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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 March 31, 1997
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)
Not applicable.
-----------------------------------------------------
(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 May 9, 1997, there were 7,573,595 shares of the registrant's
Common Stock outstanding.
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<PAGE>
ITEM 1. PART I. FINANCIAL INFORMATION
CAPITAL BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION
(In Thousands of Dollars)
March 31, December 31,
1997 1996
----------- ------------
(Unaudited) (Audited)
ASSETS
Cash and due from banks $ 105,771 $ 128,359
Federal funds sold and securities
purchased under agreement to resell 10,000 52,900
---------- ----------
Cash and cash equivalents 115,771 181,259
---------- ----------
Securities held to maturity
(market value 3/31/97 - $29,331,
12/31/96 - $ 31,647) 29,396 31,425
Securities available for sale
(at market value) 187,512 187,061
---------- ----------
Total securities 216,908 218,486
---------- ----------
Loans 854,742 830,330
Less allowance for loan losses (9,718) (9,333)
Less unearned income (3,388) (2,964)
---------- ----------
Loans, net 841,636 818,033
---------- ----------
Accounts receivable - factoring
subsidiary, net 479,822 449,528
Premises and equipment, net 28,935 29,171
Due from customers on acceptances 21,613 29,900
Other real estate 3,469 3,632
Accrued interest and other assets 31,533 32,889
---------- ----------
Total assets $1,739,687 $1,762,898
========== ==========
LIABILITIES, MINORITY INTEREST AND STOCKHOLDERS' EQUITY
Deposits:
Non-interest bearing
deposits $ 288,127 $ 315,800
Savings and money market deposits 297,754 302,651
Time deposits 478,742 478,374
---------- ----------
Total deposits 1,064,623 1,096,825
---------- ----------
Funds purchased and securities sold
under agreements to repurchase 87,953 79,905
Bank acceptances outstanding 21,613 29,900
Due to clients - factoring subsidiary 189,986 191,489
Long-term debt 211,420 202,220
Other liabilities 12,741 15,207
---------- ----------
Total liabilities 1,588,336 1,615,546
---------- ----------
Minority interest in
consolidated subsidiary 12,044 11,610
---------- ----------
Stockholders' equity:
Common stock, $1.00 par value
Authorized - 20,000,000 shares
Issued and outstanding - 7,562,131
shares - 3/31/97, 7,533,726
shares - 12/31/96 7,562 7,534
Capital surplus 13,455 13,219
Retained earnings 120,384 115,827
Unrealized loss on securities
available for sale,
net of applicable taxes (2,094) (838)
---------- ----------
Total stockholders' equity 139,307 135,742
---------- ----------
Total liabilities, minority
interest and stockholders'
equity $1,739,687 $1,762,898
========== ==========
See accompanying notes to consolidated financial statements.
Page 2
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<PAGE>
CAPITAL BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands of Dollars Except Per Share Data)
(Unaudited)
Three Months Ended
March 31,
-------------------
1997 1996
------- -------
INTEREST INCOME:
Loans $19,554 $17,309
Advances-factoring clients 7,858 6,032
Securities 3,495 3,628
Federal funds sold 651 636
Other 120 340
------- -------
Total interest income 31,678 27,945
------- -------
INTEREST EXPENSE:
Savings and money market deposits 1,776 1,711
Time deposits 6,509 5,619
Short-term borrowings 976 905
Long-term debt 3,695 3,132
------- -------
Total interest expense 12,956 11,367
------- -------
Net interest income 18,722 16,578
Provision for loan losses 1,525 600
Provision for doubtful accounts-
factoring subsidiary 1,400 1,100
------- -------
Net interest income after
provisions 15,797 14,878
------- -------
OTHER INCOME:
Factoring revenues 7,987 6,480
Service charges on deposits 3,492 2,962
Fees on letters of credit 1,005 1,143
Securities gains 57 --
Other operating income 1,280 1,193
------- -------
Total other income 13,821 11,778
------- -------
OTHER EXPENSES:
Salaries and employee benefits 11,555 10,026
Occupancy expense, net 1,518 2,016
Other operating expenses,net 7,560 7,533
------- -------
Total other expenses 20,633 19,575
------- -------
Minority interest in net income of
consolidated subsidiaRy 434 --
------- ------
Income before income taxes 8,551 7,081
Provision for income taxes 3,364 2,679
------- -------
Net income $ 5,187 $ 4,402
======= =======
Earnings per common and common
equivalent share:
Primary $ .64 $ .54
======= =======
Fully diluted $ .64 $ .54
======= =======
Cash dividends declared per share of
common stock $ .0833 $ .0833
======= =======
See accompanying notes to consolidated financial statements.
Page 3
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<PAGE>
CAPITAL BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands of Dollars)
(Unaudited)
Three Months Ended
March 31,
----------------------
1997 1996
-------- --------
Cash flows from operating activities:
Net income $ 5,187 $ 4,402
Adjustments to reconcile net income
to net cash provided by operating
activities:
Provision for loan losses 1,525 600
Provision for doubtful accounts-factoring
subsidiary 1,400 1,100
Depreciation and amortization 1,203 1,187
Net losses on other real estate 75 212
Securities gains (57) --
(Gain) loss on disposal of premises
and equipment (1) 5
Minority interest in net income of
consolidated subsidiary 434 --
Decrease in accrued interest
and other assets 2,098 1,969
(Decrease) increase in other liabilities (2,468) 436
-------- --------
Net cash provided by operating
activities 9,396 9,911
-------- --------
Cash flows from investing activities:
Proceeds from maturities of securities
held to maturity 2,032 6,034
Purchase of securities held to maturity -- (12,000)
Proceeds from sale of securities
available for sale 7,028 --
Proceeds from maturities of securities
available for sale 5,549 34,168
Purchase of securities available
for sale (14,971) (15,941)
Net (increase) decrease in loans (25,188) 10,445
Proceeds from sale of premises
and equipment 3 --
Purchase of premises and equipment (970) (775)
Proceeds from sale of other real estate 201 770
Improvements to other real estate (53) (110)
Increase in accounts receivable-factoring
subsidiary (net of due to clients) (33,197) (33,039)
-------- --------
Net cash used in investing activities (59,566) (10,448)
-------- --------
Cash flows from financing activities:
Net decrease in deposits (32,202) (53,798)
Net increase (decrease) in Federal
funds purchased and securities sold
under agreements to repurchase 8,048 (6,076)
Proceeds from issuance of long-term debt 9,200 --
Cash dividends paid (628) (621)
Proceeds from exercise of stock options 280 83
Repurchase of Common Stock (16) --
-------- --------
Net cash used in financing activities (15,318) (60,412)
-------- --------
Net decrease in cash and cash equivalents (65,488) (60,949)
Cash and cash equivalents at beginning
of period 181,259 213,903
-------- --------
Cash and cash equivalents at end of period $115,771 $152,954
======== ========
Supplemental Disclosures
Cash paid during the period for:
Interest $ 12,978 $ 11,491
======== ========
Income taxes $ -- $ 536
======== ========
Non-cash activities:
Increase in the unrealized loss on
securities available for sale, net of
applicable benefits in 1997 - ($742)
and in 1996 - $(710) $ (1,256) $ (1,201)
======== ========
Loans transferred to other real estate $ 60 $ 597
======== ========
See accompanying notes to consolidated financial statements.
Page 4
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<PAGE>
CAPITAL BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1997
NOTE 1: Basis of Presentation
- ------------------------------
The Consolidated Statements of Condition for Capital Bancorp and
its subsidiaries (the "Company") as of March 31, 1997 and December
31, 1996, the Consolidated Statements of Income for the three-month
periods ended March 31, 1997 and 1996 and the Consolidated
Statements of Cash Flows for the three-month periods ended March
31, 1997 and 1996 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, 1996.
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, 1996 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 intercompany
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.
NOTE 2: Risk Elements - Loans and Advances
- ------------------------------------------
Foreign Outstandings
- --------------------
Foreign outstandings included in the loan portfolio consisted of
the following (in thousands of dollars):
March 31 December 31,
1997 1996
------------- ------------
Performing trade credits $130,880 $141,620
Other performing loans 14,627 3,767
Non-accrual loans 96 96
-------- --------
$145,603 $145,483
======== ========
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 $24.7 million at March 31, 1997 compared to $23.9 million
at year end 1996. In addition to the outstanding foreign loans, at
March 31, 1997 and December 31, 1996 there were $20.3 million and
$20.8 million, respectively, due primarily from foreign customers
on acceptances, offset by $2.6 million and $2.3 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 March 31,
1997 and December 31, 1996 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, exceeded 1% of consolidated total assets (in
thousands of dollars):
March 31 December 31,
1997 1996
----------- -----------
Brazil $22,931 Peru $29,127
Argentina 20,916 Brazil 23,153
Peru 18,804 Argentina 20,243
Guatemala 17,632
------- -------
$62,651 $90,155
======= =======
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<PAGE>
At March 31, 1997, the Bank had cross border outstandings to
Ecuador and Guatemala aggregating $15.1 million and $14.7 million,
respectively, which exceeded .75%, but were less than 1% of
consolidated total assets. At December 31, 1996, the Bank had no
net cross border outstandings that exceeded .75% but were less than
1% of consolidated total assets.
At March 31, 1997 and December 31, 1996, the Bank held other
interest earning assets totaling $7.6 million issued by debtors
located in foreign countries.
Impaired Loans
- --------------
At March 31, 1997 and December 31, 1996, the recorded investment in
certain loans that was considered impaired under SFAS No. 114 was
$5.9 million and $4.9 million, respectively, all of which were on
non-accrual status at the respective dates. Measurement for
impairment of $5.5 million and $4.3 million of these loans was
based on the estimated value of collateral at March 31, 1997 and
December 31, 1996, respectively, and the remainder was measured
based on the present value of projected cash flows. These loans
required a SFAS No. 114 reserve for possible credit losses of $1.9
million and $1.3 million, which is included within the overall
allowance for loan losses at March 31, 1997 and December 31, 1996,
respectively. The average recorded investment in impaired loans
during the three months ended March 31, 1997 and 1996 was $5.5
million and $5.7 million, respectively.
At March 31, 1997 and December 31, 1996, the recorded investment in
client advances that were considered impaired under SFAS No. 114
was $1.3 million and $660,000, 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 $150,000 and $30,000 at March 31, 1997 and December 31, 1996,
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 after
90 days of past due status, or at an earlier date if full
collectIbility is doubtful, 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 March 31, 1997 there were $233,000 of loans that were over 90
days past due and still accruing interest, as compared to $264,000
at December 31, 1996. Included in loans 90 days past due and still
accruing interest were commercial and consumer loans of $120,000
and $113,000, respectively, at March 31, 1997 as compared to
commercial and consumer loans of $152,000 and $112,000,
respectively, at December 31, 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):
March 31 December 31,
1997 1996
----------- ------------
Commercial loans $ 4,015 $ 2,874
Foreign loans 96 96
Real estate loans 1,824 1,881
Consumer loans 1,026 546
------- -------
Total 6,961 5,397
Advances 1,287 660
------- -------
Total non-accrual loans
and advances $ 8,248 $ 6,057
======= =======
Non-accrual loans increased to $7.0 million at March 31, 1997,
reflecting increases in commercial and consumer non-accrual loans.
The increase in commercial non-accrual loans is primarily the
result of loans totaling $1.5 million that were transferred to non-
accrual status in 1997, of which $1.4 million was with three
borrowers. The increase in non-accrual advances is primarily the
result of the transfer of advances to one client to non-accrual
status partially offset by payoffs of advances previously on non-
accrual status. 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.
Page 6
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<PAGE>
Changes to these factors could result in future adjustments to the
allowances for loan losses and doubtful accounts.
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 law suit. Such law 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 April 30, 1997, the trust formed by Capital Factors, Inc. in
connection with the securitization of its factored advances issued
a foUrth series of variable rate asset-backed securities (the
"Variable Funding Certificates"). The Variable Funding
Certificates include the issuance of $96.25 million of senior
certificates, which bear interest at LIBOR plus 0.75%, and $4.75
million of senior subordinated certificates, which bear interest at
LIBOR plus 1.50%. Unlike the previously issued series of asset
backed certificates that were fixed as to principal amount, the
Variable Funding Certificates provide for a monthly settlement of
principal, which may increase or decrease the outstanding amount.
Approximately $37.8 million of the Variable Funding Certificates
were funded at closing. Additional borrowings of up to the full
$100.0 million may be made to the extent that Capital Factors, Inc.
generates additional eligible advances. The Variable Funding
Certificates mature in April 2002.
Page 7
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<PAGE>
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., an
81%-owned 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;
Charlotte, North Carolina and a limited service office in Atlanta,
Georgia. Throughout this discussion, Bancorp and its subsidiaries
are collectively referred to as the "Company."
In addition, this Form 10-Q contains certain "forward-looking
statements" which represent the Company's expectations or beliefs,
including, but not limited to, statements concerning industry
performance and the Company's operations, performance, financial
condition, growth and strategies. For this purpose, any statements
contained in the Form 10-Q that are not statements of historical
fact may be deemed to be forward-looking statements. These
statements by their nature involve substantial risks and
uncertainties, certain of which are beyond the Company's control,
and actual results may differ materially depending on a variety of
important factors which are noted herein, including, but not
limited to, potential impact of changes in interest rates, credit
risks and collateral, dependence on management and key personnel,
supervision and regulation issues, competition, changes in regional
economic conditions, ability of the Company to continue its
operating strategies and current litigation and regulatory matters.
FINANCIAL CONDITION - MARCH 31, 1997 VS. DECEMBER 31, 1996
- ----------------------------------------------------------
Overview
- --------
Total consolidated assets decreased $23.2 million, or 1%, during
the first three months of 1997, which included a decrease of $33.7
million in non-interest earning assets offset by an increase of
$10.5 million in interest earning assets. The decrease in total
consolidated assets was comprised primarily of decreases of $65.5
million in cash and cash equivalents and $8.3 million in due from
customers on acceptances and was offset by increases of $30.3
million in net accounts receivable - factoring subsidiary and $23.6
million in net loans. Total consolidated liabilities decreased
$27.2 million and included a decrease of $39.9 million in non-
interest bearing balances (of which $27.7 million relates to non-
interest bearing deposits) offset by an increase of $12.7 million
in interest bearing balances. Total stockholders' equity increased
$3.6 million, to $139.3 million, primarily as a result of earnings
in excess of dividends declared.
Loans
- -----
During the first three months of 1997, total loans increased $24.4
million, or 3%, with an increase primarily in real estate loans
offset by a decrease in commercial loans.
Substantially all of the Company's real estate lending is
commercial in nature, including construction financing for new
residential developments and short-term (5 to 7 years) first
mortgages on income producing properties. Real estate loans
increased $34.6 million, or 13%, during the first three months of
1997, including increases of $20.6 million in mortgage loans and
$14.2 million in construction loans. Real estate loans totaled
$309.8 million and $275.1 million at March 31, 1997 and December
31, 1996, respectively.
At March 31, 1997, commercial loans totaled $213.3 million, $40.3
million of which were asset-based loans at Capital Factors. Asset-
based 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.
During 1997 commercial loans decreased $9.5 million, or 4%.
Cash and Cash Equivalents
- -------------------------
The decrease in cash and cash equivalents was composed of decreases
of $42.9 million in federal funds sold and securities purchased
Page 8
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<PAGE>
under agreements to resell and $22.6 million in cash and due from
banks. Cash and cash equivalents were used to invest in loans and
accounts receivable advances, as well as to fund deposit
withdrawals.
Accounts Receivable - Factoring Subsidiary
- ------------------------------------------
Accounts receivable - factoring subsidiary, net increased $30.3
million, or 7%, to $479.8 million as a result of an overall
increase in factoring volume. Capital Factors, as well as the
factoring industry, has historically experienced and expects to
continue to experience seasonal fluctuations in its factored sales
volume and factoring fees, which generally is highest during the
period from August to November. A principal reason for the
fluctuation is the seasonality in the sales of certain of Capital
Factors' clients, especially those in the apparel industry.
Factored sales volume and factoring fees also typically increase
during the first quarter as a result of the apparel industry, which
ships more goods during March as compared to December in order to
fill increased customer orders in anticipation of the ensuing
spring season. 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 $296.3 million at March 31, 1997, compared to
$263.5 million at December 31, 1996. Balances due to factoring
clients for receivables purchased were $190.0 million and $191.5
million at March 31, 1997 and December 31, 1996, respectively.
Non-accrual advances were $1.3 million and $660,000 at March 31,
1997 and December 31, 1996, respectively, and are considered in the
assessment of the allowance for doubtful accounts for adequacy (see
"Provision for Doubtful Accounts - Capital Factors" below).
Deposits
- --------
Total deposits were $1,064.6 million at March 31, 1997 and $1,096.8
million at December 31, 1996. The decrease in total deposits
included a decrease of $27.7 million in non-interest bearing
deposits and a decrease of $20.5 million decrease in commercial and
industrial demand deposits. Management believes that such deposit
outflows are in the normal course of business.
The Company does not operate any foreign offices; however, as a
result of the activities of the Bank's International Division,
foreign customers maintain deposit accounts with the Bank.
Deposits by foreign customers amounted to $188.2 million at March
31, 1997 and $190.7 million at December 31, 1996, representing 18%
of total deposits at both dates. 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 $8.0 million to $88.0 million during the first three
months of 1997.
Long-Term Debt
- --------------
At March 31, 1997 Capital Factors had outstanding three series of
Variable Rate Asset Backed Certificates aggregating $175.0 million.
Such certificates bear interest at LIBOR plus 1.25% (6.69% at March
31, 1997, excluding annualized transaction costs of 0.37%) before
transaction costs and are scheduled to mature in December 1999
($100.0 million), June 2000 ($25.0 million) and January 2001 ($50.0
million).
Capital Factors has also established a $40 million revolving credit
facility with an unaffiliated lender. Borrowings under this
facility bear interest at LIBOR plus 2.15% (7.59% at March 31,
1997) and mature in March 1999. During 1997 borrowings under this
credit facility increased $9.2 million to $25.1 million at March
31, 1997. Also, Capital Factors has 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.
On April 30, 1997, the trust formed by Capital Factors, Inc. in
connection with the securitization of its factored advances issued
a fourth series of variable rate asset-backed securities (the
"Variable Funding Certificates"). The Variable Funding
Certificates include the issuance of $96.25 million of senior
certificates, which bear interest at LIBOR plus 0.75%, and $4.75
million of senior subordinated certificates, which bear interest at
LIBOR plus 1.50%. Unlike the previously issued series of asset
backed certificates that were fixed as to principal amount, the
Variable Funding Certificates provide for a monthly settlement of
principal, which may increase or decrease the outstanding amount.
Approximately $37.8 million of the Variable Funding Certificates
were funded at closing. Additional borrowings of up to the full
$100.0 million may be made to the extent that Capital Factors, Inc.
generates additional eligible advances. The Variable Funding
Certificates mature in April 2002.
Page 9
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<PAGE>
CAPITAL RESOURCES
- -----------------
Stockholders' equity increased $3.6 million during the first three
months of 1997 primarily as a result of net income of $5.2 million
and was offset by an increase in the unrealized loss on securities
available for sale of $1.3 million (net of tax) and dividends
declared of $600,000.
The Florida Department of Banking and Finance (the "FDBF"), the
Federal Deposit Insurance Corporation (the "FDIC") and the Board of
Governors of the Federal Reserve System (the "Federal Reserve") use
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 March 31, 1997 and December 31, 1996, the regulatory capital
ratios of the Company and the Bank were as follows:
Minimum
Company Bank Requirement of
----------------- ----------------- --------------
3/31/97 12/31/96 3/31/97 12/31/96
------- -------- ------- --------
Leverage ratio 8.65% 8.38% 8.27% 8.03% 3%*
Tier One ratio 10.66% 10.84% 10.17% 10.37% 4%
Total ratio 11.58% 11.75% 11.09% 11.28% 8%
- --------------------
*Banking regulators expect institutions to maintain an excess of
1 to 2% above the minimum.
In the opinion of management, these ratios are sufficient to
protect depositors and facilitate future growth. 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 three
months of 1997 and 1996, the Company's annualized internal capital
generation ratio was 13.61% and 13.37%, 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.
Cash and cash equivalents totaled $115.8 million and $181.3 million
at March 31, 1997 and December 31, 1996, respectively. During the
first three months of 1997, the Company used $59.6 million and
$15.3 million in investing and financing activities, respectively,
while generating $9.4 million from operating activities.
Page 10
- ------------------------------------------------------------------
<PAGE>
During the first three months of 1997, net new advances by Capital
Factors amounted to $33.2 million, and net new loans amounted to
$25.2 million. The Company also used cash and cash equivalents to
fund net deposit outflows of $32.2 million. The Company provided
cash and cash equivalents from its financing activities by
borrowing an additional $9.2 million under Capital Factors'
revolving credit facility and purchasing $8.0 million of Federal
funds and securities sold under agreements to repurchase. Although
the decrease in deposits used $32.2 million in cash flows, deposits
are expected to remain a primary source of liquidity.
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 below in "Asset/Liability Management
and Interest Rate Risk") 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.
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 March 31,
1997, the Company had outstanding commitments to extend credit,
commercial letters of credit and standby letters of credit
amounting to $253.2 million, $94.2 million and $18.5 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.
Credit losses may be incurred when one of the parties fails to
perform in accordance with the terms of the contract. The
Company's exposure to credit loss is represented by the contractual
amount of the commitments to extend credit, commercial letters of
credit and standby letters of credit, reduced by the value of any
associated collateral obtained. This is the maximum potential loss
of principal in the event the commitment is drawn upon and the
counter-party defaults. In addition, the measurement of the risks
associated with these financial instruments is meaningful only when
all related and offsetting transactions are considered.
Liquidity is also important for Bancorp and 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
March 31, 1997, the Bank was not subject to any restrictions on the
payment of dividends other than statutory.
For the 12 months commencing March 31, 1997, Bancorp's estimated
debt service and stockholder dividend requirements total
approximately $2.9 million. At March 31, 1997, Bancorp had
available cash balances of $8.6 million and management believes
liquidity at March 31, 1997 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
liquidity risk 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.
Page 11
- ------------------------------------------------------------------
<PAGE>
Interest rates earned and paid on interest earning assets and
interest bearing 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 March 31,
1997, the Company's cumulative one-year gap (the difference between
interest earning assets and interest bearing liabilities) was
negative $69.4 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.
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 three
months of 1997, the average yield on interest earning assets was
9.24%. For the first three months of 1997, the average rate paid
on interest bearing deposit liabilities was 4.32%, while the
average rate paid for other interest bearing liabilities was 6.50%.
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 March 31, 1997. 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."
INTEREST RATE SENSITIVITY BY MATURITY
OR REPRICING DATES
(In Millions of Dollars)
90 days 91-180 181-365 Over
or less days days one year Total
------- ------ ------ -------- ------
Interest earning assets:
Securities $ 25.2 $ 12.2 $ 8.3 $ 171.2 $ 216.9
Loans(1) 450.0 67.2 50.3 280.3 847.8
Other earning assets(2) 314.4 -- -- .2 314.6
------ ------ ------ ------- -------
Total interest
earning assets 789.6 79.4 58.6 451.7 1,379.3
------ ------ ------ ------- -------
Interest bearing
liabilities:
Interest bearing
deposits 494.2 97.4 116.0 68.9 776.5
Short-term borrowings 88.0 -- -- -- 88.0
Long-term debt 201.4 -- -- 10.0 211.4
------ ------ ------ ------- -------
Total interest
bearing liabilities 783.6 97.4 116.0 78.9 1,075.9
------ ------ ------ ------- -------
Gap 6.0 (18.0) (57.4) 372.8 $ 303.4
------ ------ ------ ------- =======
Cumulative Gap $ 6.0 $(12.0) $(69.4) $ 303.4
====== ====== ====== =======
- -------------------------
(1) Excludes non-accrual loans of $7.0 million.
(2) Excludes non-accrual advances of $1.3 million.
Page 12
- ------------------------------------------------------------------
<PAGE>
RESULTS OF OPERATIONS - THREE MONTHS ENDED MARCH 31, 1997 AND 1996
- ------------------------------------------------------------------
General
- -------
The Company recorded net income of $5.2 million for the three
months ended March 31, 1997, compared to $4.4 million for the three
months ended March 31, 1996. The increase was primarily a result
of an improved net interest margin and higher factoring revenue
offset by higher provisions for credit losses and higher salaries
and employee benefits. Both primary and fully diluted earnings per
share were $.64 for the three months ended March 31, 1997 compared
to $.54, for the same period in 1996. For the three months ended
March 31, 1997, the Company's annualized returns on average assets
was 1.20% compared to 1.15% for the same period in 1996. The
annualized return on average stockholders' equity was 15.26% in
1997 compared to 15.34% in 1996.
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
March 31,
-------------------------
1997 1996
-------- --------
Net interest income and
non-interest income:
Domestic banking activities $ 17,867 $ 16,288
Foreign banking activities 2,535 2,513
---------- ----------
Total banking activities 20,402 18,801
Factoring activities 12,214 9,571
Inter company (73)(1) (16)(1)
---------- ----------
Total $ 32,543 28,356
========== ==========
Income before income taxes:
Domestic banking activities $ 4,968 $ 5,684
Foreign banking activities 1,643 22
---------- ----------
Total banking activities 6,611 5,706
Factoring activities 3,800 3,129
Minority interest in factoring
activities, net of applicable taxes (434) --
Corporate and other (1,426)(2) (1,754)(2)
---------- ----------
Total $ 8,551 $ 7,081
========== ==========
- -------------------------
(1) Inter company operating results primarily reflect service
charges on Capital Factors' accounts at 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.
Page 13
- ------------------------------------------------------------------
<PAGE>
Net interest income derived from domestic banking activities
amounted to $13.1 million and $12.2 million for the three months
ended March 31, 1997 and 1996, respectively, primarily reflecting
higher levels of average interest earning assets. Non-interest
income from domestic banking activities amounted to $4.7 million
and $4.1 million in 1997 and 1996, respectively. The increase in
non-interest income in 1997 compared to 1996 was primarily due to
an increase in service charges on deposits. Operating results from
domestic activities was also affected by higher provisions for
domestic loan losses. Based on management's assessment of the
allowance for loan losses and the domestic loan portfolio, the
provision for domestic loan losses increased $2.3 million, from a
credit of $600,000 for the three months ended March 31, 1996 to a
provision of $1.7 million for the comparable period of 1997. See
"ASSET QUALITY REVIEW" and "Allowance for Loan Losses" below for
additional discussion.
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.
Net interest income from foreign banking activities totaled $1.5
million and $1.4 million in 1997 and 1996, respectively. Net
interest income increased in 1997 compared to 1996 primarily as a
result of higher levels of average earning foreign loans and higher
average rates earned on those loans. Non-interest income from
foreign banking activities primarily represents letter of credit
fees and amounted to $1.0 million and $1.2 million in 1997 and
1996, respectively. Operating results from foreign banking
activities increased primarily as a result of lower provisions for
foreign loan losses. The provision for foreign loan losses
decreased $1.1 million, from $1.2 million for the three months
ended March 31, 1996 to a credit of $196,000 for the comparable
period of 1997. The 1996 provision reflects approximately $1.1
million for certain exposures in connection with several loans to
a Panamanian bank for which the Panamanian government suspended
operations during the first quarter.
The Company's factoring activities continued to grow in 1997, due
primarily to the increase in new clients. Non-interest income,
which primarily represents factoring commissions, amounted to $8.1
million and $6.6 million in 1997 and 1996, respectively, reflecting
increased accounts receivable purchased from $564.0 million in 1996
to $730.2 million in 1997. Net interest income derived from
factoring activities amounted to $4.1 million and $3.0 million in
1997 and 1996, respectively. Growth in average interest earning
assets, primarily in advances, due to business development gave
rise to this increase. The increases in net interest income and
non-interest income were offset by increases in non-interest
expenses and provisions for doubtful accounts. The increase in
non-interest expenses was primarily the result of the expansion of
factoring activities.
Net Interest Income
- -------------------
Net interest income is the difference between interest and fees
earned on loans and investments and interest paid on deposits and
other sources of funds. Net interest income totaled $18.7 million
and $16.6 million for the three months ended March 31, 1997 and
1996, respectively. Loan fees included in net interest income
amounted to $556,000 and $451,000 in 1997 and 1996, respectively.
Net interest income on a fully tax-equivalent basis, including loan
fees, totaled $18.9 million in 1997 compared to $16.9 million in
1996.
The following table sets forth information on yields earned and
rates paid by the Company for the three month periods ended March
31, 1997 and 1996, and should be read in conjunction with the net
interest income analysis directly following such table. 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-advances 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 14
- ------------------------------------------------------------------
<PAGE>
<PAGE>
<TABLE>
YIELDS EARNED AND RATES PAID
(All Dollar Amounts in Thousands)
<CAPTION>
FOR THE THREE MONTHS ENDED MARCH 31
--------------------------------------------------------------------------
1997 1996
----------------------------- -------------------------------
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 $ 678,639 $ 16,522 9.87% $ 575,633 $ 14,105 9.86%
Foreign Borrowers 151,050 2,730 7.33 133,234 2,398 7.24
Tax-exempt 11,802 465 16.00 17,305 697 16.20
---------- --------- ----- ---------- -------- -----
Total loans 841,491 19,717 9.50 726,172 17,200 9.53
Accounts receivable
advances - factoring
subsidiary 277,196 7,859 11.50 204,615 6,032 11.86
Securities:
Securities held to maturity:
Taxable 26,994 497 7.47 20,799 411 7.95
Tax-exempt 2,208 59 10.90 3,092 83 10.75
Securities available for sale:
Taxable 190,537 2,959 6.30 211,318 3,163 6.02
Federal funds sold
and other interest earning
assets 59,470 771 5.26 71,379 976 5.50
---------- --------- ----- ---------- -------- -----
Total interest earning
assets 1,397,896 31,862 9.24 1,237,375 27,865 9.06
--------- --------
Less allowance for loan losses
and doubtful accounts (12,764) (14,623)
Cash and due from banks 100,566 88,208
Due from customers on
acceptances 22,835 28,565
Other real estate 3,606 6,792
Other assets 242,048 189,176
---------- ----------
Total $1,754,187 $1,535,493
========== ==========
</TABLE>
Page 15
- ------------------------------------------------------------------<PAGE>
<TABLE>
YIELDS EARNED AND RATES PAID
(All Dollar Amounts in Thousands)
<CAPTION>
FOR THE THREE MONTHS ENDED MARCH 31
--------------------------------------------------------------------------
1997 1996
----------------------------- -------------------------------
Average Average
Average Yield Average Yield
Balance Interest Or Rate Balance Interest Or Rate
---------- -------- ------- ---------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
LIABILITIES, MINORITY INTEREST AND
STOCKHOLDERS' EQUITY
Interest bearing liabilities:
Deposits:
Savings and Money Market $ 295,289 $ 1,775 2.44% $ 279,467 $ 1,711 2.46%
Time 483,183 6,509 5.46 409,419 5,619 5.52
---------- --------- ----- ---------- -------- -----
Total interest bearing
deposits 778,472 8,284 4.32 688,886 7,330 4.28
Short-term borrowings 88,940 976 4.45 79,931 898 4.52
Long-term borrowings 203,461 3,696 7.37 176,650 3,139 7.15
---------- --------- ----- ---------- -------- -----
Total interest bearing
liabilities 1,070,873 12,956 4.91 945,467 11,367 4.84
---------- --------- ----- ---------- -------- -----
Non-interest bearing
deposits 303,721 305,495
Bank acceptances outstanding 22,835 28,565
Other liabilities 207,067 140,531
Minority interest in
consolidated subsidiary 11,806 --
Stockholders' equity 137,885 115,435
---------- ----------
Total liabilities,
minority interest and
stockholders' equity $1,754,187 $1,535,493
========== ==========
Net interest earnings/
yield $ 18,906 5.48% $ 16,498 5.36%
========= ===== ======== =====
Net interest spread 4.33% 4.22%
===== =====
Utilization rate 79.69% 80.59%
===== =====
Page 16
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/TABLE
<PAGE>
<PAGE>
Net interest income in the first three months of 1997 increased
$2.1 million over the same period in 1996 and was comprised of an
increase of $3.7 million in interest income offset by an increase
of $1.6 million in interest expense. The increase in net interest
income was due to an increase in average interest earning assets
(primarily loans and advances) to $1.4 billion in 1997 from $1.2
billion in 1996, and an increase in the net interest margin to
5.48% in 1997 from 5.36% in 1996. Average interest bearing
liabilities increased to $1.1 billion in 1997 from $945.5 million
in 1996. The increase in average interest bearing liabilities
occurred primarily in time deposits and long-term borrowings.
Approximately 60% of the increase in interest expense was
attributable to interest expense on deposits and is primarily the
result of an increase in average time deposits partially offset by
lower average rates paid on such deposits. Average time deposits
increased $73.8 million, or 18%, for the first three months of 1997
to $483.2 million and represented 62% of average interest bearing
deposits in 1997 compared to 59% in 1996.
See "Asset/Liability Management and Interest Rate Risk" above for
a discussion of factors that may affect net interest income.
Provision for Loan Losses
- -------------------------
For the first three months of 1997, the provision for loan losses
increased $925,000 to $1.5 million as compared to $600,000 during
the same period in 1996. The increase reflects the increase in
non-accrual and other potential problem loans in the Bank's
domestic loan portfolio. The assessment of the adequacy of the
provision involves a significant degree of estimation and is
subject to change. See "ASSET QUALITY REVIEW" and "Allowance for
Loan Losses" below for additional discussion.
Provision for Doubtful Accounts - Capital Factors
- -------------------------------------------------
For the first three months in 1997, the provision for doubtful
accounts amounted to $1.4 million compared to $1.1 million for the
same period in 1996. For the three months ended March 31, 1997 and
1996, net charge offs as a percentage of accounts receivable
purchased was .14% and .25%, respectively. For the same periods,
the percentage of provision for doubtful accounts to accounts
receivable purchased was .19% and .20%, 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. See "ASSET QUALITY REVIEW
- -- Allowance for Doubtful Accounts - Capital Factors" below for
additional discussion.
Other Income
- ------------
Other income increased $2.0 million, or 17% for the three months
ended March 31, 1997 compared to the same period in 1996. The
increase in other income consisted primarily of an increase of $1.5
million in factoring revenues. The Company, through Capital
Factors, operates factoring offices in Fort Lauderdale, Florida,
Los Angeles, California, New York, New York, Charlotte, North
Carolina, and a limited service office in Atlanta, Georgia.
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 and temporary employment services
industries.
Accounts receivable purchased totaled $730.2 million and $564.0
million for the first three months of 1997 and 1996, respectively,
representing an increase of 29%. Factoring commissions increased
24% for the same period and totaled $6.8 million or 49% of total
other income for the three months ended March 31, 1997 compared to
$5.5 million or 47% of total other income for the same period in
1996. 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 from .98% in 1996 to .93% in 1997. 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
because of 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 client's business.
Page 17
- ------------------------------------------------------------------
<PAGE>
Other Expenses
- --------------
Other expenses increased $1.1 million, or 5%, consisting primarily
of an increase of $1.5 million in salaries and employee benefits
offset by a decrease of $498,000 in net occupancy expense.
Salaries and employee benefits totaled $11.6 million in 1997
compared to $10.0 million in 1996. Approximately $1.2 million of
the $1.5 million increase was at Capital Factors due to expansion
of factoring activities.
Net occupancy expense totaled $1.5 million in 1997 compared to $2.0
million in 1996. The decrease primarily reflects a decrease in
rent expense resulting from the renegotiation of the operating
lease for the Company's main office.
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 for the three months ended March 31, 1997 aggregated
38% of pre-tax income, after considering effect of minority
interest in net income of consolidated subsidiary, unchanged from
38% for the same period in 1996.
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. Because 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.
Page 18
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<PAGE>
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):
March 31, December 31,
1997 1996
--------- ------------
Non-accrual
loans:
Domestic $ 6,865 $ 5,301
Foreign 96 96
90 days past due
or more:
Domestic 233 264
Foreign -- --
-------- --------
Sub total 7,194 5,661
Non-accrual advances 1,287 660
-------- --------
Total $ 8,481 $ 6,321
======== ========
Other potential
problem loans $ 8,336 $ 5,532
======== ========
Restructured
loans (1) $ 8,271 $ 8,293
======== ========
Restructured
assets (2) $ 3,595 $ 3,593
======== ========
- -------------------------
(1) Represents troubled debt restructurings as defined by
Statement of Financial Accounting Standards No. 15. These
loans were in compliance with terms at March 31, 1997.
(2) Represents securities available for sale (at market value)
received in connection with restructured foreign loans. These
bonds were in compliance with terms at March 31, 1997.
Domestic non-accrual loans aggregated $6.9 million at March 31,
1997, compared to $5.3 million at year end 1996. Domestic non-
accrual loans aggregated 1.0% and .9% of total domestic loans at
March 31, 1997 and December 31, 1996, respectively. The increase
in domestic non-accrual loans resulted primarily from the transfer
of several commercial loans, which totaled $1.5 million, from
accrual status to non-accrual status.
Foreign non-accrual loans aggregated $96,000 at March 31, 1997 and
December 31, 1996 and represented .1% of total foreign loans at
both dates. See "Allowance for Loan Losses" below for additional
discussion.
Impaired loans aggregated $5.9 million and $4.9 million at March
31, 1997 and December 31, 1996, respectively. All impaired loans
at March 31, 1997 and December 31, 1996 were on non-accrual status.
See "Allowance for Loan Losses" below for additional discussion.
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 $1,287,000 at March
31, 1997, compared to $660,000 at December 31, 1996. The increase
in non-accrual advances is primarily the result of the transfer of
one advance to non-accrual status offset by the payoff of one
advance previously on non-accrual status. See "RESULTS OF
OPERATIONS -- Provision for Doubtful Accounts - Capital Factors"
above and "Allowance for Doubtful Accounts - Capital Factors" below
for additional information.
Page 19
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<PAGE>
Other potential problem loans are loans that management has
identified where known information about possible credit problems
causes management to have doubts as to the ability of borrowers to
comply with present loan repayment terms. All such loans at March
31, 1997 and December 31, 1996 were with domestic borrowers. Other
potential problem loans at March 31, 1997 totaled $8.3 million, and
primarily consisted of two real estate loans aggregating $6.9
million and several commercial loans aggregating $1.3 million. At
December 31, 1996 other potential problem loans totaled $5.5
million, and primarily consisted of one real estate loan of $2.7
million and several commercial loans totaling $2.4 million. During
1997 management identified one new real estate loan totaling $4.1
million as a potential problem loan and transferred two commercial
loans totaling $1.2 million that were identified as potential
problem loans at December 31, 1996 to non-accrual status. See
"RESULTS OF OPERATIONS -- Provision for Loan Losses" above for
additional discussion.
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 March 31, 1997,
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):
Three Months Ended
March 31,
---------------------------
1997 1996
-------- --------
Allowance for loan
losses at January 1 $ 9,333 $ 11,789
Loans charged off:
Commercial and financial (372) (104)
Foreign -- --
Real estate - mortgage (33) --
Consumer (933) (825)
-------- --------
Total loans charged off (1,338) (929)
-------- --------
Recoveries on loans
previously charged off:
Commercial and financial 37 76
Foreign -- --
Real estate - mortgage 5 10
Consumer 156 86
-------- --------
Total recoveries 198 172
-------- --------
Net loans charged off (1,140) (757)
-------- --------
Additions to allowance
charged to operating expense 1,525 600
-------- --------
Allowance for loan
losses at March 31 $ 9,718 $ 11,632
======== ========
Average amount of
loans outstanding for the year $841,491 $726,172
======== ========
Ratio of net loans
charged off to average
loans outstanding for
the period (1) (2) .55% .42%
======== ========
- ---------------------
(1) Before deduction of allowance for loan losses.
(2) Annualized.
Page 20
- ------------------------------------------------------------------
<PAGE>
The allowance for loan losses totaled $9.7 million and $9.3 million
at March 31, 1997 and December 31, 1996, respectively, representing
1.1% of outstanding loans at March 31, 1997 and December 31, 1996.
The ratio of the allowance for loan losses to non-accrual loans was
140% at March 31, 1997 compared to 173% at December 31, 1996. The
ratio of the allowance to total non-performing loans (non-accrual
loans and loans past due 90 days or more) was 135% and 165% at
March 31, 1997 and December 31, 1996, respectively. The decrease
in these ratios primarily reflects the increase in non-accrual
commercial loans. While the above mentioned ratios have declined,
the Company considers the allowance for loan losses to be adequate
to absorb potential losses in the portfolio. At March 31, 1997 the
total allowance included $8.0 million allocated for domestic loans,
$1.2 million allocated for foreign exposure and $518,000
unallocated. At December 31, 1996, the domestic allocation was
$7.4 million, foreign was $1.3 million and $633,000 was
unallocated.
The allowance allocated for domestic loans increased as a result of
management's evaluation of potential problem loans in the
commercial and real estate mortgage portfolio at March 31, 1997.
Management does not believe the composition of domestic potential
problem loans represents material deteriorating trends, but are
isolated to specific borrowers.
The allowance allocated for foreign loans decreased as a result of
management's evaluation of the portfolio. Based on an assessment
of the information currently available, management believes the
allowance allocated for foreign loans at March 31, 1997 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.
During the first three months of 1997, domestic loan charge offs
generally increased compared to the same period in 1996 primarily
as a result of increases in commercial loan charge offs.
Allowance for Doubtful Accounts - Capital Factors
- -------------------------------------------------
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).
Three Months Ended
March 31,
----------------------------
1997 1996
--------- ---------
Allowance for doubtful accounts
at January 1 $ 2,994 $ 2,981
Provision for credit losses 1,400 1,100
Charge offs (1,176) (1,488)
Recoveries 176 91
--------- --------
Allowance for doubtful accounts
at March 31 $ 3,394 $ 2,684
========= ========
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. See "RESULTS OF
OPERATIONS -- Provision for Doubtful Accounts - Capital Factors"
above for additional discussion.
Page 21
- ------------------------------------------------------------------
<PAGE>
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.
A motion to dismiss this derivative action was filed by Bancorp in
January 1997. A hearing on such motion commenced on May 9, 1997
and is currently ongoing.
Other Litigation
- ----------------
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.
Regulatory Matter
- -----------------
The administrative hearing regarding the application by Daniel
Holtz, Chairman of the Board, Chief Executive Officer and President
of Bancorp, Fana Holtz, the Vice-Chairman of the Board, and Javier
Holtz, an executive officer of Bancorp, to acquire and/or maintain
a controlling interest in the Bank through their ownership and
control of Bancorp, commenced in August 1996 and ended in early
November. An order has not yet been entered on the application but
is anticipated in the second or third quarter of 1997.
Page 22
- ------------------------------------------------------------------
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
(a)
Exhibit 10.1 - Second Amendment to Employment Agreement
dated as of January 1, 1996 by and between Capital Bank and
Charles Boyce.*
Exhibit 10.2 - Second Amendment to Employment Agreement
dated as of January 1, 1996 by and between Capital Bank and
Daniel M. Holtz.*
Exhibit 10.3 - Second Amendment to Employment Agreement
dated as of January 1, 1996 by and between Capital Bank and
David Konfino.*
Exhibit 10.4 - Second Amendment to Employment Agreement
dated as of January 1, 1996 by and between Capital Bank and
Javier J. Holtz.*
Exhibit 10.5 - Second Amendment to Employment Agreement
dated as of January 1, 1996 by and between Capital Bank and
Thomas J. Flood.*
Exhibit 10.6 - Second Amendment to Employment Agreement
dated as of January 1, 1996 by and between Capital Bank and
Lucious T. Harris.*
Exhibit 10.7 - Second Amendment to Employment Agreement
dated as of January 1, 1996 by and between Capital Bank and
Timothy E. Kish.*
Exhibit 10.8 - Second Amendment to Employment Agreement
dated as of January 1, 1996 by and between Capital Factors
Holding, Inc., Capital Factors, Inc. and John W. Kiefer.*
Exhibit 10.9 - Form of Indemnification Agreement between
Capital Bancorp or Capital Bank, and each of its directors
and executive officers.
Exhibit 10.10 - Second Amendment to Lease Agreement.
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
March 31, 1997 Form 10-Q electronically filed on May 15,
1997.
- -------------------------
*Exhibits 10.1 to 10.8 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 March 31, 1997.
Page 23
- ------------------------------------------------------------------
<PAGE>
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: May 15, 1996 By: /s/ Lucious T. Harris
-------------------------
LUCIOUS T. HARRIS
Senior Vice President and
Treasurer
(Principal Financial and
Accounting Officer)
Page 24
- ------------------------------------------------------------------
<PAGE>
CAPITAL BANCORP AND SUBSIDIARIES
CALCULATION OF EARNINGS PER SHARE
Three Months Ended
March 31,
------------------------
Primary 1997 1996
- ------- ----------- -----------
Weighted average number of
common shares outstanding 7,556,694 7,457,883
Common equivalent shares
outstanding - options 581,866 661,992
----------- -----------
Total common and common
equivalent shares outstanding 8,138,560 8,119,875
=========== ===========
Net income $ 5,187,000 $ 4,402,000
=========== ===========
Primary earnings per shar $ .64 $ .54
=========== ===========
Fully diluted
- -------------
Weighted average number of
common shares outstanding 7,556,694 7,457,883
Common equivalent shares
outstanding - options 607,529 661,992
----------- -----------
Total common and common
equivalent shares outstanding 8,164,223 8,119,875
=========== ===========
Net income $ 5,187,000 $ 4,402,000
=========== ===========
Fully diluted earnings per share $ .64 $ .54
=========== ===========
EXHIBIT 10.1
SECOND AMENDMENT TO EMPLOYMENT AGREEMENT
THIS SECOND AMENDMENT TO EMPLOYMENT AGREEMENT (the "Second
Amendment") dated as of March 27, 1997 is made and entered into by
and between Charles Boyce (the "Executive") and Capital Bank, a
Florida corporation (the "Company").
WHEREAS, the Executive and the Company desire to amend the
Employment Agreement, as amended, dated as of January 1, 1996 by
and between the Executive and the Company to modify certain terms
thereof (the "Agreement"); and
WHEREAS, the Board of Directors has determined that it is in
the best interest of the Company to amend the Agreement as set
forth below and has authorized and directed management of the
Company to execute and deliver this Second Amendment;
NOW, THEREFORE, the parties hereto agree as follows:
1. Section 5.6 (a) of the Agreement is hereby amended by
deleting the first sentence and substituting in lieu thereof as
follows:
"(a) In the event that a Change in Control (as defined in
paragraph (b) of this Section 5.6) in the Company shall occur
during the Initial Term, and within one year after the date of the
Change in Control, (i) the Executive's Base Salary in effect
immediately prior to the Change in Control is reduced or (ii) the
Executive is (x) 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, (y) forced to relocate to another location more
than 25 miles from his location prior to the Change in Control, or
(z) 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) and (ii) of this Section
5.6(a), shall have the right to terminate his employment
hereunder."
2. All provisions of the Agreement, except as expressly
amended by this Second Amendment, shall remain in full force and
effect.
1
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the Executive and the Company have
executed this Second Amendment effective as of the date first above
written.
CAPITAL BANK
By: /s/ Daniel M. Holtz
--------------------------------------
Daniel M. Holtz, Chairman of the Board,
Chief Executive Officer and President
EXECUTIVE
/s/ Charles Boyce
--------------------------------------
Charles Boyce
2
EXHIBIT 10.2
SECOND AMENDMENT TO EMPLOYMENT AGREEMENT
THIS SECOND AMENDMENT TO EMPLOYMENT AGREEMENT (the "Second
Amendment") dated as of March 27, 1997 is made and entered into by
and between Daniel M. Holtz (the "Executive") and Capital Bank, a
Florida corporation (the "Company").
WHEREAS, the Executive and the Company desire to amend the
Employment Agreement, as amended, dated as of January 1, 1996 by
and between the Executive and the Company to modify certain terms
thereof (the "Agreement"); and
WHEREAS, the Board of Directors has determined that it is in
the best interest of the Company to amend the Agreement as set
forth below and has authorized and directed management of the
Company to execute and deliver this Second Amendment;
NOW, THEREFORE, the parties hereto agree as follows:
1. Section 5.6(a) of the Agreement is hereby amended by
deleting the first sentence and substituting in lieu thereof as
follows:
"(a) In the event that a Change in Control (as defined in
paragraph (b) of this Section 5.6) in the Company shall occur
during the Initial Term, and within one year after the date of the
Change in Control, (i) the Executive's Base Salary in effect
immediately prior to the Change in Control is reduced or (ii) the
Executive is (x) 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, (y) forced to relocate to another location more
than 25 miles from his location prior to the Change in Control, or
(z) 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) and (ii) of this Section
5.6(a), shall have the right to terminate his employment
hereunder."
2. All provisions of the Agreement, except as expressly
amended by this Second Amendment, shall remain in full force and
effect.
1
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the Executive and the Company have
executed this Second Amendment effective as of the date first above
written.
CAPITAL BANK
By: /s/ Russell Galbut
--------------------------------------
Russel Galbut, Chariman
Compensation Committee
EXECUTIVE
/s/ Daniel M. Holtz
--------------------------------------
Daniel M. Holtz
2
EXHIBIT 10.3
SECOND AMENDMENT TO EMPLOYMENT AGREEMENT
THIS SECOND AMENDMENT TO EMPLOYMENT AGREEMENT (the "Second
Amendment") dated as of March 27, 1997 is made and entered into by
and between David Konfino (the "Executive") and Capital Bank, a
Florida corporation (the "Company").
WHEREAS, the Executive and the Company desire to amend the
Employment Agreement, as amended, dated as of January 1, 1996 by
and between the Executive and the Company to modify certain terms
thereof (the "Agreement"); and
WHEREAS, the Board of Directors has determined that it is in
the best interest of the Company to amend the Agreement as set
forth below and has authorized and directed management of the
Company to execute and deliver this Second Amendment;
NOW, THEREFORE, the parties hereto agree as follows:
1. Section 5.6(a) of the Agreement is hereby amended by
deleting the first sentence and substituting in lieu thereof as
follows:
"(a) In the event that a Change in Control (as defined in
paragraph (b) of this Section 5.6) in the Company shall occur
during the Initial Term, and within one year after the date of the
Change in Control, (i) the Executive's Base Salary in effect
immediately prior to the Change in Control is reduced or (ii) the
Executive is (x) 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, (y) forced to relocate to another location more
than 25 miles from his location prior to the Change in Control, or
(z) 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) and (ii) of this Section
5.6(a), shall have the right to terminate his employment
hereunder."
2. All provisions of the Agreement, except as expressly
amended by this Second Amendment, shall remain in full force and
effect.
1
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the Executive and the Company have
executed this Second Amendment effective as of the date first above
written.
CAPITAL BANK
By: /s/ Daniel M. Holtz
--------------------------------------
Daniel M. Holtz, Chairman of the Board,
Chief Executive Officer and President
EXECUTIVE
/s/ David Konfino
--------------------------------------
David Konfino
2
EXHIBIT 10.4
SECOND AMENDMENT TO EMPLOYMENT AGREEMENT
THIS SECOND AMENDMENT TO EMPLOYMENT AGREEMENT (the "Second
Amendment") dated as of March 27, 1997 is made and entered into by
and between Javier J. Holtz (the "Executive") and Capital Bank, a
Florida corporation (the "Company").
WHEREAS, the Executive and the Company desire to amend the
Employment Agreement, as amended, dated as of January 1, 1996 by
and between the Executive and the Company to modify certain terms
thereof (the "Agreement"); and
WHEREAS, the Board of Directors has determined that it is in
the best interest of the Company to amend the Agreement as set
forth below and has authorized and directed management of the
Company to execute and deliver this Second Amendment;
NOW, THEREFORE, the parties hereto agree as follows:
1. Section 5.6(a) of the Agreement is hereby amended by
deleting the first sentence and substituting in lieu thereof as
follows:
"(a) In the event that a Change in Control (as defined in
paragraph (b) of this Section 5.6) in the Company shall occur
during the Initial Term, and within one year after the date of the
Change in Control, (i) the Executive's Base Salary in effect
immediately prior to the Change in Control is reduced or (ii) the
Executive is (x) 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, (y) forced to relocate to another location more
than 25 miles from his location prior to the Change in Control, or
(z) 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) and (ii) of this Section
5.6(a), shall have the right to terminate his employment
hereunder."
2. All provisions of the Agreement, except as expressly
amended by this Second Amendment, shall remain in full force and
effect.
1
<PAGE>
IN WITNESS WHEREOF, the Executive and the Company have
executed this Second Amendment effective as of the date first above
written.
CAPITAL BANK
By: /s/ Daniel M. Holtz
--------------------------------------
Daniel M. Holtz, Chairman of the Board,
Chief Executive Officer and President
EXECUTIVE
/s/ Javier J. Holtz
--------------------------------------
Javier J. Holtz
2
EXHIBIT 10.5
SECOND AMENDMENT TO EMPLOYMENT AGREEMENT
THIS SECOND AMENDMENT TO EMPLOYMENT AGREEMENT (the "Second
Amendment") dated as of March 27, 1997 is made and entered into by
and between Thomas J. Flood (the "Executive") and Capital Bank, a
Florida corporation (the "Company").
WHEREAS, the Executive and the Company desire to amend the
Employment Agreement, as amended, dated as of January 1, 1996 by
and between the Executive and the Company to modify certain terms
thereof (the "Agreement"); and
WHEREAS, the Board of Directors has determined that it is in
the best interest of the Company to amend the Agreement as set
forth below and has authorized and directed management of the
Company to execute and deliver this Second Amendment;
NOW, THEREFORE, the parties hereto agree as follows:
1. Section 5.6(a) of the Agreement is hereby amended by
deleting the first sentence and substituting in lieu thereof as
follows:
"(a) In the event that a Change in Control (as defined in
paragraph (b) of this Section 5.6) in the Company shall occur
during the Initial Term, and within one year after the date of the
Change in Control, (i) the Executive's Base Salary in effect
immediately prior to the Change in Control is reduced or (ii) the
Executive is (x) 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, (y) forced to relocate to another location more
than 25 miles from his location prior to the Change in Control, or
(z) 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) and (ii) of this Section
5.6(a), shall have the right to terminate his employment
hereunder."
2. All provisions of the Agreement, except as expressly
amended by this Second Amendment, shall remain in full force and
effect.
1
<PAGE>
IN WITNESS WHEREOF, the Executive and the Company have
executed this Second Amendment effective as of the date first above
written.
CAPITAL BANK
By: /s/ Daniel M. Holtz
--------------------------------------
Daniel M. Holtz, Chairman of the Board,
Chief Executive Officer and President
EXECUTIVE
/s/ Thomas J. Flood
--------------------------------------
Thomas J. Flood
2
EXHIBIT 10.6
SECOND AMENDMENT TO EMPLOYMENT AGREEMENT
THIS SECOND AMENDMENT TO EMPLOYMENT AGREEMENT (the "Second
Amendment") dated as of March 27, 1997 is made and entered into by
and between Lucious T. Harris (the "Executive") and Capital Bank,
a Florida corporation (the "Company").
WHEREAS, the Executive and the Company desire to amend the
Employment Agreement, as amended, dated as of January 1, 1996 by
and between the Executive and the Company to modify certain terms
thereof (the "Agreement"); and
WHEREAS, the Board of Directors has determined that it is in
the best interest of the Company to amend the Agreement as set
forth below and has authorized and directed management of the
Company to execute and deliver this Second Amendment;
NOW, THEREFORE, the parties hereto agree as follows:
1. Section 5.6(a) of the Agreement is hereby amended by
deleting the first sentence and substituting in lieu thereof as
follows:
"(a) In the event that a Change in Control (as defined in
paragraph (b) of this Section 5.6) in the Company shall occur
during the Initial Term, and within one year after the date of the
Change in Control, (i) the Executive's Base Salary in effect
immediately prior to the Change in Control is reduced or (ii) the
Executive is (x) 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, (y) forced to relocate to another location more
than 25 miles from his location prior to the Change in Control, or
(z) 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) and (ii) of this Section
5.6(a), shall have the right to terminate his employment
hereunder."
2. All provisions of the Agreement, except as expressly
amended by this Second Amendment, shall remain in full force and
effect.
1
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the Executive and the Company have
executed this Second Amendment effective as of the date first above
written.
CAPITAL BANK
By: /s/ Daniel M. Holtz
--------------------------------------
Daniel M. Holtz, Chairman of the Board,
Chief Executive Officer and President
EXECUTIVE
/s/ Lucious T. Harris
--------------------------------------
Lucious T. Harris
2
EXHIBIT 10.7
SECOND AMENDMENT TO EMPLOYMENT AGREEMENT
THIS SECOND AMENDMENT TO EMPLOYMENT AGREEMENT (the "Second
Amendment") dated as of March 27, 1997 is made and entered into by
and between Timothy E. Kish (the "Executive") and Capital Bank, a
Florida corporation (the "Company").
WHEREAS, the Executive and the Company desire to amend the
Employment Agreement, as amended, dated as of January 1, 1996 by
and between the Executive and the Company to modify certain terms
thereof (the "Agreement"); and
WHEREAS, the Board of Directors has determined that it is in
the best interest of the Company to amend the Agreement as set
forth below and has authorized and directed management of the
Company to execute and deliver this Second Amendment;
NOW, THEREFORE, the parties hereto agree as follows:
1. Section 5.6(a) of the Agreement is hereby amended by
deleting the first sentence and substituting in lieu thereof as
follows:
"(a)In the event that a Change in Control (as defined in
paragraph (b) of this Section 5.6) in the Company shall occur
during the Initial Term, and within one year after the date of the
Change in Control, (i) the Executive's Base Salary in effect
immediately prior to the Change in Control is reduced or (ii) the
Executive is (x) 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, (y) forced to relocate to another location more
than 25 miles from his location prior to the Change in Control, or
(z) 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) and (ii) of this Section
5.6(a), shall have the right to terminate his employment
hereunder."
2. All provisions of the Agreement, except as expressly
amended by this Second Amendment, shall remain in full force and
effect.
1
<PAGE>
IN WITNESS WHEREOF, the Executive and the Company have
executed this Second Amendment effective as of the date first above
written.
CAPITAL BANK
By: /s/ Daniel M. Holtz
--------------------------------------
Daniel M. Holtz, Chairman of the Board,
Chief Executive Officer and President
EXECUTIVE
/s/ Timothy E. Kish
--------------------------------------
Timothy E. Kish
2
EXHIBIT 10.8
SECOND AMENDMENT TO EMPLOYMENT AGREEMENT
This Second Amendment to Employment Agreement is made and
entered into effective as of the 28th day of April, 1997, 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").
RECITALS
--------
WHEREAS, the Company and the Executive entered into an
Employment Agreement (the "Employment Agreement") pursuant to which
the Executive renders certain services to the Company; and
WHEREAS, the Company and the Executive desire to amend the
Employment Agreement in accordance with the terms of this
Amendment.
NOW, THEREFORE, in consideration of the mutual promises and
covenants set forth in this Amendment, and other good and valuable
consideration, the parties to this Amendment agree as follows:
1. All capitalized terms in this Amendment shall have the
same meaning as in the Employment Agreement, unless otherwise
specified.
2. Section 3.3(f) of the Agreement is hereby amended to read
as follows:
"(f)The Executive shall be entitled to receive the
estimated amount of the Incentive Compensation (the "Estimated
Incentive Compensation"), net of any withholding and other taxes,
within fifteen (15) days after the end of each year during the
Term, such Estimated Incentive Compensation to be determined by the
Compensation Committee based on the Company's unaudited
consolidated financial statements as reviewed and approved by the
Board. In no event shall the Estimated Incentive Compensation
exceed the amount, if any, by which (i) $1,000,000 exceeds (ii) all
remuneration, other than the Incentive Compensation, payable to the
Executive that is required to be taken into account in determining
the maximum amount of such remuneration that may be deducted by the
Company under Section 162(m) of the Code for the year for which the
Incentive Compensation is payable. 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
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"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, but in no
event prior to the date on which the Compensation Committee of the
Company has certified in writing that the performance goals upon
which the Incentive Compensation is based have been met. 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. A new paragraph (g) is hereby added to Section 3.3 of the
Agreement, to read as follows:
"(g) For purposes of determining the Executive's
Incentive Compensation for any year during the Term:
(i) the Executive's Base Salary taken into account
shall be equal to the Executive's Base Salary as of March 31 of the
calendar year for which the Incentive Compensation is payable, and
(ii) the maximum amount of Base Salary that may be
taken into account shall be $600,000."
4. Section 3.4 of the Agreement is hereby amended by adding
the following paragraphs to the end thereof:
"For purposes of determining the Deferred
Compensation earned for any year during the Term:
(i) the Executive's Base Salary taken into account
shall be equal to the Executive's Base Salary as of the March 31 of
the calendar year for which the Deferred Compensation is payable,
and
(ii) the maximum amount of Base Salary that may be
taken into account shall be $600,000.
In no event shall any Deferred Compensation earned
for any year be paid prior to the date on which the Compensation
and Benefits Committee of the Company has certified in writing that
the performance goals upon which the Deferred Compensation is based
have been met."
5. Section 3.6 of the Agreement is hereby amended to read as
follows:
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"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 Corporation, payment of the portion (the
"Section 162(m) Portion") of the Executive's Incentive Compensation
and Deferred Compensation 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), 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". 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.
6. All other terms and conditions of the Employment Agreement
shall remain the same.
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IN WITNESS WHEREOF, the parties have caused this Amendment to
be duly executed effective as of the day and year first above
written.
COMPANY:
CAPITAL FACTORS HOLDING, INC.
By: /s/ Javier J. Holtz
--------------------------
Javier J. Holtz
FACTORS:
CAPITAL FACTORS, INC.
By: /s/ Javier J. Holtz
--------------------------
Javier J. Holtz
EXECUTIVE:
By: /s/ John W. Kiefer
--------------------------
John W. Kiefer
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EXHIBIT 10.9
FORM OF INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT ("Agreement"), is made and
entered into as of the _____ day of April, 1997, by and between
________________________, a Florida corporation (the "Company"),
and ____________________________ (the "Indemnitee").
RECITALS
--------
A. The Indemnitee currently serves as a director and/or
executive officer of the Company.
B. As a condition to the Indemnitee's agreement to serve the
Company as such, the Indemnitee required that the Company indemnify
him from liability to the fullest extent permitted by law.
C. The Company has previously determined to indemnify the
Indemnitee to the fullest extent permitted by law in order to
retain the services of the Indemnitee and has entered into this
Agreement in order to memorialize such indemnification obligations.
NOW, THEREFORE, for and in consideration of the mutual
premises and covenants contained herein, the Company and the
Indemnitee agree as follows:
SECTION 1. MANDATORY INDEMNIFICATION IN PROCEEDINGS OTHER
THAN THOSE BY OR IN THE RIGHT OF THE COMPANY. The Company shall
indemnify and hold harmless the Indemnitee from and against any and
all claims, damages, expenses (including attorneys' fees),
judgments, penalties, fines (including excise taxes assessed with
respect to an employee benefit plan), amounts paid in settlement
and all other liabilities actually and reasonably 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, investigative or otherwise (other than an action by
or in the right of the Company) and to which the Indemnitee was or
is a party or is threatened to be made a party by reason of the
fact that the Indemnitee is or was an officer, director,
shareholder, employee or agent of the Company, or is or was serving
at the request of the Company as an officer, director, partner,
trustee, employee or agent of another corporation, partnership,
joint venture, trust, employee benefit plan, or other enterprise,
or by reason of anything done or not done by the Indemnitee in any
such capacity or capacities, provided that the Indemnitee acted in
good faith 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.
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SECTION 2.MANDATORY INDEMNIFICATION IN PROCEEDINGS BY OR IN
THE RIGHT OF THE COMPANY. The Company shall indemnify and hold
harmless the Indemnitee from and against any and all expenses
(including attorneys' fees) and amounts paid in settlement actually
and reasonably 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 by or
in the right of the Company to procure a judgment in its favor,
whether civil, criminal, administrative, investigative or
otherwise, and to which the Indemnitee was or is a party or is
threatened to be made a party by reason of the fact that the
Indemnitee is or was an officer, director, shareholder, employee or
agent of the Company, or is or was serving at the request of the
Company as an officer, director, partner, trustee, employee or
agent of another corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise, or by reason of anything
done or not done by the Indemnitee in any such capacity or
capacities, provided that (i) the Indemnitee acted in good faith
and in a manner he reasonably believed to be in or not opposed to
the best interests of the Company, and (ii) no indemnification
shall be made under this Section 2 in respect of any claim, issue
or matter as to which the Indemnitee shall have been adjudged to be
liable to the Company for misconduct in the performance of his duty
to the Company unless and only to the extent that the court in
which such action, suit or proceeding was brought (or any other
court of competent jurisdiction) shall determine upon application
that, despite the adjudication of liability but in view of all the
circumstances of the case, the Indemnitee is fairly and reasonably
entitled to indemnity for such expenses which such court shall deem
proper.
SECTION 3. REIMBURSEMENT OF EXPENSES FOLLOWING ADJUDICATION
OF NEGLIGENCE. The Company shall reimburse the Indemnitee for any
expenses (including attorney's fees) and amounts paid in settlement
actually and reasonably incurred or paid by him in connection with
the investigation, defense, settlement or appeal of any action or
suit described in Section 2 hereof that results in an adjudication
that the Indemnitee was liable for negligence, gross negligence or
recklessness (but not willful misconduct) in the performance of his
duty to the Company; provided, however, that the Indemnitee acted
in good faith and in a manner he believed to be in the best
interests of the Company.
SECTION 4. AUTHORIZATION OF INDEMNIFICATION. Any
indemnification under Sections 1 and 2 hereof (unless ordered by a
court) and any reimbursement made under Section 3 hereof shall be
made by the Company only as authorized in the specific case upon a
determination (the "Determination") that indemnification or
reimbursement of the Indemnitee is proper in the circumstances
because the Indemnitee has met the applicable standard of conduct
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set forth in Section 1, 2 or 3 hereof, as the case may be. Subject
to Sections 5.6, 5.7, 5.8 and 8 of this Agreement, the
Determination shall be made in the following order of preference:
(1) first, by the Company's Board of Directors (the
"Board") by majority vote or consent of a quorum consisting of
directors ("Disinterested Directors") who are not, at the time of
the Determination, named parties to such action, suit or
proceeding; or
(2) next, if such a quorum of Disinterested
Directors cannot be obtained, by majority vote or consent of a
committee duly designated by the Board (in which designation all
directors, whether or not Disinterested Directors, may participate)
consisting solely of two or more Disinterested Directors; or
(3) next, if such a committee cannot be designated,
by any independent legal counsel (who may be any outside counsel
regularly employed by the Company); or
(4) next, if such legal counsel determination
cannot be obtained, by vote or consent of the holders of a majority
of the Company's Common Stock that are represented in person or by
proxy at a meeting called for such purpose.
4.1 NO PRESUMPTIONS. The termination of any action,
suit or proceeding by judgment, order, settlement, conviction, or
upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the Indemnitee did not act in
good faith and in a manner that 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 reasonable cause to
believe that his conduct was unlawful.
4.2 BENEFIT PLAN CONDUCT. The Indemnitee's conduct with
respect to an employee benefit plan for a purpose he reasonably
believed to be in the interests of the participants in and
beneficiaries of the plan shall be deemed to be conduct that the
Indemnitee reasonably believed to be not opposed to the best
interests of the Company.
4.3 RELIANCE AS SAFE HARBOR. For purposes of any
Determination hereunder, the Indemnitee shall be deemed to have
acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the Company, or, with
respect to any criminal action or proceeding, to have had no
reasonable cause to believe his conduct was unlawful, if his action
is based on (i) the records or books of account of the Company or
another enterprise, including financial statements, (ii)
information supplied to him by the officers of the Company or
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another enterprise in the course of their duties, (iii) the advice
of legal counsel for the Company or another enterprise, or (iv)
information or records given or reports made to the Company or
another enterprise by an independent certified public accountant or
by an appraiser or other expert selected with reasonable care by
the Company or another enterprise. The term "another enterprise"
as used in this Section 4.3 shall mean any other corporation or any
partnership, joint venture, trust, employee benefit plan or other
enterprise of which the Indemnitee is or was serving at the request
of the Company as an officer, director, partner, trustee, employee
or agent. The provisions of this Section 4.3 shall not be deemed
to be exclusive or to limit in any way the other circumstances in
which the Indemnitee may be deemed to have met the applicable
standard of conduct set forth in Sections 1, 2 or 3 hereof, as the
case may be.
4.4 SUCCESS ON MERITS OR OTHERWISE. Notwithstanding any
other provision of this Agreement, to the extent that the
Indemnitee has been successful on the merits or otherwise in
defense of any action, suit or proceeding described in Section 1 or
2 hereof, or in defense of any claim, issue or matter therein, he
shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the
investigation, defense, settlement or appeal thereof. For purposes
of this Section 4.4, the term "successful on the merits or
otherwise" shall include, but not be limited to, (i) any
termination, withdrawal, or dismissal (with or without prejudice)
of any claim, action, suit or proceeding against the Indemnitee
without any express finding of liability or guilt against him, (ii)
the expiration of 120 days after the making of any claim or threat
of an action, suit or proceeding without the institution of the
same and without any promise or payment made to induce a
settlement, or (iii) the settlement of any action, suit or
proceeding under Section 1, 2 or 3 hereof pursuant to which the
Indemnitee pays less than $25,000.
4.5 PARTIAL INDEMNIFICATION OR REIMBURSEMENT. If the
Indemnitee is entitled under any provision of this Agreement to
indemnification and/or reimbursement by the Company for some or a
portion of the claims, damages, expenses (including attorneys'
fees), judgments, fines or amounts paid in settlement by the
Indemnitee in connection with the investigation, defense,
settlement or appeal of any action specified in Section 1, 2 or 3
hereof, but not, however, for the total amount thereof, the Company
shall nevertheless indemnify and/or reimburse the Indemnitee for
the portion thereof to which the Indemnitee is entitled. The party
or parties making the Determination shall determine the portion (if
less than all) of such claims, damages, expenses (including
attorneys' fees), judgments, fines or amounts paid in settlement
for which the Indemnitee is entitled to indemnification and/or
reimbursement under this Agreement.
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4.6 LIMITATIONS ON INDEMNIFICATION. No indemnification
pursuant to Sections 1 or 2 hereof shall be paid by the Company if
a judgment (after exhaustion of all appeals) or other final
adjudication determines that the Indemnitee's actions, or omissions
to act, were material to the cause of action so adjudicated and
constitute:
(a) a violation of criminal law, unless the
Indemnitee had reasonable cause to believe his conduct was lawful
or had no reasonable cause to believe his conduct was unlawful;
(b) a transaction from which the Indemnitee derived
an improper personal benefit within the meaning of Section
607.0850(7) of the Florida Business Corporation Act;
(c) in the event that the Indemnitee is a director
of the Company, a circumstance under which the liability provisions
of Section 607.0834 of the Florida Business Corporation Act are
applicable; or
(d) willful misconduct or conscious disregard for
the best interests of the Company in a proceeding by or in the
right of the Company to procure a judgment in its favor or in a
proceeding by or in the right of a shareholder of the Company.
SECTION 5. PROCEDURES FOR DETERMINATION OF WHETHER STANDARDS
HAVE BEEN SATISFIED.
5.1 COSTS. All costs of making the Determination
required by Section 4 hereof shall be borne solely by the Company,
including, but not limited to, the costs of legal counsel, proxy
solicitations and judicial determinations. The Company shall also
be solely responsible for paying (i) all reasonable expenses
incurred by the Indemnitee to enforce this Agreement, including,
but not limited to, the costs incurred by the Indemnitee to obtain
court-ordered indemnification pursuant to Section 8 hereof,
regardless of the outcome of any such application or proceeding,
and (ii) all costs of defending any suits or proceedings
challenging payments to the Indemnitee under this Agreement.
5.2 TIMING OF THE DETERMINATION. The Company shall use
its best efforts to make the Determination contemplated by Section
4 hereof promptly. In addition, the Company agrees:
(a) if the Determination is to be made by the Board
or a committee thereof, such Determination shall be made not later
than 15 days after a written request for a Determination (a
"Request") is delivered to the Company by the Indemnitee;
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(b) if the Determination is to be made by
independent legal counsel, such Determination shall be made not
later than 30 days after a Request is delivered to the Company by
the Indemnitee; and
(c) if the Determination is to be made by the
shareholders of the Company, such Determination shall be made not
later than 90 days after a Request is delivered to the Company by
the Indemnitee.
The failure to make a Determination within the above-specified time
period shall constitute a Determination approving full
indemnification or reimbursement of the Indemnitee.
Notwithstanding anything herein to the contrary, a Determination
may be made in advance of (i) the Indemnitee's payment (or
incurring) of expenses with respect to which indemnification or
reimbursement is sought, and/or (ii) final disposition of the
action, suit or proceeding with respect to which indemnification or
reimbursement is sought.
5.3 REASONABLENESS OF EXPENSES. The evaluation and
finding as to the reasonableness of expenses incurred by the
Indemnitee for purposes of this Agreement shall be made (in the
following order of preference) within 15 days after the
Indemnitee's delivery to the Company of a Request that includes a
reasonable accounting of expenses incurred:
(a) first, by the Board by majority vote or consent
of a quorum consisting of Disinterested Directors; or
(b) next, if such a quorum cannot be obtained, by
majority vote or consent of a committee duly designated by the
Board (in which designation all directors, whether or not
Disinterested Directors, may participate), consisting solely of two
or more Disinterested Directors; or
(c) next, if such a committee cannot be designated,
by any independent legal counsel (who may be any outside counsel
regularly employed by the Company);
provided, however, that if a determination as to reasonableness of
expenses is not made under any of the foregoing subsections (a),
(b) and (c), such determination shall be made, not later than 90
days after the Indemnitee's delivery of such Request, by vote or
consent of the holders of a majority of the Company's Common Stock
that are represented in person or by proxy at a meeting called for
such purpose.
All expenses shall be considered reasonable for purposes of this
Agreement if the finding contemplated by this Section 5.3 is not
made within the prescribed time. The finding required by this
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Section 5.3 may be made in advance of the payment (or incurring) of
the expenses for which indemnification or reimbursement is sought.
5.4 PAYMENT OF INDEMNIFIED AMOUNT. Immediately
following a Determination that the Indemnitee has met the
applicable standard of conduct set forth in Section 1, 2 or 3
hereof, as the case may be, and the finding of reasonableness of
expenses contemplated by Section 5.3 hereof, or the passage of time
prescribed for making such determination(s), the Company shall pay
to the Indemnitee in cash the amount to which the Indemnitee is
entitled to be indemnified and/or reimbursed, as the case may be,
without further authorization or action by the Board; provided,
however, that the expenses for which indemnification or
reimbursement is sought have actually been incurred by the
Indemnitee.
5.5 SHAREHOLDER VOTE ON DETERMINATION. Notwithstanding
the provisions of Section 607.0850 of the Florida Business
Corporation Act, the Indemnitee and any other shareholder who is a
party to the proceeding for which indemnification or reimbursement
is sought shall be entitled to vote on any Determination to be made
by the Company's shareholders, including a Determination made
pursuant to Section 5.7 hereof. In addition, in connection with
each meeting at which a shareholder Determination will be made, the
Company shall solicit proxies that expressly include a proposal to
indemnify or reimburse the Indemnitee. Any Company proxy statement
relating to a proposal to indemnify or reimburse the Indemnitee
shall not include a recommendation against indemnification or
reimbursement.
5.6 SELECTION OF INDEPENDENT LEGAL COUNSEL. If the
Determination required under Section 4 is to be made by independent
legal counsel, such counsel shall be selected by the Indemnitee
with the approval of the Board, which approval shall not be
unreasonably withheld. The fees and expenses incurred by counsel
in making any Determination (including Determinations pursuant to
Section 5.8 hereof) shall be borne solely by the Company regardless
of the results of any Determination and, if requested by counsel,
the Company shall give such counsel an appropriate written
agreement with respect to the payment of their fees and expenses
and such other matters as may be reasonably requested by counsel.
5.7 RIGHT OF INDEMNITEE TO APPEAL AN ADVERSE
DETERMINATION BY BOARD. If a Determination is made by the Board or
a committee thereof that the Indemnitee did not meet the applicable
standard of conduct set forth in Section 1, 2 or 3 hereof, upon the
written request of the Indemnitee and the Indemnitee's delivery of
$500 to the Company, the Company shall cause a new Determination to
be made by the Company's shareholders at the next regular or
special meeting of shareholders. Subject to Section 8 hereof, such
Determination by the Company's shareholders shall be binding and
conclusive for all purposes of this Agreement.
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5.8 RIGHT OF INDEMNITEE TO SELECT FORUM FOR
DETERMINATION. If, at any time subsequent to the date of this
Agreement, "Continuing Directors" do not constitute a majority of
the members of the Board, or there is otherwise a change in control
of the Company (as contemplated by Item 403(c) of Regulation S-K),
then upon the request of the Indemnitee, the Company shall cause
the Determination required by Section 4 hereof to be made by
independent legal counsel selected by the Indemnitee and approved
by the Board (which approval shall not be unreasonably withheld),
which counsel shall be deemed to satisfy the requirements of clause
(3) of Section 4 hereof. If none of the legal counsel selected by
the Indemnitee are willing and/or able to make the Determination,
then the Company shall cause the Determination to be made by a
majority vote or consent of a Board committee consisting solely of
Continuing Directors. For purposes of this Agreement, a
"Continuing Director" means either a member of the Board at the
date of this Agreement or a person nominated to serve as a member
of the Board by a majority of the then Continuing Directors.
5.9 ACCESS BY INDEMNITEE TO DETERMINATION. The Company
shall afford to the Indemnitee and his representatives ample
opportunity to present evidence of the facts upon which the
Indemnitee relies for indemnification or reimbursement, together
with other information relating to any requested Determination.
The Company shall also afford the Indemnitee the reasonable
opportunity to include such evidence and information in any Company
proxy statement relating to a shareholder Determination.
5.10 JUDICIAL DETERMINATIONS IN DERIVATIVE SUITS. In
each action or suit described in Section 2 hereof, the Company
shall cause its counsel to use its best efforts to obtain from the
Court in which such action or suit was brought (i) an express
adjudication whether the Indemnitee is liable for negligence or
misconduct in the performance of his duty to the Company, and, if
the Indemnitee is so liable, (ii) a determination whether and to
what extent, despite the adjudication of liability but in view of
all the circumstances of the case (including this Agreement), the
Indemnitee is fairly and reasonably entitled to indemnification.
SECTION 6. SCOPE OF INDEMNITY. The actions, suits and
proceedings described in Sections 1 and 2 hereof shall include, for
purposes of this Agreement, any actions that involve, directly or
indirectly, activities of the Indemnitee both in his official
capacities as a Company director or officer and actions taken in
another capacity while serving as director or officer, including,
but not limited to, actions or proceedings involving (i)
compensation paid to the Indemnitee by the Company, (ii) activities
by the Indemnitee on behalf of the Company, including actions in
which the Indemnitee is plaintiff, (iii) actions alleging a
misappropriation of a "corporate opportunity," (iv) responses to a
takeover attempt or threatened takeover attempt of the Company, (v)
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transactions by the Indemnitee in Company securities, and (vi) the
Indemnitee's preparation for and appearance (or potential
appearance) as a witness in any proceeding relating, directly or
indirectly, to the Company. In addition, the Company agrees that,
for purposes of this Agreement, all services performed by the
Indemnitee on behalf of, in connection with or related to any
subsidiary of the Company, any employee benefit plan established
for the benefit of employees of the Company or any subsidiary, any
corporation or partnership or other entity in which the Company or
any subsidiary has a 5% ownership interest, or any other affiliate
of the Company, shall be deemed to be at the request of the
Company.
SECTION 7. ADVANCE FOR EXPENSES.
7.1 MANDATORY ADVANCE. Expenses (including attorneys'
fees, court costs, judgments, fines, amounts paid in settlement and
other payments) incurred by the Indemnitee in investigating,
defending, settling or appealing any action, suit or proceeding
described in Section 1 or 2 hereof shall be paid by the Company in
advance of the final disposition of such action, suit or
proceeding. The Company shall promptly pay the amount of such
expenses to the Indemnitee, but in no event later than 10 days
following the Indemnitee's delivery to the Company of a written
request for an advance pursuant to this Section 7, together with a
reasonable accounting of such expenses.
7.2 UNDERTAKING TO REPAY. The Indemnitee hereby
undertakes and agrees to repay to the Company any advances made
pursuant to this Section 7 if and to the extent that it shall
ultimately be found that the Indemnitee is not entitled to be
indemnified by the Company for such amounts.
7.3 MISCELLANEOUS. The Company shall make the advances
contemplated by this Section 7 regardless of the Indemnitee'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 7 shall be unsecured and interest-free.
SECTION 8. COURT-ORDERED INDEMNIFICATION. Regardless whether
the Indemnitee has met the standard of conduct set forth in
Sections 1, 2 or 3 hereof, as the case may be, and notwithstanding
the presence or absence of any Determination whether such standards
have been satisfied, the Indemnitee may apply for indemnification
(and/or reimbursement pursuant to Section 3 or 12 hereof) to the
court conducting any proceeding to which the Indemnitee is a party
or to any other court of competent jurisdiction. On receipt of an
application, the court, after giving any notice the court considers
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necessary, may order indemnification (and/or reimbursement) if it
determines the Indemnitee is fairly and reasonably entitled to
indemnification (and/or reimbursement) in view of all the relevant
circumstances (including this Agreement).
SECTION 9. NONDISCLOSURE OF PAYMENTS. Except as expressly
required by Federal securities laws, neither party shall disclose
any payments under this Agreement unless prior approval of the
other party is obtained. Any payments to the Indemnitee that must
be disclosed shall, unless otherwise required by law, be described
only in Company proxy or information statements relating to special
and/or annual meetings of the Company's shareholders, and the
Company shall afford the Indemnitee the reasonable opportunity to
review all such disclosures and, if requested, to explain in such
statement any mitigating circumstances regarding the events
reported.
SECTION 10. COVENANT NOT TO SUE, LIMITATION OF ACTIONS AND
RELEASE OF CLAIMS. No legal action shall be brought and no cause
of action shall be asserted by or on behalf of the Company (or any
of its subsidiaries) against the Indemnitee, his spouse, heirs,
executors, personal representatives or administrators after the
expiration of 2 years following the date the Indemnitee ceases (for
any reason) to serve as either an executive officer or director of
the Company, and any and all such claims and causes of action of
the Company (or any of its subsidiaries) shall be extinguished and
deemed released unless asserted by filing of a legal action within
such 2-year period.
SECTION 11. INDEMNIFICATION OF INDEMNITEE'S ESTATE.
Notwithstanding any other provision of this Agreement, and
regardless whether indemnification of the Indemnitee would be
permitted and/or required under this Agreement, if the Indemnitee
is deceased, the Company shall indemnify and hold harmless the
Indemnitee's estate, spouse, heirs, administrators, personal
representatives and executors (collectively the "Indemnitee's
Estate") against, and the Company shall assume, any and all claims,
damages, expenses (including attorneys' fees), penalties,
judgments, fines and amounts paid in settlement actually incurred
by the Indemnitee or the Indemnitee's Estate in connection with the
investigation, defense, settlement or appeal of any action
described in Section 1 or 2 hereof. Indemnification of the
Indemnitee's Estate pursuant to this Section 11 shall be mandatory
and not require a Determination or any other finding that the
Indemnitee's conduct satisfied a particular standard of conduct.
SECTION 12. REIMBURSEMENT OF ALL LEGAL EXPENSES.
Notwithstanding any other provision of this Agreement, and
regardless of the presence or absence of any Determination, the
Page 10
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<PAGE>
Company promptly (but not later than 30 days following the
Indemnitee's submission of a reasonable accounting) shall reimburse
the Indemnitee for all attorneys' fees and related court costs and
other expenses incurred by the Indemnitee (but not for judgments,
penalties, fines or amounts paid in settlement) in connection with
the investigation, defense, settlement or appeal of any action
described in Section 1 or 2 hereof (including, but not limited to,
the matters specified in Section 6 hereof).
SECTION 13. MISCELLANEOUS.
13.1 NOTICE PROVISION. Any notice, payment, demand or
communication required or permitted to be delivered or given by the
provisions of this Agreement shall be deemed to have been
effectively delivered or given and received on the date personally
delivered to the respective party to whom it is directed, or when
deposited by registered or certified mail, with postage and charges
prepaid and addressed to the parties at the respective addresses
set forth below opposite their signatures to this Agreement, or to
such other address as to which notice is given.
13.2 ENTIRE AGREEMENT. Except for the Company's
Articles of Incorporation, this Agreement constitutes the entire
understanding of the parties and supersedes all prior
understandings, whether written or oral, between the parties with
respect to the subject matter of this Agreement.
13.3 SEVERABILITY OF PROVISIONS. If any provision of
this Agreement is held to be illegal, invalid, or unenforceable
under present or future laws effective during the term of this
Agreement, such provision shall be fully severable; this Agreement
shall be construed and enforced as if such illegal, invalid, or
unenforceable provision had never comprised a part of this
Agreement; and the remaining provisions of this Agreement shall
remain in full force and effect and shall not be affected by the
illegal, invalid, or unenforceable provision or by its severance
from this Agreement. Furthermore, in lieu of each such illegal,
invalid, or unenforceable provision there shall be added
automatically as a part of this Agreement a provision as similar in
terms to such illegal, invalid or unenforceable provision as may be
possible and be legal, valid, and enforceable.
13.4 APPLICABLE LAW. This Agreement shall be governed
by and construed under the laws of the State of Florida.
13.5 EXECUTION IN COUNTERPARTS. This Agreement and any
amendment may be executed simultaneously or in two or more
counterparts, each of which together shall constitute one and the
same instrument.
Page 11
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<PAGE>
13.6 COOPERATION AND INTENT. The Company shall
cooperate in good faith with the Indemnitee and use its best
efforts to ensure that the Indemnitee is indemnified and/or
reimbursed for liabilities described herein to the fullest extent
permitted by law.
13.7 AMENDMENT. No amendment, modification or
alteration of the terms of this Agreement shall be binding unless
in writing, dated subsequent to the date of this Agreement, and
executed by the parties.
13.8 BINDING EFFECT. The obligations of the Company to
the Indemnitee hereunder shall survive and continue as to the
Indemnitee even if the Indemnitee ceases to be a director, officer,
employee and/or agent of the Company. Each and all of the
covenants, terms and provisions of this Agreement shall be binding
upon and inure to the benefit of the successors to the Company and,
upon the death of the Indemnitee, to the benefit of the estate,
heirs, executors, administrators and personal representatives of
the Indemnitee.
13.9 GENDER AND NUMBER. Wherever the context shall so
require, all words herein in the male gender shall be deemed to
include the female or neuter gender, all singular words shall
include the plural and all plural words shall include the singular.
13.10 NONEXCLUSIVITY. The rights of indemnification and
reimbursement provided in this Agreement shall be in addition to
any rights to which the Indemnitee may otherwise be entitled by
statute, bylaw, agreement, vote of shareholders or otherwise.
13.11 EFFECTIVE DATE. The provisions of this Agreement
shall cover claims, actions, suits and proceedings whether now
pending or hereafter commenced and shall be retroactive to cover
acts or omissions or alleged acts or omissions which heretofore
have taken place.
Page 12
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<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of the date first above written.
ADDRESS: THE COMPANY:
- -------- ------------
_____________________________
By:
Name:
Title:
ADDRESS: THE INDEMNITEE:
- -------- ---------------
_____________________________
By:
Name:
Title:
Page 13
- ------------------------------------------------------------------
EXHIBIT 10.10
SECOND AMENDMENT TO LEASE AGREEMENT
-----------------------------------
This SECOND AMENDMENT TO LEASE AGREEMENT ("Second Amendment")
is made this 1st day of January 1997, by and between BRICKELL
EQUITIES CORPORATION, LTD. ("Landlord"), and CAPITAL BANK
("Tenant").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Landlord's predecessor, AmeriSwiss Associates
("AmeriSwiss"), and Tenant entered into a certain Lease Agreement
dated October 23, 1986, as amended by a certain Rider to Lease
between AmeriSwiss and Tenant, and as further amended by two
Settlement Agreements, each dated June 30, 1989, among AmeriSwiss,
Tenant and Adler Group, Inc. (collectively, the "Settlement
Agreements"), and as further amended by a certain First Amendment
dated December 6, 1993 between Landlord and Tenant (said Lease, as
so amended, is referred to herein as the "Lease") for certain
premises more particularly described in the Lease (the "Existing
Premises") consisting of a portion of the lobby, a portion of the
11th floor and all of the 2nd, 3rd, 4th, 6th and 12th floors of the
office building located at 1221 Brickell Avenue, Miami, for a term
expiring February 14, 1999 with respect to the portion of the 11th
floor, and August 31, 1997 with respect to the remainder of the
Existing Space; and
WHEREAS, Tenant desires to surrender to Landlord the space
leased on the 3rd and 4th floors and a portion of the 11th floor of
the Building (the "Surrendered Space") on or prior to the Surrender
Date (as hereinafter defined);
WHEREAS, Landlord and Tenant also desire to extend the Term of
the Lease and modify the Lease upon the terms and conditions set
forth in this Second Amendment.
NOW, THEREFORE, in consideration of the sum of TEN and NO/100
DOLLARS ($10.00) paid by Tenant to Landlord, the mutual promises
contained herein, and other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, Landlord and
Tenant do hereby agree as follows:
1. RECITALS. The foregoing recitals are true and correct and
are hereby incorporated by this reference as if set forth in their
entirety.
2. DEFINED TERMS. Capitalized terms in this Second Amendment
shall have the same meaning as such terms have in the Lease, unless
otherwise defined in this Second Amendment.
Page 1
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<PAGE>
3. THE NEW PREMISES.
A. Commencing on January 1, 1997 (the "New Premises
Commencement Date"), the Leased Premises shall consist of a portion
of the lobby, the 2nd, 6th and 12th floors, and a portion of the
11th floor of the Building, all as more particularly set forth on
Exhibit A annexed hereto (collectively, the "New Premises").
Landlord and Tenant have agreed that the New Premises consists of
45,257 square feet of Rentable Area (including 5,392 square feet of
Rentable Area in the lobby) and that the same shall not be subject
to further measurement.
B. All accrued and unpaid Base Rent and Additional Rent
with respect to the Existing Premises shall be apportioned and paid
as of the New Premises Commencement Date.
C. Tenant shall surrender the Surrendered Space to
Landlord on the Surrender Date (as hereinafter defined) in
accordance with Article 34 of the Lease. The term "Surrender Date"
shall mean: (i) July 31, 1997, with respect to the 3rd floor; (ii)
May 31, 1997, with respect to the 4th floor; and (iii) June 30,
1997, with respect to the 11th floor. From and after the New
Premises Commencement Date, no Rent shall be charged for the
Surrendered Space; provided, however, that in the event Tenant
fails to surrender to Landlord the Surrendered Space in accordance
with this subparagraph C, the term "Rent" for purposes of said
Article 34 shall be deemed to mean an annual rate of $27.10 per
square foot of Rentable Area of the Surrendered Space occupied by
Tenant after the Surrender Date.
4. EXTENSION OF TERM OF LEASE.
The Term of the Lease is extended to expire on December
31, 2001 (the "Expiration Date"), unless sooner terminated in
accordance with the provisions of the Lease. Except as expressly
set forth in this Second Amendment, all terms, conditions,
covenants and agreements set forth in the Lease shall be applicable
to Tenant's occupancy of the Premises during the Term, as extended
hereby, and such terms, conditions, covenants and agreements are
expressly incorporated herein by this reference.
5. BUILD-OUT OF THE NEW PREMISES.
Upon execution of this Second Amendment by Landlord and
Tenant, Tenant shall build-out, improve or refurbish the New
Premises at Tenant's expense (subject to Tenant's Allowance as
defined in the Workletter annexed hereto as Exhibit B and
incorporated herein by reference), in accordance with the terms and
conditions of the Workletter. Article 3 of the Lease and Exhibit
B to the lease (including the Construction Contract) are hereby
Page 2
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<PAGE>
deleted in their entirety. Notwithstanding the foregoing Tenant
agrees, at Tenant's expense, to perform any additional work which
may be required at any time during Tenant's occupancy of New
Premises by any authority having jurisdiction over the New Premises
with respect to American's with Disabilities Act and the Florida
Accessability Act as a result of any alteration or improvement made
by Tenant or at the request of Tenant to the new Premises. Tenant
further agrees to indemnify and hold Landlord harmless from and
against any liability, cost, damage or expenses (including but not
limited to reasonable attorney fees) incurred by Landlord as a
result of Tenant's breech of the immediately preceding sentence.
6. BASE RENT. Commencing on the New Premises Commencement
Date and continuing throughout the Lease Term, Tenant shall pay
Base Rent for the New Premises at the rate of $649,532.80 per
annum ($54,127.73 per month) plus applicable sales tax with respect
to the 2nd, 6th and 11th floors, and $446,705.70 per annum
($37,225.48 per month) plus applicable sales tax with respect to
the 12th floor (it being understood that no Base Rent shall be
charged for the Lobby Space during the Term except as provided in
paragraph 12 hereof). Base Rent shall be payable at the times and
in the manner and subject to the provisions of Article 4 of the
Lease except that (i) the first paragraph of said Article 4 shall
not apply and (ii) there shall be no abatement of Base Rent.
7. ADDITIONAL RENT. From and after the New Premises
Commencement Date, Tenant shall pay Additional Rent on the New
Premises in accordance with and as calculated in Paragraph 5 of the
Lease, except that (i) the Base Year shall be calendar year 1997;
and (ii) Tenant's Proportionate Share shall be 10.0823%. Tenant
shall also pay to Landlord annually commencing on the New Premises
Commencement Date as Additional Rent, in lieu of Base Rent, for the
Lobby Space an amount ("Tenant's Lobby Share") equal to Landlord's
estimate of Operating Expenses and Real Estate Taxes for the Lobby
Space for the then calendar year (Landlord's estimate of Operating
Expenses and Real Estate Taxes for the Lobby Space for calendar
year 1997 is $56,616 per annum ($4,718 per month)). Tenant's Lobby
Share shall be adjusted after the end of each year upon
determination of the actual Operating Expenses and Real Estate
Taxes, in the same manner as Tenant's Proportionate Share is
adjusted).
8. USE. Supplementing Article 8 of the Lease, the term
"banking" for purposes of the lobby area shall be shall be deemed
to refer only to those activities customarily conducted by a retail
branch facility of a Florida chartered bank.
9. SUBORDINATION. Supplementing Articles 19 and 20 of the
Lease, Landlord and Tenant acknowledge that the Building is
presently encumbered by a mortgage held by the Gotthard Bank, and
the partied agree to execute and deliver the Subordination,
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<PAGE>
Non-Disturbance and Attornment Agreement annexed hereto as Exhibit
C and Landlord agrees to cause Landlord's mortgagee to execute and
deliver the same.
10. PARKING. On and after the New Premises Commencement
Date, the number of parking spaces allotted in the Parking Facility
as provided in Article 17 of the Lease shall be a total of one
hundred and ten (110). All other terms and provisions of Article
17 of the Lease shall continue to apply after the date hereof.
11. MODIFICATIONS. Landlord and Tenant agree that the Lease
is hereby modified as follows:
A. The provisions of paragraphs 1 and 5 of the Rider to
Lease shall not apply to the New Premises from and after the New
Premises Commencement Date and that paragraph 2 of the Rider shall
be deleted in its entirety and the following language shall be
substituted in lieu thereof:
B. Restrictions on Other Tenants and Other Uses:
Landlord shall not lease any portion of the lobby
space of the Building to any banking facility other than that of
Tenant, nor shall any automated teller facility or night depository
be permitted on the lobby floor other than that of Tenant. In
addition, other than Tenant no "commercial banking institution"
(i.e. any financial institution that is allowed to take domestic
deposits) whatsoever shall be permitted to occupy any portion of
the Building except for Delta National Bank and Trust Company of
Florida ("Delta"). With respect to Delta, Landlord represents to
Tenant that Delta's lease prohibits Delta from operating teller
facilities in the Building except for than one (1) "courtesy
teller" within its premises and Landlord agrees to enforce such
restriction.
C. In addition, Landlord and Tenant agree that the
Settlement Agreements shall not apply to the New Premises from and
after the New Premises Commencement Date.
12. RENEWAL OPTION.
A. Tenant shall have the right to extend the Term of
this Lease for one (1) period of five (5) years (hereinafter called
the "Extended Term"), provided Tenant shall notify Landlord in
writing not less than nine (9) months prior to the Expiration Date
that Tenant elects to extend the term of this Lease and provided
further that if Tenant is in default (after the expiration of any
applicable grace period) on the date of giving the option notice
the option notice shall be ineffective or if Tenant is in default
(after the expiration of any applicable grace period) on the date
the Extended Term is to commence, the Extended Term shall not
Page 4
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<PAGE>
commence, and this Lease shall expire at the end of the then
current term. If the lease term is extended as aforesaid this
Lease, as extended, shall be upon the same terms, covenants and
conditions as are set forth therein except that: (i) Base Rent
shall be payable at the rate set forth in paragraph B below plus
applicable sales tax; (ii) the Base Year during the Extended Term
shall be calendar year 2002; (iii) Landlord shall have no
obligation to contribute to or make or pay for any alterations or
improvements to the Premises; (iv) Tenant shall have no further
option to renew or extend the term; and (v) Tenant's Lobby Share
shall be payable during the Extended Term. Failure to comply with
the provisions of this Paragraph A shall be deemed a complete
waiver of the option set forth herein.
B. BASE RENT. Tenant shall pay Base Rent during the
Extended Term as follows: (i) Base Rent for first Lease Year (as
hereinafter defined) of the Extended Term shall be payable at the
rate of $1,324,872.50 per annum ($110,406.04 per month) and (ii)
Base Rent for each of the second, third, fourth and fifth Lease
Years of the Extended Term shall be payable by Tenant at an annual
rate equal to the Base Rent in effect for the immediately preceding
Lease Year, increased by 30% of the Annual CPI Percentage Increase
(as hereinafter defined).
In computing the annual increase for any Lease Year, the
full Base Rent for the previous Lease Year shall be used,
notwithstanding any abatements, concessions or reductions provided
for in the Lease or otherwise applicable during such Lease Year.
For purposes of this Lease, the term "Lease Year" shall
mean each twelve (12) month period falling wholly or partly within
the Extended Term and commencing on the first day of the Extended
Term or any anniversary of said date.
For purposes of this Lease, the term "Annual CPI
Percentage Increase" shall mean the increase, if any, expressed as
a percentage, in the Consumer Price Index for the month of November
immediately preceding each Lease Year over the Consumer Price Index
for the previous November. As used herein "The Consumer Price
Index" shall mean and refer to The Consumer Price Index for all
Urban Consumers, Miami - Ft. Lauderdale, Fla., All Items,
(1982-4=100)", issued by the Bureau of Labor Statistics of the
United States Department of Labor or the generally accepted
successor thereto should such publication be discontinued.
C. The foregoing option to extend the Term of this Lease
shall apply to all of the New Premises leased by Tenant in the
Building (it being understood that Tenant shall not have the option
Page 5
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<PAGE>
to extend the term of this Lease with respect to less than the
total Rentable Area of the New Premises then leased by Tenant in
the Building.
13. BROKERS.
A. Tenant represents and warrants that it has dealt only
with Landlord's agent, AFA Real Estate Services, Inc. (the
"Broker") and Tenant's consultant, The Amend Group, in negotiating
and executing this Second Amendment. Tenant covenants and agrees
to pay, hold harmless and indemnify Landlord from and against any
and all costs, expenses (including reasonable attorneys' fees
before trial, at trial and on appeal) or liability for any
compensation, commissions, or charges claimed by the Amend Group or
any other broker, agent or consultant other than Broker with
respect to this Second Amendment or the negotiation thereof.
B. At any time after the Commencement Date, Landlord
shall, upon Tenant's written request, reimburse Tenant for up to
$82,341.56 of the fees paid by Tenant to The Amend Group with
respect to this Second Amendment. In addition, in the event Tenant
elects to extend the Term upon the terms and conditions set forth
herein, Landlord shall, upon Tenant's written request (given at any
time after Landlord receives the first monthly installment of Base
Rent due during the Renewal Term), reimburse to Tenant up to
$116,347.51 of the fees paid by Tenant to The Amend Group with
respect to this Second Amendment.
14. CANCELLATION OPTION.
Provided Tenant shall keep, observe and perform all of
the terms, covenants and conditions of this Lease on Tenant's part
to be kept, observed and performed, Tenant shall have the right to
cancel this Lease at any time after the New Premises Commencement
Date and prior to the Expiration Date, provided Tenant shall notify
Landlord in writing not less than six (6) months prior to the date
set forth in said notice as the effective date of cancellation (the
"Cancellation Date") that Tenant irrevocably elects to cancel this
Lease as of the Cancellation Date; provided, however, that: (i)
together with the delivery of such notice, Tenant shall pay to
Landlord a cancellation fee, in immediately available funds, in the
amount set forth on EXHIBIT D annexed hereto; (ii) if requested
Tenant shall execute a termination agreement in a form reasonably
acceptable to Landlord; (iii) all Base Rent and Additional Rent
shall be apportioned and paid as of the Cancellation Date; (iv)
Tenant shall pay all sales taxes applicable to the cancellation;
and (v) the New Premises will be surrendered on or before the
Cancellation Date in the condition required by the Lease. The
obligations set forth in this paragraph 15 shall survive the
cancellation of the Lease. The provisions of this paragraph 16
shall not be applicable during the Extended Renewal Term.
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<PAGE>
15. RATIFICATION. In the event of any conflict or ambiguity
between this Second Amendment and the Lease, this Second Amendment
shall control. The parties hereby ratify and confirm their rights
and obligations under the Lease as modified by this Second
Amendment. Landlord and Tenant each represent and warrant to the
other (i) that the execution and delivery of the Second Amendment
has been fully authorized by all necessary corporate action, (ii)
that this document is valid, binding and legally enforceable in
accordance with its terms.
IN WITNESS WHEREOF, Landlord and Tenant have each executed
this Second Amendment as of the day and year first above written.
WITNESSES: LANDLORD:
BRICKELL EQUITIES CORPORATION,
LTD.
/s/ Vivian Gonzalez /s/ Amos Kaminski
- ----------------------------- ------------------------------
Name: Vivian Gonzalez Name: Amos Kaminski
Title: Vice President
Jenny Metzler
- ----------------------------- ------------------------------
Name: Jenny Metzler
WITNESSES: TENANT:
CAPITAL BANK
/s/ Jacky Portal /s/ Charles Boyce
- ----------------------------- ------------------------------
Name: Jacky Portal Name: Charles Boyce
Title: Executive Vice President
/s/ M. Beatrice Pucci
- -----------------------------
Name: M. Beatrice Pucci
Page 7
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<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 105,771
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 10,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 187,512
<INVESTMENTS-CARRYING> 29,396
<INVESTMENTS-MARKET> 29,331
<LOANS> 851,354
<ALLOWANCE> 9,718
<TOTAL-ASSETS> 1,739,687<F1>
<DEPOSITS> 1,064,623
<SHORT-TERM> 87,953
<LIABILITIES-OTHER> 224,340
<LONG-TERM> 211,420
0
0
<COMMON> 7,562
<OTHER-SE> 131,745
<TOTAL-LIABILITIES-AND-EQUITY> 1,727,643<F1>
<INTEREST-LOAN> 19,554
<INTEREST-INVEST> 3,495
<INTEREST-OTHER> 8,629
<INTEREST-TOTAL> 31,678
<INTEREST-DEPOSIT> 8,285
<INTEREST-EXPENSE> 12,956
<INTEREST-INCOME-NET> 18,722
<LOAN-LOSSES> 1,525
<SECURITIES-GAINS> 57
<EXPENSE-OTHER> 20,633<F2>
<INCOME-PRETAX> 8,551
<INCOME-PRE-EXTRAORDINARY> 8,551
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,187
<EPS-PRIMARY> .64
<EPS-DILUTED> .64
<YIELD-ACTUAL> 5.48
<LOANS-NON> 6,961
<LOANS-PAST> 233
<LOANS-TROUBLED> 8,271
<LOANS-PROBLEM> 8,336
<ALLOWANCE-OPEN> 9,333
<CHARGE-OFFS> 1,338
<RECOVERIES> 198
<ALLOWANCE-CLOSE> 9,718
<ALLOWANCE-DOMESTIC> 8,000
<ALLOWANCE-FOREIGN> 1,200
<ALLOWANCE-UNALLOCATED> 518
<FN>
<F1>Difference is minority interest in consolidated subsidiary of $12,044.
<F2>Does not include $434 of minority interest in net income of consolidated
subsidiary.
</FN>
</TABLE>
