or county in which
the Company has an office will be deemed to be in competition with
the Company); provided that such provision shall not apply to the
Executive's ownership of Common Stock of Bancorp or the acquisition
by the Executive, solely as an investment, of securities of any
issuer that is registered under Section 12(b) or 12(g) of the
Securities Exchange Act of 1934, as amended, and that are listed or
admitted for trading on any United States national securities
exchange or that are quoted on the National Association of
Securities Dealers Automated Quotations System, or any similar
system or automated dissemination of quotations of securities
prices in common use, so long as the Executive is not a member of
any control group (within the meaning of the rules and regulations
of the Securities and Exchange Commission) of any such issuer.
6.2 Nondisclosure. The Executive shall not divulge,
communicate, use to the detriment of the Company or for the benefit
of any other person or persons, or misuse in any way, any confiden-
tial information pertaining to the business of the Company. Any
confidential information or data now or hereafter acquired by the
Executive with respect to the business of the Company (which shall
include, but not be limited to, information concerning the
Company's financial condition, prospects, customers, sources of
leads and methods of doing business) shall be deemed a valuable,
special and unique asset of the Company that is received by the
Executive in confidence and as a fiduciary, and Executive shall
remain a fiduciary to the Company with respect to all of such
information.
6.3 Nonsolicitation of Employees and Clients. For the period
ending on the earlier of (i) termination of Executive's employment
with the Company pursuant to Section 5.6 hereof following a Change
in Control, and (ii) two years following the Expiration Date
(except that, the period shall be six months after the Expiration
Date if (1) the Executive is employed by the Company on the
Expiration Date, and (2) the Company has not offered, at or prior
to the Expiration Date, to employ the Executive after the
Expiration Date on terms that provide for payment of (x) a base
salary equal to or greater than the Base Salary (adjusted for cost-
of-living increases) being paid to the Executive on the Expiration
Date, and (y) incentive compensation on terms equal to or greater
than the Incentive Compensation terms in effect as of the
Expiration Date); the Executive shall not, directly or indirectly,
for himself or for any other person, firm, corporation,
partnership, association or other entity (a) employ or attempt to
employ or enter into any contractual arrangement with any employee
or former employee of the Company, unless such employee or former
employee has not been employed by the Company for a period in
excess of six months, and/or (b) call on or solicit any of the
actual or targeted prospective clients of the Company on behalf of
any person or entity in connection with any business competitive
with the business of the Company, nor shall the Executive make
known the names and addresses of such clients or any information
relating in any manner to the Company's trade or business
relationships with such customers, other than in connection with
the performance of Executive's duties under this Agreement.
6.4 Books and Records. All books, records, and accounts
relating in any manner to the customers or clients of the Company,
whether prepared by the Executive or otherwise coming into the
Executive's possession, shall be the exclusive property of the
Company and shall be returned immediately to the Company on
termination of the Executive's employment hereunder or on the
Company's request at any time.
6.5 Definition of Company. Solely for purposes of this
Section 6, the term "Company" also shall include any future
subsidiaries of the Company that are operating during the time
periods described herein and any other entities that directly or
indirectly, through one or more intermediaries, control, are
controlled by or are under common control with the Company during
the periods described herein.
6.6 Acknowledgment by Executive. The Executive acknowledges
and confirms that the length of the term of the provisions of this
Section 6 and the geographical restrictions contained in Section
6.1 are fair and reasonable and not the result of overreaching,
duress or coercion of any kind. The Executive further acknowledges
and confirms that his full, uninhibited and faithful observance of
each of the covenants contained in this Section 6 will not cause
him any undue hardship, financial or otherwise, and that
enforcement of each of the covenants contained herein will not
impair his ability to obtain employment commensurate with his
abilities and on terms fully acceptable to him or otherwise to
obtain income required for the comfortable support of him and his
family and the satisfaction of the needs of his creditors. The
Executive acknowledges and confirms that his special knowledge of
the business of the Company is such as would cause the Company
serious injury or loss if he were to use such ability and knowledge
to the benefit of a competitor or were to compete with the Company
in violation of the terms of this Section 6.
6.7 Survival. The provisions of this Section 6 shall survive
the termination of this Agreement, as applicable.
7. Injunction. It is recognized and hereby acknowledged by the
parties hereto that a breach by the Executive of any of the
covenants contained in Section 6 of this Agreement will cause
irreparable harm and damage to the Company, the monetary amount of
which may be virtually impossible to ascertain. As a result, the
Executive recognizes and hereby acknowledges that the Company shall
be entitled to an injunction from any court of competent
jurisdiction enjoining and restraining any violation of any or all
of the covenants contained in Section 6 of this Agreement by the
Executive or any of his affiliates, associates, partners or agents,
either directly or indirectly, and that such right to injunction
shall be cumulative and in addition to whatever other remedies the
Company may possess.
8. Assignment. Neither party shall have the right to assign or
delegate his rights or obligations hereunder, or any portion
thereof, to any other person.
9. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Florida.
10. Entire Agreement. This Agreement constitutes the entire
agreement between the parties hereto with respect to the subject
matter hereof and, upon its effectiveness, shall supersede all
prior agreements, understandings and arrangements, both oral and
written, between the Executive and the Company (or any of its
affiliates) with respect to such subject matter. This Agreement
may not be modified in any way unless by a written instrument
signed by both the Company and the Executive.
11. Notices: Any notice required or permitted to be given
hereunder shall be deemed given when delivered by hand or when
deposited in the United States mail, by registered or certified
mail, return receipt requested, postage prepaid, (i) if to the
Company, addressed to Capital Bank, 1221 Brickell Avenue, Miami,
Florida 33133, Attention: President, and (ii) if to the Executive,
to his address as reflected on the payroll records of the Company,
or to such other address as either party hereto may from time to
time give notice of to the other.
12. Benefits; Binding Effect. This Agreement shall be for the
benefit of and binding upon the parties hereto and their respective
heirs, personal representatives, legal representatives, successors
and, where applicable, assigns, including, without limitation, any
successor to the Company, whether by merger, consolidation, sale of
stock, sale of assets or otherwise.
13. Severability. The invalidity of any one or more of the words,
phrases, sentences, clauses or sections contained in this Agreement
shall not affect the enforceability of the remaining portions of
this Agreement or any part thereof, all of which are inserted
conditionally on their being valid in law, and, in the event that
any one or more of the words, phrases, sentences, clauses or
sections contained in this Agreement shall be declared invalid,
this Agreement shall be construed as if such invalid word or words,
phrase or phrases, sentence or sentences, clause or clauses, or
section or sections had not been inserted. If such invalidity is
caused by length of time or size of area, or both, the otherwise
invalid provision will be considered to be reduced to a period or
area which would cure such invalidity.
14. Waivers. The waiver by either party hereto of a breach or
violation of any term or provision of this Agreement shall not
operate nor be construed as a waiver of any subsequent breach or
violation.
15. Damages. Nothing contained herein shall be construed to
prevent the Company or the Executive from seeking and recovering
from the other damages sustained by either or both of them as a
result of its or his breach of any term or provision of this
Agreement. In the event that either party hereto brings suit for
the collection of any damages resulting from, or the injunction of
any action constituting, a breach of any of the terms or provisions
of this Agreement, then the party found to be at fault shall pay
all reasonable court costs and attorneys' fees of the other.
16. Section Headings. The section headings contained in this
Agreement are for reference purposes only and shall not affect in
any way the meaning or interpretation of this Agreement.
17. No Third Party Beneficiary. Nothing expressed or implied in
this Agreement is intended, or shall be construed, to confer upon
or give any person other than the Company, the parties hereto and
their respective heirs, personal representatives, legal represen-
tatives, successors and assigns, any rights or remedies under or by
reason of this Agreement.
18. Indemnification.
(a) Subject to limitations imposed by law, the Company shall
indemnify and hold harmless the Executive to the fullest extent
permitted by law from and against any and all claims, damages,
expenses (including attorneys' fees), judgments, penalties, fines,
settlements, and all other liabilities incurred or paid by him in
connection with the investigation, defense, prosecution, settlement
or appeal of any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or
investigative and to which the Executive was or is a party or is
threatened to be made a party by reason of the fact that the
Executive is or was an officer, employee or agent of the Company,
or by reason of anything done or not done by the Executive in any
such capacity or capacities, provided that the Executive acted in
good faith, in a manner that was not grossly negligent or
constituted wilful misconduct and in a manner he reasonably
believed to be in or not opposed to the best interests of the
Company, and, with respect to any criminal action or proceeding,
had no reasonable cause to believe his conduct was unlawful. The
Company also shall pay any and all expenses (including attorney's
fees) incurred by the Executive as a result of the Executive being
called as a witness in connection with any matter involving the
Company and/or any of its officers or directors. The Company shall
advance.
(b) The Company shall pay any expenses (including attorneys'
fees), judgments, penalties, fines, settlements, and other
liabilities incurred by the Executive in investigating, defending,
settling or appealing any action, suit or proceeding described in
this Section 18 in advance of the final disposition of such action,
suit or proceeding. The Company shall promptly pay the amount of
such expenses to the Executive, but in no event later than 10 days
following the Executive's delivery to the Company of a written
request for an advance pursuant to this Section 18, together with
a reasonable accounting of such expenses.
(c) The Executive hereby undertakes and agrees to repay to the
Company any advances made pursuant to this Section 18 if and to the
extent that it shall ultimately be found that the Executive is not
entitled to be indemnified by the Company for such amounts.
(d) The Company shall make the advances contemplated by this
Section 18 regardless of the Executive's financial ability to make
repayment, and regardless whether indemnification of the Indemnitee
by the Company will ultimately be required. Any advances and
undertakings to repay pursuant to this Section 18 shall be
unsecured and interest-free.
(e) The provisions of this Section 18 shall survive the
termination of this Agreement.
19. Regulatory Limitations. Notwithstanding anything else
contained herein, no payment shall be made hereunder that
constitutes a golden parachute payment or prohibited
indemnification payment in violation of 12 CFR Part 359.
20. Waiver of Jury Trial. The undersigned expressly (i) waive any
right to a trial by jury of any claim, demand, action or cause of
action arising out of this Agreement or in any way related or
incidental to the performance of the parties' obligations
hereunder, and (ii) agree that the Company or the Executive may
file an original counterpart or copy of this Section 20 with any
court as written evidence of the consent to the waiver of the right
to trial by jury.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as
of the date first above written.
COMPANY:
CAPITAL BANK
By: /s/ DANIEL M. HOLTZ
---------------------------------
Daniel M. Holtz
Chief Executive Officer
EXECUTIVE:
/s/ LUCIOUS T. HARRIS
---------------------------------
LUCIOUS T. HARRIS<PAGE>
Exhibit 10.7
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is made and entered into on
this 12th day of June, 1996 as of January 1, 1996 by and between
CAPITAL BANK, a Florida corporation (the "Company"), and DAVID
KONFINO (hereinafter called the "Executive").
R E C I T A L S
A. The Executive is currently employed as the Chief International
Officer of the Company.
B. The Executive possesses intimate knowledge of the business and
affairs of the Company, its policies, methods and personnel.
C. The Board of Directors of the Company (the "Board") recognizes
that the Executive has contributed to the growth and success of the
Company, and desires to assure the Company of the Executive's
continued employment and to compensate him therefor.
D. The Board has determined that this Agreement will reinforce and
encourage the Executive's continued attention and dedication to the
Company.
E. The Executive is willing to make his services available to the
Company and on the terms and conditions hereinafter set forth.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and mutual
covenants set forth herein, the parties agree as follows:
1. Employment.
1.1 Employment and Term. The Company hereby agrees to employ
the Executive and the Executive hereby agrees to serve the Company
on the terms and conditions set forth herein.
1.2 Duties of Executive. During the term of this Agreement,
the Executive shall serve as the Chief International Officer of the
Company, shall diligently perform all services as may be assigned
to him by the Board or the Chief Executive Officer of the Company
(provided that, such services shall not materially differ from the
services currently provided by the Executive), and shall exercise
such power and authority as may from time to time be delegated to
him by the Board or the Chief Executive Officer of the Company.
The Executive shall devote his full time and attention to the
business and affairs of the Company, render such services to the
best of his ability, and use his best efforts to promote the
interests of the Company; provided, however that nothing in this
Agreement shall preclude the Executive from providing services to,
and receiving compensation from, Capital Bancorp., the parent
company of the Company, or any direct or indirect subsidiary of
Capital Bancorp.
2. Term.
2.1 Initial Term. The initial term of this Agreement, and the
employment of the Executive hereunder, shall commence on January 1,
1996 (the "Commencement Date") and shall expire on May 31, 1998
(the "Expiration Date"), unless sooner terminated in accordance
with the terms and conditions hereof (the "Initial Term").
2.2 Renewal Terms. The Initial Term of this Agreement, and
the employment of the Executive hereunder, may be renewed and/or
extended for such period or periods as may be mutually agreed to by
the Company and the Executive in a written supplement to this
Agreement signed by the Executive and the Company ("Written
Supplement"). If this Agreement is not so renewed and/or extended
prior to the expiration of the Initial Term, this Agreement, and
the employment of the Executive hereunder, shall automatically
terminate on the Expiration Date.
3. Compensation.
3.1 Base Salary. The Executive shall receive a base salary at
the annual rate of $150,000 (the "Base Salary") during the term of
this Agreement, with such Base Salary payable in installments
consistent with the Company's normal payroll schedule, subject to
applicable withholding and other taxes. The Base Salary also shall
be reviewed, at least annually, for merit increases and may, by
action and in the discretion of the Board, be increased at any time
or from time to time. If the term of this Agreement shall be
renewed and/or extended as provided in Section 2.2 hereof, then
during such renewal term of his employment hereunder, the Executive
shall be paid a base salary as set forth in the Written Supplement.
3.2 Signing Loan and Bonuses.
(a) Upon execution of this Agreement, Capital Bancorp
("Bancorp") shall loan $50,000 to the Executive (the "Signing
Loan"). The Signing Loan shall bear interest at the "mid-term
applicable federal rate" as such term is defined in Section 1274(d)
of the Internal Revenue Code, with principal and interest being
payable in five (5) equal annual installments. The Signing Loan
shall be evidenced by and payable in accordance with a promissory
note in the form attached hereto as Exhibit "A" and made a part
hereof.
(b) On June 1, 1997, and on June 1 of each of the
succeeding four (4) years during the term of this Agreement, the
Company shall pay an annual bonus (the "Signing Loan Bonus") to the
Executive equal to the quotient obtained by dividing (i) the
payment due on that date under the Signing Loan, by (ii) 100% minus
the highest marginal federal income tax rate applicable to
compensation paid by the Company to the Executive for the year
(excluding any other income or expenses of the Executive). The
portion of the Signing Loan Bonuses that is equal to the payment
due under the Signing Loan shall be paid directly to Bancorp on
behalf of the Executive at such time as the payment is due under
the Signing Loan. The remaining portion of the Signing Loan Bonus,
less applicable withholding taxes on the entire Signing Loan Bonus,
shall be paid to the Executive.
(c) In the event that the Executive's employment with the
Company terminates by reason of the Executive's death or disability
as described under Section 5.2 hereof, is terminated by the Company
without Cause under Section 5.4 hereof, is terminated under Section
5.6 hereof after a Change in Control, or terminates at any time
after the Expiration Date if the Company has not offered the
Executive to renew the term of this Agreement for a period of three
(3) years beyond the Expiration Date on terms substantially the
same as those in effect during the Initial Term, then the Company
shall pay to the Executive, within 45 days of such termination, a
bonus (the "Final Signing Loan Bonus") equal to the quotient
obtained by dividing (i) the amount necessary to repay in full the
outstanding principal and accrued interest on the Signing Loan, by
(ii) 100% minus the highest marginal federal income tax rate
applicable to compensation paid by the Company to the Executive for
the immediately preceding year (excluding any other income or
expenses of the Executive). The portion of the Final Signing Loan
Bonus that is equal to the outstanding principal and accrued
interest on the Signing Loan shall be paid directly to Bancorp, on
behalf of the Executive. The remaining portion of the Final
Signing Loan Bonus, less applicable withholding taxes, shall be
paid to the Executive (or the Executive's estate in the case of the
Executive's death).
3.3 Incentive Compensation.The Executive shall be entitled to
receive incentive compensation ("Incentive Compensation") during
each year of the Initial Term of this Agreement equal to the amount
of incentive compensation for such year determined pursuant to the
Incentive Bonus Plan attached hereto as Exhibit "B" and made a part
hereof, as amended from time to time (the "Incentive Compensation
Plan"). In the event that this Agreement terminates on the
Expiration Date by reason of the expiration of the term of this
Agreement, then the Company shall pay the Executive Incentive
Compensation for the period from January 1, 1998 through May 31,
1998, equal to five-twelfths of the Incentive Compensation, if any,
for calendar year 1998; provided, however, that the Company's goals
under the Incentive Compensation Plan for calendar year 1998 shall
be based on (1) the period from January 1, 1998 through May 31,
1998, and (2) unaudited financial information prepared in
accordance with generally accepted accounting principles, applied
consistently with prior periods, as approved and reviewed by the
Board.
3.4 Section 162(m) Limits. Notwithstanding any other
provision of this Agreement to the contrary, if and to the extent
that any remuneration payable by the Company to the Executive for
any year would exceed the maximum amount of remuneration that the
Company may deduct for that year under Section 162(m) ("Section
162(m)") of the Internal Revenue Code of 1986, as amended (the
"Code"), payment of the portion of the remuneration for that year
that would not be so deductible under Section 162(m) shall, in the
sole discretion of the Board, be deferred and become payable at
such time or times as the Board determines that it first would be
deductible by the Company under Section 162(m), with interest at
the "short-term applicable federal rate" as such term is defined in
Section 1274(d) of the Code. The limitation set forth under this
Section 3.4 shall not apply with respect to any amounts payable to
the Executive pursuant to Section 5.6 hereof.
4. Expense Reimbursement and Other Benefits.
4.1 Reimbursement of Expenses. During the term of Executive's
employment hereunder, the Company, upon the submission of proper
substantiation by the Executive, shall reimburse the Executive for
all reasonable expenses actually paid or incurred by the Executive
in the course of and pursuant to the business of the Company. The
Executive shall account to the Company in writing for all expenses
for which reimbursement is sought and shall supply to the Company
copies of all relevant invoices, receipts or other evidence
reasonably requested by the Company.
4.2 Compensation/Benefit Programs. During the term of this
Agreement, the Executive shall be entitled to participate in all
medical, dental, hospitalization, accidental death and
dismemberment, disability, travel and life insurance plans, and any
and all other plans as are presently and hereinafter offered by the
Company to its executives, including savings, pension, profit-
sharing and deferred compensation plans.
4.3 Working Facilities. The Company shall furnish the
Executive with an office, secretarial help and such other
facilities and services suitable to his position and adequate for
the performance of his duties hereunder.
4.4 Automobile. The Company shall continue to provide the
Executive an automobile comparable to the existing automobile
provided to Executive, together with reimbursement of the operating
expenses thereof.
4.5 Stock Options. During the term of this Agreement, the
Executive shall be eligible to be granted options to purchase
common stock (the "Common Stock") of Bancorp under (and therefore
subject to all terms and conditions of) the Capital Bancorp Stock
Option Plan as amended, and any successor plan thereto (the "Stock
Option Plan") and all rules of regulation of the Securities and
Exchange Commission applicable to stock option plans then in
effect. The number of options and terms and conditions of options
shall be determined by the Stock Option Committee of Bancorp in its
discretion and pursuant to the Stock Option Plan.
4.6 Other Benefits. The Executive shall be entitled to four
weeks of vacation every year. The Executive shall receive such
additional benefits, if any, as the Chief Executive Officer of the
Company shall from time to time determine.
5. Termination.
5.1 Termination for Cause. The Company shall at all times
have the right, upon written notice to the Executive, to terminate
the Executive's employment hereunder, for cause. For purposes of
this Agreement, the term "cause" shall mean (i) an action or
omission of the Executive which constitutes a willful and material
breach of this Agreement which is not cured within fifteen (15)
days after receipt by the Executive of written notice of same, (ii)
fraud, embezzlement, misappropriation of funds or breach of trust,
(iii) conviction of any crime which involves dishonesty or a breach
of trust, (iv) gross negligence in connection with the performance
of the Executive's duties hereunder, (v) material and willful or
knowing failure or refusal (other than as a result of a disability)
by the Executive to perform his duties hereunder, or (vi) the
formal written request addressed to the Board of Directors of the
Company by any regulatory agency that regulates Capital Bank or
Capital Bancorp that the Executive be removed from his duties
hereunder and setting forth the basis for such request. Any
termination for cause shall be made in writing to the Executive,
which notice shall set forth in detail all acts or omissions upon
which the Company is relying for such termination. The Executive
shall have the right to address the Company's Board regarding the
acts set forth in the notice of termination. Upon any termination
pursuant to this Section 5.1, the Executive shall be entitled to be
paid his Base Salary to the date of termination and the Company
shall have no further liability hereunder (other than for (x)
reimbursement for reasonable business expenses incurred prior to
the date of termination, subject, however, to the provisions of
Section 4.1, and (y) payment of compensation for unused vacation
days that have accumulated during the calendar year in which such
termination occurs).
5.2 Disability. The Company shall at all times have the
right, upon written notice to the Executive, to terminate the
Executive's employment hereunder, if the Executive shall, as the
result of mental or physical incapacity, illness or disability,
become unable to perform his obligations hereunder for a period of
90 consecutive days. Upon any termination pursuant to this Section
5.2, the Company shall (i) pay to the Executive any unpaid Base
Salary through the effective date of termination specified in such
notice, (ii) pay to the Executive the Incentive Compensation, if
any, and Signing Loan Bonus not yet paid to the Executive for any
year prior to such termination, at such times as the Incentive
Compensation and Signing Loan Bonus otherwise would have been
payable to the Executive, (iii) pay to the Executive a severance
payment equal to three (3) months of the Executive's Base Salary at
the time of such disability, (iv) pay to the Executive (within 45
days after the end of the calendar quarter in which such
termination occurs) a prorata portion (based upon the period ending
on the date of termination of the Executive's employment hereunder)
of the Incentive Compensation, if any, for the year in which such
termination occurs, as calculated pursuant to the terms of Section
3.3 hereof and the Incentive Compensation Plan; provided that the
goals under the Incentive Compensation Plan for each period used in
the calculation of the Executive's Incentive Compensation, shall be
based on (1) the portion of the year through the end of the
calendar quarter in which such termination occurs and (2) unaudited
financial information prepared in accordance with generally
accepted accounting principles, applied consistently with prior
periods, as approved and reviewed by the Board, and (v) pay the
Final Signing Loan Bonus pursuant to Section 3.2(c) hereof. The
Company shall have no further liability hereunder (other than for
(x) reimbursement for reasonable business expenses incurred prior
to the date of termination, subject, however to the provisions of
Section 4.1, and (y) payment of compensation for unused vacation
days that have accumulated during the calendar year in which such
termination occurs).
5.3 Death. In the event of the death of the Executive during
the term of his employment hereunder, the Company shall (i) pay to
the estate of the deceased Executive any unpaid Base Salary through
the Executive's date of death, (ii) pay to the estate of the
deceased Executive the Incentive Compensation, if any, and Signing
Loan Bonus not yet paid to the Executive for any year prior to the
date of death, at such time as the Incentive Compensation and
Signing Loan Bonus otherwise would have been payable to the
Executive, (iii) pay to the estate of the deceased Executive
(within 45 days after the end of the calendar quarter in which his
death occurs) a prorata portion (based upon the period ending on
the date of death) of the Incentive Compensation, if any, for the
year in which his death occurs, as calculated pursuant to the terms
of Section 3.3 and the Incentive Compensation Plan; provided that,
the goals under the Incentive Compensation Plan for each period
used in the calculation of the Executive's Incentive Compensation
shall be based on (1) the portion of the year through the end of
the calendar quarter in which the Executive's death occurs, and (2)
unaudited financial information prepared in accordance with
generally accepted accounting principles, applied consistently with
prior periods, as approved and reviewed by the Board, and (iv) pay
the Final Signing Loan Bonus pursuant to Section 3.2(c) hereof.
The Company shall have no further liability hereunder (other than
for (x) reimbursement for reasonable business expenses incurred
prior to the date of the Executive's death, subject, however to the
provisions of Section 4.1, and (y) payment of compensation for
unused vacation days that have accumulated during the calendar year
in which such termination occurs).
5.4 Termination Without Cause. At any time the Company shall
have the right to terminate the Executive's employment hereunder by
written notice to the Executive. Upon any termination pursuant to
this Section 5.4 (that is not a termination under any of Sections
5.1, 5.2, 5.3, 5.5 or 5.6(a)), the Company shall (i) pay to the
Executive any unpaid Base Salary through the effective date of
termination specified in such notice, (ii) pay to the Executive the
Incentive Compensation, if any, and Signing Loan Bonus, not yet
paid to the Executive for any year prior to such termination, at
such time as the Incentive Compensation and Signing Loan Bonus
otherwise would have been payable to the Executive, (iii) continue
to pay the Executive's Base Salary through the Expiration Date, in
the manner and at such time as the Base Salary otherwise would have
been payable to the Executive, (iv) continue to pay the Executive
Incentive Compensation and continue to provide the Executive with
the benefits he was receiving under Sections 4.2, 4.4 and 4.6
hereof, through the Expiration Date, in the manner and at such
times as the compensation or benefits otherwise would have been
payable or provided to the Executive, (v) pay to the Executive as
a single lump sum payment, within 30 days of the termination of his
employment hereunder, a lump sum benefit equal to the value of the
portion of his benefits under any savings, pension, profit sharing
or deferred compensation plans that are forfeited under such plans
by reason of the termination of his employment hereunder, and (vi)
pay the Final Signing Loan Bonus pursuant to Section 3.2(c) hereof.
In the event that the termination of Executive's employment
hereunder shall occur on or before December 31, 1996, then the
Incentive Compensation and benefits payable under clause (iv) of
this Section 5.4 shall be equal to the amounts that would have been
paid or provided to the Executive for the year ended December 31,
1996. In the event that termination of Executive's employment
hereunder shall occur after December 31, 1996, then the Incentive
Compensation, Signing Loan Bonuses and other benefits payable under
clause (iv) of this Section 5.4 shall be equal to the amounts of
such compensation and benefits payable or provided to the Executive
for the calendar year immediately preceding the termination of
Executive's employment hereunder. In the event that the Company is
unable to provide the Executive with a continuation of any savings,
pension, profit-sharing or deferred compensation plans required
hereunder by reason of the termination of the Executive's
employment pursuant to this Section 5.4, then the Company shall pay
the Executive cash equal to the value of the benefit that otherwise
would have accrued for the Executive's benefit under the plan, for
the period during which such benefits could not be provided under
the plans, said cash payments to be made within 45 days after the
end of the year for which such contributions would have been made
or would have accrued. The Company's good faith determination of
the amount that would have been contributed or the value of any
benefits that would have accrued under any plan shall be binding
and conclusive on the Executive. Further, the Executive shall
continue to vest in the Executive's Stock Options through the
Expiration Date in the same manner and to the same extent as if his
employment hereunder terminated on the Expiration Date. The
Company shall have no further liability hereunder (other than for
(x) reimbursement for reasonable business expenses incurred prior
to the date of termination, subject, however, to the provisions of
Section 4.1, (y) payment of compensation for unused vacation days
that have accumulated during the calendar year in which such
termination occurs, and (z) any amounts payable to the Executive
pursuant to Section 5.6 hereof by reason of Section 5.6(c)).
5.5 Resignation by Executive. The Executive shall at all
times have the right, upon ninety (90) days written notice to the
Company, to terminate the Executive's employment hereunder. Upon
any termination pursuant to this Section 5.5, the Company shall (i)
pay to the Executive any unpaid Base Salary through the effective
date of termination specified in such notice and (ii) pay to the
Executive the Incentive Compensation, if any, and Signing Loan
Bonus not yet paid to the Executive for any year prior to such
termination, at such time as the Incentive Compensation and Signing
Loan Bonus otherwise would have been payable to the Executive.
The Company shall have no further liability hereunder (other than
for (x) reimbursement for reasonable business expenses incurred
prior to the date of termination, subject, however, to the
provisions of Section 4.1, (y) payment of compensation for unused
vacation days that have accumulated during the calendar year in
which such termination occurs, and (z) any amounts payable to the
Executive pursuant to Section 5.6 hereof by reason of Section
5.6(c)).
5.6 Change in Control of the Company.
(a) In the event that (x) a Change in Control (as defined
in paragraph (b) of this Section 5.6) in the Company shall occur
during the Initial Term, and (y) within one year after the date of
the Change in Control, the Executive is (i) assigned any position,
duties or responsibilities that are significantly diminished or
changed when compared with the position, duties or responsibilities
of the Executive prior to such Change in Control, (ii) forced to
relocate to another location more than 25 miles from his location
prior to the Change in Control, or (iii) no longer provided
coverage under benefit programs in existence prior to the Change in
Control (unless a comparable substitute is offered); then the
Executive, by written notice to the Company at any time within the
thirty (30) day period following the occurrence of an event
described in clauses (i) through (iii) of this Section 5.6(a),
shall have the right to terminate his employment hereunder. Upon
the voluntary termination by the Executive pursuant to this Section
5.6(a), or the involuntary termination of the Executive by the
Company within one year after the date of a Change in Control, the
Company shall (v) pay to the Executive any unpaid Base Salary
through the effective date of termination, (w) pay to the Executive
the Incentive Compensation, if any, not yet paid to the Executive
for any year prior to such termination, at such time as the
Incentive Compensation otherwise would have been payable to the
Executive, (x) pay to the Executive (within 45 days after the end
of the calendar quarter in which such termination occurs) a prorata
portion (based upon the period ending on the date of termination of
the Executive's employment hereunder) of the Incentive
Compensation, if any, for the year in which such termination
occurs, as calculated pursuant to the terms of Section 3.3 hereof
and the Incentive Compensation Plan; provided that the Company's
goals under the Incentive Compensation Plan for each period used in
the calculation of the Executive's Incentive Compensation, shall be
based on (1) the portion of the year through the end of the
calendar quarter in which such termination occurs, and (2)
unaudited financial information prepared in accordance with
generally accepted accounting principles, applied consistently with
prior periods, as approved and reviewed by the Board, (y) pay the
Final Signing Loan Bonus pursuant to Section 3.2(c) hereof, and (z)
pay to the Executive as a single lump sum payment, within 45 days
of the termination of his employment hereunder, a lump sum payment
equal to the sum of (a) the product of (i) an amount which shall
not be less than one, equal to the number of days between the date
of the Executive's termination of employment with the Company and
the Expiration Date, divided by 365 days, and (ii) his annual Base
Salary, Incentive Compensation, and the value of the annual fringe
benefits required to be provided to the Executive under Sections
4.2 and 4.4 hereof, for the year immediately preceding the year in
which his employment terminates, plus (b) the value of the portion
of his benefits under any savings, pension, profit sharing or
deferred compensation plans that are forfeited under those plans by
reason of the termination of his employment hereunder. Further,
upon the Change in Control, the Executive's Stock Options shall
immediately vest. The Company shall have no further liability
hereunder (other than for (1) reimbursement for reasonable business
expenses incurred prior to the date of termination, subject,
however, to the provisions of Section 4.1, and (2) payment of
compensation for unused vacation days that have accumulated during
the calendar year in which such termination occurs).
(b) For purposes of this Agreement, a "Change in Control"
shall be deemed to have occurred if:
(i) an event which would be required to be reported
in response to Item (a) of the current report on Form 8-K, as in
effect on the date hereof, pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 (the "Exchange Act") occurs and the
transaction required to be reported is consummated;
(ii) an event occurs which results in a change in
control of the Company or Capital Bancorp within the meaning of the
Federal Change in Bank Control Act and/or applicable sections of
the Florida Banking Code and/or the rules and regulations
promulgated by the Board of Governors of the Federal Reserve System
or the Florida Department of Banking as in effect on the date
hereof;
(iii) individuals who constitute the Board of
Directors of each of the Company or Capital Bancorp on the date
hereof (the "Incumbent Board") cease for any reason to constitute
at least a majority thereof, provided that any person becoming a
director subsequent to the date hereof whose election was approved
by a vote of at least three-quarters of the directors comprising
the Incumbent Board, or whose nomination for election by the
Company's stockholders was approved by a majority of the Incumbent
Board, shall be, for purposes of this clause (iii), considered as
though he or she were a member of the Incumbent Board;
(iv) Capital Bancorp ceases to own at least 80% of
the voting stock of the Company;
(v) there occurs any transaction (which shall
include a series of transactions occurring within 60 days or
occurring pursuant to a plan) that has the result that shareholders
of Capital Bancorp immediately before such transaction cease to own
at least 51% of the voting stock of Capital Bancorp or of any
entity that results from the participation of Capital Bancorp in a
reorganization, consolidation, merger, liquidation or other form of
corporate transaction;
(vi) any person or group of persons (other than
those persons who own or control as a group not less than 40% of
the outstanding stock of the Company on the date of this Agreement
(the "Present Control Group")) acting in concert acquire in excess
of both (a) 25% of the outstanding voting stock of Capital Bancorp,
and (b) the number of shares of Capital Bancorp with respect to
which the Present Control Group, in the aggregate, have voting
rights to after such acquisition;
(vii) Capital Bancorp or the Company liquidate or
dissolve; or
(viii) the Company or Capital Bancorp sells, leases,
exchanges or otherwise disposes of all or substantially all of its
property or assets.
(c) In the event that:
(i) the Company enters into a letter of intent or a
definitive agreement for the Company to enter into a transaction
that would constitute a Change in Control (the letter of intent or
definitive agreement being hereinafter referred to as a "Change in
Control Agreement"), and discussions relating to the transaction
reflected in the Change in Control Agreement had commenced while
the Executive was employed by the Company;
(ii) the Change in Control Agreement is entered into
(a) while the Executive is employed by the Company prior to the
Expiration Date, (b) within 90 days after the Company's termination
of the Executive's employment without Cause, or (c) within 90 days
after the Expiration Date if the Executive was employed by the
Company on the Expiration Date;
(iii) the transaction contemplated by the Change in
Control Agreement is effectuated and results in a Change in
Control; and
(iv) within the period that begins on the date on
which the Change in Control Agreement is executed by the Company
and ends one year after the date of the Change in Control, either
(a) the Executive voluntarily terminates his employment hereunder
after one of the events described in clause (i), (ii) or (iii) of
paragraph (a) of this Section 5.6 occurs, or (b) the Executive's
employment with the Company is involuntarily terminated by the
Company;
then the Company shall pay to the Executive the amounts provided in
paragraph 5.6(a), reduced by any amounts paid by the Company to the
Executive under Section 5.4 or 5.5 hereof, and the Executive's
rights to receive any additional amounts under Section 5.4 or 5.5
shall cease.
5.7 Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any
payment, distribution or other action by the Company to or for the
benefit of the Executive (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise,
but determined without regard to any additional payments required
under this Section 5.7) (a "Payment") would be subject to an excise
tax imposed by Section 4999 of the Internal Revenue Code of 1986,
as amended (the "Code"), or any interest or penalties are incurred
by the Executive with respect to any such excise tax (such excise
tax, together with any such interest and penalties, are hereinafter
collectively referred to as the "Excise Tax"), the Company or
Bancorp shall make a payment to the Executive (a "Gross-Up
Payment") in an amount equal to the Excise Tax imposed upon the
Payments.
(b) Subject to the provisions of Section 5.7(c), all
determinations required to be made under this Section 5.7,
including whether and when a Gross-Up Payment is required and the
amount of such Gross-Up Payment and the assumptions to be utilized
in arriving at such determination, shall be made by Deloitte Touche
LLP (the "Accounting Firm") which shall provide detailed supporting
calculations both to the Company and the Executive within 15
business days of the receipt of notice from the Executive that
there has been a Payment, or such earlier time as is requested by
the Company. In the event that the Accounting Firm is serving as
accountant or auditor for the individual, entity or group effecting
the Change of Control, the Executive shall appoint another
nationally recognized accounting firm to make the determinations
required hereunder (which accounting firm shall then be referred to
as the Accounting Firm hereunder). All fees and expenses of the
Accounting Firm shall be borne solely by the Company. Any Gross-Up
Payment, as determined pursuant to this Section 5.7, shall be paid
by the Company to the Executive within five days of the receipt of
the Accounting Firm's determination. If the Accounting Firm
determines that no Excise Tax is payable by the Executive, it shall
furnish the Executive with a written opinion that failure to report
the Excise Tax on the Executive's applicable federal income tax
return would not result in the imposition of a negligence or
similar penalty. Any determination by the Accounting Firm shall be
binding upon the Company and the Executive. As a result of the
uncertainty in the application of Section 4999 of the Code at the
time of the initial determination by the Accounting Firm hereunder,
it is possible that Gross-Up Payments which will not have been made
by the Company should have been made ("Underpayment"), consistent
with the calculations required to be made hereunder. In the event
that the Company exhausts its remedies pursuant to Section 5.7(c)
and the Executive thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall determine the amount of the
Underpayment that has occurred and any such Underpayment shall be
promptly paid by the Company to or for the benefit of the
Executive.
(c) The Executive shall notify the Company in writing of
any claim by the Internal Revenue Service that, if successful,
would require the payment by the Company of the Gross-Up Payment.
Such notification shall be given as soon as practicable but no
later than ten business days after the Executive is informed in
writing of such claim and shall apprise the Company of the nature
of such claim and the date on which such claim is requested to be
paid. The Executive shall not pay such claim prior to the
expiration of the 30-day period following the date on which it
gives such notice to the Company (or such shorter period ending on
the date that any payment of taxes with respect to such claim is
due). If the Company notifies the Executive in writing prior to
the expiration of such period that it desires to contest such
claim, the Executive shall:
(i) give the Company any information reasonably
requested by the Company relating to such claim,
(ii) take such action in connection with contesting
such claim as the Company shall reasonably request in writing from
time to time, including, without limitation, accepting legal
representation with respect to such claim by an attorney reasonably
selected by the Company,
(iii) cooperate with the Company in good faith in
order effectively to contest such claim, and
(iv) permit the Company to participate in any
proceedings relating to such claim;
provided, however, that the Company shall bear and pay directly all
costs and expenses (including additional interest and penalties)
incurred in connection with such contest and shall indemnify and
hold the Executive harmless, on an after-tax basis, for any Excise
Tax or income tax (including interest and penalties with respect
thereto) imposed as a result of such representation and payment of
costs and expenses. Without limitation on the foregoing provisions
of this Section 5.7(c), the Company shall control all proceedings
taken in connection with such contest and, at its sole option, may
pursue or forego any and all administrative appeals, proceedings,
hearings and conferences with the taxing authority in respect of
such claim and may, at its sole option, either direct the Executive
to pay the tax claimed and sue for a refund or contest the claim in
any permissible manner, and the Executive agrees to prosecute such
contest to a determination before any administrative tribunal, in
a court of initial jurisdiction and in one or more appellate
courts, as the Company shall determine; provided, however, that if
the Company directs the Executive to pay such claim and sue for a
refund, the Company shall advance the amount of such payment to the
Executive, on an interest-free basis and shall indemnify and hold
the Executive harmless, on an after-tax basis, from any Excise Tax
or income tax (including interest or penalties with respect
thereto) imposed with respect to such advance or with respect to
any imputed income with respect to such advance; and further
provided that any extension of the statute of limitations relating
to payment of taxes for the taxable year of the Executive with
respect to which such contested amount is claimed to be due is
limited solely to such contested amount. Furthermore, the
Company's control of the contest shall be limited to issues with
respect to which a Gross-Up Payment would be payable hereunder and
the Executive shall be entitled to settle or contest, as the case
may be, any other issue raised by the Internal Revenue Service or
any other taxing authority.
(d) If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 5.7(c), the Executive
becomes entitled to receive any refund with respect to such claim,
the Executive shall (subject to the Company's complying with the
requirements of Section 5.7(c)) promptly pay to the Company the
amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by
the Executive of an amount advanced by the Company pursuant to
Section 5.7(c), a determination is made that the Executive shall
not be entitled to any refund with respect to such claim and the
Company does not notify the Executive in writing of its intent to
contest such denial of refund prior to the expiration of 30 days
after such determination, then such advance shall be forgiven and
shall not be required to be repaid and the amount of such advance
shall offset, to the extent thereof, the amount of Gross-Up Payment
required to be paid.
5.8 Survival. The provisions of this Article 5 shall survive
the termination of this Agreement, as applicable.
6. Restrictive Covenants.
6.1 Non-competition. For the period through the Expiration
Date and at all times while the Executive is employed by the
Company; the Executive shall not, directly or indirectly, engage in
or have any interest in any sole proprietorship, partnership,
corporation or business or any other person or entity (whether as
an employee, officer, director, partner, agent, security holder,
creditor, consultant or otherwise) that directly or indirectly (or
through any affiliated entity) engages in competition with the
Company in any domestic or foreign market (for this purpose, any
financial institution with offices in any city or county in which
the Company has an office will be deemed to be in competition with
the Company); provided that such provision shall not apply to the
Executive's ownership of Common Stock of Bancorp or the acquisition
by the Executive, solely as an investment, of securities of any
issuer that is registered under Section 12(b) or 12(g) of the
Securities Exchange Act of 1934, as amended, and that are listed or
admitted for trading on any United States national securities
exchange or that are quoted on the National Association of
Securities Dealers Automated Quotations System, or any similar
system or automated dissemination of quotations of securities
prices in common use, so long as the Executive is not a member of
any control group (within the meaning of the rules and regulations
of the Securities and Exchange Commission) of any such issuer.
6.2 Nondisclosure. The Executive shall not divulge,
communicate, use to the detriment of the Company or for the benefit
of any other person or persons, or misuse in any way, any
confidential information pertaining to the business of the Company.
Any confidential information or data now or hereafter acquired by
the Executive with respect to the business of the Company (which
shall include, but not be limited to, information concerning the
Company's financial condition, prospects, customers, sources of
leads and methods of doing business) shall be deemed a valuable,
special and unique asset of the Company that is received by the
Executive in confidence and as a fiduciary, and Executive shall
remain a fiduciary to the Company with respect to all of such
information.
6.3 Nonsolicitation of Employees and Clients. For the period
ending on the earlier of (i) termination of Executive's employment
with the Company pursuant to Section 5.6 hereof following a Change
in Control, and (ii) two years following the Expiration Date
(except that, the period shall be six months after the Expiration
Date if (1) the Executive is employed by the Company on the
Expiration Date, and (2) the Company has not offered, at or prior
to the Expiration Date, to employ the Executive after the
Expiration Date on terms that provide for payment of (x) a base
salary equal to or greater than the Base Salary (adjusted for cost-
of-living increases) being paid to the Executive on the Expiration
Date, and (y) incentive compensation on terms equal to or greater
than the Incentive Compensation terms in effect as of the
Expiration Date); the Executive shall not, directly or indirectly,
for himself or for any other person, firm, corporation,
partnership, association or other entity (a) employ or attempt to
employ or enter into any contractual arrangement with any employee
or former employee of the Company, unless such employee or former
employee has not been employed by the Company for a period in
excess of six months, and/or (b) call on or solicit any of the
actual or targeted prospective clients of the Company on behalf of
any person or entity in connection with any business competitive
with the business of the Company, nor shall the Executive make
known the names and addresses of such clients or any information
relating in any manner to the Company's trade or business
relationships with such customers, other than in connection with
the performance of Executive's duties under this Agreement.
6.4 Books and Records. All books, records, and accounts
relating in any manner to the customers or clients of the Company,
whether prepared by the Executive or otherwise coming into the
Executive's possession, shall be the exclusive property of the
Company and shall be returned immediately to the Company on
termination of the Executive's employment hereunder or on the
Company's request at any time.
6.5 Definition of Company. Solely for purposes of this
Section 6, the term "Company" also shall include any future
subsidiaries of the Company that are operating during the time
periods described herein and any other entities that directly or
indirectly, through one or more intermediaries, control, are
controlled by or are under common control with the Company during
the periods described herein.
6.6 Acknowledgment by Executive. The Executive acknowledges
and confirms that the length of the term of the provisions of this
Section 6 and the geographical restrictions contained in Section
6.1 are fair and reasonable and not the result of overreaching,
duress or coercion of any kind. The Executive further acknowledges
and confirms that his full, uninhibited and faithful observance of
each of the covenants contained in this Section 6 will not cause
him any undue hardship, financial or otherwise, and that
enforcement of each of the covenants contained herein will not
impair his ability to obtain employment commensurate with his
abilities and on terms fully acceptable to him or otherwise to
obtain income required for the comfortable support of him and his
family and the satisfaction of the needs of his creditors. The
Executive acknowledges and confirms that his special knowledge of
the business of the Company is such as would cause the Company
serious injury or loss if he were to use such ability and knowledge
to the benefit of a competitor or were to compete with the Company
in violation of the terms of this Section 6.
6.7 Survival. The provisions of this Section 6 shall survive
the termination of this Agreement, as applicable.
7. Injunction. It is recognized and hereby acknowledged by the
parties hereto that a breach by the Executive of any of the
covenants contained in Section 6 of this Agreement will cause
irreparable harm and damage to the Company, the monetary amount of
which may be virtually impossible to ascertain. As a result, the
Executive recognizes and hereby acknowledges that the Company shall
be entitled to an injunction from any court of competent
jurisdiction enjoining and restraining any violation of any or all
of the covenants contained in Section 6 of this Agreement by the
Executive or any of his affiliates, associates, partners or agents,
either directly or indirectly, and that such right to injunction
shall be cumulative and in addition to whatever other remedies the
Company may possess.
8. Assignment. Neither party shall have the right to assign or
delegate his rights or obligations hereunder, or any portion
thereof, to any other person.
9. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Florida.
10. Entire Agreement. This Agreement constitutes the entire
agreement between the parties hereto with respect to the subject
matter hereof and, upon its effectiveness, shall supersede all
prior agreements, understandings and arrangements, both oral and
written, between the Executive and the Company (or any of its
affiliates) with respect to such subject matter. This Agreement
may not be modified in any way unless by a written instrument
signed by both the Company and the Executive.
11. Notices: Any notice required or permitted to be given
hereunder shall be deemed given when delivered by hand or when
deposited in the United States mail, by registered or certified
mail, return receipt requested, postage prepaid, (i) if to the
Company, addressed to Capital Bank, 1221 Brickell Avenue, Miami,
Florida 33133, Attention: President, and (ii) if to the Executive,
to his address as reflected on the payroll records of the Company,
or to such other address as either party hereto may from time to
time give notice of to the other.
12. Benefits; Binding Effect. This Agreement shall be for the
benefit of and binding upon the parties hereto and their respective
heirs, personal representatives, legal representatives, successors
and, where applicable, assigns, including, without limitation, any
successor to the Company, whether by merger, consolidation, sale of
stock, sale of assets or otherwise.
13. Severability. The invalidity of any one or more of the words,
phrases, sentences, clauses or sections contained in this Agreement
shall not affect the enforceability of the remaining portions of
this Agreement or any part thereof, all of which are inserted
conditionally on their being valid in law, and, in the event that
any one or more of the words, phrases, sentences, clauses or
sections contained in this Agreement shall be declared invalid,
this Agreement shall be construed as if such invalid word or words,
phrase or phrases, sentence or sentences, clause or clauses, or
section or sections had not been inserted. If such invalidity is
caused by length of time or size of area, or both, the otherwise
invalid provision will be considered to be reduced to a period or
area which would cure such invalidity.
14. Waivers. The waiver by either party hereto of a breach or
violation of any term or provision of this Agreement shall not
operate nor be construed as a waiver of any subsequent breach or
violation.
15. Damages. Nothing contained herein shall be construed to
prevent the Company or the Executive from seeking and recovering
from the other damages sustained by either or both of them as a
result of its or his breach of any term or provision of this
Agreement. In the event that either party hereto brings suit for
the collection of any damages resulting from, or the injunction of
any action constituting, a breach of any of the terms or provisions
of this Agreement, then the party found to be at fault shall pay
all reasonable court costs and attorneys' fees of the other.
16. Section Headings. The section headings contained in this
Agreement are for reference purposes only and shall not affect in
any way the meaning or interpretation of this Agreement.
17. No Third Party Beneficiary. Nothing expressed or implied in
this Agreement is intended, or shall be construed, to confer upon
or give any person other than the Company, the parties hereto and
their respective heirs, personal representatives, legal
representatives, successors and assigns, any rights or remedies
under or by reason of this Agreement.
18. Indemnification.
(a) Subject to limitations imposed by law, the Company shall
indemnify and hold harmless the Executive to the fullest extent
permitted by law from and against any and all claims, damages,
expenses (including attorneys' fees), judgments, penalties, fines,
settlements, and all other liabilities incurred or paid by him in
connection with the investigation, defense, prosecution, settlement
or appeal of any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or
investigative and to which the Executive was or is a party or is
threatened to be made a party by reason of the fact that the
Executive is or was an officer, employee or agent of the Company,
or by reason of anything done or not done by the Executive in any
such capacity or capacities, provided that the Executive acted in
good faith, in a manner that was not grossly negligent or
constituted wilful misconduct and in a manner he reasonably
believed to be in or not opposed to the best interests of the
Company, and, with respect to any criminal action or proceeding,
had no reasonable cause to believe his conduct was unlawful. The
Company also shall pay any and all expenses (including attorney's
fees) incurred by the Executive as a result of the Executive being
called as a witness in connection with any matter involving the
Company and/or any of its officers or directors. The Company shall
advance.
(b) The Company shall pay any expenses (including attorneys'
fees), judgments, penalties, fines, settlements, and other
liabilities incurred by the Executive in investigating, defending,
settling or appealing any action, suit or proceeding described in
this Section 18 in advance of the final disposition of such action,
suit or proceeding. The Company shall promptly pay the amount of
such expenses to the Executive, but in no event later than 10 days
following the Executive's delivery to the Company of a written
request for an advance pursuant to this Section 18, together with
a reasonable accounting of such expenses.
(c) The Executive hereby undertakes and agrees to repay to
the Company any advances made pursuant to this Section 18 if and to
the extent that it shall ultimately be found that the Executive is
not entitled to be indemnified by the Company for such amounts.
(d) The Company shall make the advances contemplated by this
Section 18 regardless of the Executive's financial ability to make
repayment, and regardless whether indemnification of the Indemnitee
by the Company will ultimately be required. Any advances and
undertakings to repay pursuant to this Section 18 shall be
unsecured and interest-free.
(e) The provisions of this Section 18 shall survive the
termination of this Agreement.
19. Regulatory Limitations. Notwithstanding anything else
contained herein, no payment shall be made hereunder that
constitutes a golden parachute payment or prohibited
indemnification payment in violation of 12 CFR Part 359.
20. Waiver of Jury Trial. The undersigned expressly (i) waive any
right to a trial by jury of any claim, demand, action or cause of
action arising out of this Agreement or in any way related or
incidental to the performance of the parties' obligations
hereunder, and (ii) agree that the Company or the Executive may
file an original counterpart or copy of this Section 20 with any
court as written evidence of the consent to the waiver of the right
to trial by jury.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as
of the date first above written.
COMPANY:
CAPITAL BANK
By: /s/ DANIEL M. HOLTZ
---------------------------------
Daniel M. Holtz
Chief Executive Officer
EXECUTIVE:
/s/ DAVID KONFINO
---------------------------------
DAVID KONFINO<PAGE>
Exhibit 10.8
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is made and entered into on
this 1st day of June, 1996 as of January 1, 1996 by and between
CAPITAL BANK, a Florida corporation (the "Company"), and CHARLES
BOYCE (hereinafter called the "Executive").
R E C I T A L S
A. The Executive is currently employed as the Chief Administrative
Officer of the Company.
B. The Executive possesses intimate knowledge of the business and
affairs of the Company, its policies, methods and personnel.
C. The Board of Directors of the Company (the "Board") recognizes
that the Executive has contributed to the growth and success of the
Company, and desires to assure the Company of the Executive's
continued employment and to compensate him therefor.
D. The Board has determined that this Agreement will reinforce and
encourage the Executive's continued attention and dedication to the
Company.
E. The Executive is willing to make his services available to the
Company and on the terms and conditions hereinafter set forth.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and mutual
covenants set forth herein, the parties agree as follows:
1. Employment.
1.1 Employment and Term. The Company hereby agrees to employ
the Executive and the Executive hereby agrees to serve the Company
on the terms and conditions set forth herein.
1.2 Duties of Executive. During the term of this Agreement,
the Executive shall serve as the Chief Administrative Officer of
the Company, shall diligently perform all services as may be
assigned to him by the Board or the Chief Executive Officer of the
Company (provided that, such services shall not materially differ
from the services currently provided by the Executive), and shall
exercise such power and authority as may from time to time be
delegated to him by the Board or the Chief Executive Officer of the
Company. The Executive shall devote his full time and attention to
the business and affairs of the Company, render such services to
the best of his ability, and use his best efforts to promote the
interests of the Company; provided, however that nothing in this
Agreement shall preclude the Executive from providing services to,
and receiving compensation from, Capital Bancorp., the parent
company of the Company, or any direct or indirect subsidiary of
Capital Bancorp.
2. Term.
2.1 Initial Term. The initial term of this Agreement, and the
employment of the Executive hereunder, shall commence on January 1,
1996 (the "Commencement Date") and shall expire on May 31, 1998
(the "Expiration Date"), unless sooner terminated in accordance
with the terms and conditions hereof (the "Initial Term").
2.2 Renewal Terms. The Initial Term of this Agreement, and
the employment of the Executive hereunder, may be renewed and/or
extended for such period or periods as may be mutually agreed to by
the Company and the Executive in a written supplement to this
Agreement signed by the Executive and the Company ("Written
Supplement"). If this Agreement is not so renewed and/or extended
prior to the expiration of the Initial Term, this Agreement, and
the employment of the Executive hereunder, shall automatically
terminate on the Expiration Date.
3. Compensation.
3.1 Base Salary. The Executive shall receive a base salary at
the annual rate of $134,130 (the "Base Salary") during the term of
this Agreement, with such Base Salary payable in installments
consistent with the Company's normal payroll schedule, subject to
applicable withholding and other taxes. The Base Salary also shall
be reviewed, at least annually, for merit increases and may, by
action and in the discretion of the Board, be increased at any time
or from time to time. If the term of this Agreement shall be
renewed and/or extended as provided in Section 2.2 hereof, then
during such renewal term of his employment hereunder, the Executive
shall be paid a base salary as set forth in the Written Supplement.
3.2 Signing Loan and Bonuses.
(a) Upon execution of this Agreement, Capital Bancorp
("Bancorp") shall loan $50,000 to the Executive (the "Signing
Loan"). The Signing Loan shall bear interest at the "mid-term
applicable federal rate" as such term is defined in Section 1274(d)
of the Internal Revenue Code, with principal and interest being
payable in five (5) equal annual installments. The Signing Loan
shall be evidenced by and payable in accordance with a promissory
note in the form attached hereto as Exhibit "A" and made a part
hereof.
(b) On June 1, 1997, and on June 1 of each of the
succeeding four (4) years during the term of this Agreement, the
Company shall pay an annual bonus (the "Signing Loan Bonus") to the
Executive equal to the quotient obtained by dividing (i) the
payment due on that date under the Signing Loan, by (ii) 100% minus
the highest marginal federal income tax rate applicable to
compensation paid by the Company to the Executive for the year
(excluding any other income or expenses of the Executive). The
portion of the Signing Loan Bonuses that is equal to the payment
due under the Signing Loan shall be paid directly to Bancorp on
behalf of the Executive at such time as the payment is due under
the Signing Loan. The remaining portion of the Signing Loan Bonus,
less applicable withholding taxes on the entire Signing Loan Bonus,
shall be paid to the Executive.
(c) In the event that the Executive's employment with the
Company terminates by reason of the Executive's death or disability
as described under Section 5.2 hereof, is terminated by the Company
without Cause under Section 5.4 hereof, is terminated under Section
5.6 hereof after a Change in Control, or terminates at any time
after the Expiration Date if the Company has not offered the
Executive to renew the term of this Agreement for a period of three
(3) years beyond the Expiration Date on terms substantially the
same as those in effect during the Initial Term, then the Company
shall pay to the Executive, within 45 days of such termination, a
bonus (the "Final Signing Loan Bonus") equal to the quotient
obtained by dividing (i) the amount necessary to repay in full the
outstanding principal and accrued interest on the Signing Loan, by
(ii) 100% minus the highest marginal federal income tax rate
applicable to compensation paid by the Company to the Executive for
the immediately preceding year (excluding any other income or
expenses of the Executive). The portion of the Final Signing Loan
Bonus that is equal to the outstanding principal and accrued
interest on the Signing Loan shall be paid directly to Bancorp, on
behalf of the Executive. The remaining portion of the Final
Signing Loan Bonus, less applicable withholding taxes, shall be
paid to the Executive (or the Executive's estate in the case of the
Executive's death).
3.3 Incentive Compensation.The Executive shall be entitled to
receive incentive compensation ("Incentive Compensation") during
each year of the Initial Term of this Agreement equal to the amount
of incentive compensation for such year determined pursuant to the
Incentive Bonus Plan attached hereto as Exhibit "B" and made a part
hereof, as amended from time to time (the "Incentive Compensation
Plan"). In the event that this Agreement terminates on the
Expiration Date by reason of the expiration of the term of this
Agreement, then the Company shall pay the Executive Incentive
Compensation for the period from January 1, 1998 through May 31,
1998, equal to five-twelfths of the Incentive Compensation, if any,
for calendar year 1998; provided, however, that the Company's goals
under the Incentive Compensation Plan for calendar year 1998 shall
be based on (1) the period from January 1, 1998 through May 31,
1998, and (2) unaudited financial information prepared in
accordance with generally accepted accounting principles, applied
consistently with prior periods, as approved and reviewed by the
Board.
3.4 Section 162(m) Limits. Notwithstanding any other
provision of this Agreement to the contrary, if and to the extent
that any remuneration payable by the Company to the Executive for
any year would exceed the maximum amount of remuneration that the
Company may deduct for that year under Section 162(m) ("Section
162(m)") of the Internal Revenue Code of 1986, as amended (the
"Code"), payment of the portion of the remuneration for that year
that would not be so deductible under Section 162(m) shall, in the
sole discretion of the Board, be deferred and become payable at
such time or times as the Board determines that it first would be
deductible by the Company under Section 162(m), with interest at
the "short-term applicable federal rate" as such term is defined in
Section 1274(d) of the Code. The limitation set forth under this
Section 3.4 shall not apply with respect to any amounts payable to
the Executive pursuant to Section 5.6 hereof.
4. Expense Reimbursement and Other Benefits.
4.1 Reimbursement of Expenses. During the term of Executive's
employment hereunder, the Company, upon the submission of proper
substantiation by the Executive, shall reimburse the Executive for
all reasonable expenses actually paid or incurred by the Executive
in the course of and pursuant to the business of the Company. The
Executive shall account to the Company in writing for all expenses
for which reimbursement is sought and shall supply to the Company
copies of all relevant invoices, receipts or other evidence
reasonably requested by the Company.
4.2 Compensation/Benefit Programs. During the term of this
Agreement, the Executive shall be entitled to participate in all
medical, dental, hospitalization, accidental death and
dismemberment, disability, travel and life insurance plans, and any
and all other plans as are presently and hereinafter offered by the
Company to its executives, including savings, pension, profit-
sharing and deferred compensation plans.
4.3 Working Facilities. The Company shall furnish the
Executive with an office, secretarial help and such other
facilities and services suitable to his position and adequate for
the performance of his duties hereunder.
4.4 Automobile. The Company shall continue to provide the
Executive an automobile comparable to the existing automobile
provided to Executive, together with reimbursement of the operating
expenses thereof.
4.5 Stock Options. During the term of this Agreement, the
Executive shall be eligible to be granted options to purchase
common stock (the "Common Stock") of Bancorp under (and therefore
subject to all terms and conditions of) the Capital Bancorp Stock
Option Plan as amended, and any successor plan thereto (the "Stock
Option Plan") and all rules of regulation of the Securities and
Exchange Commission applicable to stock option plans then in
effect. The number of options and terms and conditions of options
shall be determined by the Stock Option Committee of Bancorp in its
discretion and pursuant to the Stock Option Plan.
4.6 Other Benefits. The Executive shall be entitled to four
weeks of vacation every year. The Executive shall receive such
additional benefits, if any, as the Chief Executive Officer of the
Company shall from time to time determine.
5. Termination.
5.1 Termination for Cause. The Company shall at all times
have the right, upon written notice to the Executive, to terminate
the Executive's employment hereunder, for cause. For purposes of
this Agreement, the term "cause" shall mean (i) an action or
omission of the Executive which constitutes a willful and material
breach of this Agreement which is not cured within fifteen (15)
days after receipt by the Executive of written notice of same, (ii)
fraud, embezzlement, misappropriation of funds or breach of trust,
(iii) conviction of any crime which involves dishonesty or a breach
of trust, (iv) gross negligence in connection with the performance
of the Executive's duties hereunder, (v) material and willful or
knowing failure or refusal (other than as a result of a disability)
by the Executive to perform his duties hereunder, or (vi) the
formal written request addressed to the Board of Directors of the
Company by any regulatory agency that regulates Capital Bank or
Capital Bancorp that the Executive be removed from his duties
hereunder and setting forth the basis for such request. Any
termination for cause shall be made in writing to the Executive,
which notice shall set forth in detail all acts or omissions upon
which the Company is relying for such termination. The Executive
shall have the right to address the Company's Board regarding the
acts set forth in the notice of termination. Upon any termination
pursuant to this Section 5.1, the Executive shall be entitled to be
paid his Base Salary to the date of termination and the Company
shall have no further liability hereunder (other than for (x)
reimbursement for reasonable business expenses incurred prior to
the date of termination, subject, however, to the provisions of
Section 4.1, and (y) payment of compensation for unused vacation
days that have accumulated during the calendar year in which such
termination occurs).
5.2 Disability. The Company shall at all times have the
right, upon written notice to the Executive, to terminate the
Executive's employment hereunder, if the Executive shall, as the
result of mental or physical incapacity, illness or disability,
become unable to perform his obligations hereunder for a period of
90 consecutive days. Upon any termination pursuant to this Section
5.2, the Company shall (i) pay to the Executive any unpaid Base
Salary through the effective date of termination specified in such
notice, (ii) pay to the Executive the Incentive Compensation, if
any, and Signing Loan Bonus not yet paid to the Executive for any
year prior to such termination, at such times as the Incentive
Compensation and Signing Loan Bonus otherwise would have been
payable to the Executive, (iii) pay to the Executive a severance
payment equal to three (3) months of the Executive's Base Salary at
the time of such disability, (iv) pay to the Executive (within 45
days after the end of the calendar quarter in which such
termination occurs) a prorata portion (based upon the period ending
on the date of termination of the Executive's employment hereunder)
of the Incentive Compensation, if any, for the year in which such
termination occurs, as calculated pursuant to the terms of Section
3.3 hereof and the Incentive Compensation Plan; provided that the
goals under the Incentive Compensation Plan for each period used in
the calculation of the Executive's Incentive Compensation, shall be
based on (1) the portion of the year through the end of the
calendar quarter in which such termination occurs and (2) unaudited
financial information prepared in accordance with generally
accepted accounting principles, applied consistently with prior
periods, as approved and reviewed by the Board, and (v) pay the
Final Signing Loan Bonus pursuant to Section 3.2(c) hereof. The
Company shall have no further liability hereunder (other than for
(x) reimbursement for reasonable business expenses incurred prior
to the date of termination, subject, however to the provisions of
Section 4.1, and (y) payment of compensation for unused vacation
days that have accumulated during the calendar year in which such
termination occurs).
5.3 Death. In the event of the death of the Executive during
the term of his employment hereunder, the Company shall (i) pay to
the estate of the deceased Executive any unpaid Base Salary through
the Executive's date of death, (ii) pay to the estate of the
deceased Executive the Incentive Compensation, if any, and Signing
Loan Bonus not yet paid to the Executive for any year prior to the
date of death, at such time as the Incentive Compensation and
Signing Loan Bonus otherwise would have been payable to the
Executive, (iii) pay to the estate of the deceased Executive
(within 45 days after the end of the calendar quarter in which his
death occurs) a prorata portion (based upon the period ending on
the date of death) of the Incentive Compensation, if any, for the
year in which his death occurs, as calculated pursuant to the terms
of Section 3.3 and the Incentive Compensation Plan; provided that,
the goals under the Incentive Compensation Plan for each period
used in the calculation of the Executive's Incentive Compensation
shall be based on (1) the portion of the year through the end of
the calendar quarter in which the Executive's death occurs, and (2)
unaudited financial information prepared in accordance with
generally accepted accounting principles, applied consistently with
prior periods, as approved and reviewed by the Board, and (iv) pay
the Final Signing Loan Bonus pursuant to Section 3.2(c) hereof.
The Company shall have no further liability hereunder (other than
for (x) reimbursement for reasonable business expenses incurred
prior to the date of the Executive's death, subject, however to the
provisions of Section 4.1, and (y) payment of compensation for
unused vacation days that have accumulated during the calendar year
in which such termination occurs).
5.4 Termination Without Cause. At any time the Company shall
have the right to terminate the Executive's employment hereunder by
written notice to the Executive. Upon any termination pursuant to
this Section 5.4 (that is not a termination under any of Sections
5.1, 5.2, 5.3, 5.5 or 5.6(a)), the Company shall (i) pay to the
Executive any unpaid Base Salary through the effective date of
termination specified in such notice, (ii) pay to the Executive the
Incentive Compensation, if any, and Signing Loan Bonus, not yet
paid to the Executive for any year prior to such termination, at
such time as the Incentive Compensation and Signing Loan Bonus
otherwise would have been payable to the Executive, (iii) continue
to pay the Executive's Base Salary through the Expiration Date, in
the manner and at such time as the Base Salary otherwise would have
been payable to the Executive, (iv) continue to pay the Executive
Incentive Compensation and continue to provide the Executive with
the benefits he was receiving under Sections 4.2, 4.4 and 4.6
hereof, through the Expiration Date, in the manner and at such
times as the compensation or benefits otherwise would have been
payable or provided to the Executive, (v) pay to the Executive as
a single lump sum payment, within 30 days of the termination of his
employment hereunder, a lump sum benefit equal to the value of the
portion of his benefits under any savings, pension, profit sharing
or deferred compensation plans that are forfeited under such plans
by reason of the termination of his employment hereunder, and (vi)
pay the Final Signing Loan Bonus pursuant to Section 3.2(c) hereof.
In the event that the termination of Executive's employment
hereunder shall occur on or before December 31, 1996, then the
Incentive Compensation and benefits payable under clause (iv) of
this Section 5.4 shall be equal to the amounts that would have been
paid or provided to the Executive for the year ended December 31,
1996. In the event that termination of Executive's employment
hereunder shall occur after December 31, 1996, then the Incentive
Compensation, Signing Loan Bonuses and other benefits payable under
clause (iv) of this Section 5.4 shall be equal to the amounts of
such compensation and benefits payable or provided to the Executive
for the calendar year immediately preceding the termination of
Executive's employment hereunder. In the event that the Company is
unable to provide the Executive with a continuation of any savings,
pension, profit-sharing or deferred compensation plans required
hereunder by reason of the termination of the Executive's
employment pursuant to this Section 5.4, then the Company shall pay
the Executive cash equal to the value of the benefit that otherwise
would have accrued for the Executive's benefit under the plan, for
the period during which such benefits could not be provided under
the plans, said cash payments to be made within 45 days after the
end of the year for which such contributions would have been made
or would have accrued. The Company's good faith determination of
the amount that would have been contributed or the value of any
benefits that would have accrued under any plan shall be binding
and conclusive on the Executive. Further, the Executive shall
continue to vest in the Executive's Stock Options through the
Expiration Date in the same manner and to the same extent as if his
employment hereunder terminated on the Expiration Date. The
Company shall have no further liability hereunder (other than for
(x) reimbursement for reasonable business expenses incurred prior
to the date of termination, subject, however, to the provisions of
Section 4.1, (y) payment of compensation for unused vacation days
that have accumulated during the calendar year in which such
termination occurs, and (z) any amounts payable to the Executive
pursuant to Section 5.6 hereof by reason of Section 5.6(c)).
5.5 Resignation by Executive. The Executive shall at all
times have the right, upon ninety (90) days written notice to the
Company, to terminate the Executive's employment hereunder. Upon
any termination pursuant to this Section 5.5, the Company shall (i)
pay to the Executive any unpaid Base Salary through the effective
date of termination specified in such notice and (ii) pay to the
Executive the Incentive Compensation, if any, and Signing Loan
Bonus not yet paid to the Executive for any year prior to such
termination, at such time as the Incentive Compensation and Signing
Loan Bonus otherwise would have been payable to the Executive.
The Company shall have no further liability hereunder (other than
for (x) reimbursement for reasonable business expenses incurred
prior to the date of termination, subject, however, to the
provisions of Section 4.1, (y) payment of compensation for unused
vacation days that have accumulated during the calendar year in
which such termination occurs, and (z) any amounts payable to the
Executive pursuant to Section 5.6 hereof by reason of Section
5.6(c)).
5.6 Change in Control of the Company.
(a) In the event that (x) a Change in Control (as defined
in paragraph (b) of this Section 5.6) in the Company shall occur
during the Initial Term, and (y) within one year after the date of
the Change in Control, the Executive is (i) assigned any position,
duties or responsibilities that are significantly diminished or
changed when compared with the position, duties or responsibilities
of the Executive prior to such Change in Control, (ii) forced to
relocate to another location more than 25 miles from his location
prior to the Change in Control, or (iii) no longer provided
coverage under benefit programs in existence prior to the Change in
Control (unless a comparable substitute is offered); then the
Executive, by written notice to the Company at any time within the
thirty (30) day period following the occurrence of an event
described in clauses (i) through (iii) of this Section 5.6(a),
shall have the right to terminate his employment hereunder. Upon
the voluntary termination by the Executive pursuant to this Section
5.6(a), or the involuntary termination of the Executive by the
Company within one year after the date of a Change in Control, the
Company shall (v) pay to the Executive any unpaid Base Salary
through the effective date of termination, (w) pay to the Executive
the Incentive Compensation, if any, not yet paid to the Executive
for any year prior to such termination, at such time as the
Incentive Compensation otherwise would have been payable to the
Executive, (x) pay to the Executive (within 45 days after the end
of the calendar quarter in which such termination occurs) a prorata
portion (based upon the period ending on the date of termination of
the Executive's employment hereunder) of the Incentive
Compensation, if any, for the year in which such termination
occurs, as calculated pursuant to the terms of Section 3.3 hereof
and the Incentive Compensation Plan; provided that the Company's
goals under the Incentive Compensation Plan for each period used in
the calculation of the Executive's Incentive Compensation, shall be
based on (1) the portion of the year through the end of the
calendar quarter in which such termination occurs, and (2)
unaudited financial information prepared in accordance with
generally accepted accounting principles, applied consistently with
prior periods, as approved and reviewed by the Board, (y) pay the
Final Signing Loan Bonus pursuant to Section 3.2(c) hereof, and (z)
pay to the Executive as a single lump sum payment, within 45 days
of the termination of his employment hereunder, a lump sum payment
equal to the sum of (a) the product of (i) an amount which shall
not be less than one, equal to the number of days between the date
of the Executive's termination of employment with the Company and
the Expiration Date, divided by 365 days, and (ii) his annual Base
Salary, Incentive Compensation, and the value of the annual fringe
benefits required to be provided to the Executive under Sections
4.2 and 4.4 hereof, for the year immediately preceding the year in
which his employment terminates, plus (b) the value of the portion
of his benefits under any savings, pension, profit sharing or
deferred compensation plans that are forfeited under those plans by
reason of the termination of his employment hereunder. Further,
upon the Change in Control, the Executive's Stock Options shall
immediately vest. The Company shall have no further liability
hereunder (other than for (1) reimbursement for reasonable business
expenses incurred prior to the date of termination, subject,
however, to the provisions of Section 4.1, and (2) payment of
compensation for unused vacation days that have accumulated during
the calendar year in which such termination occurs).
(b) For purposes of this Agreement, a "Change in Control"
shall be deemed to have occurred if:
(i) an event which would be required to be reported
in response to Item (a) of the current report on Form 8-K, as in
effect on the date hereof, pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 (the "Exchange Act") occurs and the
transaction required to be reported is consummated;
(ii) an event occurs which results in a change in
control of the Company or Capital Bancorp within the meaning of the
Federal Change in Bank Control Act and/or applicable sections of
the Florida Banking Code and/or the rules and regulations
promulgated by the Board of Governors of the Federal Reserve System
or the Florida Department of Banking as in effect on the date
hereof;
(iii) individuals who constitute the Board of
Directors of each of the Company or Capital Bancorp on the date
hereof (the "Incumbent Board") cease for any reason to constitute
at least a majority thereof, provided that any person becoming a
director subsequent to the date hereof whose election was approved
by a vote of at least three-quarters of the directors comprising
the Incumbent Board, or whose nomination for election by the
Company's stockholders was approved by a majority of the Incumbent
Board, shall be, for purposes of this clause (iii), considered as
though he or she were a member of the Incumbent Board;
(iv) Capital Bancorp ceases to own at least 80% of
the voting stock of the Company;
(v) there occurs any transaction (which shall
include a series of transactions occurring within 60 days or
occurring pursuant to a plan) that has the result that shareholders
of Capital Bancorp immediately before such transaction cease to own
at least 51% of the voting stock of Capital Bancorp or of any
entity that results from the participation of Capital Bancorp in a
reorganization, consolidation, merger, liquidation or other form of
corporate transaction;
(vi) any person or group of persons (other than
those persons who own or control as a group not less than 40% of
the outstanding stock of the Company on the date of this Agreement
(the "Present Control Group")) acting in concert acquire in excess
of both (a) 25% of the outstanding voting stock of Capital Bancorp,
and (b) the number of shares of Capital Bancorp with respect to
which the Present Control Group, in the aggregate, have voting
rights to after such acquisition;
(vii) Capital Bancorp or the Company liquidate or
dissolve; or
(viii) the Company or Capital Bancorp sells, leases,
exchanges or otherwise disposes of all or substantially all of its
property or assets.
(c) In the event that:
(i) the Company enters into a letter of intent or a
definitive agreement for the Company to enter into a transaction
that would constitute a Change in Control (the letter of intent or
definitive agreement being hereinafter referred to as a "Change in
Control Agreement"), and discussions relating to the transaction
reflected in the Change in Control Agreement had commenced while
the Executive was employed by the Company;
(ii) the Change in Control Agreement is entered into
(a) while the Executive is employed by the Company prior to the
Expiration Date, (b) within 90 days after the Company's termination
of the Executive's employment without Cause, or (c) within 90 days
after the Expiration Date if the Executive was employed by the
Company on the Expiration Date;
(iii) the transaction contemplated by the Change in
Control Agreement is effectuated and results in a Change in
Control; and
(iv) within the period that begins on the date on
which the Change in Control Agreement is executed by the Company
and ends one year after the date of the Change in Control, either
(a) the Executive voluntarily terminates his employment hereunder
after one of the events described in clause (i), (ii) or (iii) of
paragraph (a) of this Section 5.6 occurs, or (b) the Executive's
employment with the Company is involuntarily terminated by the
Company;
then the Company shall pay to the Executive the amounts provided in
paragraph 5.6(a), reduced by any amounts paid by the Company to the
Executive under Section 5.4 or 5.5 hereof, and the Executive's
rights to receive any additional amounts under Section 5.4 or 5.5
shall cease.
5.7 Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any
payment, distribution or other action by the Company to or for the
benefit of the Executive (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise,
but determined without regard to any additional payments required
under this Section 5.7) (a "Payment") would be subject to an excise
tax imposed by Section 4999 of the Internal Revenue Code of 1986,
as amended (the "Code"), or any interest or penalties are incurred
by the Executive with respect to any such excise tax (such excise
tax, together with any such interest and penalties, are hereinafter
collectively referred to as the "Excise Tax"), the Company or
Bancorp shall make a payment to the Executive (a "Gross-Up
Payment") in an amount equal to the Excise Tax imposed upon the
Payments.
(b) Subject to the provisions of Section 5.7(c), all
determinations required to be made under this Section 5.7,
including whether and when a Gross-Up Payment is required and the
amount of such Gross-Up Payment and the assumptions to be utilized
in arriving at such determination, shall be made by Deloitte Touche
LLP (the "Accounting Firm") which shall provide detailed supporting
calculations both to the Company and the Executive within 15
business days of the receipt of notice from the Executive that
there has been a Payment, or such earlier time as is requested by
the Company. In the event that the Accounting Firm is serving as
accountant or auditor for the individual, entity or group effecting
the Change of Control, the Executive shall appoint another
nationally recognized accounting firm to make the determinations
required hereunder (which accounting firm shall then be referred to
as the Accounting Firm hereunder). All fees and expenses of the
Accounting Firm shall be borne solely by the Company. Any Gross-Up
Payment, as determined pursuant to this Section 5.7, shall be paid
by the Company to the Executive within five days of the receipt of
the Accounting Firm's determination. If the Accounting Firm
determines that no Excise Tax is payable by the Executive, it shall
furnish the Executive with a written opinion that failure to report
the Excise Tax on the Executive's applicable federal income tax
return would not result in the imposition of a negligence or
similar penalty. Any determination by the Accounting Firm shall be
binding upon the Company and the Executive. As a result of the
uncertainty in the application of Section 4999 of the Code at the
time of the initial determination by the Accounting Firm hereunder,
it is possible that Gross-Up Payments which will not have been made
by the Company should have been made ("Underpayment"), consistent
with the calculations required to be made hereunder. In the event
that the Company exhausts its remedies pursuant to Section 5.7(c)
and the Executive thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall determine the amount of the
Underpayment that has occurred and any such Underpayment shall be
promptly paid by the Company to or for the benefit of the
Executive.
(c) The Executive shall notify the Company in writing of
any claim by the Internal Revenue Service that, if successful,
would require the payment by the Company of the Gross-Up Payment.
Such notification shall be given as soon as practicable but no
later than ten business days after the Executive is informed in
writing of such claim and shall apprise the Company of the nature
of such claim and the date on which such claim is requested to be
paid. The Executive shall not pay such claim prior to the
expiration of the 30-day period following the date on which it
gives such notice to the Company (or such shorter period ending on
the date that any payment of taxes with respect to such claim is
due). If the Company notifies the Executive in writing prior to
the expiration of such period that it desires to contest such
claim, the Executive shall:
(i) give the Company any information reasonably
requested by the Company relating to such claim,
(ii) take such action in connection with contesting
such claim as the Company shall reasonably request in writing from
time to time, including, without limitation, accepting legal
representation with respect to such claim by an attorney reasonably
selected by the Company,
(iii) cooperate with the Company in good faith in
order effectively to contest such claim, and
(iv) permit the Company to participate in any
proceedings relating to such claim;
provided, however, that the Company shall bear and pay directly all
costs and expenses (including additional interest and penalties)
incurred in connection with such contest and shall indemnify and
hold the Executive harmless, on an after-tax basis, for any Excise
Tax or income tax (including interest and penalties with respect
thereto) imposed as a result of such representation and payment of
costs and expenses. Without limitation on the foregoing provisions
of this Section 5.7(c), the Company shall control all proceedings
taken in connection with such contest and, at its sole option, may
pursue or forego any and all administrative appeals, proceedings,
hearings and conferences with the taxing authority in respect of
such claim and may, at its sole option, either direct the Executive
to pay the tax claimed and sue for a refund or contest the claim in
any permissible manner, and the Executive agrees to prosecute such
contest to a determination before any administrative tribunal, in
a court of initial jurisdiction and in one or more appellate
courts, as the Company shall determine; provided, however, that if
the Company directs the Executive to pay such claim and sue for a
refund, the Company shall advance the amount of such payment to the
Executive, on an interest-free basis and shall indemnify and hold
the Executive harmless, on an after-tax basis, from any Excise Tax
or income tax (including interest or penalties with respect
thereto) imposed with respect to such advance or with respect to
any imputed income with respect to such advance; and further
provided that any extension of the statute of limitations relating
to payment of taxes for the taxable year of the Executive with
respect to which such contested amount is claimed to be due is
limited solely to such contested amount. Furthermore, the
Company's control of the contest shall be limited to issues with
respect to which a Gross-Up Payment would be payable hereunder and
the Executive shall be entitled to settle or contest, as the case
may be, any other issue raised by the Internal Revenue Service or
any other taxing authority.
(d) If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 5.7(c), the Executive
becomes entitled to receive any refund with respect to such claim,
the Executive shall (subject to the Company's complying with the
requirements of Section 5.7(c)) promptly pay to the Company the
amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by
the Executive of an amount advanced by the Company pursuant to
Section 5.7(c), a determination is made that the Executive shall
not be entitled to any refund with respect to such claim and the
Company does not notify the Executive in writing of its intent to
contest such denial of refund prior to the expiration of 30 days
after such determination, then such advance shall be forgiven and
shall not be required to be repaid and the amount of such advance
shall offset, to the extent thereof, the amount of Gross-Up Payment
required to be paid.
5.8 Survival. The provisions of this Article 5 shall survive
the termination of this Agreement, as applicable.
6. Restrictive Covenants.
6.1 Non-competition. For the period through the Expiration
Date and at all times while the Executive is employed by the
Company; the Executive shall not, directly or indirectly, engage in
or have any interest in any sole proprietorship, partnership,
corporation or business or any other person or entity (whether as
an employee, officer, director, partner, agent, security holder,
creditor, consultant or otherwise) that directly or indirectly (or
through any affiliated entity) engages in competition with the
Company in any domestic or foreign market (for this purpose, any
financial institution with offices in any city or county in which
the Company has an office will be deemed to be in competition with
the Company); provided that such provision shall not apply to the
Executive's ownership of Common Stock of Bancorp or the acquisition
by the Executive, solely as an investment, of securities of any
issuer that is registered under Section 12(b) or 12(g) of the
Securities Exchange Act of 1934, as amended, and that are listed or
admitted for trading on any United States national securities
exchange or that are quoted on the National Association of
Securities Dealers Automated Quotations System, or any similar
system or automated dissemination of quotations of securities
prices in common use, so long as the Executive is not a member of
any control group (within the meaning of the rules and regulations
of the Securities and Exchange Commission) of any such issuer.
6.2 Nondisclosure. The Executive shall not divulge,
communicate, use to the detriment of the Company or for the benefit
of any other person or persons, or misuse in any way, any
confidential information pertaining to the business of the Company.
Any confidential information or data now or hereafter acquired by
the Executive with respect to the business of the Company (which
shall include, but not be limited to, information concerning the
Company's financial condition, prospects, customers, sources of
leads and methods of doing business) shall be deemed a valuable,
special and unique asset of the Company that is received by the
Executive in confidence and as a fiduciary, and Executive shall
remain a fiduciary to the Company with respect to all of such
information.
6.3 Nonsolicitation of Employees and Clients. For the period
ending on the earlier of (i) termination of Executive's employment
with the Company pursuant to Section 5.6 hereof following a Change
in Control, and (ii) two years following the Expiration Date
(except that, the period shall be six months after the Expiration
Date if (1) the Executive is employed by the Company on the
Expiration Date, and (2) the Company has not offered, at or prior
to the Expiration Date, to employ the Executive after the
Expiration Date on terms that provide for payment of (x) a base
salary equal to or greater than the Base Salary (adjusted for cost-
of-living increases) being paid to the Executive on the Expiration
Date, and (y) incentive compensation on terms equal to or greater
than the Incentive Compensation terms in effect as of the
Expiration Date); the Executive shall not, directly or indirectly,
for himself or for any other person, firm, corporation,
partnership, association or other entity (a) employ or attempt to
employ or enter into any contractual arrangement with any employee
or former employee of the Company, unless such employee or former
employee has not been employed by the Company for a period in
excess of six months, and/or (b) call on or solicit any of the
actual or targeted prospective clients of the Company on behalf of
any person or entity in connection with any business competitive
with the business of the Company, nor shall the Executive make
known the names and addresses of such clients or any information
relating in any manner to the Company's trade or business
relationships with such customers, other than in connection with
the performance of Executive's duties under this Agreement.
6.4 Books and Records. All books, records, and accounts
relating in any manner to the customers or clients of the Company,
whether prepared by the Executive or otherwise coming into the
Executive's possession, shall be the exclusive property of the
Company and shall be returned immediately to the Company on
termination of the Executive's employment hereunder or on the
Company's request at any time.
6.5 Definition of Company. Solely for purposes of this
Section 6, the term "Company" also shall include any future
subsidiaries of the Company that are operating during the time
periods described herein and any other entities that directly or
indirectly, through one or more intermediaries, control, are
controlled by or are under common control with the Company during
the periods described herein.
6.6 Acknowledgment by Executive. The Executive acknowledges
and confirms that the length of the term of the provisions of this
Section 6 and the geographical restrictions contained in Section
6.1 are fair and reasonable and not the result of overreaching,
duress or coercion of any kind. The Executive further acknowledges
and confirms that his full, uninhibited and faithful observance of
each of the covenants contained in this Section 6 will not cause
him any undue hardship, financial or otherwise, and that
enforcement of each of the covenants contained herein will not
impair his ability to obtain employment commensurate with his
abilities and on terms fully acceptable to him or otherwise to
obtain income required for the comfortable support of him and his
family and the satisfaction of the needs of his creditors. The
Executive acknowledges and confirms that his special knowledge of
the business of the Company is such as would cause the Company
serious injury or loss if he were to use such ability and knowledge
to the benefit of a competitor or were to compete with the Company
in violation of the terms of this Section 6.
6.7 Survival. The provisions of this Section 6 shall survive
the termination of this Agreement, as applicable.
7. Injunction. It is recognized and hereby acknowledged by the
parties hereto that a breach by the Executive of any of the
covenants contained in Section 6 of this Agreement will cause
irreparable harm and damage to the Company, the monetary amount of
which may be virtually impossible to ascertain. As a result, the
Executive recognizes and hereby acknowledges that the Company shall
be entitled to an injunction from any court of competent
jurisdiction enjoining and restraining any violation of any or all
of the covenants contained in Section 6 of this Agreement by the
Executive or any of his affiliates, associates, partners or agents,
either directly or indirectly, and that such right to injunction
shall be cumulative and in addition to whatever other remedies the
Company may possess.
8. Assignment. Neither party shall have the right to assign or
delegate his rights or obligations hereunder, or any portion
thereof, to any other person.
9. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Florida.
10. Entire Agreement. This Agreement constitutes the entire
agreement between the parties hereto with respect to the subject
matter hereof and, upon its effectiveness, shall supersede all
prior agreements, understandings and arrangements, both oral and
written, between the Executive and the Company (or any of its
affiliates) with respect to such subject matter. This Agreement
may not be modified in any way unless by a written instrument
signed by both the Company and the Executive.
11. Notices: Any notice required or permitted to be given
hereunder shall be deemed given when delivered by hand or when
deposited in the United States mail, by registered or certified
mail, return receipt requested, postage prepaid, (i) if to the
Company, addressed to Capital Bank, 1221 Brickell Avenue, Miami,
Florida 33133, Attention: President, and (ii) if to the Executive,
to his address as reflected on the payroll records of the Company,
or to such other address as either party hereto may from time to
time give notice of to the other.
12. Benefits; Binding Effect. This Agreement shall be for the
benefit of and binding upon the parties hereto and their respective
heirs, personal representatives, legal representatives, successors
and, where applicable, assigns, including, without limitation, any
successor to the Company, whether by merger, consolidation, sale of
stock, sale of assets or otherwise.
13. Severability. The invalidity of any one or more of the words,
phrases, sentences, clauses or sections contained in this Agreement
shall not affect the enforceability of the remaining portions of
this Agreement or any part thereof, all of which are inserted
conditionally on their being valid in law, and, in the event that
any one or more of the words, phrases, sentences, clauses or
sections contained in this Agreement shall be declared invalid,
this Agreement shall be construed as if such invalid word or words,
phrase or phrases, sentence or sentences, clause or clauses, or
section or sections had not been inserted. If such invalidity is
caused by length of time or size of area, or both, the otherwise
invalid provision will be considered to be reduced to a period or
area which would cure such invalidity.
14. Waivers. The waiver by either party hereto of a breach or
violation of any term or provision of this Agreement shall not
operate nor be construed as a waiver of any subsequent breach or
violation.
15. Damages. Nothing contained herein shall be construed to
prevent the Company or the Executive from seeking and recovering
from the other damages sustained by either or both of them as a
result of its or his breach of any term or provision of this
Agreement. In the event that either party hereto brings suit for
the collection of any damages resulting from, or the injunction of
any action constituting, a breach of any of the terms or provisions
of this Agreement, then the party found to be at fault shall pay
all reasonable court costs and attorneys' fees of the other.
16. Section Headings. The section headings contained in this
Agreement are for reference purposes only and shall not affect in
any way the meaning or interpretation of this Agreement.
17. No Third Party Beneficiary. Nothing expressed or implied in
this Agreement is intended, or shall be construed, to confer upon
or give any person other than the Company, the parties hereto and
their respective heirs, personal representatives, legal
representatives, successors and assigns, any rights or remedies
under or by reason of this Agreement.
18. Indemnification.
(a) Subject to limitations imposed by law, the Company shall
indemnify and hold harmless the Executive to the fullest extent
permitted by law from and against any and all claims, damages,
expenses (including attorneys' fees), judgments, penalties, fines,
settlements, and all other liabilities incurred or paid by him in
connection with the investigation, defense, prosecution, settlement
or appeal of any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or
investigative and to which the Executive was or is a party or is
threatened to be made a party by reason of the fact that the
Executive is or was an officer, employee or agent of the Company,
or by reason of anything done or not done by the Executive in any
such capacity or capacities, provided that the Executive acted in
good faith, in a manner that was not grossly negligent or
constituted wilful misconduct and in a manner he reasonably
believed to be in or not opposed to the best interests of the
Company, and, with respect to any criminal action or proceeding,
had no reasonable cause to believe his conduct was unlawful. The
Company also shall pay any and all expenses (including attorney's
fees) incurred by the Executive as a result of the Executive being
called as a witness in connection with any matter involving the
Company and/or any of its officers or directors. The Company shall
advance.
(b) The Company shall pay any expenses (including attorneys'
fees), judgments, penalties, fines, settlements, and other
liabilities incurred by the Executive in investigating, defending,
settling or appealing any action, suit or proceeding described in
this Section 18 in advance of the final disposition of such action,
suit or proceeding. The Company shall promptly pay the amount of
such expenses to the Executive, but in no event later than 10 days
following the Executive's delivery to the Company of a written
request for an advance pursuant to this Section 18, together with
a reasonable accounting of such expenses.
(c) The Executive hereby undertakes and agrees to repay to
the Company any advances made pursuant to this Section 18 if and to
the extent that it shall ultimately be found that the Executive is
not entitled to be indemnified by the Company for such amounts.
(d) The Company shall make the advances contemplated by this
Section 18 regardless of the Executive's financial ability to make
repayment, and regardless whether indemnification of the Indemnitee
by the Company will ultimately be required. Any advances and
undertakings to repay pursuant to this Section 18 shall be
unsecured and interest-free.
(e) The provisions of this Section 18 shall survive the
termination of this Agreement.
19. Regulatory Limitations. Notwithstanding anything else
contained herein, no payment shall be made hereunder that
constitutes a golden parachute payment or prohibited
indemnification payment in violation of 12 CFR Part 359.
20. Waiver of Jury Trial. The undersigned expressly (i) waive any
right to a trial by jury of any claim, demand, action or cause of
action arising out of this Agreement or in any way related or
incidental to the performance of the parties' obligations
hereunder, and (ii) agree that the Company or the Executive may
file an original counterpart or copy of this Section 20 with any
court as written evidence of the consent to the waiver of the right
to trial by jury.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as
of the date first above written.
COMPANY:
CAPITAL BANK
By: /s/ DANIEL M. HOLTZ
---------------------------------
Daniel M. Holtz
Chief Executive Officer
EXECUTIVE:
/s/ CHARLES BOYCE
---------------------------------
CHARLES BOYCE<PAGE>
EXHIBIT 10.9
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is made and entered into as
of January 1, 1996 by and between CAPITAL FACTORS HOLDING, INC., a
Florida corporation (the "Company"), CAPITAL FACTORS, INC., a
Florida corporation ("Factors"), and JOHN W. KIEFER (hereinafter
called the "Executive").
R E C I T A L S
A. The Executive is currently employed as President and Chief
Executive Officer of the Company and of its direct and indirect
subsidiaries, including Factors (collectively, the "Subsidiaries").
B. The Executive possesses intimate knowledge of the business and
affairs of the Company and the Subsidiaries, their policies,
methods and personnel.
C. The Board of Directors of the Company (the "Board") recognizes
that the Executive has contributed to the growth and success of the
Company and the Subsidiaries, and desires to assure the Company and
the Subsidiaries of the Executive's continued employment and to
compensate him therefor.
D. The Board has determined that this Agreement will reinforce and
encourage the Executive's continued attention and dedication to the
Company and the Subsidiaries.
E. The Executive is willing to make his services available to the
Company and the Subsidiaries on the terms and conditions
hereinafter set forth.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and mutual
covenants set forth herein, the parties agree as follows:
1. Employment.
1.1 Employment and Terms. The Company hereby agrees to employ
the Executive and the Executive hereby agrees to serve the Company
and its Subsidiaries, including Factors, on the terms and
conditions set forth herein.
1.2 Duties of Executive. During the term of this Agreement,
the Executive shall serve as the President and Chief Executive
Officer of the Company and of such of the Subsidiaries, including
Factors, as directed by the Board, shall diligently perform all
services as may be assigned to him by the Board (provided that,
such services shall not materially differ from the services
currently provided by the Executive), and shall exercise such power
and authority as may from time to time be delegated to him by the
Board. The Executive shall devote his full time and attention to
the business and affairs of the Company and the Subsidiaries,
render such services to the best of his ability, and use his best
efforts to promote the interests of the Company and the
Subsidiaries.
2. Term. The term of this Agreement, and the employment of the
Executive hereunder, shall commence as of January 1, 1996 (the
"Commencement Date") and shall expire on December 31, 2000 (the
"Expiration Date"), unless sooner terminated prior to the
Expiration Date in accordance with the terms and conditions hereof
(the "Term").
3. Compensation.
3.1 Base Salary. The Executive shall receive a base salary at
the annual rate of $300,000 (the "Base Salary") during the term of
this Agreement, with such Base Salary payable in installments
consistent with the Company's or Capital Factors, Inc.'s normal
payroll schedule, subject to applicable withholding and other
taxes. The Base Salary shall be reviewed, at least annually, for
merit increases and may, by action and in the discretion of the
Board or the Company's Compensation and Benefits Committee, be
increased at any time or from time to time. At a minimum, the Base
Salary shall be increased each year by $25,000.
3.2 Signing Bonus and Company Loan. Upon execution of this
Agreement, the Company shall: (i) pay the Executive $250,000 in
cash as a signing bonus, subject to applicable withholding and
other taxes; and (ii) loan the Executive $100,000 (the "Company
Loan"). The Company Loan shall bear interest at the "mid-term
applicable federal rate" as such term is defined in Section 1274(d)
of the Internal Revenue Code. The entire principal balance
together with all accrued interest thereon shall be due and payable
in full on the earlier of (i) the Expiration Date or (ii) the
termination of this Agreement. Notwithstanding the foregoing, the
Company shall, for each December 31st during the Term that
Executive continues to be employed by the Company, forgive 20
percent of the outstanding principal balance of the Company Loan
together with all accrued interest attributable to the forgiven
principal. In the event of the death or disability of the
Executive, the Company Loan shall be forgiven in full. The
Executive or his estate shall be responsible for all applicable
withholding and other taxes attributable to the forgiveness of
indebtedness and such forgiveness shall be expressly conditioned
upon the Executive satisfying all such withholding and other tax
obligations.
3.3 Annual Bonuses. The Executive shall be entitled to
receive incentive compensation ("Incentive Compensation") for each
year during the Term of this Agreement, commencing with the 1996
year, as set forth below:
(a) Attached hereto as Exhibits "A" and "B" is
Executive's strategic plan (the "Plan") for the Company and the
Subsidiaries during the Term, including projections as to net
revenues ("Projected Net Revenues") and net earnings before income
taxes ("Projected EBT") as set forth on Exhibits "A" and "B."
Exhibit "A" assumes completion of a Public Offering (as defined in
Section 4.5 hereof). For purposes hereof, "Net Revenues" is the
sum of (i) the difference between interest income and interest
expense, (ii) factoring fees or commission income and (iii) other
income. For purposes hereof, "EBT" is net earnings before income
taxes or the difference between (i) Net Revenues and (ii) the sum
of total operating expenses and any provisions, and is otherwise
referred to in the Plan and on the Company's consolidated financial
statements as "Income Before Income Taxes."
(b) Not less than 45 days prior to the beginning of each
calendar year during the Term, the Executive shall propose an
annual budget for the forthcoming year (the "Annual Budget").
Approval of each Annual Budget shall be in the sole discretion of
the Board and the Company's Compensation and Benefits Committee.
After 1996, in no event shall Net Revenues and EBT in any Annual
Budget be less than Projected Net Revenues and Projected EBT as set
forth on Exhibit "A" or Exhibit "B" hereto, as applicable, for the
preceding calendar year, unless otherwise agreed by the Board and
the Company's Compensation and Benefits Committee in its sole
discretion. Exhibit "A" shall be used to determine Projected Net
Revenues and Projected EBT if the Company has completed a Public
Offering (as defined in Section 4.5 hereof) on or prior to the year
applicable. Otherwise, Exhibit "B" shall be used to determined
Projected Net Revenues and Projected EBT. For purposes of this
Agreement, the Net Revenues and EBT as set forth in any Annual
Budget shall be referred to as "Target Net Revenues" and "Target
EBT" for the calendar year with respect to which the Annual Budget
was prepared. Furthermore, Target Net Revenues and Target EBT for
1996 are $45,289,295 and $18,606,913, respectively, if an IPO is
completed in 1996 and $43,915,787 and $17,233,405, respectively, if
an IPO is not completed in 1996.
(c) Within 90 days after the end of each calendar year
during the Term, the Company shall calculate Net Revenues for such
preceding calendar year. In addition, the Company shall calculate
an amount equal to the quotient of Net Revenues for such year
divided by Target Net Revenues for such year (the "Net Revenues
Realization Ratio"). For each such year, the Executive shall be
entitled to a bonus (the "Net Revenues Bonus") equal to the product
of (i) Base Salary for the applicable year and (ii) the applicable
percentage (the "Applicable Percentage") set forth on Exhibit "C"
to this Agreement next to the Net Revenues Realization Ratio that
is equal to or, if not equal, closest to but less than the Net
Revenues Realization Ratio for that year. For example, the Net
Revenues Bonus shall be 20% of Base Salary if Net Revenues = Target
Net Revenues.
(d) Within 90 days after the end of each calendar year
during the Term, the Company shall calculate EBT for such preceding
calendar year. In addition, the Company shall calculate an amount
equal to the quotient of EBT for such year divided by Target EBT
for such year (the "EBT Realization Ratio"). For each such year,
the Executive shall be entitled to a bonus (the "EBT Bonus") equal
to the product of (i) Base Salary for the applicable year and (ii)
the Applicable Percentage set forth on Exhibit "D" to this
Agreement next to the EBT Realization Ratio that is equal to or, if
not equal, closest to but less than the EBT Realization Ratio for
that year. For example, the EBT Bonus shall be 80% of Base Salary
if EBT = Target EBT.
(e) Net Revenues and EBT for each year during the Term
shall be as reported on or calculated from the Company's annual
audited consolidated financial statements for the Company's
calendar year and shall be calculated in accordance with generally
accepted accounting principles, applied consistently with prior
periods.
(f) The Executive shall be entitled to receive the
estimated amount of the Incentive Compensation (the "Estimated
Incentive Compensation"), net of applicable withholding and other
taxes, within fifteen (15) days after the end of each year during
the Term, such Estimated Incentive Compensation to be based on the
Company's unaudited consolidated financial statements as reviewed
and approved by the Board. The Estimated Incentive Compensation
will be subject to upward or downward adjustment based on the
Company's annual audited consolidated financial statements from the
Company's independent certified public accountants (the
"Adjustment"). The Adjustment shall be paid by the Executive to
the Company, or shall be paid by the Company to the Executive, as
the case may be, within fifteen (15) days of receipt of the
Company's audited consolidated financial statements. In the event
the Executive does not reimburse the Company for any Adjustment
within such fifteen-day period, the Company shall have the right to
offset the Adjustment against any other payments due to the
Executive hereunder.
3.4 Deferred Compensation. The Executive shall be entitled to
deferred compensation equal to .67 of his Base Salary (the
"Deferred Compensation"), vesting and payable as set forth below,
for each year during the Term that (i) both Net Revenues and EBT
are equal to or greater than applicable Projected Net Revenues and
Projected EBT as set forth in the applicable Plan (as determined in
accordance with Section 3.3(b)), (ii) Net Revenues for such year
have increased at least 13.5% over Net Revenues for the prior year,
and (iii) EBT for such year has increased at least 22.5% over EBT
for the prior year.
The Executive's rights in and to the Deferred Compensation for each
year shall vest as follows:
(i) The Executive shall vest in 50% of the Deferred
Compensation payable for any year during the Term on the January 1
first following the third anniversary of December 31 of the year in
which Deferred Compensation is earned by the Executive, provided
that the Executive is still employed by the Company at such time;
(ii) The Executive shall vest in an additional 25%
of the Deferred Compensation payable for any year during the Term
on the January 1 first following the fourth anniversary of December
31 of the year in which Deferred Compensation is earned by the
Executive, provided that the Executive is still employed by the
Company at such time;
(iii) The Executive shall vest in the final 25% of
the Deferred Compensation payable for any year during the Term on
the January 1 first following the fifth anniversary of December 31
of the year in which Deferred Compensation is earned by the
Executive, provided that the Executive is still employed by the
Company at such time; and
(iv) Notwithstanding the foregoing, the Executive
shall not be required to remain employed by the Company after the
Expiration Date in order to vest in Deferred Compensation vesting
after the Expiration Date, provided that the Executive is employed
by the Company pursuant to this Agreement through the Expiration
Date. Furthermore, should the Company and the Executive enter into
another employment agreement or amend or extend this Agreement for
an additional period of five years or more, then, immediately
following the Expiration Date, the remaining unvested portion of
the Deferred Compensation shall immediately become vested.
Subject to Section 3.6 hereof, upon or after the Executive's
vesting in any Deferred Compensation, whether during or after the
Term, such Deferred Compensation shall be paid to the Executive.
Subject to Section 3.6 hereof, payments shall be made on the date
on which the Executive's Deferred Compensation vests (the "Vesting
Date"), or on such later date elected in writing by the Executive
at least one year prior to the earlier of the Vesting Date or the
Expiration Date.
3.5 Board Election on Payment of Compensation. At the
election of the Board, all or any portion of the compensation or
any other amounts due to the Executive pursuant to this Section 3
or any other section of this Agreement shall be paid by Factors.
3.6 Event of Non-Deductibility.
Section 162(m) Limits. Notwithstanding any other provision of this
Agreement, if the Company becomes a separate publicly-held
corporation (a "Separate Publicly Held Corporation") for purposes
of Section 162(m) of the Internal Revenue Code of 1986, as amended,
and the regulations thereunder (collectively, "Section 162(m)"),
then for each calendar year that ends after the first regularly
scheduled meeting of the Company's shareholders that occurs more
than 12-months after the Company becomes a Separate Publicly Held
Company, payment of the portion (the "Section 162(m) Portion") of
the Executive's Incentive Compensation earned for that calendar
year that would not otherwise be deductible by reason of Section
162(m) (determined after taking into account all other remuneration
required to be taken into account under Section 162(m) for the
year), as well as payment of any Deferred Compensation earned for
such year, shall be subject to the following conditions: (i) the
performance goals set forth in Sections 3.3 and 3.4 that must be
satisfied in order for the Section 162(m) Portion to be earned for
that year shall be subject to the approval of, and may be modified
by, the Compensation Committee of the Company, at such times as may
be required for the Section 162(m) Portion to be deductible under
Section 162(m); (ii) payment of the Section 162(m) Portion shall be
subject to the approval by the shareholders of the Company of the
material terms of the performance goals relating to the Section
162(m) Portion before the Section 162(m) Portion is paid; and (iii)
the maximum amount of Incentive Compensation and Deferred
Compensation payable to the Executive is as set forth in Sections
3.3 and 3.4 and Exhibits "C" and "D." If and to the extent that
any remuneration (including without limitation any Deferred
Compensation) payable by the Company to the Executive for any year
would exceed the maximum amount of such remuneration that the
Company may deduct for that year by reason of Section 162(m),
payment of the portion of the remuneration for that year that would
not be so deductible under Section 162(m) shall, in the sole
discretion of the Compensation and Benefits Committee of the
Company, be deferred so that it shall become payable at such time
or times as the Compensation and Benefits Committee of the Company
reasonably determines that it first would be deductible by the
Company under Section 162(m), with interest at the "short-term
applicable federal rate" as such term is defined in Section 1274(d)
of the Code. In addition, the grant of options to purchase shares
of Common Stock pursuant to Section 4.5 hereof shall be subject to
and conditioned upon (i) the approval by either the Stock Option
Committee of Capital Bancorp before the Company becomes a separate
publicly-held corporation or the Compensation Committee of the
Company after the Company becomes a separate publicly-held
corporation, and (ii) the approval by shareholders of the Company
after the Company becomes a separate publicly-held corporation, of
a stock option plan pursuant to which the options shall be granted.
3.7 No Payment In Violation of Applicable Law or Regulation.
Notwithstanding anything else contained herein, no payment shall be
made hereunder that constitutes a golden parachute payment or
prohibited indemnification payment in violation of 12 CFR Part 359.
4. Expense Reimbursement and Other Benefits.
4.1 Reimbursement of Expenses. During the term of Executive's
employment hereunder, the Company or the Subsidiaries, upon the
submission of proper substantiation by the Executive, shall
reimburse the Executive for all reasonable expenses actually paid
or incurred by the Executive in the course of and pursuant to the
business of the Company or the Subsidiaries. The Executive shall
account to the Company or the relevant Subsidiary in writing for
all expenses for which reimbursement is sought and shall supply to
the Company or the relevant Subsidiary copies of all relevant
invoices, receipts or other evidence reasonably requested by the
Company or the relevant Subsidiary.
4.2 Other Benefits. The Executive shall be entitled to
participate in all medical and hospitalization, group life
insurance, and any and all other plans as are presently and here-
inafter offered by the Company to its executives. The Executive
shall be entitled to four weeks of vacation every year. During the
term of this Agreement, the Company shall continue to pay for the
Executive's membership in a country club on terms consistent with
past practices.
4.3 Working Facilities. The Company shall furnish the
Executive with an office, secretarial help and such other
facilities and services suitable to his position and adequate for
the performance of his duties hereunder.
4.4 Automobile. The Company shall continue to provide the
Executive with the use of an automobile comparable to the existing
automobile provided to Executive, together with reimbursement of
the operating expenses thereof.
4.5 Stock Options. In the event the Company sells its common
stock, par value $.01 per share (the "Common Stock"), pursuant to
any registration statement declared effective under the Securities
Act of 1933, as amended (the "Public Offering") during the Term,
then, subject to the terms and conditions of this Section 4.5, the
Company shall grant to the Executive sufficient non-qualified
options to purchase the Company's Common Stock so that at the end
of the Term, the Executive will have been granted non-qualified
options to purchase one percent (1.0%) of the total issued and
outstanding shares of the Company's Common Stock, after giving
effect to the Public Offering. The number of shares of Common
Stock subject to the options granted hereunder shall be adjusted
for any subsequent stock splits, stock dividends or similar
recapitalizations of the Company's Common Stock which results in an
increase or decrease of the number of shares of outstanding Common
Stock of the Company. Such options will be granted under (and
therefore be subject to all terms and conditions of) the Company's
stock option plan in effect at that time and all rules and
regulations of the Securities and Exchange Commission applicable to
stock option plans then in effect, and will contain such
restrictions as required by the Board or applicable committee
thereof. The options will (i) be granted upon effectiveness of the
Public Offering, and (ii) have a per share exercise price equal to
the Public Offering price of the Common Stock. The options shall
vest as determined by the Board. The Executive may be considered
for the grant of options under the Capital Bancorp Stock Option
Plan pursuant to the terms thereof and subject to the restrictions
contained therein, including those as to eligibility.
5. Termination.
5.1 Termination for Cause. The Company shall at all times
have the right, upon written notice to the Executive, to terminate
the Executive's employment hereunder, for cause. For purposes of
this Agreement, the term "cause" shall mean (i) an action or
omission of the Executive which constitutes a willful and material
breach of this Agreement which is not cured within fifteen (15)
days after receipt by the Executive of written notice of same, (ii)
fraud, embezzlement, misappropriation of funds or breach of trust,
(iii) any criminal act which is a felony, (iv) gross negligence in
connection with the performance of the Executive's duties
hereunder, (v) material and willful or knowing failure or refusal
(other than as a result of a disability) by the Executive to
perform his duties hereunder, or (vi) the written request by any
regulatory agency that regulates Capital Bank or Capital Bancorp
that the Executive be removed from his duties hereunder, such
written request to set forth in detail the basis therefor. Any
termination for cause shall be made in writing to the Executive,
which notice shall set forth in detail all acts or omissions upon
which the Company is relying for such termination. The Executive
shall have the right to address the Company's Board regarding the
acts set forth in the notice of termination. Upon any termination
pursuant to this Section 5.1, the Executive shall be entitled to be
paid his Base Salary to the date of termination and the Company
shall have no further liability hereunder (other than for (i)
reimbursement for reasonable business expenses incurred prior to
the date of termination, subject, however, to the provisions of
Section 4.1, and (ii) payment of compensation for unused vacation
days that have accumulated during the calendar year in which such
termination occurs).
5.2 Disability. The Company shall at all times have the
right, upon written notice to the Executive, to terminate the
Executive's employment hereunder, if the Executive shall, as the
result of mental or physical incapacity, illness or disability,
become unable to perform his obligations hereunder for a period of
90 consecutive days. Upon any termination pursuant to this Section
5.2, the Company shall (i) pay to the Executive any unpaid Base
Salary through the effective date of termination specified in such
notice, (ii) pay to the Executive the Incentive Compensation, if
any, not yet paid to the Executive for any year prior to such
termination, at such time as the Incentive Compensation would
otherwise have been payable to the Executive, (iii) pay to the
Executive a severance payment equal to three (3) months of the
Executive's Base Salary at the time of such disability, (iv) pay to
the Executive (within 45 days after such termination) a pro rata
portion of the Incentive Compensation, if any, for the year in
which such termination occurs, as calculated pursuant to the terms
of Section 3.3; provided that, for purposes of such calculation,
(x) Net Revenues and EBT shall be calculated for the portion of the
year through the end of the month prior to the month in which such
termination occurs, and based upon unaudited financial information
prepared in accordance with generally accepted accounting
principles, applied consistently with prior periods, as approved
and reviewed by the Board, (y) Target Net Revenues and Target EBT
shall be modified by multiplying each by a fraction, the numerator
of which is the number of months in the year through the month
prior to the month in which termination occurs and the denominator
of which is 12 and (z) in determining the Net Revenues Bonus and
EBT Bonus, Base Salary shall be the amount of Base Salary actually
paid to the Executive during the year of termination other than
pursuant to Section 5.2(iii), and (v) pay to the Executive, within
45 days after the termination date, any Deferred Compensation
earned in prior years during the Term, whether or not vested, and
a pro rata portion of the Deferred Compensation for the current
year, if any. Whether any Deferred Compensation is due for the
current year shall be determined pursuant to Section 3.4(i)-(iii)
after multiplying each of Net Revenues and EBT for the year through
the month prior to the month in which termination occurs by a
fraction, the numerator of which is 12 and the denominator of which
is the number of months in the year through the month prior to the
month in which termination occurs, and using the product of each in
performing the calculations under Section 3.4(i)-(iii). If
Deferred Compensation is due, the amount due shall be calculated by
multiplying .67 by the amount of Base Salary paid to the Executive
for the year other than pursuant to Section 5.2(iii). The Company
shall have no further liability hereunder (other than for (i)
reimbursement for reasonable business expenses incurred prior to
the date of termination, subject, however to the provisions of
Section 4.1, and (ii) payment of compensation for unused vacation
days that have accumulated during the calendar year in which such
termination occurs).
5.3 Death. In the event of the death of the Executive during
the term of his employment hereunder, the Company shall (i) pay to
the estate of the Executive any unpaid Base Salary through the
Executive's date of death, (ii) pay to the estate of the deceased
Executive the Incentive Compensation, if any, not yet paid to the
estate of the Executive for any year prior to the date of death, at
such time as the Incentive Compensation would otherwise have been
payable to the Executive, (iii) pay to the estate of the Executive
(within 45 days after such termination) a pro rata portion of the
Incentive Compensation, if any, for the year in which such
termination occurs, as calculated pursuant to the terms of Section
3.3; provided that, for purposes of such calculation, (x) Net
Revenues and EBT shall be calculated for the portion of the year
through the end of the month prior to the month in which such
termination occurs, and based upon unaudited financial information
prepared in accordance with generally accepted accounting
principles, applied consistently with prior periods, as approved
and reviewed by the Board, (y) Target Net Revenues and Target EBT
shall be multiplied by multiplying each by a fraction, the
numerator of which is the number of months in the year through the
month prior to the month in which termination occurs and the
denominator of which is 12 and (z) in determining the Net Revenues
Bonus and EBT Bonus, Base Salary shall be the amount of Base Salary
actually paid to the Executive during the year of termination, and
(iv) pay to the estate of the Executive, within 45 days after the
termination date, any Deferred Compensation earned in prior years
during the Term, whether or not vested, and a pro rata portion of
the Deferred Compensation for the current year, if any. Whether
any Deferred Compensation is due for the current year shall be
determined pursuant to Section 3.4(i)-(iii) after multiplying each
of Net Revenues and EBT for the year through the month prior to the
month in which termination occurs by a fraction, the numerator of
which is 12 and the denominator of which is the number of months in
the year through the month prior to the month in which termination
occurs, and using the product of each in performing the
calculations under Section 3.4(i)-(iii). If Deferred Compensation
is due, the amount due shall be calculated by multiplying .67 by
the amount of Base Salary paid to the Executive for the year. The
Company shall have no further liability hereunder (other than for
(i) reimbursement for reasonable business expenses incurred prior
to the date of the Executive's death, subject, however to the
provisions of Section 4.1, and (ii) payment of compensation for
unused vacation days that have accumulated during the calendar year
in which such termination occurs).
5.4 Termination Without Cause. At any time the Company shall
have the right to terminate the Executive's employment hereunder by
written notice to the Executive. Upon any termination pursuant to
this Section 5.4 (that is not a termination under any of Sections
5.1, 5.2, 5.3, 5.5 or 5.6), the Company shall (i) pay to the
Executive any unpaid Base Salary through the effective date of
termination specified in such notice, (ii) subject to the last
sentence of this Section 5.4, continue to pay the Executive's Base
Salary through the Expiration Date, in the manner and at such time
as the Base Salary would otherwise have been payable to the
Executive, (iii) pay to the Executive the Incentive Compensation,
if any, not yet paid to the Executive for any year prior to such
termination, at such time as the Incentive Compensation would
otherwise have been payable to the Executive, (iv) pay to the
Executive (within 45 days after such termination) a pro rata
portion of the Incentive Compensation, if any, for the year in
which such termination occurs, as calculated pursuant to the terms
of Section 3.3; provided that, for purposes of such calculation,
(x) Net Revenues and EBT shall be calculated for the portion of the
year through the end of the month prior to the month in which such
termination occurs, and based upon unaudited financial information
prepared in accordance with generally accepted accounting
principles, applied consistently with prior periods, as approved
and reviewed by the Board, (y) Target Net Revenues and Target EBT
shall be multiplied by multiplying each by a fraction, the
numerator of which is the number of months in the year through the
month prior to the month in which termination occurs and the
denominator of which is 12 and (z) in determining the Net Revenues
Bonus and EBT Bonus, Base Salary shall be the amount of Base Salary
actually paid to the Executive during the year of termination other
than pursuant to Section 5.4(ii), and (v) pay to the Executive,
within 45 days after the termination date, any Deferred
Compensation earned in prior years during the Term, whether or not
vested, and a pro rata portion of the Deferred Compensation for the
current year, if any. Whether any Deferred Compensation is due for
the current year shall be determined pursuant to Section
3.4(i)-(iii) after multiplying each of Net Revenues and EBT for the
year through the month prior to the month in which termination
occurs by a fraction, the numerator of which is 12 and the
denominator of which is the number of months in the year through
the month in which termination occurs, and using the product of
each in performing the calculations under Sections 3.4(i)-(iii).
If Deferred Compensation is due, the amount due shall be calculated
by multiplying .67 by the amount of Base Salary paid to the
Executive for the year other than pursuant to Section 5.4(ii). The
Company shall have no further liability hereunder (other than for
(i) reimbursement for reasonable business expenses incurred prior
to the date of termination, subject, however, to the provisions of
Section 4.1, and (ii) payment of compensation for unused vacation
days that have accumulated during the calendar year in which such
termination occurs). Notwithstanding the foregoing, if the
Executive shall find other employment prior to the Expiration Date,
then the Executive shall notify the Company in writing of the date
and terms of such employment and the Company shall be entitled to
reduce the amount payable to the Executive pursuant to Section 5.4
(ii) during the period from the commencement of such other
employment until the Expiration Date (the "Other Employment
Period") by the compensation payable to the Executive for services
rendered in connection with such other employment during the Other
Employment Period. Nothing contained in this Section 5.4 or
elsewhere herein shall relieve that Executive from any obligation
to comply with any of the provisions of Section 6 hereof, which
shall remain binding on the Executive.
5.5 Resignation by Executive. The Executive shall at all
times have the right, upon 90 days written notice to the Company,
to terminate the Executive's employment hereunder. Upon any
termination pursuant to this Section 5.5, the Executive shall be
entitled to be paid his Base Salary to the date of termination and
the Company shall have no further liability hereunder (other than
for (i) reimbursement for reasonable business expenses incurred
prior to the date of termination, subject, however, to the
provisions of Section 4.1, and (ii) payment of compensation for
unused vacation days that have accumulated during the calendar year
in which such termination occurs).
5.6 Change in Control of the Company. In the event that (x)
a Change in Control (as hereafter defined) in the Company shall
occur during the Term, and (y) within one year of such Change in
Control, the Executive is (i) assigned any position, duties or
responsibilities that are significantly diminished or changed when
compared with the position, duties or responsibilities of the
Executive prior to such Change in Control, (ii) forced to relocate
to another location more than 50 miles from his location prior to
the Change in Control or (iii) no longer provided coverage under
benefit programs in existence prior to the Change in Control
(unless a comparable substitute is offered) (any of (i) to (iii)
being hereinafter referred to as an "Event"); then the Executive,
by written notice to the Company at any time within the thirty (30)
day period following the occurrence of an Event, shall have the
right to terminate his employment hereunder. For purposes of this
Agreement, the term "Change in Control" shall be deemed to have
occurred if (a) Capital Bank and any other direct or indirect
subsidiaries of Capital Bancorp ("Corporate Affiliates"), after
aggregating all the shares of the Company held by such entities, no
longer own enough shares of the Company to, in the aggregate, be
the largest single shareholder of the Company, (b) Capital Bank and
its Corporate Affiliates, in the aggregate, cease to own at least
25% of the outstanding Common Stock of the Company; or (c) there
occurs any transaction which shall include a series of transactions
occurring within 60 days or occurring pursuant to a plan
(collectively, "Transaction") that has the result that (i)
shareholders of Capital Bancorp immediately before such Transaction
cease to own at least 51% of the voting stock of Capital Bancorp or
of any entity that results from the participation of Capital
Bancorp in a reorganization, consolidation, merger, liquidation or
any other form of corporate transaction and (ii) any person or
group of persons acting in concert acquire in excess of 40% or more
of the outstanding voting stock of Capital Bancorp; provided,
however, that it shall not constitute a "Change in Control" if all
or part of the shares in the Company are distributed to
shareholders of Capital Bancorp, regardless of the manner in which
such shares are distributed. In the event that Capital Bank and
Capital Bancorp make such a distribution then, thereafter, a
"Change in Control" shall be deemed to have occurred only upon the
following: (a) the shareholders of the Company shall approve and
the Company shall consummate a plan of merger, consolidation,
reorganization, liquidation or any other form of corporate
transaction in which shareholders of the Company immediately before
such transaction cease to own at least 51% of the voting stock of
the Company or any other entity that results from the participation
of the Company in any of the foregoing; or (b) the shareholders of
the Company shall approve and the Company shall consummate a plan
for the sale, lease, exchange or other disposition of all or
substantially all of the property and assets of the Company.
Upon termination by the Executive pursuant to this Section 5.6, the
Company shall (i) pay to the Executive any unpaid Base Salary
through the effective date of termination specified in such notice,
(ii) pay to the Executive the Incentive Compensation, if any, not
yet paid to the Executive for any year prior to such termination,
at such time as the Incentive Compensation would otherwise have
been payable to the Executive, (iii) pay to the Executive (within
45 days after such termination) a pro rata portion of the Incentive
Compensation, if any, for the year in which such termination
occurs, as calculated pursuant to the terms of Section 3.3;
provided that, for purposes of such calculation, (x) Net Revenues
and EBT shall be calculated for the portion of the year through the
end of the month prior to the month in which such termination
occurs, and based upon unaudited financial information prepared in
accordance with generally accepted accounting principles, applied
consistently with prior periods, as approved and reviewed by the
Board, (y) Target Net Revenues and Target EBT shall be multiplied
by multiplying each by a fraction, the numerator of which is the
number of months in the year through the month prior to the month
in which termination occurs and the denominator of which is 12 and
(z) in determining the Net Revenues Bonus and EBT Bonus, Base
Salary shall be the amount of Base Salary actually paid to the
Executive during the year of termination other than as a lump sum
pursuant to Section 5.6, (iv) pay to the Executive, within 45 days
after the termination date, any Deferred Compensation earned in
prior years during the Term, whether or not vested, and a pro rata
portion of the Deferred Compensation for the current year, if any
(whether any Deferred Compensation is due for the current year
shall be determined pursuant to Section 3.4(i)-(iii) after
multiplying each of Net Revenues and EBT for the year through the
month prior to the month in which termination occurs by a fraction,
the numerator of which is 12 and the denominator of which is the
number of months in the year through the month in which termination
occurs, and using the product of each in performing the
calculations under Sections 3.4(i)-(iii). If Deferred Compensation
is due, the amount due shall be calculated by multiplying .67 by
the amount of Base Salary paid to the Executive for the year other
than as a lump sum pursuant to this Section 5.6); and (v) pay to
the Executive a lump sum equal to the sum of (a) two years' Base
Salary at the date of termination plus (b) the product of his
Incentive Compensation for the prior year multiplied by two. In
the event that the Executive's employment is terminated by the
Company within one year following a Change in Control and Without
Cause, then, in lieu of the compensation in clause (v) of this
paragraph above, the Company shall pay to the Executive a lump sum
equal to the sum of (a) two years' Base Salary at the date of
termination and (b) the product of the sum of his Incentive
Compensation and Deferred Compensation for the prior year
multiplied by two. The Company shall also continue to pay the
premiums for the same or substantially similar medical and
hospitalization, life and other insurance coverage provided to the
Executive pursuant to Section 4.2 hereof for a period of two years
from the date of termination. In addition, all options held by the
Executive to purchase shares of Common Stock shall immediately vest
in the Executive, subject to any other restrictions contained in
the applicable option agreement or option plan. The Company shall
have no further liability hereunder (other than for (i)
reimbursement for reasonable business expenses incurred prior to
the date of termination, subject, however, to the provisions of
Section 4.1, and (ii) payment of compensation for unused vacation
days that have accumulated during the calendar year in which such
termination occurs).
6. Restrictive Covenants.
6.1 Non-competition. For the period through the Expiration
Date (except that, if the Executive's employment is terminated
pursuant to Sections 5.4 or 5.6 hereof, the period shall be the
greater of (i) one year after such termination date, but in no
event beyond the Expiration Date, or (ii) (A) if the termination is
pursuant to Section 5.4, the period of time that or for which the
Executive is receiving Base Salary payments or (B) if the
termination is pursuant to Section 5.6, the period of time with
respect to which the Executive receives a lump sum Base Salary
payment pursuant to Section 5.6 (identified as two years in Section
5.6), the Executive shall not, directly or indirectly, engage in or
have any interest in any sole proprietorship, partnership,
corporation or business or any other person or entity (whether as
an employee, officer, director, partner, agent, security holder,
creditor, consultant or otherwise) that directly or indirectly
engages in competition with the Company in any state in which the
Company operates or has a client or customer at the time of such
termination; provided that such provision shall not apply to the
Executive's ownership of Common Stock of the Company or the
acquisition by the Executive, solely as an investment, of
securities of any issuer that is registered under Section 12(b) or
12(g) of the Securities Exchange Act of 1934, as amended, and that
are listed or admitted for trading on any United States national
securities exchange or that are quoted on the National Association
of Securities Dealers Automated Quotations System, or any similar
system or automated dissemination of quotations of securities
prices in common use, so long as the Executive is not a member of
any control group (within the meaning of the rules and regulations
of the Securities and Exchange Commission) of any such issuer.
6.2 Nondisclosure. The Executive shall not divulge,
communicate, use to the detriment of the Company or for the benefit
of any other person or persons, or misuse in any way, any
confidential information pertaining to the business of the Company.
Any confidential information or data now or hereafter acquired by
the Executive with respect to the business of the Company (which
shall include, but not be limited to, information concerning the
Company's financial condition, prospects, customers, sources of
leads and methods of doing business) shall be deemed a valuable,
special and unique asset of the Company that is received by the
Executive in confidence and as a fiduciary, and Executive shall
remain a fiduciary to the Company with respect to all of such
information.
6.3 Nonsolicitation of Employees and Clients. For the period
through the Expiration Date, and for a period of two years
following the Expiration Date (except that, the period shall be six
months after the Expiration Date if (i) the Executive is employed
by the Company on the Expiration Date, and (ii) the Company has not
offered, at or prior to the Expiration Date, to employ the
Executive after the Expiration Date on terms that provide for
payment of (x) a base salary equal to or greater than the Base
Salary (adjusted for cost-of-living increases) being paid to the
Executive on the Expiration Date, and (y) incentive compensation on
terms equal to or greater than the Incentive Compensation terms in
effect as of the Expiration Date); the Executive shall not,
directly or indirectly, for himself or for any other person, firm,
corporation, partnership, association or other entity (i) employ or
attempt to employ or enter into any contractual arrangement with
any employee or former employee of the Company, unless such
employee or former employee has not been employed by the Company
for a period in excess of six months, and/or (ii) call on or
solicit any of the actual or targeted prospective clients of the
Company on behalf of any person or entity in connection with any
business competitive with the business of the Company, nor shall
the Executive make known the names and addresses of such clients or
any information relating in any manner to the Company's trade or
business relationships with such customers, other than in
connection with the performance of Executive's duties under this
Agreement.
6.4 Books and Records. All books, records and accounts
relating in any manner to the customers or clients of the Company,
whether prepared by the Executive or otherwise coming into the
Executive's possession, shall be the exclusive property of the
Company and shall be returned immediately to the Company on
termination of the Executive's employment hereunder or on the
Company's request at any time.
6.5 Definition of Company. As used in this Section 6, the
term "Company" shall also include Factors and any existing or
future subsidiaries of the Company that are operating during the
time periods described herein.
6.6 Acknowledgement by Executive. The Executive acknowledges
and confirms that the length of the term of the provisions of this
Section 6 and the geographical restrictions contained in Section
6.1 are fair and reasonable and not the result of overreaching,
duress or coercion of any kind. The Executive further acknowledges
and confirms that his observance of each of the covenants contained
in this Section 6 will not cause him any undue hardship, financial
or otherwise, and that such covenants are fair and reasonable and
are reasonably required for the protection of the interests of the
Company, its affiliates, officers and directors, and to prevent
irreparable harm to the foregoing. The Executive acknowledges and
confirms that his special knowledge of the business of the Company
is such as would cause the Company serious injury or loss if he
were to use such ability and knowledge to the benefit of a
competitor or were to compete with the Company in violation of the
terms of this Section 6.
6.7 Survival. The provisions of this Section 6 shall survive
the termination of this Agreement, as applicable.
7. Injunction. It is recognized and hereby acknowledged by the
parties hereto that a breach by the Executive of any of the
covenants contained in Section 6 of this Agreement will cause
irreparable harm and damage to the Company, the monetary amount of
which may be virtually impossible to ascertain. As a result, the
Executive recognizes and hereby acknowledges that the Company shall
be entitled to an injunction from any court of competent
jurisdiction enjoining and restraining any violation of any or all
of the covenants contained in Section 6 of this Agreement by the
Executive or any of his affiliates, associates, partners or agents,
either directly or indirectly, and that such right to injunction
shall be cumulative and in addition to whatever other remedies the
Company may possess.
8. Assignment. The Executive agrees that the Company and Factors
shall have the right to assign this Agreement. The Executive shall
not delegate his employment obligations hereunder, or any portion
thereof, to any other person.
9. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Florida.
10. Entire Agreement. This Agreement constitutes the entire
agreement between the parties hereto with respect to the subject
matter hereof and, upon its effectiveness, shall supersede all
prior agreements, understandings and arrangements, both oral and
written, between the Executive, the Company and Factors (or any of
their affiliates) with respect to such subject matter. This
Agreement may not be modified in any way unless by a written
instrument signed by the Company, Factors and the Executive.
11. Notices: Any notice required or permitted to be given
hereunder shall be deemed given when delivered by hand or when
deposited in the United States mail, by registered or certified
mail, return receipt requested, postage prepaid, (i) if to the
Company or Factors, to the address of the Company's principal
offices in Fort Lauderdale, Florida, with a copy to Capital Bank,
1221 Brickell Avenue, Miami, Florida 33133, Attention: President,
and (ii) if to the Executive, to his address as reflected on the
payroll records of the Company, or to such other address as either
party hereto may from time to time give notice of to the other.
12. Benefits; Binding Effect. This Agreement shall be for the
benefit of and binding upon the parties hereto and their respective
heirs, personal representatives, legal representatives, successors
and, where applicable, assigns, including, without limitation, any
successor to the Company and Factors, whether by merger,
consolidation, sale of stock, sale of assets or otherwise.
13. Severability. The invalidity of any one or more of the words,
phrases, sentences, clauses or sections contained in this Agreement
shall not affect the enforceability of the remaining portions of
this Agreement or any part thereof, all of which are inserted
conditionally on their being valid in law, and, in the event that
any one or more of the words, phrases, sentences, clauses or
sections contained in this Agreement shall be declared invalid,
this Agreement shall be construed as if such invalid word or words,
phrase or phrases, sentence or sentences, clause or clauses, or
section or sections had not been inserted. If such invalidity is
caused by length of time or size of area, or both, the otherwise
invalid provision will be considered to be reduced to a period or
area which would cure such invalidity.
14. Waivers. The waiver by either party hereto of a breach or
violation of any term or provision of this Agreement shall not
operate nor be construed as a waiver of any subsequent breach or
violation.
15. Damages. Nothing contained herein shall be construed to
prevent the Company, Factors and/or the Executive from seeking and
recovering from the other damages sustained by either or both of
them as a result of its or his breach of any term or provision of
this Agreement. In the event that either party hereto brings suit
for the collection of any damages resulting from, or the injunction
of any action constituting, a breach of any of the terms or
provisions of this Agreement, then the party found to be at fault
shall pay all reasonable court costs and attorneys' fees of the
other.
16. Section Headings. The section headings contained in this
Agreement are for reference purposes only and shall not affect in
any way the meaning or interpretation of this Agreement.
17. No Third Party Beneficiary. Nothing expressed or implied in
this Agreement is intended, or shall be construed, to confer upon
or give any person other than the Company, the parties hereto and
their respective heirs, personal representatives, legal represen-
tatives, successors and assigns, any rights or remedies under or by
reason of this Agreement.
18. Indemnification. Subject to limitations imposed by law, the
Company shall indemnify the Executive to the fullest extent
permitted by law.
19. Waiver of Jury Trial. The undersigned expressly (i) waive any
right to a trial by jury of any claim, demand, action or cause of
action arising out of this Agreement or in any way related or
incidental to the performance of the parties' obligations
hereunder, and (ii) agree that the Company, Factors or the
Executive may file an original counterpart or copy of this Section
19 with any court as written evidence of the consent to the waiver
of the right to trial by jury.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as
of the date first above written.
COMPANY:
CAPITAL FACTORS HOLDING, INC.
By: /s/ JAVIER J. HOLTZ
---------------------------------
CAPITAL FACTORS, INC.
By: /s/ JAVIER J. HOLTZ
---------------------------------
EXECUTIVE:
/s/ JOHN W. KIEFER
---------------------------------
JOHN W. KIEFER
<PAGE>
Exhibit 10.10
AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT
DATED AS OF JANUARY 1, 1996 BY AND BETWEEN
CAPITAL FACTORS HOLDING, INC., a Florida corporation
CAPITAL FACTORS, INC., a Florida corporation,
and JOHN W. KIEFER (hereinafter the "Executive")
------------------------------------------------
This Amendment No. 1 to the Employment Agreement dated as of
January 1, 1996, by and between CAPITAL FACTORS HOLDING, INC., a
Florida corporation (the "Company"), CAPITAL FACTORS, INC., a
Florida corporation ("Factors"), and JOHN W. KIEFER (hereinafter
called the "Executive") (the "Agreement"), a copy of which is
attached hereto as Exhibit "A", is entered into as of this 28th day
of June, 1996, by and between the Company, Factors and the
Executive.
WHEREAS, the parties hereto desire to amend Section 3.2 hereof in
the manner set forth below.
NOW, THEREFORE, in consideration of the mutual covenants,
agreements, undertakings, representations and warranties herein
contained, the parties hereto hereby agree and covenant with each
other as follows:
1. Amendment of Section 3.2. Section 3.2 of this Agreement
is amended to read in its entirety as follows:
3.2 Signing Bonus and Company Loan. Upon execution of
this Agreement, the Company shall: (i) pay the Executive $250,000
in cash as a signing bonus, subject to applicable withholding and
other taxes; and (ii) loan the Executive $100,000 (the "Company
Loan"). The Company Loan shall bear interest at the Wall Street
Journal prime rate (as defined in the Capital Bank line of credit
agreements) plus 1-1/2%. On each December 31 during the Term,
twenty percent of the entire remaining principal amount of the
Company Loan together with all interest accrued through such date
shall become immediately due and payable. The entire principal
balance together with all accrued interest thereon shall be due and
payable in full in the event of and upon the earlier termination of
this Agreement. Notwithstanding the foregoing, the Company shall,
for each December 31 during the Term that Executive continues to be
employed by the Company at such time, pay to the Executive a bonus
equal to the amount of principal and accrued interest due and
payable to the Company under the Company Loan at such December 31.
2. Terms of Agreement. Except as provided above, the terms and
provisions of the Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as
of the date first above written.
CAPITAL FACTORS HOLDING, INC.
By: /s/ JAVIER J. HOLTZ
------------------------------------
CAPITAL FACTORS, INC.
By: /s/ JAVIER J. HOLTZ
------------------------------------
/s/ JOHN W. KIEFER
------------------------------------
JOHN W. KIEFER
