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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
[NO FEE REQUIRED]
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
[NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM __________ TO __________
COMMISSION FILE NUMBER 0-14671
REPUBLIC SECURITY FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
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<S> <C>
FLORIDA 59-2335075
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
450 SOUTH AUSTRALIAN AVENUE (561) 650-2500
WEST PALM BEACH, FL 33401 (Registrant's telephone number,
(Address of principal executive offices)(Zip Code) including area code)
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SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
COMMON STOCK, $.01 PAR VALUE PER SHARE
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed 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. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of
the Registrant as of March 16, 1999 was approximately $425,258,217. The number
of shares outstanding of the Registrant's $.01 par value Common Stock as of
March 16, 1999 was 50,529,765.
DOCUMENTS INCORPORATED BY REFERENCE:
Certain information required by Part III is incorporated by reference to
portions of the Registrant's Proxy Statement for the 1999 Annual Meeting of
Shareholders.
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TABLE OF CONTENTS
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PART I
ITEM 1 -- BUSINESS
General .............................................................. 1
Lending Activities ................................................... 2
Servicing of Mortgage Loans .......................................... 6
Non-Performing Assets and Allowance for Loan Losses .................. 7
Investment Activities ................................................ 9
Deposits ............................................................. 10
Borrowings ........................................................... 10
Market Area and Competition .......................................... 12
Subsidiary Activities ................................................ 12
Employees ............................................................ 12
CERTAIN REGULATORY CONSIDERATIONS ..................................... 12
ITEM 2 -- PROPERTIES .................................................. 21
ITEM 3 -- LEGAL PROCEEDINGS ........................................... 27
ITEM 4 -- SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ......... 27
PART II
ITEM 5 -- MARKET FOR REPUBLIC SECURITY FINANCIAL CORPORATION'S
COMMON STOCK AND RELATED SHARE HOLDER MATTERS ............... 28
ITEM 6 -- SELECTED FINANCIAL DATA ..................................... 30
ITEM 7 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Corporate Overview ................................................... 33
Results of Operations ................................................ 35
Net Interest Income .................................................. 36
Interest Income ...................................................... 37
Interest Expense ..................................................... 38
Provision for Loan Losses and Allowance for Loan Losses .............. 40
Non-Interest Income .................................................. 42
Operating Expenses ................................................... 43
Income Taxes ......................................................... 44
Liquidity ............................................................ 45
Capital Compliance ................................................... 46
Impact of Inflation .................................................. 46
Financial Condition .................................................. 46
Year 2000 Matters .................................................... 47
ITEM 7A -- QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK .......................................... 49
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ITEM 8 -- FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ................. 51
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies ....................... 57
2. Mergers, Branch Acquisitions and Potential Mergers ............... 62
3. Investments ...................................................... 65
4. Loans Receivable--Net ............................................ 68
5. Non-Performing Loans and Allowance for Loan Losses ............... 68
6. Cash and Amounts Due from Depository Institutions ................ 69
7. Property and Equipment ........................................... 69
8. Deposits ......................................................... 70
9. Borrowed Money ................................................... 71
10. Senior Debentures ................................................ 72
11. Shareholders' Equity ............................................. 72
12. Stock Option and Other Incentive Plans ........................... 73
13. Capital Compliance ............................................... 77
14. Commitments and Contingencies .................................... 78
15. Related Party Transactions ....................................... 80
16. Federal Deposit Insurance Corporation Special Savings
Association Insurance Fund Assessment ............................ 80
17. Income Taxes ..................................................... 81
18. Earnings per Share ............................................... 83
19. Parent Company Financial Information ............................. 84
20. Fair Values of Financial Instruments ............................. 86
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS .................... 89
ITEM 9 -- CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE ...................... 92
PART III
ITEM 10 -- DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT ......... 92
ITEM 11 -- EXECUTIVE COMPENSATION ..................................... 92
ITEM 12 -- SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT ............................................. 92
ITEM 13 -- CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS ............. 92
PART IV
ITEM 14 -- EXHIBITS, FINANCIAL STATEMENT SCHEDULES
AND REPORTS ON FORM 8-K .................................... 93
SIGNATURES ............................................................ 96
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ii
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PART 1
ITEM 1. BUSINESS
GENERAL
Republic Security Financial Corporation (the "Company"), incorporated in
Florida in 1983, is a commercial bank holding company, the principal business
of which is the operation of a commercial bank business through Republic
Security Bank (the "Bank"), its wholly owned subsidiary, a state chartered
commercial bank. The Bank commenced operations on November 19, 1984, and is a
member of the Federal Home Loan Bank ("FHLB") System. Its deposits are insured
by the Federal Deposit Insurance Corporation (the "FDIC") up to applicable
limits. In November 1995, the Company and the Bank received all necessary
federal and state regulatory approvals and converted from a thrift charter to a
commercial bank holding company and a State of Florida chartered commercial
bank.
The Bank is currently the largest independent commercial bank
headquartered in Florida. The Bank has 94 banking facilities of which 67 are
traditional branches and 27 are in-store supermarket branches. The Bank has 46
branches located in Palm Beach county, 25 branches in Broward county, 11
branches in Dade county, 4 branches in Lee county, 2 branches in each of Martin
and Marion counties and one branch each in Orange, Alachua, Hillsborough and
St. Lucie counties. Palm Beach County is the third largest banking market in
Florida and has the third largest population base, Broward County is the
State's second largest banking market and has the second largest population
base and Dade County is the largest banking market in Florida with the State's
largest population base.
On July 2, 1998, the Company acquired Unifirst Federal Savings Bank
("Unifirst"), a federally chartered savings bank headquartered in Hollywood,
Florida with one additional branch located in Broward county. The acquisition
was accounted for as a pooling of interests and resulted in the Bank acquiring
assets of $141.9 million, liabilities of $132.7 million and $9.2 million in
equity. All information contained herein has been retroactively restated to
include the accounts and results of operations of Unifirst.
On October 29, 1998, the Company acquired First Palm Beach Bancorp
("FPBB"), and its subsidiary First Bank of Florida ("First Bank"), a federally
chartered Savings and Loan Association headquartered in West Palm Beach,
Florida. First Bank operated 52 offices in Palm Beach, Broward, Dade, Martin
and Lee counties. The acquisition was accounted for as a pooling of interest
and resulted in the Company acquiring assets of $1.8 billion, total loans of
$1.1 billion, total deposits of $1.3 billion and total equity of $128 million.
First Bank was merged into the Bank as of October 29, 1998. All information
contained herein has been retroactively restated to include the accounts and
results of operations of FPBB.
On November 20, 1998, the Bank purchased two branch offices of Household
Bank, FSB ("Household"), a wholly owned subsidiary of Household International,
Inc. The Bank acquired a total of $28.3 million in net loans and $19.0 million
in deposits and offices located in Harbour Island and Orlando, Florida.
On December 11, 1998, the Company acquired Newberry Bank ("Newberry"), a
Florida state chartered commercial bank headquartered in Newberry, Florida with
one branch office in Ocala, Florida. Newberry was simultaneously merged into
the Bank and resulted in the Bank acquiring $38.9 million in assets, $28.7
million in net loans and $34.8 million in deposits. The transaction was
accounted for as a purchase business combination and the operations of Newberry
are included since the date of acquisition.
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LENDING ACTIVITIES
GENERAL. Under applicable regulations, the Bank originates, purchases and
sells loans or participating interests in loans. See "Regulatory
Matters--Federal Regulation" for a description of applicable regulations which
limit lending in relation to assets or net worth. The Bank originates,
purchases and participates in loans for its own portfolio and for sale in the
secondary market. Lending activities include the origination and purchase of
commercial and residential mortgage loans, construction loans, commercial
business loans and consumer loans. Approximately 95% of the Bank's mortgage
loans are secured by property located in Florida.
The following tables set forth the composition of the Bank's loan
portfolio by type of loan (excluding loans held for sale) at the periods
indicated:
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DECEMBER 31,
-----------------------------------------------
1998 1997
----------------------- -----------------------
TYPE OF LOAN AMOUNT PERCENT AMOUNT PERCENT
- ----------------------------------- ------------- --------- ------------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Real estate loans:
Commercial real estate ...........
* Commercial real estate ......... $ 398,933 20% $ 348,923 18%
* Residential property ........... 1,143,803 56 1,096,468 56
* Construction loans ............. 113,662 6 187,593 9
---------- -- ---------- --
Total real estate loans ......... 1,656,398 82 1,632,984 83
---------- -- ---------- --
Consumer Loans:
* Personal and Other ............. 97,284 4 72,284 4
* Automobile ..................... 159,423 8 175,937 9
---------- -- ---------- --
Total consumer loans .............. 256,707 12 248,221 13
---------- -- ---------- --
Commercial business loans ......... 114,170 6 74,129 4
---------- -- ---------- --
TOTAL LOANS ..................... 2,027,275 100% 1,955,334 100%
---------- === ---------- ===
Less:
Loans in process .................. 45,559 75,261
Discounts, premiums and
deferred loan fees .............. (3,627) (6,698)
Allowance for loan losses ......... 26,043 13,146
---------- ----------
TOTAL ........................... $1,959,300 $1,873,625
========== ==========
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DECEMBER 31, MARCH 31,
----------------------------------------------- ----------------------
1996 1995 1995
----------------------- ----------------------- ----------------------
TYPE OF LOAN AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
- ----------------------------------- ------------- --------- ------------- --------- ------------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Real estate loans:
Commercial real estate ...........
* Commercial real estate ......... $ 311,211 17% $ 235,099 15% $ 213,206 16%
* Residential property ........... 911,503 52 858,410 57 768,875 57
* Construction loans ............. 208,926 12 177,941 12 180,770 14
---------- -- ---------- -- ---------- --
Total real estate loans ......... 1,431,640 81 1,271,450 84 1,162,851 87
---------- -- ---------- -- ---------- --
Consumer Loans:
* Personal and Other ............. 64,838 4 47,968 3 29,913 2
* Automobile ..................... 201,999 11 131,841 9 88,682 7
---------- -- ---------- -- ---------- --
Total consumer loans .............. 266,837 15 179,809 12 118,595 9
---------- -- ---------- -- ---------- --
Commercial business loans ......... 64,017 4 57,342 4 58,170 4
---------- -- ---------- -- ---------- --
TOTAL LOANS ..................... 1,762,494 100% 1,508,601 100% 1,339,616 100%
---------- === ---------- === ---------- ===
Less:
Loans in process .................. 82,952 62,812 88,403
Discounts, premiums and
deferred loan fees .............. (8,508) (2,405) 2,016
Allowance for loan losses ......... 19,515 10,073 10,088
---------- ---------- ----------
TOTAL ........................... $1,668,535 $1,438,121 $1,239,109
========== ========== ==========
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2
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The following table sets forth at December 31, 1998, the principal amounts
of the Bank's loans with contractual maturities during the periods indicated.
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DECEMBER 31, 1998
---------------------------------------------------------------------
MATURING
---------------------------------------------------------------------
AFTER 1 YEAR
WITHIN 1 YEAR THROUGH 5 YEARS AFTER 5 YEARS TOTAL
--------------- ----------------- --------------- -------------
<S> <C> <C> <C> <C>
Real Estate:
Residential(1) .................. $ 92,041 $ 45,031 $1,010,358 $1,147,430
Construction and lot(2) ......... 40,184 10,557 17,362 68,103
Commercial ...................... 233,121 96,377 69,435 398,933
Commercial business .............. 44,560 59,220 10,390 114,170
Consumer ......................... 35,436 167,162 54,109 256,707
-------- -------- ---------- ----------
Total .......................... $445,342 $378,347 $1,161,654 $1,985,343
======== ======== ========== ==========
Maturing after one year with:
Variable interest rates .......... $ 618,244
Fixed interest rates ............. 921,757
----------
Total .......................... $1,540,001
==========
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(1) Excludes loans held for sale
(2) Net of loans-in-process
The Bank provides commercial and residential real estate loans,
construction loans, commercial business loans and consumer loans. Loans secured
by real estate generally include commercial and residential real estate,
construction loans, loans to refinance or purchase existing properties, home
equity loans and land acquisition and development loans.
REAL ESTATE MORTGAGE LOANS. The Bank's real estate mortgage loans, which
totaled $1.6 billion or 82% of the Bank's total loan portfolio as of December
31, 1998, consist of commercial and residential mortgage loans, which are
secured by existing properties. Loans secured by commercial properties
generally have terms ranging from fifteen to twenty years and interest rate
adjustment periods ranging from monthly to five years. Amortization periods for
commercial mortgage loans generally do not exceed 25 years. Commercial real
estate loans originated by the Bank are primarily secured by income-producing
properties such as office buildings, warehouse buildings, retail space and
multi-family properties. Generally, in underwriting commercial real estate
loans, the Bank requires the personal guaranty of borrowers, a maximum loan to
value ratio of 80%, and a cash flow to debt service ratio of 1.25 to 1.
The Bank's residential mortgage loans have terms which do not exceed 30
years and are secured by one-to-four family residences. Loans made for 80% to
95% of the appraised value of the financed residences are primarily originated
with private mortgage insurance, which essentially insures that portion of the
loan which is in excess of 80% of the appraised value of the financed
residences. As of December 31, 1998, the loan portfolio includes approximately
$76.4 million of residential loans which have loan to value ratios of greater
than 80%, when originated, and have no private mortgage insurance. The Bank
believes that these loans, which are made in the normal course of business from
time to time, have not resulted in a significantly greater loss experience than
the aggregate residential mortgage portfolio and these loans generally have
higher yields. As of December 31, 1998, the Bank's residential loan portfolio
consisted of approximately 40% in ARMs and 60% in fixed rate loans.
Residential mortgage loans generally are underwritten by the Bank in
accordance with guidelines of the Federal Home Loan Mortgage Corporation (the
"FHLMC"). The Bank is an approved seller/servicer for the Federal National
Mortgage Association (the "FNMA") and the FHLMC.
CONSTRUCTION LOANS. Gross construction loans comprised approximately 6% of
the Bank's total loan portfolio as of December 31, 1998. The total gross
construction loan portfolio of approximately
3
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$113.7 million as of December 31, 1998 is primarily composed of one-to-four
family residential properties and to a lesser extent multi-family and
commercial real estate properties.
The Bank originates one-to-four family residential loans to individuals on
a pre-sold basis and through developers on a pre-sold and speculative basis.
The Bank's underwriting guidelines regarding residential construction loans
require an analysis of the financial condition of the developer or the
borrower, the appraised value of the property, and the marketability of the
proposed residence, including location, and overall portfolio concentrations.
Limitations are imposed by the Bank on the aggregate outstanding principle
balance of loans for the purpose of construction of residences that have not
been pre-sold.
Construction loans generally provide for terms of between 6 and 12 months
with interest only payments. Loan proceeds are advanced as construction
progresses and inspections warrant. Construction loans are structured either to
be converted to permanent loans at the end of the construction phase, or to be
paid off upon receipt of financing from another lender. Construction loans
acquired in connection with the acquisition of FPBB have the same general terms
as the Bank except FPBB's originated construction loans provide for interest
only payments at fixed interest rates. Fixed rate construction loans
outstanding at December 31, 1998 were $22.4 million.
The Bank's construction loans are secured by first mortgages on the
underlying real estate and have loan-to-value ratios which generally do not
exceed 80%. All such loans provide for recourse to the borrower or a related
individual in the event of a default. The loan agreements generally require the
Bank to advance funds for fees. The amount of the loan generally provides the
borrowers with sufficient funds to pay the interest on the loan during
construction since interest is considered part of the total cost of the
property.
Construction loans afford the Bank the opportunity to increase the
interest rate sensitivity of its loan portfolio and to receive yields higher
than those obtainable on adjustable-rate mortgage loans secured by existing
residential properties. These higher yields correspond to the higher credit
risks associated with construction lending. Historically, the Bank has obtained
its construction loans through its retail loan officer and branch network and
also through the wholesale broker network. These loans are generally made to
the homeowner and may or may not involve an end loan commitment.
The Bank offered to selected builders a revolving commitment. These
commitments are for speculative, model and contract construction loans, the
collateral for which is individually analyzed and approved prior to closing.
The commitment is a pre-approval of the builder on a credit basis only to
determine the maximum level of exposure the Bank wishes to have. If permanent
loans are placed through it, it may grant preferential rates to the builder
through those commitments.
Construction loans involve additional risks attributable to the fact that
loan funds are advanced upon the security of a project under construction,
which security is of uncertain value prior to its completion. Because of the
uncertainties inherent in estimating construction costs, as well as the market
value of the completed project (which is often beyond the control of the
borrower), and the effects of governmental regulation on real property, it is
relatively difficult to evaluate accurately the total funds required to
complete a project and the related loan-to-value ratio. As a result of the
foregoing, construction lending often involves the disbursement of substantial
funds with repayment dependent, in part, on the success of the ultimate project
rather than on the ability of the borrower or guarantor to repay principal and
interest. If the Bank is forced to foreclose on a project prior to or at
completion due to a default, there can be no assurance that the Bank will be
able to recover all of the unpaid balance of, and accrued interest on, the loan
as well as the related foreclosure and holding costs. In addition, the Bank may
be required to fund additional amounts to complete a project and may have to
hold the property for an indeterminable period of time. The Bank has
underwriting procedures designed to identify what it believes to be acceptable
levels of risk.
CONSUMER LOANS. Consumer loans are extended for a variety of purposes
including the purchase of automobiles, home improvement, lines of credit,
unsecured personal loans and education. As of
4
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December 31, 1998, consumer loans were approximately $256.7 million or 12% of
total loans. Loans secured by automobiles are the dominant consumer loans and
represented $159.4 million or 8% of total consumer loans as of December 31,
1998. Automobile loans are obtained from both the retail branch network and
indirectly through referrals from automobile dealerships. Primarily all of the
indirect automobile loans currently are obtained from dealerships within the
Bank's market area and are underwritten to the same standards as those
automobile loans acquired through the retail banking network.
Consumer loan underwriting standards include an examination of the
applicant's payment history on other debts and an evaluation of the applicant's
ability to meet existing obligations and payments on the proposed loan.
Although creditworthiness of the applicant is of primary importance, the
underwriting process also includes a comparison of the value of the security,
if any, in relation to the proposed loan amount. While consumer loans generally
involve a higher element of credit risk than one-to-four family residential
loans, consumer loans are typically made at higher interest rates and for
shorter terms, or at adjustable rates, and are helpful in maintaining a
profitable spread between the Bank's loan yield and its cost of funds. Lending
in this area may involve special risk, including decreases in the value of
collateral and transaction costs associated with foreclosure and repossession.
During the fiscal years ended 1995 and 1996, FPBB (a pooled company)
became more active in the indirect automobile lending market. Higher than
anticipated charge-offs were experienced in the indirect automobile lending
portfolio, primarily during the latter part of the fiscal year ended 1996.
Higher delinquencies and charge-offs did not occur until the third quarter
1996. Because of the collection problems, a $16.4 million provision for loan
losses was recorded in 1996. Based upon an analysis of the overall performance
of the indirect lending program, management determined that effective September
30, 1996, no new applications for indirect loans would be accepted; thereby,
discontinuing the indirect lending program. FPBB's indirect loan portfolio
decreased from $194.1 million at December 31, 1996 to $153.8 million at
December 31, 1997 to $40.6 million at December 31, 1998.
COMMERCIAL BUSINESS LOANS. Commercial business loans (excluding Small
Business Administration ("SBA") loans) totaled $99.7 million or 5% of the
Bank's loan portfolio, as of December 31, 1998. Commercial business loan
underwriting practices assess the borrower's creditworthiness and ability to
repay, including an evaluation of the value of any collateral securing the
proposed loan. While commercial business loans generally are made for shorter
terms and at a higher yields than one-to-four family residential loans, such
loans generally involve a higher level of risk than one-to-four family
residential loans.
SBA loans, which totaled $14.5 million at December 31, 1998, are
underwritten in accordance with the guidelines of the SBA. These loans are made
to small businesses and usually require that significant collateral be assigned
to the Bank from the borrower. Typically, the SBA guarantees 70% to 90% of the
loan balance with the remaining portion unguaranteed. Although the Bank is
permitted to sell the SBA-guaranteed portion of the loan in secondary markets,
with the Bank retaining the portion that is not guaranteed, the Bank does not
typically sell such portions in secondary markets. SBA loans are similar to
commercial business loans in yield and credit risk.
OTHER LENDING ACTIVITIES. The Bank may also extend loans for other
purposes from time to time, including land acquisition and development and
residential lot loans.
LENDING PROCEDURES. Loan applications may be approved by the Board of
Directors, the Board Loan Committee, the Management Loan Committee or the Loan
Officer if the loan is within delegated authority limits. The review of each
loan application includes the applicant's credit history, debt service ability,
financial condition, and the value of any collateral to secure the loan (which,
in the case of real estate loans, utilizes a review of an appraisal report
prepared by an independent appraiser). In the case of major real estate loans,
the loan underwriting process typically involves an analysis of the economic
feasibility of the proposed project as well as an analysis of any and all
guarantors.
5
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The Management Loan Committee is currently comprised of the President,
Senior Executive Vice President-CFO, Senior Executive Vice President-CBO,
Senior Executive Vice President-CCO, Market President-Broward County, Market
President-Dade County, Senior Vice President-Retail Banking, Senior Vice
President-Business Banking, and the Chairman of the Board-Broward County. The
Management Loan Committee is authorized to approve residential and commercial
mortgage loans up to $1,000,000 and commercial non-mortgage loans up to
$750,000. The committee is also authorized to approve consumer loan
applications up to $250,000. All other loan applications are subject to the
approval of the Board of Directors or the Board Loan Committee.
With respect to any approved real estate loan, the Bank issues a written
commitment to the applicant, setting forth the terms under which the loan will
be extended. A title insurance commitment for the mortgaged property is
obtained from an approved title company prior to the closing. Fire, casualty,
and flood insurance (where applicable) are obtained, naming the Bank as a
mortgagee.
In accordance with the Bank's policies and applicable law, the
documentation of each real estate loan includes: an application signed by the
applicant, disclosing the purpose for which the loan is sought and the identity
of the property; one or more written appraisal reports disclosing the fair
market value of the security offered by the applicant; a signed financial
statement of the applicant and/or a written credit report prepared by the Bank
or by others at its request; documentation showing the date, amounts, purpose,
and recipient of every disbursement of loan proceeds; an opinion of the Bank's
attorney; a title insurance policy or other documentary evidence customarily
used in the appropriate jurisdiction, affirming the quality and validity of the
Bank's lien on the relevant real estate; documentation covering all
modifications of the original mortgage contract showing appropriate approval
for each such modification; and documentation covering all releases of any
portion of the collateral supporting the loan.
SERVICING OF MORTGAGE LOANS
The Bank services virtually all of its loan portfolio. As of December 31,
1998, the Bank was also servicing $411.8 million in mortgage loans and mortgage
loan participations for other lenders. The Bank services both loans and loan
participations it has sold to others, as well as loans pursuant to the purchase
of servicing rights.
Mortgage loan servicing involves collecting principal, interest and escrow
funds for taxes and insurance from mortgage loan borrowers, paying principal
and interest to mortgage loan investors, paying property taxes and insurance
premiums on mortgaged property, supervising foreclosures in the event of
unremedied defaults, and performing all related accounting and reporting
activities.
With regard to purchased servicing rights, such rights are typically
purchased from thrift institutions and mortgage banking companies. In
purchasing servicing rights, a valuation of the servicing rights and an
assessment of the portfolio is conducted by the Bank. A computer model is
utilized in the evaluation process which assesses prepayment expectations,
costs to establish servicing files, the on-going costs of servicing, the
mortgage loan coupon range and concentrations, servicing margin, payment
remittance cycles and utilization of escrow funds. At December 31, 1998, the
Bank had approximately $1.8 million of purchased servicing rights.
Although the originator or its assignee retains title and reimburses the
servicer for the majority of expenses should foreclosure be required, the
purchase of servicing rights involves risks to the servicer, particularly
should the underlying loans be prepaid faster than that assumed in the
servicing rights valuation process. Should loan prepayments be accelerated, the
amortization of the amount paid for servicing rights (which amount is amortized
over the estimated life of the underlying loan utilizing the interest method)
must also be accelerated thereby reducing income. The Bank seeks to mitigate
such risks by diversifying the servicing portfolio between fixed-rate and
adjustable-rate mortgage loans and among various states, including Florida,
California, Iowa and Illinois.
6
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NON-PERFORMING ASSETS AND ALLOWANCE FOR LOAN LOSSES
The Bank's non-performing assets consist of real estate acquired through
foreclosures (other real estate owned) and loans which are 90 days or more past
due. Generally, accrued interest on loans which are more than 90 days past due
is excluded from income and any previously accrued and unpaid interest is
reversed through interest income. Non-performing assets as of December 31, 1998
were approximately $16.6 million, representing .55% of the Company's total
assets.
The following table details the Bank's non-performing assets at December
31, 1998, 1997, 1996, 1995, and March 31, 1995:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
---------------------------------------------- ----------
1998 1997 1996 1995 1995
--------- --------- --------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Loans:
Consumer ................................ $ 1,366 $ 1,588 $ 1,709 $ 356 $ 404
Commercial business ..................... 1,140 1,008 683 1,050 1,905
Residential mortgage .................... 6,877 11,422 15,938 5,741 4,244
Residential construction ................ 598 572 107 3,698
Commercial mortgage ..................... 3,395 698 3,562 4,201 2,933
Repossessed automobiles ................. 800 672 1,798 566 118
------- ------- ------- ------- -------
Total non-performing loans ............ 14,176 15,388 24,262 12,021 13,302
------- ------- ------- ------- -------
Other real estate owned:
Residential construction ................ 3,504 4,700 4,096 4,323
Residential mortgage .................... 1,585 4,149 2,718 2,194 2,634
Land for residential use ................ 145 1,329 1,051 1,329
Land for commercial use ................. 733 188 243 857 1,109
Commercial real estate .................. 1,349 1,386 1,720
------- ------- ------- ------- -------
Total other real estate owned ......... 2,463 7,841 10,339 9,584 11,115
------- ------- ------- ------- -------
Total non-performing assets ............. $16,639 $23,229 $34,601 $21,605 $24,417
======= ======= ======= ======= =======
</TABLE>
The table above reflects reclassifications of in-substance foreclosures
from other real estate owned to non-performing loans in accordance with SFAS
No. 114 for all periods presented. The adoption of SFAS No. 114 had no material
impact on the operations of the Bank or the comparability of the tables
presented.
Total non-performing assets increased $13.0 million as of December 31,
1996, as compared to December 31, 1995, primarily due to the significant
increase in non-performing residential mortgage loans and repossessed
automobiles. The increase of $10.2 million in non-performing residential
mortgage loans is due to the addition of $6.2 million residential development
loans to a single borrower of a pooled company as of December 31, 1996.
Repossessed automobiles increased $1.2 million due to significant problems in
FPBB's indirect lending portfolio (see discussion at "Management Discussion and
Analysis--Provision for Loan Losses and Allowances for Loan Losses"). The
remaining increase in non-performing assets is due to increases in the overall
loan portfolio. Total non-performing assets decreased $11.4 million as of
December 31, 1997, as compared to December 31, 1996 due to the reduction in
non-performing residential mortgage loans and non-performing commercial
mortgage loans. The reduction in non-performing loans can be attributed to the
resolution of the $6.2 million residential development loans and $2.2 million
in commercial mortgage loans of a pooled company. The reduction of
non-performing assets as of December 31, 1998, as compared to December 31,
1997, is primarily due to the sale of other real estate owned during 1998.
The Bank's non-residential loans in excess of $100,000 are reviewed
annually by a committee of the Bank's management (the "Committee") for the
purpose of determining a loan's classification as
7
<PAGE>
special mention, substandard, doubtful, or loss, as appropriate. An asset is
considered "substandard" if it is inadequately protected by the current net
worth and paying capacity of the obligor or the collateral pledged.
"Substandard" assets include those characterized by the distinct possibility
that the Bank will sustain some loss if the deficiencies are not corrected.
Assets classified as "doubtful" have all of the weaknesses inherent in those
classified as substandard, with the added characteristic that the weaknesses
present make collection or liquidation in full on the basis of currently
existing facts, conditions, and values, highly questionable and improbable.
General allowances represent loss allowances which have been established
to recognize the inherent risk associated with lending activities. Unlike
specific allowances, general allowances have not been allocated to a particular
problem asset. Assets classified as loss are those considered uncollectible and
of such little value that continuance as assets is not warranted. The Bank will
charge off 100% of the assets classified as loss. The Bank's determination as
to the classification of its assets and the amount of its valuation allowances
is subject to review by the FRB and the Florida Banking Department, which can
order the establishment of additional general or specific loss allowances.
Although the Bank uses its best judgment in underwriting each loan,
industry experience indicates that a portion of the Bank's loans will become
delinquent. Regardless of the underwriting criteria utilized by banks, losses
may be experienced as a result of many factors beyond their control including,
among other things, changes in market conditions affecting the value of
security and unrelated problems affecting the credit of the borrower. Due to
the concentration of loans in South Florida, adverse economic conditions in
this area could result in a decrease in the value of a significant portion of
the Bank's collateral.
In the normal course of business, the Bank has recognized and will
continue to recognize losses resulting from the inability of certain borrowers
to repay loans and the insufficient realizable value of collateral securing
such loans.
Accordingly, management has established an allowance for loan losses,
which totaled approximately $26.0 million at December 31, 1998, which is
allocated according to the following table:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------------------------------------
1998 1997 1996
------------------------ ------------------------ ------------------------
ALLOW % OF ALLOW % OF ALLOW % OF
FOR LOAN LOANS TO FOR LOAN LOANS TO FOR LOAN LOANS TO
LOSS TOTAL LOANS LOSS TOTAL LOANS LOSS TOTAL LOANS
---------- ------------- ---------- ------------- ---------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Real estate
construction
and lot loans ........... $ 568 6% $ 1,234 10% $ 1,044 12%
Residential mortgage ..... 4,025 56% 1,844 56% 2,158 52%
Commercial mortgage ...... 6,859 20% 2,538 18% 2,658 18%
Commercial business ...... 877 6% 1,330 3% 498 3%
Consumer ................. 8,558 12% 4,743 13% 10,024 15%
Unallocated .............. 5,156 1,457 3,133
------- --- ------- --- ------- ---
TOTAL .................. $26,043 100% $13,146 100% $19,515 100%
======= === ======= === ======= ===
<CAPTION>
DECEMBER 31, MARCH 31,
------------------------ -----------------------
1995 1995
------------------------ -----------------------
ALLOW % OF ALLOW % OF
FOR LOAN LOANS TO FOR LOAN LOANS TO
LOSS TOTAL LOANS LOSS TOTAL LOANS
---------- ------------- ---------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Real estate
construction
and lot loans ........... $ 751 12% $ 1,467 13%
Residential mortgage ..... 1,887 57% 1,427 58%
Commercial mortgage ...... 2,569 16% 1,917 16%
Commercial business ...... 839 3% 742 4%
Consumer ................. 1,187 12% 810 9%
Unallocated .............. 2,840 3,725
------- --- ------- ---
TOTAL .................. $10,073 100% $10,088 100%
======= === ======= ===
</TABLE>
In evaluating the adequacy of the allowance for loan losses, management
has taken into consideration concentrations within the loan portfolio, past
loan loss experience, growth of the portfolio, current economic conditions,
workout arrangements, pending sales, the financial strength of the borrowers,
and the appraised value of the collateral at the time reserves were
established. Although management believes the allowance for loan losses is
adequate, their evaluation is dependent upon future events. Management's
evaluation of losses is a continuing process which may necessitate adjustments
to the allowance in future periods.
Management's evaluation of the allowance for loan losses includes applying
relevant risk factors to the entire loan portfolio, including non-performing
loans. Risk factors applied to the performing
8
<PAGE>
loan portfolio are based on the Bank's past three year loss history considering
the current portfolio's characteristics, current economic conditions and other
relevant factors. Non-performing loans are carried at fair value based on the
most recent information available. At December 31, 1998 the following risk
factors were applied to the carrying value of each classified loan: (i)
substandard at 15%, (ii) doubtful at 50%, and (iii) loss charged-off at 100%.
The following table details the charge-offs, recoveries, net charge-offs
and ending balance of the allowance for loan losses for the years ended
December 31, 1998, 1997 and 1996, the nine months ended December 31, 1995 and
the year ended March 31, 1995:
<TABLE>
<CAPTION>
AT OR FOR THE AT OR FOR THE
YEARS ENDED NINE MONTHS AT OR FOR THE
DECEMBER 31, ENDED YEAR ENDED
----------------------------------------- DECEMBER 31, MARCH 31,
1998 1997 1996 1995 1995
----------- ------------ ------------ -------------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Beginning balance ............................. $13,146 $ 19,515 $ 10,073 $ 10,088 $ 8,291
Reserves acquired in connection
with purchase business combinations ......... 1,211 2,627 1,399
Net change in allowance for the three
months ended December 31, 1997, for
pooled company .............................. (885)
Charge-offs:
* Real estate mortgage ....................... 2,308 1,923 1,621 442 457
* Real estate construction ................... 344 19 2 411 10
* Consumer ................................... 8,291 11,528 8,532 555 185
* Commercial business ........................ 130 890 643 205 229
------- -------- -------- -------- --------
SUBTOTAL -- Charge-offs ..................... 11,073 14,360 10,798 1,613 881
------- -------- -------- -------- --------
Recoveries:
* Real estate mortgage ....................... 86 27 113 39 182
* Consumer ................................... 504 2,270 454 94 59
* Commercial ................................. 260 646 322 667 556
------- -------- -------- -------- --------
SUBTOTAL--Recoveries ........................ 850 2,943 889 800 797
------- -------- -------- -------- --------
Net charge-offs ............................... 10,223 11,417 9,909 813 84
Provision for loan losses ..................... 22,794 5,048 16,724 798 482
------- -------- -------- -------- --------
Ending Balance ................................ $26,043 $ 13,146 $ 19,515 $ 10,073 $ 10,088
======= ======== ======== ======== ========
Ratio of net charge-offs during the
period to average loans outstanding
during that period .......................... 0.54% 0.65% 0.59% 0.06% 0.01%
======= ======== ======== ======== ========
</TABLE>
See "--Management's Discussion and Analysis of Financial Condition and
Results of Operations--Provision for Loan Losses and Allowance for Loan
Losses."
INVESTMENT ACTIVITIES
The Bank is required by federal regulations to maintain minimum levels of
liquid assets. See "--Management's Discussion and Analysis of Financial
Condition and Results of Operations-- Liquidity." The Bank considers such
factors as liquidity, yields, interest rate exposure and general economic
conditions in determining the composition of its investment portfolio. As of
December 31, 1998, the Company had cash and cash equivalents of $162.2 million
and investments of $729.3 million representing, in the aggregate, 30% of its
total assets. See Note 3 of Notes to Consolidated Financial Statements.
9
<PAGE>
DEPOSITS
The Bank offers a variety of deposit programs, including non-interest
bearing accounts, NOW accounts, money market deposit accounts, statement
savings accounts, and variable- or fixed-rate certificates of deposit with
maturities ranging from 30 days to five years. The principal differences among
certificate accounts relate to minimum balance, term, interest rate, and method
of compounding.
As of December 31, 1998, certificate accounts in the amount of $100,000 or
more amounted to approximately $226.5 million, representing 10% of total
deposits.
The following tables set forth the amounts and the weighted-average
interest rate on each category of the Bank's deposit accounts as of the dates
indicated:
<TABLE>
<CAPTION>
DECEMBER 31, 1998 DECEMBER 31, 1997
-------------------------------------- --------------------------------------
WEIGHTED PERCENT WEIGHTED PERCENT
AVERAGE OF TOTAL AVERAGE OF TOTAL
AMOUNT STATED RATE DEPOSITS AMOUNT STATED RATE DEPOSITS
------------- ------------- ---------- ------------- ------------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Non-interest bearing
accounts ....................... $ 271,311 12% $ 215,638 10%
NOW accounts .................... 222,415 0.85% 10% 186,516 1.56% 9%
Savings accounts ................ 145,307 3.41% 6% 247,568 3.46% 12%
Money market accounts ........... 358,134 3.59% 15% 146,856 3.27% 7%
Certificates of deposit ......... 1,307,688 5.60% 57% 1,302,703 5.78% 62%
---------- -- ---------- --
Total Deposits ................ $2,304,855 4.57% 100% $2,099,281 4.86% 100%
========== === ========== ===
<CAPTION>
DECEMBER 31, 1996
-------------------------------------
WEIGHTED PERCENT
AVERAGE OF TOTAL
AMOUNT STATED RATE DEPOSITS
------------- ------------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Non-interest bearing
accounts ....................... $ 191,968 10%
NOW accounts .................... 178,504 1.78% 9%
Savings accounts ................ 235,656 3.45% 12%
Money market accounts ........... 133,739 2.91% 7%
Certificates of deposit ......... 1,223,966 5.58% 62%
---------- --
Total Deposits ................ $1,963,833 4.71% 100%
========== ===
</TABLE>
BORROWINGS
Several credit options are made available to banks from time to time by
the FHLB to meet seasonal or other withdrawals of deposits and to permit the
expansion of lending activities. Each credit option has a specified maturity
and either a fixed or a variable interest rate determined by the FHLB. Rates
offered for variable rate FHLB borrowings are set from time to time by the
FHLB. FHLB policy prescribes the acceptable use for which the proceeds of such
borrowings may be used. The Bank has a credit facility from the FHLB in the
amount of $600.0 million. The Bank also has the ability to draw on existing
lines of credit with two commercial banks for an aggregate amount of $14.0
million. No amounts were drawn on the commercial bank lines at December 31,
1998, 1997 and 1996.
FHLB advances are collateralized by FHLB stock, mortgage loans and
mortgage backed securities pledged in accordance with agreements the Bank
entered into with the FHLB. In accordance with the agreements, the Bank had
pledged as collateral loans with an aggregate principal balance of
approximately $388.9 million and $604.2 million at December 31, 1998 and 1997,
respectively. In 1997, FPBB had a blanket floating lien that required the Bank
to maintain mortgage loans pledged as collateral in an amount equal to the
advances, when discounted at 65% of the unpaid principal balance. This floating
line was not in effect at December 31, 1998. At December 31, 1998 and 1997, the
Bank also had pledged mortgage backed securities in the amount of $57.4 million
and $23.5 million, respectively. The Bank had $409.3 million in outstanding
advances at December 31, 1998.
From time to time the Bank enters into repurchase agreements with
customers, securities dealers and commercial banks. A repurchase agreement is a
form of securities borrowing which involves the sale and delivery of securities
by the Bank to an independent safekeeping agent, securities broker or dealer in
an amount equal to a percentage of the fair market value of the securities,
coupled with the Bank's agreement to repurchase the securities at a later date.
The Bank pays the customer, broker or dealer a variable or fixed rate of
interest for the use of the funds for the period involved which ranges from
overnight to two years. At maturity, the loans are repaid and the securities
are returned to the
10
<PAGE>
Bank. The amounts of securities sold under such agreements vary widely and
depend on many factors which include the terms available for such transactions,
the ability of the Bank to apply the proceeds to investments having higher
returns, the demand for such transactions, and management's perception of
trends in short-term interest rates. The Bank, in each such transaction,
requires the broker or dealer to adhere to procedures for the safekeeping of
the Bank's securities. As of December 31, 1998, the Bank had $9.1 million
outstanding in repurchase agreements.
The following table presents selected information on borrowings:
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS
DECEMBER 31, ENDED YEARS ENDED
--------------------------------------------- DECEMBER 31, MARCH 31,
1998 1997 1996 1995 1995
------------- ------------- ------------- -------------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
FHLB ADVANCES AND OTHER
BORROWINGS:
Amounts outstanding
at end of year .................. $ 410,368 $ 454,322 $ 235,880 $ 197,125 $ 126,200
Weighted average rate
at end of year .................. 5.49% 6.05% 5.91% 6.20% 5.18%
Maximum amount outstanding
at any month end ................ $ 514,097 $ 454,322 $ 238,100 $ 198,125 $ 197,910
Approximate average amount
outstanding during year ......... $ 376,252 $ 232,071 $ 202,158 $ 149,776 $ 141,911
Approximate weighted average
rate for year ................... 5.67% 5.94% 5.98% 6.12% 4.73%
SECURITIES SOLD UNDER
AGREEMENT TO REPURCHASE:
Amounts outstanding
at end of year .................. $ 9,144 $ 43,389 $ 24,613 $ 27,660 $ 43,968
Weighted average rate
at end of year .................. 3.88% 5.27% 4.78% 5.65% 5.56%
Maximum amount outstanding
at any month end ................ $ 29,394 $ 45,542 $ 43,021 $ 87,314 $ 74,148
Approximate average outstanding
during year ..................... $ 11,391 $ 27,001 $ 20,105 $ 46,519 $ 54,710
Approximate weighted average
rate
for year ........................ 4.43% 5.41% 5.10% 5.65% 4.22%
TOTAL BORROWINGS:
Amounts outstanding
at end of year .................. $ 419,512 $ 497,711 $ 260,493 $ 224,785 $ 170,168
Weighted average rate
at end of year .................. 5.45% 6.00% 5.79% 6.13% 5.27%
Maximum amount outstanding at
any month end ................... $ 543,491 $ 472,467 $ 281,121 $ 283,439 $ 272,058
Approximate average amount
outstanding during year ......... $ 387,643 $ 259,072 $ 222,263 $ 196,295 $ 196,621
Approximate weighted average
rate for year ................... 5.63% 5.89% 5.90% 6.01% 4.59%
</TABLE>
On June 30, 1997, FPBB issued $35.0 million of 10.35% Senior Debentures,
maturing on June 30, 2002. The interest on the Senior Debentures is payable
semi-annually in arrears on June 30 and December 31 of each year. The net
proceeds of the debenture issuance are being used for general corporate
purposes, including contributing $25.0 million of the net proceeds to the Bank.
11
<PAGE>
MARKET AREA AND COMPETITION
The Bank experiences strong competition both in attracting deposits and
originating loans in its South and Central Florida market area. Direct
competition for deposits comes from other commercial banks, savings and loan
associations, credit unions, money market funds and other providers of
financial services. Competition in South Florida markets is significant,
largely due to the desire of financial institutions to access the high
proportion of retirees who live in South Florida and have above average liquid
assets. The Bank competes with other commercial banks, savings and loan
associations, brokerage firms, insurance companies and credit unions for
deposits and loans. In addition, mortgage banking companies are competitors for
residential real estate loans. Many of these competitors have greater financial
resources, larger branch networks, better name recognition, greater economies
of scale, fewer regulatory burdens, less onerous capital requirements and
larger employee bases than the Bank. The primary methods used to attract
deposit accounts include interest rates, variety and quality of services,
convenience of branches and advertising and promotions. The Bank competes for
loans through interest rates, loan fees and efficient, quality service provided
to customers.
SUBSIDIARY ACTIVITIES
The Company has an insurance agency subsidiary, Republic Security
Insurance Agency, which acts as agent in the sale of mortgage life insurance,
credit life insurance and homeowner property insurance to customers of the
Bank. The Bank has no active subsidiaries at this time.
EMPLOYEES
The Company and Bank employed approximately 909 persons as of December 31,
1998. The Company places a high priority on staff development which involves
training in operational procedures, customer service and regulatory compliance.
Extensive incentive programs that focus on and are dependent on the achievement
of certain financial and customer service goals are in place for employees.
None of the Company's or the Bank's employees are subject to a collective
bargaining agreement, and the Company believes that its employee relations are
good.
CERTAIN REGULATORY CONSIDERATIONS
The Bank is a commercial bank organized under the laws of the State of
Florida and a member of the Federal Reserve Bank of Atlanta. The Company is a
bank holding company under the Bank Holding Company Act of 1956, as amended
("BHCA"). The Bank is subject to regulation by the Florida Department of
Banking and Finance (the "FDBF") and the Board of Governors of the Federal
Reserve System ("FRB"), and the Company is subject to regulation by the FRB.
The Company and the Bank must comply with state and federal banking laws
and regulations that control virtually all aspects of operations. These laws
and regulations generally aim to protect depositors, not shareholders.
Particular references to statutes or regulations in this document qualify and
supersede any summaries or descriptions of the particular statutes or
regulations. Any changes in applicable laws or regulations may materially
affect the business and prospects of the Company. Such legislative changes or
changes in regulatory policies may also affect the operations of the Company
and the Bank. The Company cannot predict the nature or extent of effects on
business or earnings caused by future fiscal or monetary policies, economic
control or new federal or state legislation.
THE COMPANY
GENERAL
As a result of its ownership of the Bank, the Company is registered as a
bank holding company under the BHCA and is regulated by the FRB. Under the
BHCA, the Company is subject to periodic
12
<PAGE>
examination by the FRB and is required to file periodic reports of its
operations and such additional information as the FRB may require.
THE BANK HOLDING COMPANY ACT OF 1956
Permitted Activities. The BHCA limits the Company's activities to managing
or controlling banks, furnishing services to or performing services for its
subsidiaries, and engaging in other activities that the FRB determines to be so
closely related to banking or managing or controlling banks as to be a proper
incident thereto. In determining whether a particular activity is permissible,
the FRB must consider whether the performance of such an activity reasonably
can be expected to produce benefits to the public that outweigh possible
adverse effects. Possible benefits include greater convenience, increased
competition and gains in efficiency. Possible adverse effects include undue
concentration of resources, decreased or unfair competition, conflicts of
interest and unsound banking practices. The FRB has determined the following
activities, among others, to be permissible for bank holding companies:
* Factoring accounts receivable;
* Acquiring or servicing loans;
* Leasing personal property;
* Conducting discount securities brokerage activities;
* Performing certain data processing services;
* Acting as agent or broker and selling credit life insurance and certain
other types of insurance in connection with credit transactions; and
* Performing certain insurance underwriting activities.
There are no territorial limitations on permissible non-banking activities
of bank holding companies. Despite prior approval, the FRB may order a holding
company or its subsidiaries to terminate any activity or to terminate ownership
or control of any subsidiary when the FRB has reasonable cause to believe that
a serious risk to the financial safety, soundness or stability of any bank
subsidiary of that bank holding company may result from such an activity.
CHANGES IN CONTROL. In addition, and subject to certain exceptions, the
BHCA and the Change in Bank Control Act, together with regulations thereunder,
require FRB approval (or, depending on the circumstances, no notice of
disapproval) prior to any person or company acquiring "control" of a bank
holding company, such as the Company. A conclusive presumption of control
exists if an individual or company acquires 25% or more of any class of voting
securities of the bank holding company. A rebuttable presumption of control
exists if a person acquires 10% or more but less than 25% of any class of
voting securities and either the Company has registered securities under
Section 12 of the Securities Exchange Act of 1934, as amended, or no other
person will own a greater percentage of that class of voting securities
immediately after the transaction.
The BHCA requires, among other things, the prior approval of the FRB in
any case where a bank holding company proposes to (i) acquire all or
substantially all of the assets of a bank, (ii) acquire direct or indirect
ownership or control of more than 5% of the outstanding voting stock of any
bank (unless it owns a majority of such bank's voting shares), or (iii) merge
or consolidate with any other bank holding company. Additionally, the BHCA
prohibits a bank holding company, with certain limited exceptions, from (i)
acquiring or retaining direct or indirect ownership or control of more than 5%
of the outstanding voting stock of any company which is not a bank or bank
holding company, or (ii) engaging directly or indirectly in activities other
than those of banking, managing or controlling banks, or performing services
for its subsidiaries unless such non-banking business is determined by the FRB
to be so closely related to banking or managing or controlling banks as to be a
proper incident thereto.
13
<PAGE>
TYING. The BHCA also prohibits bank holding companies and their affiliates
from tying the provision of certain services, such as extending credit, to
other services offered by the bank holding company or its affiliates.
CAPITAL; DIVIDENDS; SOURCE OF STRENGTH. The FRB imposes certain capital
requirements on the Company under the BHCA, including a minimum leverage ratio
and a minimum ratio of "qualifying" capital to risk-weighted assets. These
requirements are described below under "Capital Regulations." Subject to its
capital requirements and certain other restrictions, the Company is able to
borrow money to make a capital contribution to the Bank, and such loans may be
repaid from dividends paid from the Bank to the Company (although the ability
of the Bank to pay dividends will be subject to regulatory restrictions as
described below under "The Bank--Dividends"). The Company is also able to raise
capital for contribution to the Bank by issuing securities without having to
receive regulatory approval, subject to compliance with federal and state
securities laws.
In accordance with FRB policy, the Company is expected to act as a source
of financial strength to the Bank and to commit resources to support the Bank
in circumstances in which the Company might not otherwise do so. Under the
BHCA, the FRB may require a bank holding company to terminate any activity or
relinquish control of a nonbank subsidiary (other than a nonbank subsidiary of
a bank) upon the FRB's determination that such activity or control constitutes
a serious risk to the financial soundness or stability of any subsidiary
depository institution of the bank holding company. Further, federal bank
regulatory authorities have additional discretion to require a bank holding
company to divest itself of any bank or nonbank subsidiary if the agency
determines that divestiture may aid the depository institution's financial
condition.
FINANCIAL INSTITUTIONS REFORM, RECOVERY AND ENFORCEMENT ACT OF 1989
The Financial Institutions Reform, Recovery and Enforcement Act of 1989
("FIRREA") was enacted in August 1989. FIRREA contains major regulatory reforms
which include stronger civil and criminal enforcement provisions applicable to
all financial institutions. FIRREA allows the acquisition of healthy and failed
savings and loans by bank holding companies, and removes all interstate
barriers on these bank holding company acquisitions. With certain
qualifications, FIRREA also allows bank holding companies to merge acquired
savings and loans into their existing commercial bank subsidiaries.
The FRB, the FDBF and the Federal Deposit Insurance Corporation ("FDIC")
collectively have extensive enforcement authority over depository institutions
and their holding companies, and this authority has been enhanced substantially
by FIRREA. This enforcement authority includes, among other things, the ability
to assess civil money penalties, to issue cease-and-desist or removal orders,
to initiate injunctive actions, and, in extreme cases, to terminate deposit
insurance. In general, these enforcement actions may be initiated for
violations of laws and regulations and unsafe or unsound practices. Other
actions or inactions may provide the basis for enforcement action, including
misleading or untimely reports filed with the federal banking agencies. FIRREA
significantly increased the amount of and grounds for civil money penalties and
generally requires public disclosure of final enforcement actions.
FIRREA further requires a depository institution or holding company
thereof to give 30 days' prior written notice to its primary federal regulator
of the appointment of any proposed director or senior executive officer if the
institution (i) has been chartered less than two years; (ii) has undergone a
change in control within the preceding two years; or (iii) is not in compliance
with the minimum capital requirements or otherwise is in a "troubled
condition." The regulator would have the opportunity to disapprove any such
appointment.
ECONOMIC GROWTH AND REGULATORY PAPERWORK REDUCTION ACT OF 1996
The enactment of the Economic Growth and Regulatory Paperwork Reduction
Act of 1996 ("EGRPRA") streamlined the non-banking activities application
process for well-capitalized and well-managed bank holding companies. Under
EGRPRA, qualified bank holding companies may
14
<PAGE>
commence a regulatory approved non-banking activity without prior notice to the
FRB; written notice is merely required within 10 days after commencing the
activity. Also, under EGRPRA, the prior notice period is reduced to 12 business
days in the event of any non-banking acquisition or share purchase, assuming
the size of the acquisition does not exceed 10% of risk-weighted assets of the
acquiring bank holding company and the consideration does not exceed 15% in
Tier 1 capital. This prior notice requirement also applies to commencing a
non-banking activity de novo which has been previously approved by order of the
FRB, but not yet implemented by regulations.
THE BANK
GENERAL
The Bank is a banking institution which is chartered by and operated in
the State of Florida, and it is subject to supervision and regulation by the
FDBF. The Bank is a member bank of the Federal Reserve System and its
operations are also subject to broad federal regulation and oversight by the
FRB. The deposit accounts of the Bank are insured by the FDIC which gives the
FDIC certain enforcement powers over the Bank. Various consumer laws and
regulations also affect the operations of the Bank, including state usury laws,
laws relating to fiduciaries, consumer credit and equal credit laws, and fair
credit reporting.
The FDBF supervises and regulates all areas of the Bank's operations
including, without limitation, the making of loans, the issuance of securities,
the conduct of the Bank's corporate affairs, capital adequacy requirements, the
payment of dividends and the establishment or closing of branches.
In addition, the Federal Deposit Insurance Corporation Improvement Act of
1991 prohibits insured state chartered institutions from conducting activities
as principal that are not permitted for national banks. A bank may, however,
engage in an otherwise prohibited activity if it meets its minimum capital
requirements and the FDIC determines that the activity does not present a
significant risk to the deposit insurance funds.
As a state chartered banking institution in the State of Florida, the Bank
is empowered by statute, subject to the limitations contained in those
statutes, to take savings and time deposits and pay interest on them, to accept
checking accounts, to make loans on residential and other real estate, to make
consumer and commercial loans, to invest, with certain limitations, in equity
securities and in debt obligations of banks and corporations and to provide
various other banking services on behalf of the Bank's customers.
The FRB requires all depository institutions to maintain reserves against
their transaction accounts (primarily checking accounts) and non-personal time
deposits. The balances maintained to meet the reserve requirements imposed by
the FRB may be used to satisfy liquidity requirements.
Institutions are authorized to borrow from the Federal Reserve Bank
"discount window," but FRB regulations require institutions to exhaust other
reasonable alternative sources of funds, including Federal Home Loan Bank
("FHLB") advances, before borrowing from the Federal Reserve Bank.
FEDERAL HOME LOAN BANK
The Bank is member of the FHLB system, which consists of twelve regional
FHLBs, each subject to supervision and regulation by the Federal Housing
Finance Board ("FHFB"), an agency created by FIRREA. The FHLB provides a
central credit facility primarily for member thrift institutions as well as
other entities involved in home mortgage lending. The Bank, as a member of the
Atlanta-FHLB, is required to purchase and hold shares of capital stock in that
FHLB in an amount at least equal to the greater of (i) 1% of the aggregate
principal amount of its unpaid mortgage loans, home purchase contracts and
similar obligations at the beginning of each year; (ii) 0.3% of its assets or
(iii) 5% (or such greater fraction as established by the FHLB) of its advances
from the FHLB. The Bank is in compliance with this requirement.
15
<PAGE>
Each FHLB bank serves as a reserve or central bank for its home financing
members within its assigned region. It is funded primarily from proceeds
derived from the sale of consolidated obligations of the FHLBs. It makes loans
to members (i.e., advances) in accordance with policies and procedures,
including collateral requirements, established by the respective boards of
directors of the FHLBs. These policies and procedures are subject to the
regulation and oversight of the FHFB. All long-term advances are required to
provide funds for residential home financing. The FHFB has also established
standards of community or investment service that members must meet to maintain
access to such long-term advances.
DIVIDENDS
The Bank is subject to legal limitations on the frequency and amount of
dividends that can be paid to the Company. The FRB may restrict the ability of
a bank to pay dividends if such payments would constitute an unsafe or unsound
banking practice. These regulations and restrictions may limit the Company's
ability to obtain funds from the Bank for its cash needs, including funds for
acquisitions and the payment of dividends, interest and operating expenses.
In addition, Florida law also places certain restrictions on the
declaration of dividends from state chartered banks to their holding companies.
Pursuant to Section 658.37 of the Florida Banking Code, the board of directors
of state chartered banks, after charging off bad debts, depreciation and other
worthless assets, if any, and making provisions for reasonably anticipated
future losses on loans and other assets, may quarterly, semi-annually or
annually declare a dividend of up to the aggregate net profits of that period
combined with the bank's retained net profits for the preceding two years and,
with the approval of the FDBF, declare a dividend from retained net profits
which accrued prior to the preceding two years. Before declaring such
dividends, 20% of the net profits for the preceding period as is covered by the
dividend must be transferred to the surplus fund of the bank until this fund
becomes equal to the amount of the bank's common stock then issued and
outstanding. A state chartered bank may not declare any dividend if (i) its net
income from the current year combined with the retained net income for the
preceding two years is a loss or (ii) the payment of such dividend would cause
the capital account of the bank to fall below the minimum amount required by
law, regulation, order or any written agreement with the FDBF or a federal
regulatory agency.
INSURANCE OF ACCOUNTS AND OTHER ASSESSMENTS
The majority of the Bank's deposit accounts are insured by the Savings
Association Insurance Fund ("SAIF") and the remaining deposit accounts of the
Bank are insured by the Bank Insurance Fund ("BIF"). Both SAIF and BIF are
insurance funds of the FDIC which insure the respective deposit accounts of the
Bank to a maximum of $100,000 for each insured depositor.
Under federal law, BIF and SAIF are each statutorily required to be
recapitalized to a 1.25% of insured reserve deposits ratio. In view of the
BIF's achieving the 1.25% ratio during 1995, the FDIC reduced the assessments
for most banks by adopting a new assessment rate schedule of 4 to 31 basis
points for BIF deposits. The FDIC further reduced the BIF assessment schedule
by an additional four basis points for the 1996 calendar year so that most BIF
members paid only the statutory minimum semiannual assessment of $1,000. During
this same period, the FDIC retained the existing assessment rate schedule
applicable to SAIF deposits of 23 cents to 31 cents per $100 of domestic
deposits, depending on the institution's risk classification.
On September 30, 1996, the Deposit Insurance Funds Act of 1996 ("DIFA")
was enacted and signed into law. DIFA was intended to reduce the amount of
semi-annual FDIC insurance premiums for savings association deposits acquired
by banks to the same levels assessed for deposits insured by BIF. To accomplish
this reduction, DIFA provided for a special one-time assessment imposed on
deposits insured by SAIF to recapitalize SAIF and bring it up to statutory
required levels. This one-time assessment accrued in the third quarter of 1996.
As a result, since early 1997, both BIF and SAIF deposits have been assessed at
the same rate of 0 to 27 basis points depending on risk classification.
16
<PAGE>
Effective January 1, 1997, DIFA also separated from the SAIF assessments
the Financing Corporation ("FICO") assessments which service the interest on
its bond obligations. According to the FDIC's risk-related assessment rate
schedules, the amount assessed on individual institutions by the FICO will be
in addition to the amount paid for deposit insurance. By law, the FICO rate on
BIF-assessable deposits must be one-fifth the rate on SAIF-assessable deposits
until the insurance funds are merged as specified in DIFA or until January 1,
2000, whichever occurs first.
The federal banking agencies require an annual audit by independent
accountants of the Bank and make their own periodic examinations of the Bank.
They may revalue assets of an insured institution based upon appraisals, and
require establishment of specific reserves in amounts equal to the difference
between such revaluation and the book value of the assets, as well as require
specific charge-offs relating to such assets. The federal banking agencies may
prohibit any FDIC-insured institution from engaging in any activity they
determine by regulation or order poses a serious threat to the insurance funds.
TRANSACTIONS WITH AFFILIATES
The authority of the Bank to engage in transactions with related parties
or "affiliates" or to make loans to insiders is limited by certain provisions
of law and regulations. Commercial banks, such as the Bank, are prohibited from
making extensions of credit to any affiliate that engages in an activity not
permissible under the regulations of the FRB for a bank holding company.
Pursuant to Sections 23A and 23B of the Federal Reserve Act ("FRA"), member
banks are subject to restrictions regarding transactions with affiliates
("Covered Transactions").
With respect to any Covered Transaction, the term "affiliate" includes any
company that controls or is controlled by a company that controls the Bank, a
bank or savings association subsidiary of the Bank, any persons who own,
control or vote more than 25% of any class of stock of the Bank or the Company
and any persons who the Board of Directors determines exercises a controlling
influence over the management of the Bank or the Company. The term "affiliate"
also includes any company controlled by controlling stockholders of the Bank or
the Company and any company sponsored and advised on a contractual basis by the
Bank or any subsidiary or affiliate of the Bank. Such transactions between the
Bank and its respective affiliates are subject to certain requirements and
limitations, including limitations on the amounts of such Covered Transactions
that may be undertaken with any one affiliate and with all affiliates in the
aggregate. The federal banking agencies may further restrict such transactions
with affiliates in the interest of safety and soundness.
Section 23A of the FRA limits Covered Transactions with any one affiliate
to 10% of an institution's capital stock and surplus and limits aggregate
affiliate transactions to 20% of the Bank's capital stock and surplus. Sections
23A and 23B of the FRA provide that a loan transaction with an affiliate
generally must be collateralized (but may not be collateralized by a low
quality asset or securities issued by an affiliate) and that all Covered
Transactions, as well as the sale of assets, the payment of money or the
provision of services by the Bank to an affiliate, must be on terms and
conditions that are substantially the same, or at least as favorable to the
Bank, as those prevailing for comparable nonaffiliated transactions. A Covered
Transaction generally is defined as a loan to an affiliate, the purchase of
securities issued by an affiliate, the purchase of assets from an affiliate,
the acceptance of securities issued by an affiliate as collateral for a loan,
or the issuance of a guarantee, acceptance or letter of credit on behalf of an
affiliate. In addition, the Bank generally may not purchase securities issued
or underwritten by an affiliate.
Loans to executive officers, directors or to any person who directly or
indirectly, or acting through or in concert with one or more persons, owns,
controls or has the power to vote more than 10% of any class of voting
securities of a bank ("Principal Shareholders") and their related interests
(i.e., any company controlled by such executive officer, director, or Principal
Shareholders), or to any political or campaign committee the funds or services
of which will benefit such executive officers, directors, or Principal
Shareholders or which is controlled by such executive officers, directors or
Principal Shareholders, are subject to Sections 22(g) and 22(h) of the FRA and
the regulations promulgated thereunder (Regulation O).
17
<PAGE>
Among other things, these loans must be made on terms substantially the
same as those prevailing on transactions made to unaffiliated individuals and
certain extensions of credit to such persons must first be approved in advance
by a disinterested majority of the entire board of directors. Section 22(h) of
the FRA prohibits loans to any such individuals where the aggregate amount
exceeds an amount equal to 15% of an institution's unimpaired capital and
surplus plus an additional 10% of unimpaired capital and surplus in the case of
loans that are fully secured by readily marketable collateral, or when the
aggregate amount on all such extensions of credit outstanding to all such
persons would exceed the Bank's unimpaired capital and unimpaired surplus.
Section 22(g) identifies limited circumstances in which the Bank is permitted
to extend credit to executive officers.
COMMUNITY REINVESTMENT ACT
The Community Reinvestment Act of 1977 ("CRA") requires a financial
institution to help meet the credit needs of its entire community, including
low-income and moderate-income areas. The regulations adopt a performance-based
evaluation system which bases CRA ratings on an institution's actual lending,
service and investment performance, rather than the extent to which the
institution conducts needs assessments, documents community outreach or
complies with other procedural requirements. Federal banking agencies may take
CRA compliance into account when regulating and supervising bank and holding
company activities; for example, CRA performance may be considered in approving
proposed bank acquisitions.
CAPITAL REGULATIONS
The FRB has adopted capital adequacy guidelines for bank holding companies
and their subsidiary state-chartered banks that are members of the Federal
Reserve System. Bank holding companies and their subsidiary state-chartered
member banks must comply with the FRB's risk-based capital guidelines. The
risk-based capital guidelines are designed to make regulatory capital
requirements more sensitive to differences in risk profiles among banks and
bank holding companies, to account for off-balance sheet exposure, to minimize
disincentives for holding liquid assets and to achieve greater consistency in
evaluating the capital adequacy of major banks throughout the world. Under
these guidelines assets and off-balance sheet items are assigned to broad risk
categories each with designated weights. The resulting capital ratios represent
capital as a percentage of total risk-weighted assets and off-balance sheet
items.
The current guidelines require all bank holding companies and
federally-regulated banks to maintain a minimum risk-based total capital ratio
equal to 8%, of which at least 4% must be Tier 1 Capital. Tier 1 Capital, which
includes common stockholders' equity, noncumulative perpetual preferred stock,
and a limited amount of cumulative perpetual preferred stock, less certain
goodwill items and other intangible assets, is required to equal at least 4% of
risk-weighted assets. The remainder ("Tier 2 Capital") may consist of (i) an
allowance for loan losses of up to 1.25% of risk-weighted assets, (ii) excess
of qualifying perpetual preferred stock, (iii) hybrid capital instruments, (iv)
perpetual debt, (v) mandatory convertible securities, and (vi) subordinated
debt and intermediate-term preferred stock up to 50% of Tier 1 Capital. Total
capital is the sum of Tier 1 and Tier 2 Capital less reciprocal holdings of
other banking organizations' capital instruments, investments in unconsolidated
subsidiaries and any other deductions as determined by the FRB (determined on a
case by case basis or as a matter of policy after formal rule making).
In computing total risk-weighted assets, bank and bank holding company
assets are given risk-weights of 0%, 20%, 50% and 100%. In addition, certain
off-balance sheet items are given similar credit conversion factors to convert
them to asset equivalent amounts to which an appropriate risk-weight will
apply. Most loans will be assigned to the 100% risk category, except for
performing first mortgage loans fully secured by residential property, which
carry a 50% risk rating. Most investment securities (including, primarily,
general obligation claims on states or other political subdivisions of the
United States) will be assigned to the 20% category, except for municipal or
state revenue bonds, which have a 50% risk-weight, and direct obligations of
the U.S. Treasury or obligations backed by the
18
<PAGE>
full faith and credit of the U.S. Government, which have a 0% risk-weight. In
covering off-balance sheet items, direct credit substitutes, including general
guarantees and standby letters of credit backing financial obligations, are
given a 100% conversion factor. Transaction-related contingencies such as bid
bonds, standby letters of credit backing non-financial obligations, and undrawn
commitments (including commercial credit lines with an initial maturity of more
than one year) have a 50% conversion factor. Short-term commercial letters of
credit are converted at 20% and certain short-term unconditionally cancelable
commitments have a 0% factor.
The federal bank regulatory authorities have also adopted regulations
which supplement the risk-based guideline. These regulations generally require
banks and bank holding companies to maintain a minimum level of Tier 1 Capital
to total assets less goodwill of 4% (the "leverage ratio"). The FRB permits a
bank to maintain a minimum 3% leverage ratio under certain circumstances, as
long as the bank is not experiencing or anticipating significant growth.
Banking organizations experiencing or anticipating significant growth, as
well as those organizations which do not satisfy the criteria described above,
will be required to maintain a minimum leverage ratio ranging generally from 4%
to 5%. The FRB also continues to consider a "tangible Tier 1 leverage ratio" in
evaluating proposals for expansion or new activities. The tangible Tier 1
leverage ratio is the ratio of a banking organization's Tier 1 Capital, less
deductions for intangibles otherwise includable in Tier 1 Capital, to total
tangible assets.
Federal law and regulations establish a capital-based regulatory scheme
designed to promote early intervention for troubled banks and require the FDIC
to choose the least expensive resolution of bank failures. The capital-based
regulatory framework contains five categories of compliance with regulatory
capital requirements, including "well capitalized," "adequately capitalized,"
"undercapitalized," "significantly undercapitalized," and "critically
undercapitalized." To qualify as a "well capitalized" institution, a bank must
have a leverage ratio of no less than 5%, a Tier 1 risk-based ratio of no less
than 6%, and a total risk-based capital ratio of no less than 10%, and the bank
must not be under any order or directive from the appropriate regulatory agency
to meet and maintain a specific capital level.
Under the regulations, the applicable agency can treat an institution as
if it were in the next lower category if the agency determines (after notice
and an opportunity for hearing) that the institution is in an unsafe or unsound
condition or is engaging in an unsafe or unsound practice. The degree of
regulatory scrutiny of a financial institution will increase, and the
permissible activities of the institution will decrease, as it moves downward
through the capital categories. Institutions that fall into one of the three
undercapitalized categories may be required to (i) submit a capital restoration
plan; (ii) raise additional capital; (iii) restrict their growth, deposit
interest rates, and other activities; (iv) improve their management; (v)
eliminate management fees; or (vi) divest themselves of all or a part of their
operations. Bank holding companies controlling financial institutions can be
called upon to boost the institutions' capital and to partially guarantee the
institutions' performance under their capital restoration plans.
It should be noted that the minimum ratios referred to above are merely
guidelines and the FRB possesses the discretionary authority to require higher
ratios with respect to bank holding companies and state-member banks.
The Company and the Bank currently exceed the requirements contained in
FRB regulations, policies and directives pertaining to capital adequacy, and
management of the Company and the Bank are not aware of any violation or
alleged violation of these regulations, policies or directives.
INTERSTATE BANKING AND BRANCHING
The BHCA was amended in September 1994 by the Riegle-Neal Interstate
Banking and Branching Efficiency Act of 1994 (the "Interstate Banking Act").
The Interstate Banking Act provides
19
<PAGE>
that, effective September 29, 1995, adequately capitalized and managed bank
holding companies were permitted to acquire banks in any state. State laws
prohibiting interstate banking or discriminating against out-of-state banks are
preempted as of the effective date. States were not permitted to enact laws
opting out of this provision; however, states were allowed to adopt a minimum
age restriction requiring that target banks located within the state be in
existence for a period of years, up to a maximum of five years, before such
bank may be subject to the Interstate Banking Act. The Interstate Banking Act
establishes deposit caps which prohibit acquisitions that result in the
acquiring company controlling 30 percent or more of the deposits of insured
banks and thrift institutions held in the state in which the target maintains a
branch or 10 percent or more of the deposits nationwide. States have the
authority to waive the 30 percent deposit cap. State-level deposit caps are not
preempted as long as they do not discriminate against out-of-state companies,
and the federal deposit caps apply only to initial entry acquisitions.
The Interstate Banking Act also provides that as of June 1, 1997,
adequately capitalized and managed banks are able to engage in interstate
branching by merging with banks in different states. States were permitted to
enact legislation authorizing interstate mergers earlier than June 1, 1997, or,
unlike the interstate banking provision discussed above, states were permitted
to opt out of the application of the interstate merger provision by enacting
specific legislation before June 1, 1997.
Florida responded to the enactment of the Interstate Banking Act by
enacting the Florida Interstate Branching Act (the "Florida Branching Act")
which became effective on May 31, 1997. The purpose of the Florida Branching
Act was to permit interstate branching, effective June 1, 1997, through merger
transactions under the Interstate Banking Act. Under the Florida Branching Act,
with the prior approval of the FDBF, a Florida bank may establish, maintain and
operate one or more branches in a state other than the State of Florida
pursuant to a merger transaction in which the Florida bank is the resulting
bank. In addition, the Florida Branching Act provides that one or more Florida
banks may enter into a merger transaction with one or more out-of-state banks,
and an out-of-state bank resulting from such transaction may maintain and
operate the branches of the Florida bank that participated in such merger. An
out-of-state bank, however, is not permitted to acquire a Florida bank in a
merger transaction unless the Florida bank has been in existence and
continuously operated for more than three years.
YEAR 2000 GUIDELINES
The Federal Financial Institutions Examination Counsel ("FFIEC"), which is
composed of federal bank regulatory authorities including the FDIC and the FRB,
has issued supervisory guidelines on how banks must achieve Year 2000
compliance. Although federal bank regulatory authorities have not issued
official regulations regarding the Year 2000 problem, if a bank fails to meet
the FFIEC's Year 2000 guidelines, regulators may require the bank to submit an
acceptable compliance plan. If an insured member bank consistently fails to
satisfy the Year 2000 guidelines, either the FRB or FDIC may take corrective
action based on their authority to maintain the safety and soundness of bank
activities. The Company and the Bank have taken steps to comply with the
FFIEC's Year 2000 guidelines. See "Item 7 --Year 2000 Matters."
FUTURE LEGISLATIVE DEVELOPMENTS
Because of concerns relating to competitiveness and the safety and
soundness of the industry, Congress is considering a number of wide-ranging
proposals for altering the structure, regulation and competitive relationships
of the nation's financial institutions. Among such bills are proposals to
prohibit banks and bank holding companies from conducting certain types of
activities, to subject banks to increased disclosure and reporting
requirements, to alter the statutory separation of commercial and investment
banking and to further expand the powers of banks, bank holding companies and
competitors of banks. It cannot be predicted whether or in what form any of
these proposals will be adopted or the extent to which the business of the
Company may be affected thereby.
20
<PAGE>
EFFECT OF GOVERNMENTAL MONETARY POLICIES
The commercial banking business in which the Bank engages is affected not
only by general economic conditions, but also by the monetary policies of the
FRB. Changes in the discount rate on member bank borrowing, availability of
borrowing at the "discount window," open market operations, the imposition of
changes in reserve requirements against member banks' deposits and assets of
foreign branches and the imposition of and changes in reserve requirements
against certain borrowings by banks and their affiliates are some of the
instruments of monetary policy available to the FRB. These monetary policies
are used in varying combinations to influence overall growth and distributions
of bank loans, investments and deposits, and this use may affect interest rates
charged on loans or paid on deposits. The monetary policies of the FRB have had
a significant effect on the operating results of commercial banks and are
expected to do so in the future. The monetary policies of the FRB are
influenced by various factors, including inflation, unemployment, short-term
and long-term changes in the international trade balance and in the fiscal
policies of the U.S. Government. Future monetary policies and the effect of
such policies on the future business and earnings of the Bank cannot be
predicted.
ITEM 2. PROPERTIES
The Company and the Bank are located and conduct their business at the
Company's executive office located at 450 South Australian Avenue, West Palm
Beach, Florida, 33401. In addition, the Company or the Bank maintain the
following properties:
<TABLE>
<CAPTION>
LOCATION DATE LEASED OR ACQUIRED LEASED OR OWNED
- ------------------------------- ------------------------- ----------------
<S> <C> <C>
CONGRESS 1993 Owned
4440 Congress Avenue
West Palm Beach, FL 33407-4298
JUPITER 1997 Owned
900 West Indiantown Road
Jupiter, FL 33458
PROMENADE 1995 Owned
9860 Alternate A1A
Palm Beach Gardens, FL 33410
VILLAGE 1994 Leased
603 Village Boulevard
West Palm Beach, FL 33409
CENTURY 1995 Leased
4871 Okeechobee Boulevard
West Palm Beach, FL 33409
PHILLIPS POINT 1996 Leased
777 South Flagler Drive
West Palm Beach, FL 33401
LAKE WORTH 1997 Leased
7300 Lake Worth Road
Lake Worth, FL 33467
BOYNTON 1996 Leased
1301 North Congress Avenue
Boynton Beach, FL 33426
DELRAY 1995 Leased
5061 West Atlantic Avenue
Delray Beach, FL 33484
BOCA 1996 Leased
7601 North Federal Highway
Boca Raton, FL 33487
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
LOCATION DATE LEASED OR ACQUIRED LEASED OR OWNED
- ------------------------------------- ------------------------- ----------------
<S> <C> <C>
SAWGRASS 1994 Owned
12396 West Sunrise Boulevard
Plantation, FL 33323
DAVIE 1989 Leased
4991 South State Road #7
Davie, FL 33314
WESTON 1993 Owned
2630 Weston Road
Fort Lauderdale, FL 33330
DANIA 1988 Leased
5991 Ravenswood Road
Fort Lauderdale, FL 33312
HOLLYWOOD 1989 Owned
1220 South State Road #7
Hollywood, FL 33023
HALLANDALE 1986 Leased
1000 East Hallandale Beach Boulevard
Hallandale, FL 33009
SILVER LAKES 1995 Owned
18395 Pines Boulevard
Pembroke Pines, FL 33029
HOMESTEAD 1993 Owned
600 North Homestead Boulevard
Homestead, FL 33030
NORTH MIAMI BEACH 1962 Owned
801N.E. 167th Street
North Miami Beach, FL 33162
MIAMI LAKES 1979 Leased
15700 N.W. 67th Avenue
Miami Lakes, FL 33014
HIALEAH 1981 Leased
1651 W. 37th Street
Hialeah, FL 33012
AVENTURA 1989 Leased
20801 Biscayne Boulevard
North Miami Beach, FL 33180
BROWARD BOULEVARD 1989 Leased
1401 E. Broward Boulevard
Fort Lauderdale, FL 33301
CAL CLUB 1983 Leased
850 Ives Dairy Road
North Miami Beach, FL 33179
BAY POINT 1983 Leased
4770 Biscayne Boulevard
Miami, FL 33137
CORAL SPRINGS 1995 Leased
2855 University Drive
Coral Springs, FL 33065
LINTON BOULEVARD 1986 Leased
900 West Linton Boulevard
Delray Beach, FL 33444
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
LOCATION DATE LEASED OR ACQUIRED LEASED OR OWNED
- ----------------------------- ------------------------- ----------------
<S> <C> <C>
SUNRISE 1981 Leased
8120 West Oakland Park Blvd.
Sunrise, FL 33321
CAMINO REAL 1997 Leased
7400 West Camino Real
Boca Raton, FL 33433
PEMBROKE PINES 1997 Leased
12405 Taft Street
Pembroke Pines, FL 33028
CORAL WAY 1980 Leased
7171 Southwest 24th Street
Miami, FL 33155
PEMBROKE PINES EAST 1998 Owned
8411 Pines Boulevard
Pembroke Pines, FL 33024
ARVIDA 1998 Owned
5131 Congress Avenue
Boca Raton, FL 33487
NORTH PALM BEACH 1998 Leased
701 U.S. Highway 1
North Palm Beach, FL 33408
BAYVIEW 1998 Leased
2929 E. Commercial Boulevard
Ft. Lauderdale, FL 33308
PRESIDENTIAL CIRCLE 1985 Owned
3850 Hollywood Boulevard
Hollywood, FL 33021
AUSTRALIAN AVENUE 1997 Owned
450 South Australian Avenue
West Palm Beach, FL 33401
SOUTHERN BOULEVARD 1959 Owned
301 Southern Boulevard
West Palm Beach, FL 33405
WESTWARD 1960 Owned
2701 Okeechobee Boulevard
West Palm Beach, FL 33409
LAKE PARK 1962 Owned
500 Federal Highway
Lake Park, FL 33403
DELRAY EAST 1971 Owned
95 N.E. 5th Avenue
Delray Beach, FL 33483
BOCA EAST 1973 Owned
2400 Federal Highway
Boca Raton, FL 33431
LUCERNE AVENUE 1974 Owned
531 Lucerne Avenue
Lake Worth, FL 33460
GALLERIA 1980 Leased
165 Bradley Place
Palm Beach, FL 33480
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
LOCATION DATE LEASED OR ACQUIRED LEASED OR OWNED
- ---------------------------------- ------------------------- ----------------
<S> <C> <C>
GLADES ROAD 1981 Owned
9033 Glades Road
Boca Raton, FL 33434
STUART 1982 Leased
2285 S.E. Federal Highway
Stuart, FL 33494
GOLDEN LAKES 1984 Owned
1950 Golden Lakes Boulevard
West Palm Beach, FL 33411
BLUFF SQUARE SHOPPES 1986 Leased
4050 U.S. Highway One
Jupiter, FL 33477
GARDENS MALL 1988 Leased
3101 PGA Boulevard
Palm Beach Gardens, FL 33477
PALM SPRINGS 1993 Owned
2950 10th Avenue North
Lake Worth, FL 33461
ABERDEEN SQUARE 1994 Leased
4956-22/23 LeChalet Boulevard
Boynton Beach, FL 33436
BOCA POLO 1994 Leased
5030-F8 Champion Boulevard
Boca Raton, FL 33496
BOYNTON LAKES 1994 Leased
4770 North Congress Avenue
Lantana, FL 33462
PINEWOOD SQUARE 1994 Leased
6338-52/53 Lantana Road
Lake Worth, FL 33461
ROYAL PALM BEACH 1994 Leased
1135-A Royal Palm Beach Boulevard
Royal Palm Beach, FL 33411
STUART SQUARE 1994 Leased
2160 S.E. Federal Highway
Stuart, FL 34994
WELLINGTON 1994 Leased
13841-A Wellington Trace
West Palm Beach, FL 33414
CORAL CREEK 1995 Leased
6572 North State Road 7, Bay #9
Coconut Creek, FL 33073
CLEMATIS 1995 Leased
301 Clematis Street
West Palm Beach, FL 33401
FT. MYERS SOUTH 1995 Leased
16970-A San Carlos Boulevard
Ft. Myers, FL 33908
LAKE WORTH ALBERTSONS 1995 Leased
4481-A Lake Worth Road
Lake Worth, FL 33461
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
LOCATION DATE LEASED OR ACQUIRED LEASED OR OWNED
- -------------------------------- ------------------------- ----------------
<S> <C> <C>
PEMBROKE ISLE PLAZA 1995 Leased
17171-A Pines Boulevard
Pembroke Pines, FL 33027
OAKLAND PARK 1995 Leased
9919-A West Oakland Park
Sunrise, FL 33351
WESTCHESTER 1995 Leased
7807-A S.W. 40th Street
Miami, FL 33165
BONITA SPRINGS 1996 Leased
26831-A South Tamiami Trail
Bonita Springs, FL 34134
BOYNTON BEACH MARKET 1996 Leased
9839-A South Military Trail
Boynton Beach, FL 33436
UNIVERSITY 1996 Leased
2201-A University Drive
Coral Springs, FL 33065
KENDALL LAKES 1996 Leased
14655-A S.W. 56th Street
Miami, FL 33175
LAKEVIEW CENTER 1996 Leased
1430 Coral Ridge Drive, Bay A2
Coral Springs, FL 33071
MISSION BAY 1996 Leased
20409-A State Road 7
Boca Raton, FL 33434
TAMARAC 1996 Leased
7100-A North University Drive
Tamarac, FL 33319
TURTLE RUN 1996 Leased
6355-A Sample Road
Coral Springs, FL 33067
CAPE CORAL 1997 Leased
127-A Cape Coral Parkway
Cape Coral, FL 33914
DEERFIELD BEACH 1997 Leased
3701-A West Hillsboro Boulevard
Deerfield Beach, FL 33442
DELRAY TOWN CENTER 1997 Leased
4801-A Linton Boulevard
Delray Beach, FL 33445
FT. MYERS CENTRAL 1997 Leased
13401-A Summerlin Road
Ft. Myers, FL 33907
JONATHAN'S LANDING 1997 Leased
17400-A Alternate A1A
Jupiter, FL 33477
PEMBROKE PINES ALBERTSONS 1997 Leased
8030-A Pines Boulevard
Pembroke Pines, FL 33024
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
LOCATION DATE LEASED OR ACQUIRED LEASED OR OWNED
- ------------------------------------- ------------------------- ----------------
<S> <C> <C>
RIVERWALK 1997 Leased
7477 Riverwalk Circle, Suite 215
West Palm Beach, FL 33411
WESTVIEW 1997 Leased
9545-A Westview Drive
Coral Springs, FL 33076
COOPER CITY 1998 Leased
10018-A Griffin Road
Cooper City, FL 33328
WEST PALM BEACH 1997 Leased
1901-A Military Trail
West Palm Beach, FL 33409
PORT ST. LUCIE 1998 Leased
10105-A U.S. Highway One
Port St. Lucie, FL 34952
NEWBERRY 1906 Owned
25365 W. Newberry Road
Newberry, FL 32669
OCALA 1997 Leased
1410 N.E. 8th Avenue
Ocala, FL 34479
BUMBY 1983 Owned
400 North Bumby Avenue
Orlando, FL 32803
HARBOUR ISLAND 1985 Leased
One Harbour Place
777 South Harbour Island Blvd.
Tampa, FL 33602
GAINESVILLE 1998 Leased
2323 N.W. 13th Street
Gainesville, FL 32609
LOAN ORIGINATION OFFICES
10100 West Sample Road 1996 Leased
Coral Springs, FL 33065
CORPORATE OFFICE BUILDINGS
400 and 450 South Australian Avenue 1998 Owned
West Palm Beach, FL 33401
4400 Congress Avenue 1993 Owned
West Palm Beach, FL 33407
STORAGE WAREHOUSES
2206 Mercer Avenue 1984 Owned
West Palm Beach, FL 33401
ANTICIPATED BRANCH CLOSINGS
280 North Congress Avenue 1973 Leased
Boynon Beach, FL 33426
4920 West Atlantic Avenue 1981 Leased
Delray Beach, FL 33445
7050-29 West Palmetto Park Road 1995 Leased
Boca Raton, FL 33433
3979 Jog Road 1995 Leased
Lake Worth, FL 33467
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
LOCATION DATE LEASED OR ACQUIRED LEASED OR OWNED
- --------------------------- ------------------------- ----------------
<S> <C> <C>
5405 Okeechobee Boulevard 1995 Leased
West Palm Beach, FL 33417
3495 Hiatus Road 1996 Leased
Sunrise, FL 33351
</TABLE>
Net book value for office buildings and land was approximately $33.2
million at December 31, 1998.
ITEM 3. LEGAL PROCEEDINGS
Neither the Company nor its subsidiaries are involved in any pending legal
proceeding other than routine legal matters occurring in the ordinary course of
business which in the aggregate involves amounts which are believed by
management to be immaterial to the consolidated financial condition or results
of operations of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Incorporated by reference to Item 4 of the Company's Report on Form 10-Q
for the quarter ended September 30, 1998.
27
<PAGE>
PART II
ITEM 5. MARKET FOR REPUBLIC SECURITY FINANCIAL CORPORATION'S COMMON STOCK AND
RELATED SHARE HOLDER MATTERS
MARKET PRICE AND DIVIDENDS
The Common Stock of the Company, par value $.01 per share, is traded on
the NASDAQ National Market under the symbol RSFC. The table sets forth the high
and low bid prices for the common stock for the period indicated as reported by
NASDAQ.
BID PRICE
<TABLE>
<CAPTION>
YEAR ENDED
---------------------------------------------
DECEMBER 31, DECEMBER 31,
1998 1997
--------------------- ---------------------
HIGH LOW HIGH LOW
---------- -------- ---------- --------
<S> <C> <C> <C> <C>
Quarter ended March 31 ............. $11 7/16 $ 8 1/4 $ 7 3/4 $5 7/8
Quarter ended June 30 .............. $13 13/16 $10 5/8 $ 9 1/2 $6 7/8
Quarter ended September 30 ......... $11 1/2 $ 7 1/2 $11 7/16 $8 1/8
Quarter ended December 31 .......... $12 5/16 $ 6 1/2 $10 1/2 $8 3/8
</TABLE>
Currently the Company has thirty market makers in its common stock:
<TABLE>
<S> <C>
Advest, Inc. Allen C. Ewing & Co.
Baird, Patrick & Co, Inc. Barron Chase Securities
Bear, Stearns & Co., Inc. Dean Witter Reynolds, Inc.
F. J. Morrissey & Co., Inc. Fahnestock & Co., Inc.
Fidelity Capital Markets First Colonial Securities
Gruntal & Co., Inc. Herzog, Heine, Geduld, Inc.
JWGenesis Capital Markets JWGenesis Clearing Corp.
Janney Montgomery Scott, Inc. Keefe, Bruyette & Woods, Inc.
Knight Securites, L.P. Mayer & Schweitzer, Inc.
Nash Weiss/Division of ShatKin Inv. Raymond James & Associates
Robert W. Baird & Co., Inc. Ryan Beck & Co., Inc.
SBC Warburg Salomon Smith Barney Inc.
Sandler O'Neill & Partners, L.P. Sherwood Securities Corp.
Southeast Research Partners Spear, Leeds & Kellogg
Sterne, Agee & Leach, Inc. William R. Hough & Co.
</TABLE>
As of March 16, 1999, there were 50,529,765 common shares issued and
outstanding held by approximately 2,944 shareholders of record, not including
the number of persons or entities whose stock is held in nominee or "street"
name through various brokerage firms or banks.
The following table sets forth cash dividends paid:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-----------------------
QUARTER ENDED 1998 1997
- ---------------------------- ---------- ----------
<S> <C> <C>
March 31 ............. $ 0.05 $ 0.04
June 30 .............. $ 0.06 $ 0.05
September 30 ......... $ 0.06 $ 0.05
December 31 .......... $ 0.06 $ 0.05
</TABLE>
Future payment of dividends is subject to determination and declaration by
the Board of Directors. See Note 11 to the audited consolidated financial
statements for discussion of restrictions on dividend payments.
28
<PAGE>
RECENT SALES OF UNREGISTERED SECURITIES
UNIFIRST
On July 2, 1998, in connection with the Agreement and Plan of Merger,
dated as of March 26, 1998, by and among the Company, Republic Security Bank
and Unifirst Federal Savings Bank ("Unifirst"), the Company issued 1,207,132
shares of its common stock, par value $0.01 per share ("RSFC Common Stock") in
exchange for the 1,224,382 shares of Unifirst common stock, par value $5.00 per
share outstanding on July 2, 1998 (the "Unifirst Merger"). The Company effected
the Unifirst Merger in reliance on the exemption from registration provided
under Section 3(a)(10) under the Securities Act of 1933, as amended (the
"Securities Act"). On June 10, 1998, the State of Florida, Department of
Banking and Finance, Division of Banking (the "Department") held a public
hearing on the approval of the Unifirst Merger during which the Department
reviewed the Unifirst Merger based on the following criteria: (1) the resulting
bank meets all the capital requirements of state law as to the formation of a
new state bank; (2) the capital structure of the resulting bank, including
surplus, is adequate; (3) the valuation is fair; and (4) the merger is not
contrary to public interest. On June 24, 1998, the Department issued its Report
on Public Hearing (the "June 24, 1998 Report") in which the Department stated
that "the terms and conditions of the merger are fair, the merger valuation for
each shareholder is fair, the merger is not contrary to the public's interest
and the resulting bank meets all the capital requirements of state law as to
the formation of a new state bank and the capital structure of the resulting
bank, including surplus, is adequate." On June 26, 1998, the Department issued
a Final Order confirming the June 24, 1998 Report and approving the Unifirst
Merger.
NORTHSIDE
On February 26, 1999, in connection with the Agreement and Plan of Merger,
dated as of September 11, 1998, by and among the Company, Republic Security
Bank and Northside Bank of Tampa ("Northside"), the Company issued 2,467,956
shares of RSFC Common Stock in exchange for the 633,754 shares of Northside
common stock, par value $5.00 per share, outstanding on February 26, 1999 (the
"Northside Merger". The Company effected the Northside Merger in reliance on
the exemption from registration provided under Section 3(a)(10) under the
Securities Act. Beginning on February 8, 1999 and concluding on February 9,
1999, the Department held a public hearing on the approval of the Northside
Merger during which the Department reviewed the Northside Merger based on the
following criteria: (1) the resulting bank meets all the capital requirements
of state law as to the formation of a new state bank; (2) the capital structure
of the resulting bank, including surplus, is adequate; (3) the valuation is
fair; and (4) the merger is not contrary to public interest. On February 25,
1999, the Department issued its Report on Public Hearing (the "February 25,
1999 Report") in which the Department stated that "the terms and conditions of
the merger are fair to all parties, the merger valuation for each shareholder
is fair to all parties, the merger is not contrary to the public's interest and
the resulting bank meets all the capital requirements of state law as to the
formation of a new state bank and the capital structure of the resulting bank,
including surplus, is adequate." On February 25, 1999, the Department issued a
Final Order confirming the February 25, 1999 Report and approving the Northside
Merger.
29
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
SELECTED CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
YEARS ENDED NINE MONTHS YEAR
DECEMBER 31, ENDED ENDED
----------------------------------------- DECEMBER 31, MARCH 31,
1998(A) 1997(B) 1996(C) 1995 1995
------------- ------------- ------------- -------------- -------------
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
SUMMARY OF OPERATING RESULTS:
Interest income ................................ $ 204,656 $ 194,114 $ 174,871 $ 113,102 $ 117,522
Interest expense ............................... 118,526 104,536 89,884 59,656 55,229
--------- --------- --------- --------- ---------
Net interest income ............................ 86,130 89,578 84,987 53,446 62,293
Provision for loan losses ...................... 22,794 5,048 16,724 798 482
Net interest income after provision
for loan losses .............................. 63,336 84,530 68,263 52,648 61,811
Non-interest income ............................ 25,269 18,440 19,581 8,946 12,470
Operating expenses ............................. 103,306 84,289 76,326 43,709 56,291
--------- --------- --------- --------- ---------
(Loss) income before income taxes
and accounting change ........................ (14,701) 18,681 11,518 17,885 17,990
(Benefit) provision for income taxes ........... (3,042) 7,224 4,122 6,601 6,590
--------- --------- --------- --------- ---------
(Loss) income before accounting change ......... (11,659) 11,457 7,396 11,284 11,400
Change in method of accounting
for income taxes ............................. 460
--------- --------- --------- --------- ---------
Net (loss) income .............................. $ (11,659) $ 11,457 $ 7,396 $ 11,284 $ 11,860
========= ========= ========= ========= =========
PER SHARE DATA:
Basic earnings per common share:
(Loss) income before change in accounting
for income taxes ............................. $ (0.26) $ 0.24 $ 0.15 $ 0.28 $ 0.28
Net (loss) income .............................. $ (0.26) $ 0.24 $ 0.15 $ 0.28 $ 0.29
Diluted earnings per common share:
(Loss) income before change in accounting
for income taxes ............................. $ (0.26) $ 0.23 $ 0.15 $ 0.26 $ 0.27
Net (loss) income .............................. $ (0.26) $ 0.23 $ 0.15 $ 0.26 $ 0.28
Weighted average common shares and
common stock equivalents outstanding:
Basic ......................................... 46,502 44,375 43,521 40,992 40,268
Diluted ....................................... 46,502 45,897 45,536 43,968 42,668
Book value per common share(d) ................. $ 4.38 $ 4.50 $ 4.20 $ 4.11 $ 3.84
Dividends per common share ..................... $ 0.22 $ 0.19 $ 0.12 $ 0.07 $ 0.04
</TABLE>
- ----------------
(a) Includes pretax merger related and one-time expenses of $31.4 million of
which $26.1 million is included in operating expenses and $5.3 million is
included in provision for loan losses.
(b) Includes pretax merger related expenses of $10.6 million of which $9.9
million is included in operating expenses and $0.7 million is included in
provision for loan losses.
(c) Includes pretax litigation settlement and FDIC assessment of $11.7 million
which is included in operating expenses.
(d) Book value per share is calculated by dividing common shareholders' equity
plus the proceeds of the assumed conversion of "in the money" options,
warrants and convertible preferred stock by the number of shares of common
stock outstanding and conversion of all "in the money" options, warrants
and convertible preferred stock.
30
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA (CONTINUED)
<TABLE>
<CAPTION>
YEARS ENDED NINE MONTHS YEAR
DECEMBER 31, ENDED ENDED
------------------------------------------------ DECEMBER 31, MARCH 31,
1998(A) 1997(B) 1996(C) 1995 1995
---------------- --------------- --------------- -------------- ---------------
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
AT PERIOD END:
Total assets .................................$3,007,732 $ 2,899,656 $ 2,486,589 $ 2,091,381 $ 1,985,412
Investments .................................. 729,276 636,126 427,846 439,251 571,796
Loans (e) .................................... 2,001,343 1,900,336 1,695,823 1,454,979 1,249,183
Allowance for loan losses .................... 26,043 13,146 19,515 10,073 10,074
Total deposits ............................... 2,304,855 2,099,281 1,963,833 1,612,521 1,603,717
Borrowed money ............................... 419,512 497,711 260,493 230,872 179,764
Shareholders' equity ......................... 198,402 207,212 200,462 195,798 163,572
Senior debentures ............................ 27,518 33,839
Shares outstanding ........................... 47,370 44,883 43,997 42,788 40,254
AVERAGE BALANCES:
Assets .......................................$2,903,903 $ 2,599,439 $ 2,308,572 $ 2,010,962 $ 1,808,251
Shareholders' equity ......................... 212,741 204,515 206,636 175,172 163,938
Interest-earning assets ...................... 2,698,464 2,419,266 2,166,263 1,906,971 1,706,336
Interest-bearing liabilities ................. 2,354,561 2,119,041 1,871,414 1,643,831 1,444,567
OTHER DATA:
Return on average assets(f) .................. (0.40)% 0.44% 0.32% 0.75% 0.66%
Return on average shareholders
equity(f) .................................. (5.48)% 5.60% 3.58% 8.59% 7.23%
Average shareholders' equity to
average total assets ....................... 7.33% 7.87% 8.95% 8.71% 9.07%
Shareholders' equity to total assets ......... 6.60% 7.15% 8.06% 9.36% 8.24%
Net interest spread .......................... 2.55% 3.09% 3.27% 3.07% 3.06%
Net interest margin .......................... 3.19% 3.70% 3.92% 3.74% 3.65%
Non-performing loans(g) ......................$ 13,376 $ 14,716 $ 22,464 $ 11,455 $ 13,184
Non-performing assets(g) .....................$ 16,639 $ 23,229 $ 34,601 $ 21,605 $ 23,780
Non-performing loans to
total loans ................................ 0.67% 0.77% 1.32% 0.79% 1.06%
Non-performing assets to
total assets ............................... 0.55% 0.80% 1.39% 1.03% 1.20%
Allowance for loan losses to
total loans ................................ 1.30% 0.69% 1.15% 0.69% 0.81%
Net charge-offs to average loans ............. 0.54% 0.65% 0.59% 0.06% 0.01%
Efficiency ratio(h) .......................... 71% 70% 73% 67% 75%
Dividend payout ratio(i) ..................... 48% 51% 36% 24% 13%
Number of full-service offices ............... 94 79 65 52 47
</TABLE>
- ----------------
(e) Net of deferred loan fees, purchased loan discounts and premiums and
undisbursed loans-in-process. Includes loans held for sale.
(f) Includes merger related and one-time expenses of $22.6 million and $6.5
million, net of taxes, for the years ended December 31, 1998 and 1997,
respectively and the effect of the reduction of the allowance for deferred
tax assets of $1.1 million for the year ended December 31, 1997. Excludes
a litigation settlement and FDIC assessment of $7.4 million, net of taxes,
for the year ended December 31, 1996.
(g) Non-performing loans are loans contractually past due 90 days or more
placed on non-accrual. Non-performing assets include non-performing loans,
other real estate owned and repossessed assets.
(h) The efficiency ratio is calculated by dividing non-interest expense by net
interest income plus non-interest income excluding realized securities
gains/losses and non recurring expenses as described in note (f).
(i) Dividend payout ratio is calculated by dividing dividends declared per
share by basic earnings per share. Amount for the years ended December 31,
1998 and 1997 is adjusted to exclude merger related expenses (see note
(f)).
31
<PAGE>
QUARTERLY FINANCIAL DATA
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31, 1998
----------------------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER(A)
------------ ------------ ------------ -------------
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Interest income ............................................. $ 52,397 $ 50,921 $ 50,746 $ 50,592
Interest expense ............................................ 30,002 29,450 29,981 29,093
-------- -------- -------- ---------
Net interest income ......................................... 22,395 21,471 20,765 21,499
Provision for loan losses ................................... 2,913 380 1,448 18,053
-------- -------- -------- ---------
Net interest income after provision for loan losses ......... 19,482 21,091 19,317 3,446
Non-interest income ......................................... 7,451 6,246 4,741 6,831
Operating expense ........................................... 18,274 19,848 21,595 43,589
-------- -------- -------- ---------
Income (loss) before income taxes ........................... 8,659 7,489 2,463 (33,312)
Provision (benefit) for income taxes ........................ 3,283 2,835 1,213 (10,373)
-------- -------- -------- ---------
Net income (loss) ........................................... $ 5,376 $ 4,654 $ 1,250 $ (22,939)
======== ======== ======== =========
PER SHARE DATA:
Basic earnings (loss) per common share ...................... $ 0.12 $ 0.10 $ 0.03 $ (0.49)
Diluted earnings (loss) per common share .................... $ 0.12 $ 0.10 $ 0.03 $ (0.49)
Dividends per common share .................................. $ 0.05 $ 0.06 $ 0.06 $ 0.06
Weighted average common shares and common stock
equivalents outstanding .................................... 46,415 47,719 47,775 48,054
</TABLE>
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31, 1997
--------------------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER(A) QUARTER QUARTER(B)
------------ ------------ ------------ -----------
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Interest income ............................................. $ 45,505 $ 46,563 $ 49,989 $ 52,057
Interest expense ............................................ 24,131 24,407 26,832 29,166
-------- -------- -------- --------
Net interest income ......................................... 21,374 22,156 23,157 22,891
Provision for loan losses ................................... 833 1,373 912 1,930
-------- -------- -------- --------
Net interest income after provision for loan losses ......... 20,541 20,783 22,245 20,961
Non-interest income ......................................... 4,248 4,480 4,625 5,087
Operating expense ........................................... 16,593 22,774 18,859 26,063
-------- -------- -------- --------
Income (loss) before income taxes ........................... 8,196 2,489 8,011 (15)
Provision for income taxes .................................. 2,629 702 2,668 1,225
-------- -------- -------- --------
Net income (loss) ........................................... $ 5,567 $ 1,787 $ 5,343 $ (1,240)
======== ======== ======== ========
PER SHARE DATA:
Basic earnings (loss) per common share ...................... $ 0.12 $ 0.04 $ 0.12 $ (0.03)
Diluted earnings (loss) per common share .................... $ 0.12 $ 0.04 $ 0.11 $ (0.03)
Dividends per common share .................................. $ 0.04 $ 0.05 $ 0.05 $ 0.05
Weighted average common shares and common stock
equivalents outstanding .................................... 45,424 45,667 46,307 46,153
</TABLE>
- ----------------
(a) Includes merger related and one-time expenses of $20.2 million and $2.4
million, net of taxes, for the three months ended December 31, 1998 and
September 30, 1998, respectively.
(b) Includes merger related expenses of $5.4 million and $1.1 million, net of
taxes, for the three months ended December 31, 1997 and June 30, 1997,
respectively.
32
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Statements in this Annual Report on Form 10-K which express the "belief",
"anticipation", or "expectation", as well as other statements which are not
historical fact, are forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995 and involve risks and
uncertainties. These forward-looking statements include, among others,
statements concerning the Bank's future business strategy, anticipated growth,
the effect of interest rate changes on the Company's net interest income, the
effect of the trust and investment initiative on the Company's financial
condition, operations and cash flows, the impact of the Year 2000 on the
Company's financial condition, operations and cash flows and other statements
of belief, anticipation, expectation, future plans and strategies, anticipated
events or trends and similar expressions concerning matters that are not
historical facts.
The Company and the Bank caution that the following important factors
could cause actual results or outcomes to differ materially from those
expressed in any forward-looking statements of the Company or the Bank made by
or on behalf of the Company or the Bank. All forward-looking statements speak
only as of the date on which such statements are made, and the Company and the
Bank undertake no obligation to update any forward-looking statement or
statements to reflect events or circumstances after the date on which such
statement is made or to reflect the occurrence of unanticipated events. New
factors emerge from time to time and it is not possible for management to
predict all of such factors, nor can it assess the impact of each such factor
on the business or the extent to which any factor, or combination of factors,
may cause actual results to differ materially from those contained in any
forward-looking statements. The most significant factors that could cause the
assumptions underlying the forward-looking statements and the actual results of
the Company to differ materially from those expressed in or implied by those
forward-looking statements include, but are not limited to the following:
* adverse general economic conditions and/or adverse economic conditions in
the counties our banking centers are located;
* intense competition for depositors and borrowers from financial
institutions with much greater resource than the Bank;
* fiscal and monetary policies of the U.S. government;
* rapid changes in interest rates;
* adverse changes in law and regulations;
* Management's ability to integrate the operations of recent mergers and
* ability to become Year 2000 compliant.
These and other risks and uncertainties affecting the Company, all of
which are difficult to predict and many of which are beyond the control of the
Company, are discussed in greater detail in this report and in other filings by
the Company with the Securities and Exchange Commission.
This discussion and analysis should be read in conjunction with the
Company's Consolidated Financial Statements and accompanying Notes included
elsewhere in this report.
CORPORATE OVERVIEW
Republic Security Financial Corporation is a commercial bank holding
company headquartered in West Palm Beach, Florida. The Company's principal
business is the operation of Republic Security
33
<PAGE>
Bank, a state chartered commercial bank with 94 full service branches. The Bank
currently has 67 traditional branches and 27 in-store supermarket branches, 46
of which are located in Palm Beach county, 25 are in Broward county, 11 are in
Dade county, 4 are in Lee county, 2 are in each of Martin and Marion counties
and one each are in Orange, Alachua, Hillsborough and St. Lucie counties. Four
of the Bank's in-store supermarket branches are located in Winn Dixie stores
and the remaining in-store supermarket branches are located in Albertsons.
During 1998 the Bank opened seven new branches: four traditional branches and 3
in-store supermarket branches. The Bank anticipates continued aggressive growth
of its branch network through a combination of traditional and in-store
supermarket locations.
Republic Security Bank is a community bank which offers a full range of
business and personal banking services and products as well as trust and
investment services. The Bank has targeted business lending relationships while
maintaining its presence in residential mortgage, construction and consumer
lending. In conjunction with targeted business relationships, the Bank has
concentrated on business and personal transaction accounts by committing
resources to electronic banking and other non traditional distribution
channels, diversified products and quality customer service. The Bank's
progressive approach to product development and service delivery has positioned
the Bank to be competitive with larger financial institutions in the areas of
electronic banking and high quality financial products and services for
business and consumer customers.
In late 1997, the Bank organized a trust and investment services division.
The new division offers asset management, trust and brokerage services to
individuals and businesses primarily in Palm Beach, Broward and Dade counties.
Management does not anticipate the new trust and investment initiative will
have a significant effect on the Company's operations or cash flows for several
years.
BUSINESS COMBINATIONS
Over the past three years, the Bank has completed seven acquisitions.
On January 19, 1996, the Company acquired Banyan Bank ("Banyan"), a
commercial bank headquartered in Boca Raton, Florida, with one branch office
located in Boynton Beach, Florida. The acquisition was accounted for as a
purchase business combination and total assets acquired in connection with the
merger were approximately $61.7 million.
On June 30, 1997, the Company acquired Family Bank ("Family"), a
commercial bank headquartered in Hallandale, Florida, with six branch locations
in Broward county, Florida. Family Bank was simultaneously merged into the Bank
and the acquisition was accounted for as a pooling-of-interests which resulted
in the Bank acquiring assets of $256.0 million, liabilities of $234.2 million
and equity of $21.8 million. All information contained herein has been
retroactively restated to include the accounts and results of operations of
Family Bank.
On December 2, 1997, the Company acquired County Financial Corporation
("CFC"), a commercial bank holding company, headquartered in North Miami Beach,
Florida. County National Bank of South Florida ("County"), CFC's wholly owned
subsidiary, had 14 branch locations in Dade, Broward and Palm Beach counties
and was simultaneously merged into the Bank. The acquisition was accounted for
as a pooling of interests and resulted in the Bank acquiring assets of $255.0
million, liabilities of $230.6 million and equity of $24.4 million. All
information contained herein has been retroactively restated to include the
accounts and results of operations of CFC.
On July 2, 1998, the Company acquired Unifirst Federal Savings Bank
("Unifirst"), a federally chartered savings bank headquartered in Hollywood,
Florida with one additional branch located in Broward county, Florida. The
acquisition was accounted for as a pooling of interests and resulted in the
Bank acquiring assets of $141.9 million, liabilities of $132.7 million and $9.2
million in equity. All information contained herein has been retroactively
restated to include the accounts and results of operations of Unifirst.
34
<PAGE>
On October 29, 1998, the Company acquired First Palm Beach Bancorp
("FPBB"), a Delaware chartered Thrift Holding Company headquartered in West
Palm Beach, Florida. First Bank of Florida ("First Bank"), a federally
chartered Savings and Loan Association and FPBB's wholly owned subsidiary,
operated 52 offices in Palm Beach, Broward, Dade, Martin and Lee counties. The
acquisition was accounted for as a pooling of interests and resulted in the
Bank acquiring assets of $1.8 billion, total loans of $1.1 billion, total
deposits of $1.3 billion and total equity of $128 million. First Bank was
merged into the Bank as of October 29, 1998. All information contained herein
has been retroactively restated to include the accounts and results of
operations of FPBB.
On November 20, 1998, the Bank purchased two branch offices of Household
Bank, FSB ("Household"), a wholly owned subsidiary of Household International,
Inc. The Bank acquired a total of $28.3 million in net loans and $19.0 million
in deposits and offices located in Harbour Island and Orlando, Florida.
On December 11, 1998, the Company acquired Newberry Bank ("Newberry"), a
Florida state chartered commercial bank headquartered in Newberry, Florida with
one branch office in Ocala, Florida. Newberry was simultaneously merged into
the Bank and resulted in the Bank acquiring $38.9 million in assets, $28.7
million in net loans and $34.8 million in deposits. The transaction was
accounted for as a purchase business combination and the operations of Newberry
are included since the date of acquisition.
On February 26, 1999, the Company acquired Northside Bank of Tampa
("Northside"), headquartered in Tampa, Florida with one branch office in Tampa.
The acquisition will be accounted for as a pooling of interests and resulted in
the Bank acquiring assets of $66.6 million, total loans of $36.9 million, total
deposits of $56.9 million and total equity of $8.9 million as of December 31,
1998. Northside was merged into the Bank on February 26, 1999.
Looking forward, the Bank's business strategy is to continue it's (i)
focus in commercial relationship lending and consumer lending, (ii) providing
residential mortgage lending products and services with emphasis on residential
construction lending, (iii) emphasis on business and personal transaction
accounts, (iv) focus on non-interest income opportunities, (v) development and
implementation of new products, services and delivery channels, (vi) growth
through a combination of bank and branch acquisitions, as well as de novo
expansion of the branch network and achievement of a higher profile through
additional strategically located banking offices and increased marketing
efforts. The Company's strategies for the next 24 to 36 months also include
shifting the thrift assets and liabilities acquired from First Bank into
commercial bank products. The objective of this shift is to have the Company's
asset and liability compositions and net interest margin similar to that of
peer commercial banks.
COMPARISON OF THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
RESULTS OF OPERATIONS
The following is a discussion and analysis of the Company's consolidated
results of operations. All information has been retroactively restated to
include the accounts and results of operations of Family, CFC, Unifirst and
FPBB. In addition, the Company's operating results include the results of
Newberry Bank since December 11, 1998 and Banyan Bank since January 19, 1996.
The combination of merger transactions completed by the Company and
internal growth in 1998 and 1997 had the effect of increasing the Company's
assets in excess of 700% since December 31, 1996. These merger transactions as
well as internal growth transformed the Bank, with total assets of $359 million
as a commercial bank operating in Palm Beach County, Florida at December 31,
1996 to the largest commercial bank headquartered in Florida operating in 10
counties throughout the state at December 31, 1998. Since the Company's
financial statements have been restated for the merger transactions accounted
for as pooling of interests, certain operating trends such as the Company's
35
<PAGE>
significant growth, are not reflected in the financial statements. In addition,
the Company's core operating performance has been on a positive trend, even
though net income has been negatively affected by merger related expenses.
The Company's net loss for the year ended December 31, 1998 was $11.7
million or $0.26 loss per common share compared to net income of $11.5 million
or $0.24 and $0.23, respectively, basic and diluted earnings per share for the
year ended December 31, 1997. Net income for the year ended December 31, 1998
includes merger related expenses and one time charges of $22.6 million, net of
taxes. Net income, excluding merger related expenses and one time charges
decreased 39% to $10.9 million, compared to net income, excluding merger
related expenses, of $17.9 million, for the year ended December 31, 1997. The
change is primarily due to an increase of $17.7 million in provision for loan
loss, offset by an increase of $6.9 million in non-interest income.
For the year ended December 31, 1998, merger related expenses associated
with the acquisitions of FPBB and Unifirst were approximately $15.6 million,
net of taxes, related to professional fees, fixed asset write-downs and
employee severance and retention payments and $3.8 million, net of taxes, in
additional merger related loan loss provision recorded to conform FPBB and
Unifirst's accounting and credit policies to those of the Bank's. Additional
charges of approximately $3.2 million, net of taxes, related to asset
write-downs associated primarily with assets acquired from FPBB were recognized
in the year ended December 31, 1998. The increase in the provision for loan
losses in 1998 was recorded to provide for the inherent loan portfolio risks
associated with the Bank's recent merger transactions, increased commercial
loan production and other factors associated with the Bank's growth in
commercial lending. See "--Management's Discussion and Analysis of Financial
Condition and Results of Operations--Provision for Loan Losses and Allowance
for Loan Losses."
For the year ended December 31, 1997, merger related expenses associated
with the acquisitions of Family and CFC consisted of approximately $5.9
million, net of taxes, related to employee severance, professional fees and
fixed asset write-offs, $400,000, net of taxes, for additional merger related
loan loss provisions recorded to conform Family and CFC's accounting policies
to those of the Bank's and $400,000, net of taxes, for other real estate owned
write downs.
Net income for the year ended December 31, 1996 was $7.4 million or $0.15
basic and diluted earnings per common share which includes a $2.0 million, net
of taxes, non recurring litigation settlement expense and a $5.4 million, net
of taxes, one-time Federal Deposit Insurance Corporation ("FDIC") Saving
Association Insurance Fund ("SAIF") assessment to recapitalize the national
SAIF (see Note 16). Net income, excluding merger related expenses, for the year
ended December 31, 1997 increased 21% to $17.9 million, or $0.39 and $0.37,
respectively, basic and diluted earnings per common share compared to net
income, excluding non recurring litigation settlement expense and the FDIC SAIF
assessment, of $14.8 million or $0.32 and $0.31, respectively, basic and
diluted earnings per common share for the year ended December 31, 1996. The
increase is primarily due to the reduction of $12.3 million in the provision
for loan losses and an increase of $4.6 million in net interest income, offset
by a reduction of $1.1 million in non interest income and an increase of $9.8
million in operating expenses.
The primary component of earnings for most financial institutions
including the Company is net interest income. Net interest income is the
difference between the interest income received on its interest-earning assets
and the interest paid on its interest-bearing liabilities. Net interest income
is determined primarily by interest rate spread and the relative amounts of
interest-earning assets and interest-bearing liabilities.
NET INTEREST INCOME
Net interest income decreased $3.4 million to $86.1 million for the year
ended December 31, 1998 from $89.6 million for the year ended December 31,
1997. Interest income increased approximately $10.6 million offset by a rise of
$14.0 million in interest expense. The increase in interest income is
36
<PAGE>
due to an increase of $279.2 million in average interest-earning assets offset
by a decrease of 44 basis points in asset yield for the year ended December 31,
1998 compared to the year ended December 31, 1997. Interest expense increased
$14.0 million due to an increase in interest-bearing liabilities of $235.5
million and an increase in the rate paid on interest-bearing liabilities of 10
basis points in the year ended December 31, 1998 compared to the year ended
December 31, 1997. The Company's net interest margin for the year ended
December 31, 1998 was 3.20% compared to 3.71% for the year ended December 31,
1997. The decrease in net interest income for the year ended December 31, 1998
compared to the year ended December 31, 1997 was primarily due to the decline
in market interest rates during 1998. The declining rate environment led to an
increase in residential loan refinancings at lower interest rates without a
corresponding decrease in the Bank's cost of funds. First Bank's primary
lending activities were in residential loans with aggressively competitive
rates in the Palm Beach county market. While the Bank is continuing to offer
residential lending products in all it's markets, the interest rates offered on
these products are more in-line with current market rates. In addition, FPBB
issued $35.0 million of 10.35% Senior Debentures Due 2002 on June 30, 1997
("Senior Debentures") which resulted in an increase in interest expense of
approximately $2.7 million for the year ended December 31, 1998 compared to
December 31, 1997. FPBB leveraged $25.0 million of the debenture proceeds on a
wholesale basis at lower margins which further reduced the percentage of net
interest margin for the year ended December 31, 1998 compared to December 31,
1997.
Net interest income increased to $89.6 million for the year ended December
31, 1997 compared to $85.0 million for the year ended December 31, 1996. The
increase in net interest income is primarily due to an increase of $253.0
million in average interest-earning assets while average interest-bearing
liabilities increased $247.6 million. The net interest margin decreased to
3.71% in 1997 from 3.93% in 1996 primarily due to two leverage transactions
totaling approximately $50.0 million funded in 1997 and an increase in rates
paid on certificate of deposits. While leverage transaction strategies
negatively impact net interest margin because the spreads on such transactions
are less than the Bank's overall spread, the effect on net interest income is
positive and the transactions provide a means of capital leverage to the
Company.
INTEREST INCOME
Interest income increased approximately $10.5 million for the year ended
December 31, 1998 compared to the year ended December 31, 1997 due to an
increase in interest and fees on loans of $1.1 million and a $10.9 million
increase in interest on investments offset by a decrease of $1.5 million in
interest on interest-bearing deposits and Federal Funds sold. Interest and fees
on loans increased $11.2 million due to an increase of $130.0 million in
average loan balances outstanding offset by a decrease of $10.1 million due to
a decrease in loan yield of 54 basis points for the year ended December 31,
1998 compared to the year ended December 31, 1997. The decrease in loan yield
is primarily due to increased residential loan refinancings and to a lesser
extent refinacings of commercial loans (business and real estate) due to the
declining rate environment in 1998. The prime interest rate decreased from
8.50% at the beginning of the year to 7.75% by year end. First Bank's primary
lending activities were in residential loans with aggressively competitive
rates in the Palm Beach county market. In addition, commercial loans are
typically adjustable rate loans and adjust with interest rate changes. While
the Bank is continuing to offer residential lending products in all its
markets, the interest rates on these products are more in line with current
market rates than those formerly offered by First Bank. During 1998, rates
offered for commercial loans became increasingly competitive. The increase in
loans outstanding was primarily in residential real estate, commercial real
estate and commercial business loans. The Bank will continue its focus in
commercial lending in 1999 and expects to decrease its residential loan
outstandings. Average investments increased $171.9 million for the year ended
December 31, 1998 compared to the year ended December 31, 1997 reflecting a
relatively flat investment yield during the comparison periods. Approximately
$75.0 million of investment purchases were funded with borrowings during 1998
and approximately $25.0 million in investments were funded with the proceeds of
the Senior Debentures in late 1997.
37
<PAGE>
The increase of $19.2 million in interest income for the year ended
December 31, 1997 compared to the year ended December 31, 1996 is due to an
increase of $7.8 million in interest and fees on loans, a $1.4 million increase
in interest on interest-bearing deposits in other financial institutions and
Fed Funds sold and a $10.0 million increase in interest and dividends on
investments. The increase in interest and fees on loans is primarily due to an
increase of $86.1 million in average loan balances outstanding during the year
ended December 31, 1997 compared to the year ended December 31, 1996. The
increase is due to the Bank's success in attracting residential and commercial
real estate loan customers through increased advertising and referrals and
continued improvement in business conditions during 1997. The increase in
interest on investments is due to the increase of $145 million in average
investments.
INTEREST EXPENSE
Interest expense increased approximately $14.0 million for the year ended
December 31, 1998 compared to the year ended December 31, 1997 primarily due to
an increase of $235.5 million in interest-bearing liabilities. Interest expense
on borrowed money increased $6.7 million for the year ended December 31, 1998
compared to the year ended December 31, 1997 due to an increase of
approximately $110.5 million in the average balance of borrowed money
outstanding and increased $1.3 million due to an increase in the rate paid on
borrowed money of 32 basis points. FPBB issued $35.0 million of 10.35% Senior
Debentures on June 30, 1997 which resulted in an increase in interest expense
of approximately $2.7 million for the year ended December 31, 1998 compared to
December 31, 1997. Approximately $75.0 million of borrowings were used to fund
investment purchases during 1998. The remaining increase in interest expense of
approximately $6.0 million is due primarily to the increases in average savings
and certificate of deposit balances outstanding of $79.0 million and $38.6
million, respectively, for the year ended December 31, 1998 compared to the
year ended December 31, 1997. Savings account balances increased primarily as a
result of FPBB offering a special tiered rate savings product during 1998. No
special certificate of deposit programs were offered in 1998. The rate on
interest-bearing liabilities increased from 4.93% for the year ended December
31, 1997 to 5.03% for the year ended December 31, 1998 primarily due to an
increased rates paid on borrowed money and savings accounts.
The Bank's strategy is to reduce the overall rates paid on deposits by
decreasing the balances of certificates of deposit outstanding and increasing
the balances of non interest bearing and low interest bearing deposits. Since
the acquisition of FPBB, the Bank has begun lowering interest rates offered in
the former First Bank offices on new and renewed certificate of deposit
accounts to become more aligned with rates offered by commercial banks. In
addition, the Bank is currently providing product and sales training to the
former First Bank branch personnel in an effort to convert these offices to
commercial bank like branches. As a result of this strategy, the Bank
anticipates approximately $135.0 million in run-off from the former First Bank
certificate of deposit balances during 1999 and expects continued certificate
of deposit and potentially savings account balance run-off through year 2000.
In addition, the Company purchased $6.5 million of the Senior Debentures in an
effort to further reduce the cost of interest bearing liabilities. The Bank
does not anticipate significant purchases of Senior Debentures in the future.
The increase in interest expense of $14.7 million for the year ended
December 31, 1997 compared to the year ended December 31, 1996 can be primarily
attributed to the increase of $247.6 million in interest-bearing liabilities.
Interest expense on deposits increased $10.4 million during 1997 compared to
1996 primarily due to the increase in average interest-bearing deposits of
$180.1 million during the same period. During 1997, the largest change in
interest-bearing deposits was in certificates of deposit. The average balance
of certificates of deposits increased $139 million during 1997 resulting in an
increase of $8.7 million in interest expense. The increase in certificate of
deposit in 1997 was due primarily to FPBB's opening of 12 new branches during
1997 and the aggressive pricing offered by FPBB. The remaining increase is due
to the increase in borrowed money. Interest expense on borrowed money increased
$4.3 million due to an increase in the average outstanding balance of borrowed
money of $67.5 million. The rate on interest-bearing liabilities increased from
4.80% to 4.93% during the comparison periods primarily due to an increase in
rates paid on borrowed money and deposits and an increased concentration in
certificates of deposit.
38
<PAGE>
The following table presents the average balances of the Company's
interest-earning assets and interest-bearing liabilities, interest income
earned and interest expense incurred and weighted average yield or cost for the
years ended December 31, 1998, 1997 and 1996. Average balances were obtained
from the best available daily or monthly data which in all cases approximated
the average balances calculated on a daily basis.
NET INTEREST INCOME, AVERAGE BALANCE AND RATES:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------------------------------------
1998 1997
------------------------------------- -------------------------------------
AVERAGE YIELD/ AVERAGE YIELD/
BALANCE INTEREST RATE BALANCE INTEREST RATE
--------------- ---------- ---------- --------------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
INTEREST-EARNING ASSETS:
Loans ........................... $ 1,898,327 $153,846 8.10% $ 1,768,365 $152,702 8.64%
Interest-bearing deposits
and Federal Funds sold ......... 62,532 3,327 5.32 85,193 4,788 5.62
Taxable investments ............. 701,697 45,587 6.50 546,507 35,763 6.54
Non-taxable
investments** .................. 35,908 2,249 6.26 19,201 1,145 5.96
----------- -------- ----- ----------- -------- -----
Total interest-earning
assets ......................... 2,698,464 205,009 7.60 2,419,266 194,398 8.04
Other assets .................... 205,439 180,173
----------- -----------
Total ........................... $ 2,903,903 $ 2,599,439
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY:
INTEREST-BEARING LIABILITIES:
NOW accounts .................... 186,186 2,587 1.39 170,465 2,853 1.67
Money Market accounts ........... 127,445 3,746 2.94 135,816 3,936 2.90
Savings deposits ................ 323,617 12,345 3.81 244,576 8,447 3.45
Certificate of deposits ......... 1,309,627 73,959 5.65 1,270,979 71,367 5.62
Borrowed money .................. 407,686 25,889 6.35 297,205 17,933 6.03
----------- -------- ----- ----------- -------- -----
Total interest-bearing
liabilities .................... 2,354,561 118,526 5.03 2,119,041 104,536 4.93
----------- -------- ----- ----------- -------- -----
Non interest-bearing
deposits ....................... 242,539 196,627
Other liabilities ............... 94,062 79,256
Shareholders' equity ............ 212,741 204,515
----------- -----------
Total liabilities and
shareholders' equity ........... $ 2,903,903 $ 2,599,439
=========== ===========
Net interest income/Net
interest rate spread ........... $ 86,483 2.56% $ 89,862 3.10%
-------- ----- -------- -----
Net average interest-
earning assets/Net
interest margin ................ $ 343,903 3.20% $ 300,225 3.71%
----------- ----- ----------- -----
Ratio of average interest-
earning assets to
average interest-bearing
liabilities .................... 1.15x 1.14x
=========== ===========
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------
1996
-------------------------------------
AVERAGE YIELD/
BALANCE INTEREST RATE
--------------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
ASSETS
INTEREST-EARNING ASSETS:
Loans ........................... $ 1,682,288 $144,914 8.61%
Interest-bearing deposits
and Federal Funds sold ......... 63,386 3,351 5.29
Taxable investments ............. 404,959 25,898 6.40
Non-taxable
investments** .................. 15,630 943 6.03
----------- -------- ----
Total interest-earning
assets ......................... 2,166,263 175,106 8.08
Other assets .................... 142,309
-----------
Total ........................... $ 2,308,572
===========
LIABILITIES AND SHAREHOLDERS'
EQUITY:
INTEREST-BEARING LIABILITIES:
NOW accounts .................... 172,996 3,008 1.74
Money Market accounts ........... 136,225 3,975 2.92
Savings deposits ................ 200,645 6,557 3.27
Certificate of deposits ......... 1,131,869 62,690 5.54
Borrowed money .................. 229,679 13,654 5.94
----------- -------- ----
Total interest-bearing
liabilities .................... 1,871,414 89,884 4.80
----------- -------- ----
Non interest-bearing
deposits ....................... 172,225
Other liabilities ............... 58,297
Shareholders' equity ............ 206,636
-----------
Total liabilities and
shareholders' equity ........... $ 2,308,572
===========
Net interest income/Net
interest rate spread ........... $ 85,222 3.28%
-------- ----
Net average interest-
earning assets/Net
interest margin ................ $ 294,849 3.93%
----------- ----
Ratio of average interest-
earning assets to
average interest-bearing
liabilities .................... 1.16x
===========
</TABLE>
- ---------------
** Tax equivalent basis based on 26% TEFRA rate.
39
<PAGE>
Net interest income before provision for loan losses can be analyzed in
terms of the impact of changing rates and changing volumes of interest-earning
assets and interest-bearing liabilities. The following table sets forth certain
information regarding changes in net interest income due to changes in the
average balance of interest-earning assets and interest-bearing liabilities and
due to changes in average rates for the periods indicated. Information is
provided in each category with respect to (i) changes attributable to changes
in volume (change in volume multiplied by prior year's rate), (ii) changes
attributable to changes in rate (change in rate multiplied by prior year's
volume) and (iii) the net change (total changes in rate and volume). The
changes attributable to the combined impact of volume and rate have been
allocated proportionately to the changes due to volume and the changes due to
rate.
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1998 VERSUS 1997 DECEMBER 31, 1997 VERSUS 1996
----------------------------------------- -------------------------------------
INCREASE (DECREASE) DUE TO CHANGE IN: INCREASE (DECREASE) DUE TO CHANGE IN:
----------------------------------------- -------------------------------------
AVERAGE AVERAGE NET AVERAGE AVERAGE NET
RATE VOLUME CHANGE RATE VOLUME CHANGE
------------- ----------- ----------- --------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
INTEREST INCOME:
Loans--net ...................... $ (10,085) $ 11,229 $ 1,144 $ 377 $ 7,411 $ 7,788
Interest-bearing deposits
Federal Funds sold ............ (187) (1,274) (1,461) 283 1,154 1,437
Taxable investments ............. (325) 10,149 9,824 806 9,059 9,865
Non-taxable investments ......... 108 996 1,104 (13) 215 202
--------- -------- -------- ------ ------- -------
(10,489) 21,100 10,611 1,453 17,839 19,292
--------- -------- -------- ------ ------- -------
INTEREST EXPENSE:
NOW accounts .................... (529) 263 (266) (199) 44 (155)
Money Market accounts ........... 53 (243) (190) (27) (12) (39)
Savings deposits ................ 1,171 2,727 3,898 453 1,437 1,890
Certificates of deposit ......... 420 2,172 2,592 970 7,707 8,677
Borrowed money .................. 1,294 6,662 7,956 268 4,011 4,279
--------- -------- -------- ------ ------- -------
2,409 11,581 13,990 1,465 13,187 14,652
--------- -------- -------- ------ ------- -------
Net interest income ............. $ (12,898) $ 9,519 $ (3,379) $ (12) $ 4,652 $ 4,640
========= ======== ======== ====== ======= =======
</TABLE>
PROVISION FOR LOAN LOSSES AND ALLOWANCE FOR LOAN LOSSES
The provision for loan losses is based upon management's assessment of the
adequacy of the allowance for loan losses inherent in the Bank's loan
portfolio. An evaluation of the adequacy of the overall allowance for loan
losses and, correspondingly, the provision for loan losses is determined by
management considering factors such as current economic conditions, the
underlying quality of the loan portfolio including the Bank's credit
administration policy and procedures, loan concentrations, portfolio mix, prior
loan loss experience, growth of the loan portfolio and other relevant factors.
The provision for loan losses for the year ended December 31, 1998 was
$22.8 million compared to $5.0 million and $16.7 million for the years ended
December 31, 1997 and 1996, respectively. The provision for loan losses
increased $17.7 million for the year ended December 31, 1998 compared to the
year ended December 31, 1997 as a result of issues related to the Bank's recent
merger transactions, increased commercial loan production, identified issues
arising in the indirect automobile loan portfolio and merger related
adjustments to conform Unifirst and FPBB's credit policies to those of the
Bank. Merger related provision for loan losses recorded in the year ended
December 31, 1998 was $5.2 million. An additional loan loss provision of $2.2
million was recorded in the year ended December 31, 1998 by a pooled company
(FPBB) with respect to issues arising in FPBB's indirect automobile loan
portfolio. The remaining provision for loan losses was $10.3 million for the
year ended December 31, 1998. The additional increase in the provision for loan
losses for the year ended December 31, 1998 compared to the year ended December
31, 1997 was primarily a result of
40
<PAGE>
increased commercial loan production, increased competition in the commercial
lending market and increased risk in the loan portfolio as a result of merger
integration issues associated with the merger transactions (see further
discussion below). New commercial loan production increased from an average of
approximately $8.0 million per month during 1997 to approximately $15.0 million
per month during 1998. Management believes these factors as well as the
different underwriting policies of the merged institutions results in an
increase in risks associated with the combined loan portfolios which resulted
in management increasing the risk factors used in its evaluation of the
adequacy of the allowance for the loan portfolio.
Management's evaluation of the allowance for loan losses includes
determining and applying relevant risk factors to the entire loan portfolio.
Risk factors applied to the performing loan portfolio in the year ended
December 31, 1998 are based on management's assessment of the risks in the loan
portfolio considering current economic conditions, the Bank's recent merger
transactions, the increased commercial loan production, prior loan loss history
and other factors associated with the Bank's growth in commercial lending . The
following items related to the current portfolio characteristics were
considered:
* credit administration policy and underwriting procedures of acquired
institutions as well as the Bank's,
* net growth in the commercial real estate and commercial business loan
portfolios of $90.0 million or 20% during 1998 and
* increase in non performing commercial real estate and commercial business
loans from $1.7 million at December 31, 1997 to $4.5 million at December
31, 1998.
In addition to the factors listed above, the impact of the recent merger
transactions and the increased competition in the lending environment during
1998 were considered in management's analysis of the allowance for loan losses.
The Bank's merger transactions resulted in the integration of the Bank and the
pooled companies during 1998. Integration of the Company included the
elimination of substantially all senior and middle management of the pooled
companies. Management believes the loss of those senior and middle management
positions as well as other restructure and integration issues resulted in
increased inherent risks in the loan portfolios due to the loss of customer and
automobile dealer relationships, the lack of continuity of processing and
collections procedures, the loss of specific knowledge of the origination of
the loan portfolios and other issues resulting from the transition into one
combined company.
The competition for loans from other financial institutions intensified
during 1998 which resulted in certain financial institutions lowering
underwriting standards as well as lowering interest rates offered on loans.
While the Bank did not significantly ease any requirements in its underwriting
policies, a lowering of underwriting standards in the industry as well as among
the Bank's local competitors was noted during 1998. Consideration was given to
this increased competition by Management in its assessment of the risks in the
combined loan portfolios.
The systematic method prescribed in the Bank's loan policy, which includes
procedures for early detection of potential problem loans, is consistently used
to determine the adequacy of the allowance for loan losses and also considers
the characteristics of the loan portfolio, historical charge-off history,
current economic conditions, as well as other relevant factors. As a result of
the analysis, Management determined an increase to the allowance for loan
losses was necessary and increased the risk factors applied to performing loans
in its quarterly analysis of the allowance for loan losses. Risk factors
applied to the loan portfolio in prior years were based primarily on the Bank's
three year loss history considering the portfolio's characteristics. Management
believes the new risk factors are more relevant to the current portfolio than
the risk factors applied in prior years. Furthermore, the average net
charge-offs to average loans is significantly higher for the three years ended
December 31, 1998 of .57% compared to .42% and .22%, respectively, for the
three years ended December 31, 1997 and 1996.
41
<PAGE>
Non performing loans are carried at fair value based on the most recent
information available. Risk factors as prescribed in the Bank's loan policy are
applied to the remaining book balances of classified loans. In evaluating the
adequacy of the allowance for loan losses at December 31, 1998, the following
risk factors were applied to the carrying value of each classified loan which
is consistent with prior years: (i) substandard at 15%, (ii) doubtful at 50%
and (iii) loss charged-off at 100%.
The allowance for loan losses as a percent of total loans increased from
0.69% at December 31, 1997 to 1.30% at December 31, 1998. The allowance for
loan losses to non-performing loans increased from 85% at December 31, 1997 to
approximately 195% at December 31, 1998. The lower allowance for loan losses to
non performing loans and total loans at December 31, 1997 is primarily a result
of significant charge-offs primarily related to FPBB's indirect portfolio taken
during 1997.
In accordance with the Bank's asset classification policy, non-performing
loans (loans contractually past-due 90 days or more) are recorded at the lesser
of the loan balance or estimated fair value of the collateral underlying the
loan, for collateral dependent loans, or the net present value of estimated
future cash flows discounted at the loan's original effective interest rate. As
a result, any expected losses from loans identified at December 31, 1998 as
non-performing have been recognized by the Bank and should not have a future
impact on the allowance for loan losses unless the condition of the loan
further deteriorates.
The provision for loan losses decreased $11.7 million for the year ended
December 31, 1997 compared to the year ended December 31, 1996. During 1997,
the Bank recorded $650,000 to the provision for loan losses in connection with
merger transactions to conform Family and County's accounting and credit
policies regarding loan valuations to those of the Bank's. The increased
provision for loan losses recorded in the year ended December 31, 1996 was
primarily a result of FPBB's losses related to the indirect automobile lending
program. FPBB began originating indirect automobile loans in large volumes in
August 1995 and continued this practice through September 1996. During
September 1996, FPBB ceased its originations of indirect automobile loans.
Higher delinquencies and charge-offs resulting from FPBB's indirect lending
program occurring in the quarter ended June 30, 1996 as the significant credit
problems did not surface until that time. The provisions were determined by
FPBB by projecting charge-offs based on the latest repossession activity and
recovery rates. The provision for loan losses for the year ended December 31,
1996 included a charge of $15.7 million related primarily to FPBB's consumer
lending. The provision for loan losses related to FPBB's indirect automobile
lending portfolio decreased in 1997 because FPBB discontinued its indirect
lending as of September 30, 1996. The allowance for loan losses as a percent of
total loans decreased from 1.15% at December 31, 1996 to 0.69% at December 31,
1997 primarily due to the significant net charge-offs of $11.4 million taken in
1997 related to FPBB's indirect loan portfolio.
NON-INTEREST INCOME
Non-interest income increased $6.8 million or 37% for the year ended
December 31, 1998 compared to the year ended December 31, 1997 due to an
increase in service charges on deposit accounts of $1.1 million, increases in
gain on sale of loans of $2.9 million, increase in gains on investments
available-for-sale of $1.6 and increases of $1.2 million in other income.
Non-interest income decreased approximately $1.1 million for the year
ended December 31, 1997 compared to the year ended December 31, 1996 primarily
due to an increase of $1.3 million in service charges on deposit accounts, an
increase of $836,000 in the gain on sale of investments available-for-sale and
an increase of $1.4 million in other income offset by a decrease of $4.7
million in gains on sale of loans.
SERVICE CHARGES ON DEPOSIT ACCOUNTS. Service charges on deposit accounts
increased $1.1 million or 11% for the year ended December 31, 1998 compared to
the year ended December 31, 1997 primarily as a result of increased volume in
transaction accounts. Non-interest bearing average account balances increased
approximately $45.9 million or 23% for the year ended December 31, 1998
42
<PAGE>
compared to the year ended December 31, 1997. In addition, certain deposit fees
were increased in March of 1998 contributing slightly to the increase in
service charges on deposits.
Service charges on deposit accounts increased approximately $1.3 million
or 15% for the year ended December 31, 1997 compared to the year ended December
31, 1996. Average non-interest bearing account balances increased approximately
$24.4 million or 14% for the year ended December 31, 1997 compared to the year
ended December 31, 1996, which is the primary reason for the increased level of
service charges.
GAIN ON SALES OF LOANS. Gain on sale of loans increased $2.9 million for
the year ended December 31, 1998 compared to the year ended December 31, 1997
primarily due to an increase in the volume of loans sold. During 1998, loans
with principal balances of approximately $300.0 million were sold as compared
to $72.5 million in the prior period. The increase in loans sold is due to
$160.7 million of fixed and adjustable rate loans sold by FPBB during 1998. No
significant loan sales were made by FPBB during 1997. In addition, the level of
gains is dependent on market interest rates at the time the loan is sold and if
the loan is sold servicing released or servicing retained.
Gain on sale of loans decreased by $4.7 million for the year ended
December 31, 1997 compared to the year ended December 31, 1996 primarily due to
an decrease in the volume of loans sold and a decrease in the gains realized on
the sales. During 1996, approximately $201.9 million loans were sold as
compared to $72.5 million in 1997.
NET GAIN ON SALE OF INVESTMENTS AVAILABLE-FOR SALE. Gain on sale of
investments available-for-sale increased by $1.6 million for the year ended
December 31, 1998 compared to the year ended December 31, 1997 primarily due to
the increase in the volume of investments available-for-sale sold and in the
gains realized on the sale of those investments. During 1998 approximately
$365.4 million investments available-for-sale were sold as compared to
approximately $295.0 million during 1997.
Gain on sale of investments available-for-sale increased by $836,000 for
the year ended December 31, 1997 compared to the year ended December 31, 1996.
Although the volume of investments available-for-sale declined to $295.0
million from $370.3 million in the prior period the gains realized on those
sales increased.
OTHER INCOME. Other income consists of loan servicing income net of the
amortization of loan servicing rights, loan fees, accretion of discounts on
purchased accounts receivable, rental income, ATM fees and other miscellaneous
fee income.
Other income increased $1.2 million or 19% for the year ended December 31,
1998 compared to the year ended December 31, 1997. The increase is primarily
associated with the overall growth in the Bank's customer base, ATM network and
products offered. In addition, ATM fees increased due to First Bank charging
for certain ATM transactions in 1998 that were not previously charged. Loan
servicing fees also increased due to the increase in loans serviced for others.
Other income increased $1.4 million or 28% for the year ended December 31,
1997 compared to the year ended December 31, 1996 due primarily to increased
loan servicing income, purchased accounts receivable income and miscellaneous
income.
OPERATING EXPENSES
Operating expenses, excluding merger related expenses of $21.7 million and
other non recurring charges of $5 million related to asset write downs, were
$76.6 million for the year ended December 31, 1998. Operating expenses,
excluding merger related expenses of $9.3 million and OREO write downs related
to the mergers of $640,000, were $74.4 million for the year ended December 31,
1997. Operating expenses increased approximately $2.2 million during the
comparison periods. The increase is primarily due to increases in employee
compensation and benefits, occupancy and equipment and communications expenses.
43
<PAGE>
Employee compensation and benefits, excluding one time charges related to
the FPBB merger of $594,000, increased $981,000 for the year ended December 31,
1998. The increase in compensation and benefits is due to the addition of seven
new branch locations in 1998, the addition of staff in the credit training and
loan servicing departments in late 1997 the establishment of the trust and
investment services division in mid 1997 and a $700,000 increase in ESOP
expense, offset by decreases of approximately $1.4 million related to the
accrual associated with the Company's Stock Appreciation Rights ("SARs") and
cost savings realized as a result of the mergers with Family on June 30, 1997
and County on December 2, 1997. SARs expense decreased as a result of
postponing the initial vesting and exercisable dates in order to restore the
purpose of the SAR grants of providing long-term incentive for the board
members.
Occupancy and equipment expenses for the year ended December 31, 1998
increased by $1.6 million as compared to year ended December 31, 1997. The
increases in rent expense, furniture and equipment depreciation expense,
utilities expense and equipment maintenance expenses are associated with the
addition of seven new branch locations.
Communications expenses increased $817,000 for the year ended December 31,
1998 as compared to the year ended December 31, 1997. The increase in telephone
and telegraph expense is associated with the addition of the new branch
locations and the increase in postage expense is primarily associated with the
increased deposit account growth.
Operating expenses, excluding merger related expenses of $9.3 million and
OREO write downs related to the mergers of $640,000, were $74.4 million for the
year ended December 31, 1997. Operating expenses, excluding $3 million in
litigation settlement expense and $8.6 million in one-time FDIC-SAIF
assessment, were $64.8 million for the year ended December 31, 1996. The
increase of $9.6 million for the year ended December 31, 1997 can be primarily
attributed to increases in employee compensation and benefits, occupancy and
equipment expenses and other operating expenses.
Employee compensation and benefits expense increased $5.7 million for the
year ended December 31, 1997 compared to the year ended December 31, 1996. The
primary reasons for the increase are an increase of $1.8 million related to the
accrual associated with the (SAR's) plan, the addition of fourteen branch
locations and an increase in support personnel in late 1997. The credit,
training and loan servicing departments were expanded to accommodate the
significant growth of the Company. The SARs accrual was based on the closing
stock price of the Company's common stock as of December 31, 1997 of $9.81 and
the percentage of vested SARs. See Note 12 to the consolidated Financial
Statements for terms and conditions of the Company's SAR plan.
Occupancy and equipment expenses increased $2.6 million for the year ended
December 31, 1997 compared to the year ended December 31, 1996 primarily due to
increases in rent expense, maintenance expense and furniture and equipment
depreciation expense associated with the addition of fourteen branch locations
and the addition of the new trust and investment departments.
Other operating expenses increased $2 million for the year ended December
31, 1997 as compared to the year ended December 31, 1996. The increase is
primarily due to costs associated with the organization of the trust and
investment department, fixed asset write-offs associated with the relocation of
a branch location and the overall increase in certain other expenses related to
an increase in size.
INCOME TAXES
Income tax expense decreased $10.3 million for the year ended December 31,
1998 from an income tax expense of $7.2 million to an income tax benefit of
$3.0 million, as compared to the year ended December 31, 1997. This decrease is
primarily due to a decrease in income before income taxes of $33.4 million as a
result of merger related charges and other one-time charges. The decrease in
44
<PAGE>
income tax expenses related to the decrease in income before income taxes was
offset by a decrease in the effective tax benefit rate for the year ended
December 31, 1998 compared to the year ended December 31, 1997. The increase in
the effective rate or a lower effective tax benefit rate was due to non
deductible merger expenses incurred in 1998.
Income tax expense increased $3.1 million for the year ended December 31,
1997 due to increase of $7.2 million in income before income taxes as compared
to the year ended December 31, 1996. The increase is primarily due to the
increase of net interest income after provision for loan losses of $16.3
million offset by the increase of $8 million in non-interest expense. The
increase in income taxes for year ended December 31, 1997 can also be
attributed to the increased effective tax rate for 1997. The tax impact of the
non deductible merger related expenses was partially offset by a reduction of
$1.3 million in the valuation allowance for deferred tax assets associated with
County. The effective tax rate was approximately 39% for the year ended
December 31, 1997 compared to approximately 36% for the year ended December 31,
1996.
LIQUIDITY
The Company's liquid assets consist primarily of interest bearing deposits
in other financial institutions and marketable securities. Considerations in
managing the Company's liquidity position include scheduled cash flows from
existing assets, contingencies and liabilities, as well as projected liquidity
needs arising from approved extensions of credit. Furthermore, 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.
The Company's cash inflows for the year ended December 31, 1998 consist
primarily of amounts generated from the sale of loans and investments
available-for-sale, the collection of loan principal payments, deposits and
principal payments on securities. Uses of cash consist of originations of loans
and purchases of investments available-for-sale and decreases in FHLB advances
and securities sold under agreements to repurchase. Primary sources of
borrowings include advances from the FHLB and borrowings under repurchase
agreements.
Access to funds from depositors is affected by the rate the Bank pays on
certificates of deposit and convenience and service provided to transaction
based account holders. The rate the Bank pays on certificates of deposit is
dependent on rates paid by other financial institutions within the Bank's area.
The Bank manages the cash inflows and outflows from certificates of deposit by
increasing or decreasing the rates offered in its market area.
The Company's sources of liquidity are impacted by various matters beyond
the control of the Company. Scheduled loan payments are a relatively stable
source of funds while loan prepayments and deposit flows vary widely in
reaction to market conditions, primarily prevailing interest rates. Asset sales
are influenced by the availability of loans for sale, general market demand and
other unforeseen market conditions. The Company's ability to borrow at
attractive rates is affected by its credit ratings and other market conditions.
In line with the Bank's strategy to increase transaction account balances and
decrease certificate of deposit account balances in an effort to lower the
Bank's cost of deposits, demand, NOW, Money Market and savings account balances
increased $157.1 million (excluding the assumption of Newberry and Household
deposits) while certificate of deposit account balances declined $34.5 million
during the year ended December 31, 1998. Management expects a larger decline in
certificate of deposit account balances during 1999 due to the lowering of
former First Bank and Unifirst certificates of deposit rates to become more
aligned with the commercial bank pricing offered by the Bank. Management
anticipates growth in the transaction account balances to fund the certificate
of deposit balance run-off.
Management also anticipates a temporary increase in liquidity requirements
during the fourth quarter 1999 as a result of customer reactions to Year 2000
issues. Management has not yet determined the extent of the increase in
liquidity requirements as a result of Year 2000 issues but is
45
<PAGE>
currently assessing the issue as part of the Year 2000 Project. The Bank will
likely fund the increased liquidity through short term borrowings.
In order to manage the uncertainty inherent in its sources of funds, the
Company continually evaluates alternate sources of funds and maintains and
develops diversity and flexibility in the number of such sources. The effect of
a decline in any one source of funds generally can be offset by use of an
alternative source although potentially at a different cost to the Company.
CAPITAL COMPLIANCE
The Bank and the Company are in compliance with regulatory capital
requirements at December 31, 1998 (see Note 13 to Consolidated Financial
Statements).
The Bank and the Company, as a bank holding company, are subject to the
capital requirements of the FRB. Under FRB guidelines, bank holding companies
such as the Company are required to maintain capital based on risk-adjusted
assets. Under risk-based capital guidelines, categories of assets with
potentially higher credit risk require more capital than assets with lower
risk. In addition to balance sheet assets, bank holding companies are required
to maintain capital, on a risk-adjusted basis, to support certain off-balance
sheet activities such as loan commitments. The FRB standards classify capital
into two tiers, Tier I and Total. Tier I risk-based capital consists of common
stockholders equity, noncumulative and cumulative (bank holding companies only)
perpetual preferred stock, and minority interests, less goodwill and deposit
intangibles. Total risk based capital consists of Tier I capital plus a portion
of the allowance for loan losses, hybrid capital instruments, term subordinated
debt and intermediate preferred stock. In addition to risk-based capital
requirements, the FRB requires bank holding companies to maintain a minimum
leverage capital ratio of Tier I capital to total average assets. Total assets
for this purpose do not include goodwill and any other intangible assets and
investments that the FRB determines should be deducted from Tier I capital. The
FRB requires banks and bank holding companies to maintain Tier I and Total
risk-based capital ratios of 4.0% and 8.0%, respectively, and a Tier I leverage
capital ratio of 4.0%. See Item 1-"Business: Certain Regulatory Considerations"
IMPACT OF INFLATION
The consolidated financial statements and related consolidated financial
information presented herein have been prepared in accordance with generally
accepted accounting principles, which require the measurement of financial
position and operating results in terms of historical dollars without
considering changes in the relative purchasing power of money over time due to
inflation. Unlike most industrial companies, virtually all of the assets and
liabilities of a financial institution are monetary in nature. As a result,
interest rates have a more significant impact on a financial institution s
performance than the effects of general levels of inflation. Interest rates do
not necessarily move in the same direction or same magnitude as the price of
goods and services. See Item 7a--"Quantitative and Qualitative Disclosures
about Market Risk."
FINANCIAL CONDITION
Consolidated total assets increased approximately $108.1 million or 4% to
$3.01 billion at December 31, 1998 compared to $2.9 billion at December 31,
1997. The increase in assets is partially due to the $56.1 million net asset
purchases (net of cash paid) of Newberry and the Household branches during
1998. The remaining asset increase is a result of $151.8 million increase in
deposits, excluding deposits acquired from the acquisition of Newberry and the
Household branch transactions, and $18.4 million increase in other liabilities
offset by decreases of $44 million in FHLB advances, $34 million in securities
sold under agreements to repurchase, $14.0 million in advances to borrowers for
taxes and insurance, $6.3 million in senior debentures outstanding and $8.8
million in total shareholders equity. Investments increased $93.2 million and
loans-net and loans held for sale increased $88 million while cash and cash
equivalents decreased $82 million. The increase in loans was
46
<PAGE>
partially attributable to $57 million in loans acquired in the Newberry and
Household branch transactions. Other assets increased approximately $13.8
million at December 31, 1998 compared to December 31, 1997 primarily due to
increase of $2.5 million in income taxes receivable, $5.9 million in accrued
interest receivable, $3.0 million in net deferred tax asset, $2.6 million in
deferred merger charges related to the Northside Bank acquisition which closed
on February 26, 1999 and other asset increases due to increased size of the
Company. Advances to borrowers for taxes and insurance decreased at December
31, 1998 compared to December 31, 1997 because the 1997 balance includes
balances of FPBB as of September 30, 1997. Due to the timing of tax and
insurance payment disbursements, balances at September 30 are significantly
higher each year than balances at December 31. Approximately $6.5 million of
senior debentures were repurchased by the Company during 1998 at the prevailing
market price. Other liabilities decreased $667,000 from December 31, 1997 to
December 31, 1998.
The decrease of $8.8 million in shareholders' equity at December 31, 1998
compared to December 31, 1997 is due to $11.7 million net loss for the year
ended December 31, 1998, dividend payments of $6.8 million paid by the Company
and dividend payments of $2.7 million paid by a pooled company (FPBB) during
the thirteen months ended October 29, 1998 offset by $2.2 million appreciation,
net of taxes, in investments available for sale, $4.2 million increase due to
exercise of stock options, $37 million increase associated with ESOP and RRP
amortization and $2.5 million, net income of pooled companies for the three
months ended December 31, 1997 excluded from results of operations due to
different year ends of pooled companies.
YEAR 2000 MATTERS
The Bank relies heavily on information technology ("IT") systems which are
primarily provided by third party vendors and other systems and facilities such
as telecommunications, utilities, electronic clearinghouses and building access
control systems to conduct its business. The Bank also has business
relationships with other financial institutions, regulators and customers who
are also reliant on IT and embedded systems to conduct their businesses. The
Bank utilizes and is dependent upon a third-party vendor for its primary data
processing functions. The Bank also utilizes other purchased software packages
which operate on in-house computer networks. The Bank faces the risk that one
or more of its critical service providers will not be able to provide services
to the Bank due to the third party's inability to resolve its own Year 2000
issues, including those associated with its own external relationships.
STATE OF READINESS
In 1997, the Bank's Electronic Data Processing Committee (the "EDP
Committee") started work on the Bank's Year 2000 Project. The EDP Committee is
comprised of members from each area of the Bank. The EDP Committee developed
and is currently executing a comprehensive plan designed to ensure the Bank's
mission critical IT systems and mission critical service providers are year
2000 compliant. The Bank's plan consists of five phases: (1) awareness phase,
to define the Year 2000 issue and obtain senior management and Board of
Directors support, (2) inventory phase, to identify all IT systems and service
providers and assign risk ratings in accordance with its potential business
impact, available alternatives and cost of substitution, (3) assessment phase,
to evaluate the identified mission critical systems, including those systems
provided by third-party vendors, for Year 2000 functionality and readiness, (4)
remediation phase, to replace or upgrade inventoried items to ensure Year 2000
compliance and (5) testing and certification phase, to test all remediated
systems including testing with vendors, to ensure successful operation in the
post-1999 environment. In addition, the Bank's Year 2000 plan includes
assessing the impact of the Year 2000 issue on borrowers' ability to repay
loans.
As of December 31, 1998, the Bank had completed the awareness, inventory
and assessment phases and has substantially completed the remediation phase.
The testing phase has begun and the majority of the testing is scheduled to be
substantially complete by March 31, 1999. The Bank is utilizing both internal
and external resources to upgrade, replace and test hardware, software and
47
<PAGE>
third party vendor programs. Through formal communication, the Bank's primary
data processing vendor and the majority of other critical vendors have
indicated their IT systems are or will be Year 2000 compliant and tested before
Year 2000. The Bank has also contacted all of its significant commercial loan
customers to determine the borrower's ability and readiness to become Year 2000
compliant. Approximately 60% of the loan customers contacted have responded and
the Bank has not identified any significant issues with those customers. The
Bank anticipates completing all the phases within six months but no later than
October 31, 1999.
YEAR 2000 COSTS
Year 2000 expenses primarily include costs associated with internal and
external personnel, upgrade packages and disposal of non-compliant hardware and
software. To date, the Bank has not incurred any significant expenses and does
not expect to incur any significant expenses other than internal personnel
resources associated with the Year 2000 project. Costs to purchase new
compliant hardware and software are estimated to be approximately $2.0 million,
which will be capitalized. The cost of the Year 2000 project will be funded
through operating cash flows. While management does not anticipate the cost of
the Year 2000 project to have a material impact on the Company's financial
condition, operations or cash flows, the project is not yet complete and is
dependent on third parties.
RISKS AND CONTINGENCY
If the Bank's or other third party vendors fail to resolve Year 2000
issues by December 31, 1999, potential consequences would include, among other
possibilities, the inability to accurately and timely process withdrawals,
deposits and payments, update customers' accounts, process financial
information, bill customers, accommodate customer's financial needs, determine
or meet liquidity requirements or report accurate data to management,
customers, shareholders, regulators and others as well as business
interruptions or branch closings, financial losses, reputational harm,
increased scrutiny by regulators and litigation related to Year 2000 issues.
The Bank is attempting to limit the potential impact of the Year 2000 by
monitoring the progress of its Year 2000 Project and those of its critical
vendors and by developing contingency plans. There can be no assurance that the
Bank will be completely successful in its efforts to resolve Year 2000 issues.
Any critical unresolved Year 2000 issues at the Bank or its critical vendors
could have a material adverse effect on the Company's results of operations,
financial condition or liquidity.
The Bank has begun developing comprehensive contingency plans designed to
ensure the continuity of critical business processes before and after December
31, 1999. The contingency plans will include reasonably likely Year 2000
failure scenarios for its critical business processes, procedures designed to
reduce the impact on the Bank and methods of returning to normal operations.
The Bank expects contingency planning to be substantially complete by July 31,
1999.
The foregoing Year 2000 discussion contains "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995.
Such statements, including without limitation, anticipated costs and the dates
by which the Bank expects to complete certain actions, are based on
management's best current estimates, which were derived utilizing numerous
assumptions about future events, including the continued availability of
certain resources, representations received from third parties and other
factors. However, there can be no guarantee that these estimates will be
achieved, and actual results could differ materially from those anticipated.
Specific factors that might cause such material differences include, but are
not limited to, the ability to identify and remediate all relevant systems,
results of Year 2000 parties who are service providers, suppliers or customers
of the Company, unanticipated system costs, the adequacy of and ability to
develop and implement contingency plans and similar uncertainties. The
"forward-looking statements" made in the foregoing Year 2000 discussion speak
only as of the date on which such statements are made, and the Company
undertakes no obligation to update any forward-looking statement to reflect
events or circumstances after the date on which such statement is made or to
reflect the occurrence of unanticipated events.
48
<PAGE>
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a financial institution holding company, the Company's primary
component of market risk is interest rate volatility. Fluctuations in interest
rates will ultimately impact both the level of income and expense recorded on a
large portion of the Bank's assets and liabilities and the market value of all
interest-earning assets, other than those with short term maturities. All of
the Company's interest rate risk exposure lies at the Bank level. Accordingly,
interest rate risk management procedures are performed at the Bank level. Based
on the nature of the Bank's operations, the Bank is not subject to foreign
currency exchange or commodity price risk. The Bank's real estate portfolio,
concentrated primarily within Palm Beach, Martin, Broward, Dade and Lee
counties in Florida, is subject to risks associated with the local economy.
The operations of the Bank are subject to risk resulting from interest
rate fluctuations to the extent that there is a difference between the amount
of the Company's interest-earning assets and the amount of interest-bearing
liabilities that are prepaid/withdrawn, mature or reprice in specified periods.
Management of interest rate sensitivity involves matching the maturity and
repricing dates of interest-earning assets with those of interest-bearing
liabilities in an effort to manage the impact of fluctuating interest rates on
net interest margins. The Asset Liability Committee (ALCO) has the
responsibility for the management of interest rate risk. Operating within risk
tolerance levels approved by the Board of Directors, the ALCO meets at least
quarterly to establish, communicate, coordinate and control asset/liability
management procedures. The purpose of the ALCO is to monitor the volume and mix
of the Bank's interest sensitive assets and liabilities consistent with the
Company's overall liquidity, capital, growth, risk and profitability goals.
The Bank utilizes an interest rate sensitivity model as the primary
quantitative tool in measuring the amount of interest rate risk that is
present. Interest rate sensitivity is measured as the difference between the
percentage of financial assets and liabilities in the Company's existing
portfolio that are subject to repricing within specific time periods. In
addition, the Bank measures the interest rate sensitivity of its budgeted
growth in financial assets and liabilities. These differences, known as
interest sensitivity gaps, are usually calculated cumulatively for blocks of
time. The model quantifies the potential changes in future earnings which is
measured by the effects of various interest rate changes on net income over the
ensuing one and two year periods.
The Company manages its interest rate risk exposure by limiting the amount
of long-term fixed rate loans it holds for investment, increasing emphasis on
shorter-term loans for portfolio, increasing or decreasing the relative amounts
of long-term and short-term borrowings and deposits and/or purchasing
commitments to sell loans. The following table presents the Company's exposure
to interest rate risk at December 31, 1998:
<TABLE>
<CAPTION>
DECEMBER 31, 1998
-------------------------------------------------------------------------
ONE YEAR 1 TO 3 3 TO 5 OVER 5
OR LESS YEARS YEARS YEARS TOTAL
--------------- ------------- ------------- --------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Total interest-earning assets .................... $ 672,612 $ 515,219 $ 355,437 $ 1,287,121 $2,830,389
Total interest-bearing liabilities ............... 1,871,111 295,057 86,417 167,399 2,419,984
----------- --------- --------- ----------- ----------
Interest rate sensitivity gap .................... (1,198,499) 220,162 269,020 1,119,722 410,405
=========== ========= ========= =========== ==========
Cumulative interest rate sensitivity gap ......... (1,198,499) (978,337) (709,317) 410,405
=========== ========= ========= ===========
Cumulative interest rate sensitivity gap as a
percent of total assets ......................... (39.8)% (32.5)% (23.6)% 13.6%
=========== ========= ========= ===========
</TABLE>
49
<PAGE>
- ----------------
In preparing the table above, certain assumptions have been made with regard to
loan prepayments and withdrawals of transaction account deposits. Loan
prepayment rates are based upon market consensus estimates for similar
securities. Money Market and savings account balances are assumed to reprice
with a lag of between three through twelve months to any change in market
rates, and are included in one year or less. NOW account deposits are assumed
to be non-interest sensitive and are included in one year or less. All other
assets and liabilities have been repriced based on the earlier of repricing or
contractual maturity. The above assumptions are annual percentages based on the
latest available assumptions and on remaining balances and should not be
regarded as indicative of the actual prepayments and withdrawals that may be
experienced by the Company. Moreover, certain shortcomings are inherent in the
analysis presented by the foregoing table. For example, although certain assets
and liabilities may have similar maturities or periods for repricing, they may
react in different degrees to changes in market interest rates. Also, interest
rates on certain types of assets and liabilities may fluctuate in advance of or
lag behind changes in market interest rates. Additionally, certain assets, such
as ARM loans, have features that restrict changes in interest rates on a
short-term basis and over the life of the assets.
In addition to the above, the Bank was committed to fund $175.7 million in
new loans and $16.0 million in construction loans-in-process at December 31,
1998. These loans and commitments are largely protected from interest rate
fluctuations because they are either adjustable rate loans or are fixed rate
loans which the Bank has obtained commitments to sell in the secondary market.
This relationship is not linear or consistent with other interest rate
sensitive assets and liabilities on the Company's balance sheet and management
uses computer modeling in its efforts to reduce the effects that interest rate
fluctuations have on income.
The current potential changes in future earnings relating to financial
assets and liabilities as of December 31, 1998 are as follows:
<TABLE>
<CAPTION>
POTENTIAL CHANGE IN FUTURE
EARNINGS
--------------------------
1999 2000
---------- -------------
<S> <C> <C>
Interest Rate Change in Basis Points:
+ 100 ............................. 1.84% (0.63)%
- 100 ............................. 5.59% 7.88%
</TABLE>
The most significant assumptions used in this simulation relate primarily
to the repricing rates of demand and other non-maturity deposits and loan
prepayment rates. Money market and savings deposit accounts are assumed to have
the following lag characteristics in an increasing rate environment: the Bank
will recognize a 25 basis point increase at nine months and an additional 25
basis point increase at twelve months following an increase in the market rate.
NOW accounts are considered to be non-interest rate sensitive in an increasing
rate environment. Money market, savings and NOW accounts are assumed to have
the following characteristics in a decreasing rate environment: the Bank will
recognize a 50 basis point decrease at three months and an additional 50 basis
point decrease at nine months following a decrease in the market rate. Loan
prepayment rates are based upon market consensus estimates for similar
securities. Certain shortcomings are inherent in the simulation presented by
the above table. For example, certain financial assets and liabilities may have
similar maturities or periods for repricing that may react in different degrees
to changes in market interest rates.
The potential changes in future earnings shown above are within the Bank's
interest rate risk policy limits.
50
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------
1998 1997
-------------- -------------
(RESTATED)
(AMOUNTS IN THOUSANDS EXCEPT
SHARE AND PER SHARE DATA)
<S> <C> <C>
ASSETS
Cash and amounts due from depository institutions ................................... $ 46,575 $ 81,990
Interest-bearing deposits in other financial institutions ........................... 114,471 154,279
Federal funds sold .................................................................. 1,120 7,665
---------- ----------
Cash and cash equivalents .......................................................... 162,166 243,934
Investments available-for-sale ...................................................... 722,913 397,558
Investments held to maturity (Market value of $6,422 and $241,790 at December 31,
1998 and 1997, respectively) ....................................................... 6,363 238,568
Loans receivable--net ............................................................... 1,959,300 1,873,625
Loans held for sale (Market value of $16,272 and $13,828 at December 31, 1998 and
1997, respectively) ................................................................ 16,000 13,565
Property and equipment--net ......................................................... 51,008 51,758
Other real estate owned-- net ....................................................... 2,463 7,841
Federal Home Loan Bank Stock ........................................................ 23,754 25,009
Goodwill--net ....................................................................... 11,961 9,741
Accrued interest receivable ......................................................... 15,378 15,396
Other assets ........................................................................ 36,426 22,661
---------- ----------
Total ............................................................................... $3,007,732 $2,899,656
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits ............................................................................ $2,304,855 $2,099,281
Federal Home Loan Bank advances and other borrowings ................................ 410,368 454,322
Securities sold under agreements to repurchase ...................................... 9,144 43,389
Senior debentures, net of unamortized issuance costs ................................ 27,518 33,839
Advances from borrowers for taxes and insurance ..................................... 7,677 21,707
Bank drafts payable ................................................................. 27,706 18,511
Other liabilities ................................................................... 22,062 21,395
---------- ----------
Total liabilities ................................................................... 2,809,330 2,692,444
---------- ----------
Commitments and contingencies
Shareholders' equity:
Preferred stock issued by pooled company, $7.13 stated value;
300,000 shares authorized: 111,660 shares issued and outstanding at December 31,
1997 ............................................................................... 796
Preferred stock $10.00 stated value; 10,000,000 shares authorized:
Series "C"--948,996 issued and outstanding at December 31, 1997 .................... 9,490
Common stock $.01 par value; 500,000,000 shares authorized;
47,370,265 and 44,883,357 shares issued and outstanding at December 31, 1998
and 1997, respectively ............................................................. 474 449
Additional paid-in capital .......................................................... 120,955 103,772
Retained earnings ................................................................... 75,423 94,244
Common stock purchased by:
Employee stock ownership plan ("ESOP") ............................................. (955)
Recognition and retention plans ("RRP") ............................................ (155) (117)
Accumulated other comprehensive income (loss), net of taxes ......................... 1,705 (467)
---------- ----------
Total shareholders' equity .......................................................... 198,402 207,212
---------- ----------
Total ............................................................................... $3,007,732 $2,899,656
========== ==========
</TABLE>
See notes to consolidated financial statements.
51
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------
1998 1997 1996
------------- ------------ -------------
(RESTATED) (RESTATED)
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans .................................. $ 153,846 $ 152,702 $ 144,914
Interest and dividends on investments ....................... 50,810 41,412 29,957
--------- --------- ---------
204,656 194,114 174,871
--------- --------- ---------
INTEREST EXPENSE:
Interest on deposits ........................................ 92,637 86,603 76,231
Interest on borrowings ...................................... 25,889 17,933 13,653
--------- --------- ---------
118,526 104,536 89,884
--------- --------- ---------
Net interest income ......................................... 86,130 89,578 84,987
Provision for loan losses ................................... 22,794 5,048 16,724
--------- --------- ---------
Net interest income after provision for loan losses ......... 63,336 84,530 68,263
--------- --------- ---------
NON-INTEREST INCOME:
Service charges on deposit accounts ......................... 10,836 9,763 8,474
Net gain on sales of loans .................................. 3,732 797 5,461
Net gain on sales of investments available-for-sale ......... 3,139 1,524 688
Other income ................................................ 7,562 6,356 4,958
--------- --------- ---------
25,269 18,440 19,581
--------- --------- ---------
OPERATING EXPENSES:
Employee compensation and benefits .......................... 40,175 38,600 32,868
Occupancy and equipment ..................................... 15,441 13,804 11,248
Professional fees ........................................... 3,103 4,145 4,131
Advertising and promotion ................................... 2,408 1,636 1,395
Communications .............................................. 2,786 1,969 1,749
Insurance ................................................... 2,024 1,435 11,656
Other real estate owned--net ................................ 1,505 2,868 1,944
Goodwill amortization ....................................... 920 759 616
Other ....................................................... 13,289 9,788 7,719
Merger expenses ............................................. 21,655 9,285
Litigation settlement ....................................... 3,000
--------- --------- ---------
103,306 84,289 76,326
--------- --------- ---------
(Loss) income before income taxes ........................... (14,701) 18,681 11,518
Income tax (benefit) expense ................................ (3,042) 7,224 4,122
--------- --------- ---------
NET (LOSS) INCOME ........................................... $ (11,659) $ 11,457 $ 7,396
========= ========= =========
(Loss) income applicable to common stock .................... $ (11,888) $ 10,693 $ 6,454
========= ========= =========
Per share data:
Basic (loss) earnings ....................................... $ (0.26) $ 0.24 $ 0.15
Diluted (loss) earnings ..................................... $ (0.26) $ 0.23 $ 0.15
Dividends ................................................... $ 0.22 $ 0.19 $ 0.12
--------- --------- ---------
Weighted average common shares and
common stock equivalents outstanding:
Basic ...................................................... 46,502 44,375 43,521
Diluted .................................................... 46,502 45,897 45,536
</TABLE>
See notes to consolidated financial statements.
52
<PAGE>
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------
1998 1997 1996
------------- ---------- ---------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C>
Net (loss) income ............................................ $ (11,659) $11,457 $7,396
Other comprehensive income, net of tax:
Unrealized gain on investments available-for-sale arising
during the period, net of taxes of $2,672, $1,629 and $895,
respectively .............................................. 4,087 2,554 1,337
Reclassification adjustment for amounts realized on sale of
investments included in net income, net of taxes of ($1,224),
($594) and ($268), respectively ............................. (1,915) (930) (420)
--------- ------- ------
Comprehensive (loss) income .................................. $ (9,487) $13,081 $8,313
========= ======= ======
</TABLE>
See notes to consolidated financial statements.
53
<PAGE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
ADDITIONAL
PREFERRED COMMON PAID-IN
STOCK STOCK CAPITAL
----------- -------- ------------
(AMOUNTS IN THOUSANDS EXCEPT SHARE
DATA)
<S> <C> <C> <C>
BALANCE, DECEMBER 31, 1995, AS RESTATED .......... $15,161 $ 427 $ 96,307
Exercise of warrants--268,126 shares ............. 3 1,039
Issuance of stock grants--9,000 shares ........... 32
Issuance of stock for Dividend Reinvestment
and Optional Stock Purchase Plan--2,586
shares .......................................... 13
Exercise of stock options--145,674 shares ........ 1 309
Conversion of preferred stock series "A" into
common stock--982,995 shares .................... (3,980) 10 3,970
Cash redemption of preferred stock series "A"..... (35)
Cash dividends--common stock .....................
Cash dividends paid by pooled companies--
common stock ....................................
Cash dividends--preferred stock ($56 paid by
pooled company) .................................
Amortization of deferred compensation--
ESOP & RRP ...................................... 733
Purchase of treasury stock at cost
by pooled company ............................... (15) (7,627)
Issuance of treasury stock by pooled company
for the purchase of PBS Financial Corp. ......... 13 6,613
Net income .......................................
Changes in accumulated other comprehensive
income, net of taxes ............................
------- ---- --------
BALANCE DECEMBER 31, 1996, AS RESTATED ........... 11,146 439 101,389
Exercise of stock options--1,212,582 shares ...... 12 3,256
Issuance of stock grants--3,000 shares ........... 27
Conversion of preferred stock series "C" into
common stock--133,306 shares .................... (860) 2 858
Cash dividends--common stock .....................
Cash dividends paid by pooled companies--
common stock ....................................
Cash dividends--preferred stock ($56 paid by
pooled company) .................................
Amortization of deferred compensation--
ESOP & RRP ...................................... 906
Purchase of treasury stock at cost
by pooled company ............................... (4) (2,664)
Net income .......................................
Changes in accumulated other comprehensive
income, net of taxes ............................
------- ---- --------
BALANCE DECEMBER 31, 1997, AS RESTATED ........... 10,286 449 103,772
Exercise of stock options and warrants--
952,061 shares .................................. 9 4,170
Purchase of common stock by 401(k) plan--
4,474 shares .................................... 43
Conversion of preferred stock series "C" into
common stock--1,463,347 shares .................. (9,440) 15 9,425
Cash redemption of preferred stock series "C"..... (50)
Conversion of pooled company preferred stock
into common stock--111,660 shares ............... (796) 1 795
Cash dividends--common stock .....................
Cash dividends--paid by pooled company--
common stock ....................................
Cash dividends-- preferred stock series "C"
($27 paid by pooled company).....................
Amortization of deferred compensation--
ESOP & RRP ...................................... 2,750
Net loss .........................................
Net income of pooled Company for three
months ended December 31, 1997 ..................
Changes in accumulated other comprehensive
income, net of taxes ............................
------- ----- --------
BALANCE DECEMBER 31, 1998 ........................ $ 474 $120,955
======= ===== ========
<CAPTION>
COMMON COMMON ACCUMULATED
STOCK STOCK COMPREHENSIVE
RETAINED PURCHASED PURCHASED (LOSS) INCOME,
EARNINGS ESOP RRP NET OF TAXES
------------ ----------- ----------- ---------------
(AMOUNTS IN THOUSANDS EXCEPT SHARE DATA)
<S> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1995, AS RESTATED .......... $90,042 $(2,509) $ (621) $ (3,008)
Exercise of warrants--268,126 shares .............
Issuance of stock grants--9,000 shares ...........
Issuance of stock for Dividend Reinvestment
and Optional Stock Purchase Plan--2,586
shares ..........................................
Exercise of stock options--145,674 shares ........
Conversion of preferred stock series "A" into
common stock--982,995 shares ....................
Cash redemption of preferred stock series "A".....
Cash dividends--common stock ..................... (847)
Cash dividends paid by pooled companies--
common stock .................................... (4,140)
Cash dividends--preferred stock ($56 paid by
pooled company) ................................. (942)
Amortization of deferred compensation--
ESOP & RRP ...................................... 740 460
Purchase of treasury stock at cost
by pooled company ...............................
Issuance of treasury stock by pooled company
for the purchase of PBS Financial Corp. .........
Net income ....................................... 7,396
Changes in accumulated other comprehensive
income, net of taxes ............................ 917
-------- ------ ------ --------
BALANCE DECEMBER 31, 1996, AS RESTATED ........... 91,509 (1,769) (161) (2,091)
Exercise of stock options--1,212,582 shares ......
Issuance of stock grants--3,000 shares ...........
Conversion of preferred stock series "C" into
common stock--133,306 shares ....................
Cash dividends--common stock ..................... (2,175)
Cash dividends paid by pooled companies--
common stock .................................... (5,783)
Cash dividends--preferred stock ($56 paid by
pooled company) ................................. (764)
Amortization of deferred compensation--
ESOP & RRP ...................................... 814 44
Purchase of treasury stock at cost
by pooled company ...............................
Net income ....................................... 11,457
Changes in accumulated other comprehensive
income, net of taxes ............................ 1,624
-------- ------ ------ --------
BALANCE DECEMBER 31, 1997, AS RESTATED ........... 94,244 (955) (117) (467)
Exercise of stock options and warrants--
952,061 shares ..................................
Purchase of common stock by 401(k) plan--
4,474 shares ....................................
Conversion of preferred stock series "C" into
common stock--1,463,347 shares ..................
Cash redemption of preferred stock series "C".....
Conversion of pooled company preferred stock
into common stock--111,660 shares ...............
Cash dividends--common stock ..................... (6,795)
Cash dividends--paid by pooled company--
common stock .................................... (2,669)
Cash dividends-- preferred stock series "C"
($27 paid by pooled company)..................... (229)
Amortization of deferred compensation--
ESOP & RRP ...................................... 955 (38)
Net loss ......................................... (11,659)
Net income of pooled Company for three
months ended December 31, 1997 .................. 2,531
Changes in accumulated other comprehensive
income, net of taxes ............................ 2,172
-------- ------ ------ --------
BALANCE DECEMBER 31, 1998 ........................ $75,423 $ (155) $ 1,705
======== ====== ====== ========
</TABLE>
See notes to consolidated financial statements.
54
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-------------
1998
-------------
(AMOUNTS IN
THOUSANDS)
<S> <C>
OPERATING ACTIVITIES:
Net (loss) income ........................................................................ $ (11,659)
Adjustments to reconcile net (loss) income to net cash provided by operating activities,
net of effects of purchase business combination:
Provision for loan losses ................................................................ 22,794
ESOP and RRP compensation expense ........................................................ 2,777
Depreciation and amortization ............................................................ 5,868
Deferred income taxes .................................................................... (4,380)
Amortization of deferred loan fees and costs, premiums, accretion of discounts and
other deferred yield items .............................................................. 5,680
Gain on sales of loans ................................................................... (3,732)
Loans originated for sale ................................................................ (37,015)
Purchase of loans for sale ............................................................... (56,044)
Sale of loans and loan participation certificates ........................................ 303,613
Purchase of trading securities ........................................................... (42,028)
Sale of trading securities ............................................................... 46,673
Net gain on sale of investments available-for-sale ....................................... (3,139)
Other--net ............................................................................... 5,219
----------
Net cash provided by operating activities ................................................ 234,627
----------
INVESTING ACTIVITIES:
Cash and cash equivalents paid in branch purchase, net ................................... (10,339)
Cash and cash equivalents acquired in purchase business combination--net ................. 2,635
Purchase of investments available-for-sale ............................................... (643,354)
Proceeds from sales of investments available-for-sale .................................... 370,684
Maturities and calls of investments held to maturity ..................................... 30,497
Purchases of investments held to maturity ................................................
Principal payments on securities ......................................................... 119,828
Loans purchased for investment ........................................................... (23,363)
Net increase in loans .................................................................... (194,350)
Purchases of property and equipment ...................................................... (15,023)
Proceeds from the sales of repossessed automobiles ....................................... 3,408
Other--net ............................................................................... 8,409
----------
Net cash used in investing activities .................................................... (350,968)
----------
FINANCING ACTIVITIES:
Net increase in demand deposits, NOW accounts, Money Market accounts and savings
accounts ................................................................................ 157,065
Net (decrease) increase in time deposits ................................................. (34,476)
Purchase of treasury stock, at cost ......................................................
(Decrease) increase in FHLB advances ..................................................... (59,601)
Proceeds from issuance of senior debentures, net of issuance costs .......................
Purchase of senior debentures ............................................................ (6,500)
Net (decrease) increase in securities sold under agreements to repurchase ................ (20,485)
Cash dividends--common and preferred ..................................................... (8,781)
Other--net ............................................................................... 4,172
----------
Net cash provided by financing activities ................................................ 31,394
----------
(Decrease) increase in cash and cash equivalents ......................................... (84,947)
Adjustments to reconcile for different year ends of pooled companies (see Note 2)
Net income for three months ended December 31, 1997 ..................................... 2,531
Cash dividends paid by pooled companies ................................................. (912)
Other cash flows--net ................................................................... 1,560
Cash and cash equivalents at beginning of year ........................................... 243,934
----------
Cash and cash equivalents at end of year ................................................. $ 162,166
==========
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1997 1996
------------- -------------
(RESTATED) (RESTATED)
(AMOUNTS IN THOUSANDS)
<S> <C> <C>
OPERATING ACTIVITIES:
Net (loss) income ........................................................................ $ 11,457 $ 7,396
Adjustments to reconcile net (loss) income to net cash provided by operating activities,
net of effects of purchase business combination:
Provision for loan losses ................................................................ 5,048 16,724
ESOP and RRP compensation expense ........................................................ 1,764 1,933
Depreciation and amortization ............................................................ 5,816 4,297
Deferred income taxes .................................................................... 4,784 (5,214)
Amortization of deferred loan fees and costs, premiums, accretion of discounts and
other deferred yield items .............................................................. (2,006) (1,108)
Gain on sales of loans ................................................................... (406) (4,547)
Loans originated for sale ................................................................ (17,166) (10,372)
Purchase of loans for sale ............................................................... (7,975) (7,773)
Sale of loans and loan participation certificates ........................................ 73,284 207,341
Purchase of trading securities ........................................................... (63,073)
Sale of trading securities ............................................................... 63,277
Net gain on sale of investments available-for-sale ....................................... (1,524) (688)
Other--net ............................................................................... (21,941) 6,485
----------- -----------
Net cash provided by operating activities ................................................ 51,339 214,474
----------- -----------
INVESTING ACTIVITIES:
Cash and cash equivalents paid in branch purchase, net ...................................
Cash and cash equivalents acquired in purchase business combination--net ................. 25,108
Purchase of investments available-for-sale ............................................... (460,075) (494,925)
Proceeds from sales of investments available-for-sale .................................... 296,484 371,007
Maturities and calls of investments held to maturity ..................................... 60,450 143,824
Purchases of investments held to maturity ................................................ (165,550) (27,773)
Principal payments on securities ......................................................... 61,494 37,830
Loans purchased for investment ........................................................... (59,361) (5,726)
Net increase in loans .................................................................... (213,935) (334,178)
Purchases of property and equipment ...................................................... (15,030) (10,058)
Proceeds from the sales of repossessed automobiles ....................................... 17,432 11,928
Other--net ............................................................................... 1,123 3,704
----------- -----------
Net cash used in investing activities .................................................... (476,968) (279,259)
----------- -----------
FINANCING ACTIVITIES:
Net increase in demand deposits, NOW accounts, Money Market accounts and savings
accounts ................................................................................ 55,183 102,581
Net (decrease) increase in time deposits ................................................. 80,265 90,466
Purchase of treasury stock, at cost ...................................................... (2,668) (7,642)
(Decrease) increase in FHLB advances ..................................................... 218,442 33,442
Proceeds from issuance of senior debentures, net of issuance costs ....................... 33,778
Purchase of senior debentures ............................................................
Net (decrease) increase in securities sold under agreements to repurchase ................ 18,776 (8,427)
Cash dividends--common and preferred ..................................................... (8,722) (5,929)
Other--net ............................................................................... 3,767 5,345
----------- -----------
Net cash provided by financing activities ................................................ 398,821 209,836
----------- -----------
(Decrease) increase in cash and cash equivalents ......................................... (26,808) 145,051
Adjustments to reconcile for different year ends of pooled companies (see Note 2)
Net income for three months ended December 31, 1997 .....................................
Cash dividends paid by pooled companies .................................................
Other cash flows--net ...................................................................
Cash and cash equivalents at beginning of year ........................................... 270,742 125,691
----------- -----------
Cash and cash equivalents at end of year ................................................. $ 243,934 $ 270,742
=========== ===========
</TABLE>
55
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS--(CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------
1998 1997 1996
---------- ------------ -----------
(RESTATED) (RESTATED)
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for income taxes ....................................... $ 5,492 $ 2,914 $10,242
Cash paid for interest on deposits and other borrowings .......... 123,995 103,506 89,007
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING ACTIVITIES:
Transfer to available for sale securities ........................ 193,493 39,500
Repossessed automobiles acquired in settlement of loans .......... 6,084 15,452 21,122
Real estate acquired in settlement of loans ...................... 6,982 10,833 4,845
Decrease in unrealized loss on available-for-sale securities ..... 2,172 1,624 917
SUPPLEMENTAL SCHEDULE OF NON-CASH FINANCING ACTIVITIES:
Redemption of convertible preferred stock ........................ 9,425 3,980
Redemption of convertible preferred stock by pooled company ...... 796
</TABLE>
See notes to consolidated financial statements.
56
<PAGE>
REPUBLIC SECURITY FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Republic Security Financial Corporation (the "Company" or "RSFC") is a
commercial bank holding company, the principal business of which is the
operation of a commercial bank through Republic Security Bank (the "Bank"), its
wholly owned subsidiary, a state chartered commercial bank. The Bank is a
member of the Federal Reserve Bank and the Federal Home Loan Bank System
("FHLB"). Its deposits are insured by the FDIC up to applicable limits. The
Bank has 94 full service branches, (67 traditional branches and 27 in-store
supermarket branches) of which 46 are located in Palm Beach county, 25 in
Broward county, 11 in Dade county, 4 in Lee county, 2 in Martin and Marion
counties and one each in Orange, Alachua, Hillsborough, and St Lucie counties.
The Bank's main business activities are attracting deposits, originating loans,
making investments and servicing loans for the Bank and for others.
In preparing the consolidated financial statements in conformity with
general accepted accounting principles, management is required to make use of
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates. The consolidated financial statements include the accounts of the
Company and its wholly owned subsidiary, and have been retroactively restated
to include the accounts and results of operations of First Palm Beach Bancorp,
Inc. ("FPBB"), Unifirst FSB ("Unifirst"), County Financial Corporation ("CFC")
and Family Bank ("Family") which mergers, accounted for as poolings of
interests, were consummated on October 29, 1998, July 2, 1998, December 2, 1997
and June 30, 1997, respectively (See Note 2). The statement of financial
condition of RSFC as of December 1997 is combined with the statements of
financial condition of FPBB and Unifirst as of September 30, 1997. The
statements of operations of RSFC for the years ended December 31, 1997 and 1996
are combined with the statements of operations of FPBB and Unifirst for the
years ended September 30, 1997 and 1996, respectively.
Due to the difference in year end reporting periods, the net income for
the three months ended December 31, 1997, for FPBB and Unifirst, appears as an
adjustment in the consolidated statement of shareholders' equity.
The following is a summary of the significant accounting policies:
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Republic
Security Financial Corporation and its wholly-owned subsidiary, Republic
Security Bank. All significant intercompany balances and transactions have been
eliminated in consolidation.
STATEMENTS OF CASH FLOWS
For purposes of reporting cash flows, cash and cash equivalents include
cash on hand, amounts due from banks, federal funds sold and interest-bearing
deposits in other financial institutions. Assets of $38.6 million and
liabilities of $36.3 million were acquired in connection with the purchase of
Newberry Bank on December 11, 1998. In addition, the Bank acquired assets of
$28.9 million and liabilities of $19.3 million related to the branches
purchased. Assets of approximately $62.0 million were acquired and
approximately $57.0 million of liabilities were assumed related to the merger
of Banyan Bank during the year ended December 31, 1996 (see Note 2). Redemption
of the Company's
57
<PAGE>
REPUBLIC SECURITY FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
7% cumulative convertible preferred stock, Series "C" resulted in the issuance
of 1,463,347 shares of the Company's common stock in exchange for 944,094
shares of the Series "C" preferred stock during the year ended December 31,
1998. In addition, a pooled company (Unifirst) redeemed 111,660 shares of
preferred stock in exchange for 111,660 shares of common stock during the year
ended December 31, 1998. As a result of the redemption of the Company's 7.5%
cumulative convertible preferred stock, Series "A", 982,995 shares of the
Company's common stock were issued in exchange for 398,000 shares of the Series
"A" preferred stock during the year ended December 31, 1996.
INVESTMENTS
Management determines the appropriate classification of debt and equity
securities at the time of purchase. Debt securities are classified as held to
maturity when the Company has the positive intent and ability to hold the
securities to maturity. Held to maturity securities are stated at amortized
cost. Securities classified as available-for-sale are to be held for indefinite
periods of time and may be sold in response to movements in market interest
rates, changes in the maturity mix of bank assets and liabilities or demand on
liquidity. Securities classified as available-for-sale are carried at fair
value. Unrealized gains and losses on these securities are excluded from
earnings and are reported as a component of other comprehensive income, net of
income taxes.
Interest income on debt securities is included in income using the level
yield method. Gains and losses on sales of securities are determined on a
specific identification basis.
LOANS RECEIVABLE-NET AND LOANS HELD FOR SALE
Loans receivable-net are stated at the principal amount outstanding and
are net of unearned purchased premiums or discounts, deferred loan origination
fees and costs, and the allowance for loan losses. Certain loans are held for
sale and are carried at the lower of cost or market.
Interest on loans is accrued as earned. Amortization of premiums and
accretion of discounts are recognized as adjustments to interest income over
the lives of the related loans. The Bank defers substantially all loan fees and
direct costs associated with loan originations. Deferred loan fees and costs
are amortized as a yield adjustment over the lives of the loans.
The Bank services virtually all of its loan portfolio. As of December 31,
1998, the Bank was also servicing $411.8 million in mortgage loans and mortgage
loan participations for other lenders. The Bank services both loans and loan
participations it has sold to others, as well as loans pursuant to the purchase
of servicing rights.
NON-ACCRUAL LOANS
Generally, loans contractually past due 90 days or more are placed on
non-accrual and any previously accrued and unpaid interest is charged against
interest income. Loans remain on non-accrual status until the obligation is
brought current and has performed in accordance with its contractual terms for
a reasonable period of time. In addition, accrual of interest on loans less
than 90 days past due is discontinued when, in the opinion of management,
reasonable doubt exists as to the full, timely collection of interest or
principal. Interest income, at the effective rate of the loan, is recognized
when cash is received on impaired loans.
58
<PAGE>
REPUBLIC SECURITY FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is established by provision for loan losses
charged against earnings. Loans deemed to be uncollectible are charged against
the allowance for loan losses and subsequent recoveries, if any, are credited
to the allowance.
The allowance for credit losses is maintained at a level believed adequate
by management to absorb estimated probable credit losses. Management's periodic
evaluation of the adequacy of the allowance is based on the Company's past loan
loss experience, known and inherent risks in the portfolio, adverse situations
that may affect the borrower's ability to repay (including the timing of future
payments), the estimated value of any underlying collateral, composition of the
loan portfolio, current economic conditions and other relevant factors. This
evaluation is inherently subjective as it requires material estimates including
the amounts and timing of future cash flows expected to be received on impaired
loans that may be susceptible to significant change.
All non-accrual loans, excluding smaller balance, homogeneous loans
(defined as consumer loans less than $100,000 and residential mortgage loans),
are considered to be impaired. In addition, management may determine a
performing loan to be impaired if, based on current information and events, it
is probable that the Bank will be unable to collect all amounts due according
to the contractual terms of the loan agreement. Impaired loans are measured
based on discounted cash flows using the loan's effective interest rate or the
fair value of the collateral for collateral dependent loans.
In accordance with the Bank's classification policy, impaired loan amounts
in excess of the fair market value of the underlying collateral for collateral
dependent loans or the net present value of future cash flows are charged off
against the allowance for loan losses.
ADVERTISING
Advertising expenses are recognized as they are incurred.
PROPERTY AND EQUIPMENT
Property and equipment is carried at cost less accumulated depreciation.
Depreciation is computed using the straight-line method over the estimated
useful lives of the assets ranging from five to twelve years for furniture and
equipment and twenty five years for office buildings. Leasehold improvements
are amortized over the lesser of the remaining lease term or the estimated
useful lives of the assets. Repairs and maintenance costs are charged to
expense as incurred and gains or losses on disposals are credited or charged to
earnings.
OTHER REAL ESTATE OWNED
A loan is classified as foreclosure when the Company has taken possession
of the collateral regardless of whether formal foreclosure proceedings take
place. Property acquired by foreclosure, or deed in lieu of foreclosure, is
recorded at the estimated fair value less estimated disposal costs at the time
of foreclosure. Costs related to the development and improvement of the
property are capitalized, if recoverable, whereas costs related to maintaining
the property, net of income received, are charged to other real estate owned
expense. In addition, any subsequent reductions in the valuation of the
property is included in other real estate owned expense in the consolidated
statements of operations.
59
<PAGE>
REPUBLIC SECURITY FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
The Bank follows the practice of reducing the carrying value of individual
properties in other real estate owned for any amounts in excess of the fair
value of properties less estimated disposal costs. The amount the Bank will
ultimately recover from other real estate owned could differ from the amounts
used in determining the carrying value of the property due to future market
factors beyond the Bank's control. For the years ended December 31, 1998, 1997
and 1996, provisions for other real estate losses in the amounts of $437,800,
$1.8 million and $978,000, respectively, were recorded and included in other
real estate owned expense in the consolidated statements of operations.
GOODWILL
The Company assesses long lived assets and related goodwill for impairment
under FASB Statement No. 121. "ACCOUNTING FOR THE IMPAIRMENT OF LONG LIVED
ASSETS AND FOR LONG LIVED ASSETS TO BE DISPOSED OF" and APB Opinion No. 17.
"INTANGIBLE ASSETS". Accordingly, goodwill associated with assets acquired in a
purchase business combination is included in impairment evaluations when events
or circumstances exist that indicate the carrying amount of those assets may
not be recoverable. The Company amortizes goodwill over 7 to 15 years using the
straight-line method. Accumulated amortization totaled $2.6 million and $1.6
million at December 31, 1998 and 1997, respectively.
MERGER RELATED EXPENSES
The Company records transaction-related expenses in conjunction with its
major business combinations. Transaction-related expenses are comprised of
three major categories: employee severance costs, the write down of duplicate
or excess premises and equipment, and other incremental expenses related to
effecting a business combination.
The Company recognizes a liability for the cost of employee termination
benefits that are provided to involuntarily terminated employees, if all of the
following conditions exist: (i) management has the appropriate level of
authority to involuntarily terminate employees, (ii) management approves and
commits the enterprise to the plan of termination, (iii) management establishes
the benefits that current employees will receive upon termination, (iv) the
benefit arrangement has been communicated to employees, (v) the communication
of the benefit arrangement includes sufficient detail to enable employees to
determine the type and amount of benefits they will receive if they are
terminated, (vi) the plan of termination specifically identifies the number of
employees to be terminated, their job classifications or functions, and their
locations, and (vii) the period of time to complete the plan of termination
indicates that significant changes to the plan of termination are not likely.
Upon consummation of a business combination, the Company specifically
identifies duplicate or excess facilities in the combined operations. Duplicate
or excess facilities fall into two categories: facilities owned by the Company
and facilities leased by the Company. Duplicate or excess facilities owned by
the Company are recorded at the lower of cost or fair value. The loss estimated
and recorded while these facilities remain in service does not include the
portion of the cost that is properly allocable to anticipated future service of
the facility. Depreciation is recorded on these facilities while they remain in
service. The loss estimated and recorded on leased duplicate or excess
facilities represents either costs to be incurred by the Company under
contractual obligations or represents penalties that will be incurred to cancel
the contractual obligations. Lease payments made on these facilities while they
remain in service are included in occupancy and equipment expense and are not
included in transaction-related expenses.
60
<PAGE>
REPUBLIC SECURITY FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
The other incremental expenses related to effecting a business combination
consist of both period costs and accrued contract exit fees for duplicate
services provided. The period costs include actual fees of professional
services firms (legal, underwriting, accounting, etc.) that were incurred in
conjunction with the combination, and one-time, nonrecurring incremental costs
associated with combining the entities which are being expensed as incurred.
The liability for contract exit fees for duplicate services provided is
recognized when Company management makes the decision to terminate such
contracts (See Note 2).
INCOME PER COMMON SHARE
Basic and diluted earnings per share is calculated in accordance with FASB
Statement No. 128, "EARNINGS PER SHARE". All earnings per share amounts for all
periods have been presented, and where appropriate, restated to conform to the
requirements of Statement No. 128.
STOCK BASED COMPENSATION
The Company grants stock options for a fixed number of shares to employees
and directors with an exercise price equal to the fair value of the shares at
the date of grant. The Company accounts for stock option grants in accordance
with APB Opinion No. 25, "ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES" (APB 25)
and related interpretations because the Company believes the alternative fair
value accounting provided for under FASB Statement No. 123, "ACCOUNTING FOR
STOCK-BASED COMPENSATION", requires the use of option valuation models that
were not developed for use in valuing employee stock options. Under APB 25,
because the exercise price of the Company's employee stock options equals the
market price of the underlying stock on the date of grant, no compensation
expense is recognized.
RECLASSIFICATION
Certain amounts presented in the consolidated financial statements for
prior periods have been reclassified for comparative purposes.
NEW ACCOUNTING PRONOUNCEMENTS
In 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130 "REPORTING COMPREHENSIVE INCOME" (SFAS
No. 130) which establishes standards for reporting and display of comprehensive
income and its components (revenues, expenses, gains and losses) in a full set
of general-purpose financial statements. SFAS No. 130 requires all items
recognized under accounting standards as components of comprehensive income be
reported in a financial statement that is displayed with the same prominence as
other financial statements. SFAS No. 130 also requires that an enterprise (a)
classify items of other comprehensive income by their nature in a financial
statement and (b) display the accumulated balance of other comprehensive income
separately from retained earnings and additional paid-in capital in the equity
section of a statement of financial position. SFAS No. 130 is effective for
fiscal years beginning after December 15, 1997. During 1998, the Company
adopted the requirements of SFAS No. 130. The adoption of SFAS No. 130 did not
have a material impact on the financial condition, operations or cash flows of
the Company.
The Financial Accounting Standards Board issued Statement of Accounting
Standards No. 131 "DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED
INFORMATION" (SFAS No. 131) in 1997. SFAS
61
<PAGE>
REPUBLIC SECURITY FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
No. 131 establishes standards for public companies to report information about
operating segments in annual financial statements and interim financial reports
to shareholders. SFAS No. 131 also establishes standards for related
disclosures about products and services, geographic areas, and major customers.
The Company is organized based on the geographic areas in which it conducts
business. Since these operating segments are all located in South Florida and
meet the criteria for aggregation contained in SFAS 131, information is not
presented for each segment.
In June 1998, the FASB issued SFAS No. 133 "ACCOUNTING FOR DERIVATIVE
INSTRUMENTS AND HEDGING ACTIVITIES" which is effective for fiscal years
beginning after June 15, 1999. This statement establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts and for hedging activities. It requires
that an entity recognize all derivatives as either assets or liabilities in the
statement of financial condition and measure those instruments at fair value.
This statement amends SFAS No. 52 "FOREIGN CURRENCY TRANSLATION", and
supersedes SFAS No. 80 "ACCOUNTING FOR FUTURE CONTRACTS", No. 105 "DISCLOSURE
OF INFORMATION ABOUT FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK AND
FINANCIAL INSTRUMENTS WITH CONCENTRATION OF CREDIT RISK", No. 107 "DISCLOSURES
ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS", and No. 119 "DISCLOSURE ABOUT
DERIVATIVE FINANCIAL INSTRUMENTS". The Company plans to adopt SFAS No. 133 in
fiscal 2000; however, the impact of the adoption of this statement will not
have a material impact on the financial condition, operations or cash flows of
the Company.
2. MERGERS, BRANCH ACQUISITIONS AND POTENTIAL MERGERS
On December 11, 1998 RSFC acquired Newberry Bank ("Newberry"), a Florida
state commercial bank headquartered in Newberry, Florida. Newberry had $38.9
million in assets, $28.7 million in net loans and $34.8 million in deposits.
The purchase price totaled approximately $5.1 million and was paid in the form
of cash. The transaction was accounted for as a purchase business combination.
All outstanding shares of common stock were purchased and approximately $3
million in goodwill was recorded. Operations of Newberry are included since the
date of acquisition.
On November 20, 1998 RSFC acquired the Florida branch offices of Household
Bank, FSB ("Household"), a wholly owned subsidiary of Household International,
Inc. The Bank acquired a total of $28.3 million in net loans and $19 million in
deposits. The Bank paid a purchase price equal to 4% of the total outstanding
deposit balance at the closing date. The transaction was accounted for as a
purchase and approximately $1.0 million was recorded in deposit intangibles
which is being amortized over seven years using the straight-line method.
On October 29, 1998, RSFC acquired FPBB, which was merged into RSFC. RSFC
issued 21,731,248 shares of its common stock in exchange for all of the
outstanding common stock of FPBB. The business combination was accounted for as
a pooling of interests and resulted in RSFC acquiring assets of approximately
$1.8 billion, including total loans of $1.1 billion, total deposits of $1.3
billion and equity of $128 million. All information herein has been
retroactively restated to include the accounts and results of operations of
FPBB. Non-recurring merger related costs and one-time charges recorded in
connection with the merger of FPBB totaled approximately $19.5 million for the
year ended December 31, 1998. These costs consisted primarily of $6.0 million
in professional fees, $4.0 million in fixed asset write-downs related to
duplicate and excess premises, $7.1 million in employee severance payments and
stay bonuses associated with employees engaged in activities that will be
exited, $1.0 million in costs associated with branch consolidations and $1.4
million in other expenses
62
<PAGE>
REPUBLIC SECURITY FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
2. MERGERS, BRANCH ACQUISITIONS AND POTENTIAL MERGERS--(CONTINUED)
related to the transaction. In addition, a $4.0 million adjustment to the
allowance for loan losses was recorded to conform FPBB's accounting and credit
policies regarding loan valuation to those of the Bank's. This adjustment is
included as a component of the provision for loan losses. Approximately 118
positions were or are expected to be eliminated due to duplication. At December
31, 1998, the Bank had $5.8 million remaining in accrued merger expenses.
On September 14, 1998 RSFC entered into a definitive agreement with
Northside Bank of Tampa ("Northside") whereby Northside, headquartered in
Tampa, Florida merged into the Bank, in a stock-for-stock transaction accounted
for as a pooling-of-interests. At December 31, 1998 Northside had assets of
$66.6 million, net loans of $36.9 million, deposits of $56.9 million and total
equity of $8.9 million. Under the terms of the agreement, shareholders of
Northside received 3.64 shares of RSFC's common stock for each share of
Northside common stock on February 26, 1999. RSFC issued approximately 2.5
million shares of its common stock for all of the outstanding shares of
Northside. The transaction received shareholder approval from Northside and was
closed on February 26, 1999.
On July 2, 1998, RSFC acquired Unifirst, a federally chartered savings
bank headquartered in Hollywood, Florida. Upon consummation of the merger,
Unifirst was merged into the Bank. Unifirst had two branch locations in Broward
County, Florida. RSFC issued 1.2 million shares of its common stock in exchange
for all outstanding common stock of Unifirst. The business combination was
accounted for as a pooling of interests and resulted in the Bank acquiring
assets of $141.9 million, liabilities of $132.7 million and equity of $9.2
million. All information contained herein has been retroactively restated to
include the accounts and results of operations of Unifirst.
Non-recurring costs of approximately $2.1 million were recorded in
connection with the merger of Unifirst for the year ended December 31, 1998.
These costs consist primarily of electronic data processing and personnel costs
to combine the operations, employee severance payments, employment contract
buyouts and professional fees. In addition, management recorded an adjustment
of approximately $1.2 million to the allowance for loan losses to conform
Unifirst's accounting and credit policies regarding loan valuations to those of
the Bank. This adjustment is a component of the provision for loan losses.
On December 2, 1997, the Company acquired CFC, a commercial bank holding
company headquartered in North Miami Beach, Florida. CFC's wholly-owned banking
subsidiary, County National Bank of South Florida ("County") was merged into
the Bank on December 2, 1997. County had 14 branch locations in Northern Dade,
Broward and Palm Beach counties. RSFC issued 6.2 million shares of its common
stock in exchange for all of the outstanding common stock and stock options of
CFC. The business combination was accounted for as a pooling of interests and
resulted in the Bank acquiring assets of $255.0 million, liabilities of $230.6
million and equity of $24.4 million. All information contained herein has been
retroactively restated to include the accounts and results of operations of
CFC.
On June 30, 1997, the Company acquired Family, a commercial bank
headquartered in Hallandale, Florida, with seven branch locations in Broward
County, Florida. Family was merged into the Bank on June 30, 1997. RSFC issued
8.3 million shares of its common stock in exchange for all outstanding common
stock of Family. The business combination was accounted for as a pooling-of-
interests and resulted in the Bank acquiring assets of $256.0 million,
liabilities of $234.2 million and equity of $21.8 million. All information
contained herein has been retroactively restated to include the accounts and
results of operations of Family Bank.
63
<PAGE>
REPUBLIC SECURITY FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
2. MERGERS, BRANCH ACQUISITIONS AND POTENTIAL MERGERS--(CONTINUED)
For the year ended December 31, 1997, non-recurring merger expenses
included in operating expenses in the consolidated statements of operations of
$9.3 million consists of severance charges, charges associated with the
disposal of certain duplicate assets, professional fees, OREO writedowns and
other fees and expenses related to the mergers with Family and CFC. In
addition, merger related provisions for loan losses to conform Family and
County's accounting and credit policies regarding loan valuation to those of
the Bank amounted to $650,000.
The results of operations previously reported by the separate companies
and the combined amounts presented in the accompanying consolidated statements
of operations are summarized below.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------
1998 1997 1996
------------- ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C>
INTEREST INCOME AND NON-INTEREST INCOME:
RSFC .................................. $ 121,726 $ 48,419 $ 29,480
Family(1) ............................. 10,770 19,690
CFC(1) ................................ 16,494 20,995
Unifirst(2) ........................... 5,039 10,940 10,686
FPBB(3) ............................... 103,160 125,931 113,601
--------- -------- --------
Combined .............................. $ 229,925 $212,554 $194,452
========= ======== ========
NET (LOSS) INCOME:
RSFC(4) ............................... $ (15,293) $ (3,727) $ 2,400
Family(1) ............................. 2,541 4,440
CFC(1) ................................ 2,992 924
Unifirst(2) ........................... 367 295 (917)
FPBB(3) ............................... 3,267 9,356 549
--------- -------- --------
Combined .............................. $ (11,659) $ 11,457 $ 7,396
========= ======== ========
</TABLE>
- ----------------
(1) The amount reported for Family for the year ended December 31, 1997
represents the results for the six months ended June 30, 1997 prior to the
merger. The amount reported for CFC for the year ended December 31, 1997
represents the results for the nine months of earnings realized prior to
the merger.
(2) The amounts reported for Unifirst, included in the year ended December 31,
1998 represents the results for the six months ended June 30, 1998, prior
to the merger. The years ended December 31, 1997 and 1996, represent the
results for the twelve months ended September 30, 1997 and 1996,
respectively.
(3) The amounts reported for FPBB, included in the year ended December 31, 1998
represents the results for the nine months ended September 30, 1998, prior
to the merger. The years ended December 31, 1997 and 1996, represent the
results of the twelve months ended September 30, 1997 and 1996,
respectively.
(4) The years ended December 31, 1998 and 1997 include the merger related and
one-time expenses of $22.6 million, net of taxes and $6.5 million, net of
taxes, respectively, related to the Unifirst, FPBB, CFC and Family
acquisitions.
Securities held by Family with a book value of approximately $39.4 million
and a market value of approximately $39.5 million at June 30, 1997 were
transferred as of the date of acquisition from held to maturity to
available-for-sale to maintain RSFC's existing interest rate risk position for
the combined company.
64
<PAGE>
REPUBLIC SECURITY FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
2. MERGERS, BRANCH ACQUISITIONS AND POTENTIAL MERGERS--(CONTINUED)
Due to the difference in year end reporting periods, the net income for
the three months ended December 31, 1997, for FPBB and Unifirst, appears as an
adjustment in the consolidated statement of shareholders' equity, and consists
of the following:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
DECEMBER 31,
1997
---------------
(IN THOUSANDS)
<S> <C>
REVENUES:
Unifirst ........... $ 2,726
FPBB ............... 35,870
-------
Combined ........... $38,596
EXPENSES:
Unifirst ........... 2,509
FPBB ............... 33,556
-------
Combined ........... $36,065
-------
Net Income ......... $ 2,531
=======
</TABLE>
3. INVESTMENTS
The following is a summary of available-for-sale and held to maturity
securities at December 31, 1998, 1997, and 1996:
AVAILABLE-FOR-SALE
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
----------- ------------ ------------ ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
U.S. Government and agency securities ......... $ 13,701 $ 167 $ 13,868
Corporate and other debt securities ........... 151,324 336 $1,253 150,407
Mortgage-backed securities .................... 495,138 4,040 1,426 497,752
Other securities .............................. 59,991 912 17 60,886
-------- ------ ------ --------
Total at December 31, 1998 .................... $720,154 $5,455 $2,696 $722,913
======== ====== ====== ========
U.S. Government and agency securities ......... $ 82,400 $ 370 $ 87 $ 82,683
Corporate and other debt securities ........... 38,102 500 69 38,533
Mortgage-backed securities .................... 273,324 1,115 2,728 271,711
Other securities .............................. 4,593 38 4,631
-------- ------ ------ --------
Total at December 31, 1997, restated .......... $398,419 $2,023 $2,884 $397,558
======== ====== ====== ========
U.S. Government and agency securities ......... $ 78,684 $ 343 $ 213 $ 78,814
Corporate and other debt securities ........... 3,543 3,543
Mortgage-backed securities .................... 169,733 238 3,888 166,083
Other securities .............................. 200 200
-------- ------ ------ --------
Total at December 31, 1996, restated .......... $252,160 $ 581 $4,101 $248,640
======== ====== ====== ========
</TABLE>
65
<PAGE>
REPUBLIC SECURITY FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
3. INVESTMENTS--(CONTINUED)
HELD TO MATURITY
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
----------- ------------ ------------ -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
U.S. Government and agency securities ......... $ 5,519 $ 59 $ 5,578
Other securities .............................. 844 844
-------- ------ ---- --------
Total at December 31, 1998 .................... $ 6,363 $ 59 $ 6,422
======== ====== ==== ========
U.S. Government and agency securities ......... $ 24,499 $ 192 $ 8 $ 24,683
Mortgage-backed securities .................... 213,303 3,274 236 216,341
Other securities .............................. 766 766
-------- ------ ---- --------
Total at December 31, 1997, restated .......... $238,568 $3,466 $244 $241,790
======== ====== ==== ========
U.S. Government and agency securities ......... $ 31,882 $ 209 $ 71 $ 32,020
State and municipal securities ................ 16,818 112 32 16,898
Mortgage-backed securities .................... 130,006 1,840 724 131,122
Other securities .............................. 500 500
-------- ------ ---- --------
Total at December 31, 1996, restated .......... $179,206 $2,161 $827 $180,540
======== ====== ==== ========
</TABLE>
The amortized cost and estimated market value of all investments held to
maturity at December 31, 1998 by contractual maturity are shown below:
HELD TO MATURITY
<TABLE>
<CAPTION>
WEIGHTED AMORTIZED MARKET
AVERAGE RATE COST VALUE
-------------- ----------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Due in 1 year or less ...................... 4.76% $3,569 $3,591
Due after 1 through 5 years ................ 5.03% 2,519 2,556
Due after 5 years through 10 years ......... 7.44% 275 275
---- ------ ------
Total ...................................... 4.98% $6,363 $6,422
==== ====== ======
</TABLE>
66
<PAGE>
REPUBLIC SECURITY FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
3. INVESTMENTS--(CONTINUED)
The amortized cost and estimated market value of all investments
available-for-sale at December 31, 1998 by contractual maturity are shown
below:
AVAILABLE-FOR-SALE
<TABLE>
<CAPTION>
WEIGHTED AMORTIZED MARKET
AVERAGE RATE COST VALUE
-------------- ----------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Due in 1 year or less ...................... 4.73% $ 11,083 $ 11,167
Due after 1 through 5 years ................ 4.28% 21,572 22,110
Due after 5 years through 10 years ......... 6.56% 47,998 47,473
Due after 10 years ......................... 6.01% 127,265 127,313
---- -------- --------
207,918 208,063
---- -------- --------
Equity securities .......................... 5.26% 17,098 17,098
Mortgage-backed securities ................. 6.16% 495,138 497,752
---- -------- --------
Total at December 31, 1998 ................. 6.06% $720,154 $722,913
==== ======== ========
</TABLE>
Actual maturities may differ from those presented in the tables due to
prepayments of the underlying assets or call features built into the
investment.
During the quarter ended June 30, 1998, First Bank of Florida ("First
Bank"), FPBB's wholly owned subsidiary, transferred $193 million of securities
held to maturity to available-for-sale. The transfer of these investments was
based on management's decision to create future liquidity and allow for more
flexibility in the portfolio.
At December 31, 1998 and 1997 securities with a book value of
approximately $94.5 million and $113.0 million, respectively, were pledged to
collateralize Federal Home Loan Bank advances, repurchase agreements, public
deposits and other items.
Gross realized gains on securities available-for-sale amounted to $3.7
million, $1.5 million, and $1.3 million for the years ended December 31, 1998,
1997 and 1996, respectively. Gross realized losses on securities
available-for-sale amounted to $31,000, $220,000 and $603,000 for the years
ending December 31, 1998, 1997 and 1996, respectively.
Gross realized gains on trading securities amounted to $234,000, $316,000
and $0 for the years ended December 31, 1998, 1997 and 1996, respectively.
Gross realized losses on trading securities amounted to $737,000, $22,000 and
$0 for the years ended December 31, 1998, 1997 and 1996, respectively.
67
<PAGE>
REPUBLIC SECURITY FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
4. LOANS RECEIVABLE--NET
Loans receivable--net is summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1998 1997
-------------- -------------
(RESTATED)
(IN THOUSANDS)
<S> <C> <C>
Residential mortgage ............................ $1,143,803 $1,111,372
Commercial mortgage ............................. 398,933 334,019
Real estate construction ........................ 113,662 187,593
Installment loans to individuals ................ 256,707 245,405
Commercial and financial ........................ 114,170 76,945
---------- ----------
Total loans ................................... 2,027,275 1,955,334
---------- ----------
Deferred loan fees .............................. 3,627 6,698
Undisbursed portion of loans-in-process ......... (45,559) (75,261)
Allowance for loan losses ....................... (26,043) (13,146)
---------- ----------
Loans receivable--net ........................... $1,959,300 $1,873,625
========== ==========
</TABLE>
5. NON-PERFORMING LOANS AND ALLOWANCE FOR LOAN LOSSES
At December 31, 1998 and 1997, the Bank had $13.4 million and $14.7
million, respectively, in non-performing loans. Interest income not recognized
on non-performing loans was $779,000, $1.2 million and $1.8 million during the
years ended December 31, 1998, 1997 and 1996, respectively.
At December 31, 1998 and 1997, the recorded investment in loans that are
considered to be impaired under SFAS No. 114 was $4.7 million and $3.2 million,
respectively. The related allowance for credit losses for such loans was $1.0
million and $903,000 at December 31, 1998 and 1997, respectively. The average
recorded investment in impaired loans during the years ended December 31, 1998
and 1997 was approximately $4.1 million and $10.0 million, respectively. For
the years ended December 31, 1998, 1997 and 1996, the Company recognized
$202,000, $1.3 million and $492,000, respectively, in interest income on
impaired loans.
Although management uses its best judgement in underwriting each loan,
industry experience indicates that a portion of the Bank's loans will become
delinquent. Regardless of the underwriting criteria utilized by financial
institutions, losses may be experienced as a result of many factors beyond
their control including, among other things, changes in market conditions
affecting the value of security and unrelated problems affecting the credit of
the borrower. Due to the concentration of loans in South Florida, adverse
economic conditions in this area could result in a decrease in the value of a
significant portion of the Bank's collateral.
During 1995 and continuing in 1996, FPBB (a pooled company) became active
in the indirect automobile lending market. Gross charge-offs in 1998 and 1997
primarily reflect the losses associated with this portfolio. The FPBB lending
activity in this portfolio ceased in September 1996 and the indirect loans
associated with the pooled company loan balance fell from $159 million at
September 30, 1997 to $40.6 million at December 31, 1998.
68
<PAGE>
REPUBLIC SECURITY FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
5. NON-PERFORMING LOANS AND ALLOWANCE FOR LOAN LOSSES--(CONTINUED)
An analysis of changes in the allowance for loan losses is summarized as
follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1997 1996
-------------- -------------- -------------
(RESTATED) (RESTATED)
(IN THOUSANDS)
<S> <C> <C> <C>
Beginning balance ................... $ 13,146 $ 19,515 $ 10,073
Net change in allowance for the three
months ended December 31, 1997, for
pooled company ..................... (885)
Reserves acquired in connection with
purchase business combination and
branch purchases ................... 1,211 2,627
Provision for losses ................ 22,794 5,048 16,724
Recoveries .......................... 850 2,943 888
Charge-offs ......................... (11,073) (14,360) (10,797)
--------- --------- ---------
Ending balance ...................... $ 26,043 $ 13,146 $ 19,515
========= ========= =========
</TABLE>
6. CASH AND AMOUNTS DUE FROM DEPOSITORY INSTITUTIONS
The Bank is required to maintain a non interest-bearing reserve balance
with the Federal Reserve Bank. The average reserve balance requirement was
approximately $8.3 million for the year ended December 31, 1998.
7. PROPERTY AND EQUIPMENT
Property and equipment is summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1998 1997
-------------- -------------
(RESTATED)
(IN THOUSANDS)
<S> <C> <C>
Land and buildings ..................................... $40,771 $41,576
Furniture and equipment ................................ 19,670 31,221
Leasehold improvements ................................. 7,984 6,038
------- -------
Total .................................................. 68,425 78,835
Less accumulated depreciation and amortization ......... 17,417 27,077
------- -------
Property and equipment--net ............................ $51,008 $51,758
======= =======
</TABLE>
Rent expense for the years ended December 31, 1998, 1997 and 1996 was $4.5
million, $3.8 million and $3.2 million, respectively, and is included in
occupancy and equipment expense on the consolidated statements of operations.
(See Note 15 for rent expense paid to related parties).
69
<PAGE>
REPUBLIC SECURITY FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
8. DEPOSITS
Components of deposits were as follows:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1998 1997
-------------- -------------
(RESTATED)
(IN THOUSANDS)
<S> <C> <C>
Non-interest bearing accounts ......... $ 271,311 $ 215,638
NOW accounts .......................... 222,415 186,516
Money market accounts ................. 145,307 146,856
Saving deposits ....................... 358,134 247,568
Time certificates ..................... 1,307,688 1,302,703
---------- ----------
Total ................................. $2,304,855 $2,099,281
========== ==========
</TABLE>
The Bank incurred interest expense on deposits as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1997 1996
-------------- -------------- -------------
(RESTATED) (RESTATED)
(IN THOUSANDS)
<S> <C> <C> <C>
Savings accounts ...................... $12,345 $ 8,447 $ 6,557
NOW accounts .......................... 2,587 2,851 3,008
Money market deposit accounts ......... 3,746 3,936 3,976
Certificate accounts .................. 73,959 71,369 62,690
------- ------- -------
Total ................................. $92,637 $86,603 $76,231
======= ======= =======
</TABLE>
The amounts and maturities of certificate accounts at December 31, 1998
are as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Within 12 months .......... $1,049,196
12 to 24 months ........... 146,702
24 to 36 months ........... 52,335
36 to 48 months ........... 22,331
Over 48 months ............ 37,124
----------
Total ..................... $1,307,688
==========
</TABLE>
The amounts and scheduled maturities of certificate accounts in the amount
of $100,000 or more at December 31, 1998 are as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Within 3 months .......... $ 64,625
3 to 6 months ............ 49,324
6 to 12 months ........... 55,077
Over 12 months ........... 57,453
--------
Total .................... $226,479
========
</TABLE>
70
<PAGE>
REPUBLIC SECURITY FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
9. BORROWED MONEY
The Bank has entered into an agreement with the Federal Home Loan Bank
which enables the Bank to obtain advances that are collateralized by FHLB stock
and residential mortgage loans. In accordance with the agreement, the Bank has
pledged, as collateral, residential mortgage loans with principal balances of
approximately $388.9 million and $604.2 million at December 31, 1998 and 1997,
respectively. In 1997, FPBB had a blanket floating lien that required the Bank
to maintain mortgage loans pledged as collateral in an amount equal to the
advances, when discounted at 65% of the unpaid principal balance. This floating
lien was not in effect at December 31, 1998. Mortgage-backed securities of
$57.4 million and $23.5 million were pledged as collateral at December 31, 1998
and 1997, respectively. Based on the current pledged amount, the Bank's
borrowing limit is approximately $600.0 million with a remaining borrowing
capacity of $190.7 million at December 31, 1998. The Bank also has the ability
to draw on existing lines-of-credit with two commercial banks for an aggregate
amount of $14.0 million. No amounts were drawn on these lines at December 31,
1998 and 1997. At December 31, 1998, outstanding advances from the Federal Home
Loan Bank consisted of the following:
<TABLE>
<CAPTION>
WEIGHTED DECEMBER 31,
AVERAGE RATE 1998
-------------- -------------
(IN THOUSANDS)
<S> <C> <C>
MATURE DURING:
1999 .......... 5.46% $162,000
2000 .......... 6.12% 51,280
2001 .......... 5.54% 50,345
2002 .......... 5.69% 70,000
2003 .......... 6.45% 714
2008 .......... 4.83% 75,000
---- --------
Total ......... 5.47% $409,339
==== ========
</TABLE>
During 1999 and each quarter thereafter, the FHLB has the option to
convert $70.0 million in fixed rate advances to three month LIBOR-based
floating rate advances at the then current three month LIBOR. During 2003 and
each quarter thereafter, the FHLB has the option to convert $25.0 million of
fixed rate advances to three month LIBOR-based floating rate advances at the
then current three month LIBOR. If the FHLB elects to convert the advances,
then the Bank will have the option to terminate the advances without a
prepayment fee. During July, 1999, $50.0 million in fixed rate advances are
callable by the FHLB, and quarterly thereafter.
Notes payable included in other borrowings consists of capital notes in
the amount of $380,000 at December 31, 1998 and 1997, bearing interest at 9%
per annum, payable semi-annually and a mortgage payable of $650,000 and
$750,000 at December 31, 1998 and 1997, respectively, bearing interest at 10%
per annum, principal and interest payable quarterly. The capital notes become
due and payable on January 1, 2004 and are subordinate to existing and future
indebtedness of the Bank. The mortgage is collateralized by Bank property and
matures in April 2005.
The Bank enters into short term sales of securities under agreements to
repurchase. Variable rate and fixed rate reverse repurchase agreements are
treated as financings, and the obligations to repurchase securities sold are
reflected as liabilities in the consolidated statements of financial condition
at December 31, 1998 and 1997. Securities sold under agreements to repurchase
are collateralized by U.S. Government Treasury notes and U.S. Government agency
notes with an
71
<PAGE>
REPUBLIC SECURITY FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
9. BORROWED MONEY--(CONTINUED)
aggregate carrying value of $12.2 million, accrued interest of $164,000, and a
market value of $13.3 million at December 31, 1998. All agreements are
primarily overnight obligations and have a weighted interest rate of 3.88% at
December 31, 1998. All securities underlying agreements are held by an
independent safekeeping agent and all agreements are to repurchase the same
securities. Securities sold under agreements to repurchase averaged $11.4
million and $27.0 million during the years ended December 31, 1998 and 1997,
respectively. The maximum amount outstanding at any month-end during the year
ended December 31, 1998 and 1997 was $29.4 million and $45.5 million,
respectively.
10. SENIOR DEBENTURES
On June 30, 1997, FPBB (a pooled company) issued $35.0 million of 10.35%
Senior Debentures, maturing on June 30, 2002. Issuance costs related to the
Senior Debentures were $1.2 million and are being amortized over the life of
the debt using the interest method. As of December 31, 1998 the outstanding
balance was $27.5 million, net of unamortized issuance costs, reflecting the
Company's purchase of $6.5 million of the debentures during 1998. The interest
on the Senior Debentures is payable semi-annually in arrears on June 30 and
December 31 of each year commencing December 31, 1997. The Senior Debentures
may not be redeemed prior to maturity. The indenture entered into by FPBB in
connection with the Senior Debentures includes certain covenants which, among
other things, limit the disposition of voting stock of the Bank, limit the
ability to become liable on certain forms of indebtedness, provide for
consolidated net worth requirements, provide that the Company shall not allow
the Bank to be classified as other than "Well Capitalized" and restrict
dividend or other distributions and stock repurchases. The net proceeds of the
debenture issue were used for general corporate purposes.
11. SHAREHOLDERS' EQUITY
The Company's ability to pay cash dividends on its Common Stock is limited
to the amount of dividends it could receive from the Bank plus its own cash and
cash equivalents, which amounted to $9.0 million at December 31, 1998. The
amount of dividends the Bank is permitted to pay to the Company is restricted
by regulation to 100% of its calendar year-to-date net income plus net profits
for the preceding two years. With the approval of the Florida Department of
Banking and Finance (the "Department"), the Bank may declare a dividend from
retained net profits which accrued prior to the preceding two years, but,
first, 20% of the net profits for the preceding period, as is covered by the
dividend, must be transferred to the surplus fund of the Bank until the fund is
at least equal to the amount of the Bank's common stock then issued and
outstanding. In addition, the Bank shall not declare any dividend if its net
income from the current year, combined with the retained net income for the
preceding two years, is a loss or if the dividend would cause the capital
account of the Bank to fall below the minimum amount required by law,
regulation, order, or any written agreement with the Department or a federal
regulatory agency. The Bank paid $6.9 million and $5.7 million in dividends to
the Company during the years ended December 31, 1998 and 1997, respectively.
The Bank has been granted approval by the Department to issue the regular
quarterly dividend in the first quarter of 1999.
In November 1995, the Company issued 2,070,000 and 1,035,000 shares of
Common and non-voting Series C Preferred Stock, respectively. Each share of
Series C Preferred Stock could be converted at any time, at the option of the
holder, into 1.55 shares of the Company's Common Stock
72
<PAGE>
REPUBLIC SECURITY FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
11. SHAREHOLDERS' EQUITY--(CONTINUED)
at a conversion price of $6.45 per common share. The Series C Preferred Stock
had a dividend rate of 7.0% on its stated value of $10.00 per share. The Series
C Preferred Stock could be redeemed at the Company's option any time after
November 30, 1999 at a redemption price ranging from $10.00 per share to $10.42
per share, subject to certain events. The Series C Preferred Stock could also
be redeemed by the Company prior to November 30, 1999 if the Common Stock had a
closing bid price which was at least 140% of the conversion price for 20
consecutive trading days prior to the date of the notice of redemption.
On March 9, 1998, RSFC called the 7% Cumulative Convertible Preferred
Stock series C for redemption on April 30, 1998 ("Redemption Date"). The Series
C Preferred Stock became payable and ceased to accrue dividends on the
Redemption Date. Upon surrender of the Series C Preferred Stock certificate for
redemption, the holder received the redemption price of $10.00 per share, or
alternatively, received 1.55 shares of RSFC's Common Stock for each share of
Series C Preferred Stock. In connection with the redemption, 1,463,347 shares
of RSFC's Common Stock were issued for the redemption of the Series C Preferred
Stock.
On July 1, 1998, Unifirst (a pooled company) called 109,750 shares of
Series A 7% Non-Cumulative Convertible Redeemable Preferred Stock, par value
$.01, at a price of $7.25 per share. These Non-Cumulative Convertible
Redeemable Preferred shares were converted into shares of common stock at the
option of the Board of Directors immediately prior to the date of the
transaction, as defined (sale or merger of the Bank).
On June 21, 1996, the Company called its 7.5% Cumulative Convertible
Preferred Stock Series A (the "Preferred Stock") for redemption on July 26,
1996 ("Redemption Date"). The Preferred Stock became payable and ceased to
accrue dividends on that date, and upon surrender of the stock certificates for
redemption, the holders received the redemption price of $10 per share, or
alternatively, the holders surrendered each of their shares of Preferred Stock
for conversion into 2.47 shares of the Company's Common Stock. In connection
with the redemption, 982,995 shares of the Company's Common Stock were issued.
In the year ended March 31, 1995, the Company adopted a shareholder rights
plan. Under the terms of the plan, preferred share purchase rights will be
distributed as a dividend at the rate of one right for each share of Common
Stock. Each right will entitle the holder to buy 1/100th of a share of Series B
Junior Participating Preferred Stock at an exercise price of $18.00 per share.
Each preferred share fraction will have voting and dividend rights equivalent
to one common share. The rights become exercisable upon the occurrence of
certain events as defined in the Shareholder Rights Plan and expire April 4,
2005.
12. STOCK OPTION AND OTHER INCENTIVE PLANS
The Company grants stock options for a fixed number of shares to employees
with an exercise price equal to the fair value of the shares at the date of
grant. The Company accounts for stock option grants in accordance with APB
Opinion No. 25, "ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES" (APB 25) and related
interpretations because the Company believes the alternative fair value
accounting provided for under FASB Statement No. 123, "ACCOUNTING FOR
STOCK-BASED COMPENSATION", requires the use of option valuation models that
were not developed for use in valuing employee stock options. Under APB 25,
because the exercise price of the Company's employee stock options equals the
market price of the underlying stock on the date of grant, no compensation
expense is recognized.
73
<PAGE>
REPUBLIC SECURITY FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
12. STOCK OPTION AND OTHER INCENTIVE PLANS--(CONTINUED)
The Company's 1997 Performance Incentive Plan (the "Plan") authorizes the
issuance of stock options, restricted stock, stock appreciation rights
("SARS"), performance units, performance shares, phantom stock and dividend
equivalents to all directors, officers and employees of the Company and the
Bank for up to 5,000,000 shares of the Company's common stock. The term of any
options or SARS may not exceed ten years from the date of grant. The vesting
and exercise terms will be determined by the committee administering the Plan.
Stock options under all plans are generally exercisable on a phased-in
schedule over three years, depending upon the date of grant, and expire ten
years from the grant date. At December 31, 1998, options to purchase 1,664,107
shares, with a weighted average exercise price of $4.63, were fully
exercisable.
A summary of the Company's stock option activity and related information
for the years ended December 31, are as follows:
<TABLE>
<CAPTION>
TOTAL WEIGHTED
TOTAL NUMBER AVERAGE EXERCISE
OF OPTIONS PRICE PER SHARE
-------------- -----------------
<S> <C> <C>
BALANCE DECEMBER 31, 1995 AS RESTATED .......... 2,765,906 $ 2.44
Granted ........................................ 316,788 4.14
Exercised ...................................... (145,674) 2.14
Expired ........................................ (15,091) 6.14
Forfeited ...................................... (9,880) 2.08
--------- ------
BALANCE DECEMBER 31, 1996, AS RESTATED ......... 2,912,049 2.62
Granted ........................................ 1,560,868 7.76
Exercised(1) ................................... (1,236,362) 2.26
Expired ........................................ (16,414) 5.70
Forfeited ...................................... (25,000) 10.38
---------- ------
BALANCE DECEMBER 31, 1997, AS RESTATED ......... 3,195,141 5.20
Granted ........................................ 1,431,362 9.24
Exercised(2) ................................... (1,051,419) 4.09
Expired ........................................ (67,104) 6.65
Forfeited ...................................... (65,247) 9.47
---------- ------
BALANCE DECEMBER 31, 1998 ...................... 3,442,733 $ 7.04
========== ======
</TABLE>
- ----------------
(1) Includes 23,780 options that were included in the shares issued in the
conversion of a pooling of interest transaction.
(2) 210,538 options exercised in 1998 were exercised as limited rights and
resulted in the issuance of 83,644 shares.
74
<PAGE>
REPUBLIC SECURITY FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
12. STOCK OPTION AND OTHER INCENTIVE PLANS--(CONTINUED)
The following schedule reflects the range of option prices and their
related weighted average contractual maturities as of December 31, 1998:
<TABLE>
<CAPTION>
RANGE OF WEIGHTED AVERAGE REMAINING TOTAL NUMBER
OPTION PRICES CONTRACTUAL LIFE OF OPTIONS
- --------------------------- ---------------------------- -------------
<S> <C> <C>
$1.14 - $1.65 .......... 64 months 64,350
$2.08 - $2.50 .......... 57 months 692,668
$3.33 - $4.80 .......... 74 months 73,440
$5.47 - $7.92 .......... 98 months 781,228
$8.98 - $10.38 ......... 114 months 1,831,047
</TABLE>
Activity associated with the Company's warrants is as follows:
<TABLE>
<CAPTION>
WARRANTS
---------------------------
<S> <C> <C>
Exercise Price .................................. $ 5.00 $ 3.90
Expiration Date ................................. 11/1/00 1/22/96
BALANCE DECEMBER 31, 1995, AS RESTATED .......... 137,680 299,853
Issued .......................................... (31,727)
Exercised ....................................... (268,126)
Canceled ........................................
--------- ----------
BALANCE DECEMBER 31, 1996, AS RESTATED .......... 137,680
Expired .........................................
Exercised .......................................
--------- ----------
BALANCE DECEMBER 31, 1997, AS RESTATED .......... 137,680
Issued ..........................................
Exercised ....................................... (27,536)
Canceled ........................................
--------- ----------
BALANCE DECEMBER 31, 1998 ....................... 110,144
========= ==========
</TABLE>
The price of all options, warrants and equity contracts issued was equal
to the market value of the stock at the time of issuance. Accordingly, no
compensation expense was recognized.
On December 20, 1995, the Company awarded SARs to two executives and to
its non-employee directors. The balance, activity, price and
vesting/exercisable dates are as follows:
<TABLE>
<S> <C> <C>
Base Price ........................ $ 5.75 $ 8.00
Vesting/Exercisable Date .......... 1/1/03 1/1/03
BALANCE DECEMBER 31, 1995 ......... 220,000 620,000
BALANCE DECEMBER 31, 1996 ......... 220,000 620,000
Exercised ......................... (75,000)
--------- ---------
BALANCE DECEMBER 31, 1997 ......... 145,000 620,000
--------- ---------
Exercised ......................... (65,000) (36,000)
--------- ---------
BALANCE DECEMBER 31, 1998 ......... 80,000 584,000
========= =========
</TABLE>
On June 30, 1998, the Company renegotiated and postponed the initial
vesting and exercisable dates for the SARs with the exercise price of $5.75
from January 1, 1997 to January 1, 2003, and from
75
<PAGE>
REPUBLIC SECURITY FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
12. STOCK OPTION AND OTHER INCENTIVE PLANS--(CONTINUED)
January 1, 1998 to January 1, 2003 for the SARs with the exercise price of
$8.00. The Company incurred costs of $0.25 per SAR outstanding as of June 30,
1998, as compensation expense for the postponement of SARs vesting and exercise
periods.
All unexercised SARs expire on January 1, 2006. Compensation expense,
equal to the difference in the market price of the Company's common stock and
the base price of the SARs, is being recognized during the vesting period and
is adjusted for changes in the market price. The Company recognized $625,000
and $1.9 million in compensation expense associated with SARs during the years
ended December 31, 1998 and 1997, respectively. No compensation expense was
recognized for SARs during the year ended December 31, 1996.
The Company adopted the disclosure-only option under SFAS No. 123,
"ACCOUNTING FOR STOCK-BASED COMPENSATION", as of October 1, 1996. The weighted
average fair value of the 1.4 million options granted during the year ended
December 31, 1998 is $5.61 per share.
Had compensation for the Company's stock options been determined based on
the fair value at the grant date, for awards under those plans consistent with
the method of SFAS No. 123, the Company's net income and earnings per share for
the years ended December 31, 1998, 1997 and 1996 would have reduced to the pro
forma amounts indicated below:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------
1998 1997 1996
------------- ------------ -----------
(IN THOUSANDS)
<S> <C> <C> <C>
NET (LOSS) INCOME APPLICABLE TO COMMON STOCK
As reported ................................ $ (11,888) $ 10,693 $ 6,454
Pro Forma .................................. $ (13,021) $ 9,505 $ 6,168
BASIC (LOSS) EARNINGS PER SHARE
As reported ................................ $ (0.26) $ 0.24 $ 0.15
Pro Forma .................................. $ (0.28) $ 0.21 $ 0.14
DILUTED (LOSS) EARNINGS PER SHARE
As reported ................................ $ (0.26) $ 0.23 $ 0.15
Pro Forma .................................. $ (0.28) $ 0.21 $ 0.14
</TABLE>
Option valuation models require the input of highly subjective assumptions
including the expected stock price volatility. Because the Company's employee
stock options have characteristics significantly different from those of traded
options, and because changes in the subjective input assumptions can materially
affect the fair value estimate, in management's opinion, the existing models do
not necessarily provide a reliable single measure of the fair value of its
employee stock options.
The fair market value of options granted under the Company's stock option
plans during the fiscal years ended December 31, 1998 and 1997 was estimated
using the Binomial Option Pricing Model with the following assumptions used:
dividend yield of 2.00%, expected volatility of 57% for 1998 and 29% for 1997
and a risk-free interest rate of 6.00% for expected lives of 10 years.
The fair value of options granted under FPBB's stock option plans during
the fiscal year ended December 31, 1996 was estimated using the Binomial Option
Pricing Model with the following assumptions used: dividend yield of 1.70%,
expected volatility of 22%, risk free interest rate of 5.70% for expected lives
of 2 years.
76
<PAGE>
REPUBLIC SECURITY FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
12. STOCK OPTION AND OTHER INCENTIVE PLANS--(CONTINUED)
EMPLOYEE STOCK OWNERSHIP PLAN--FPBB (a pooled company) established an
Employee Stock Ownership Plan ("ESOP") for eligible employees in connection
with the Conversion of First Federal Savings and Loan of the Palm Beaches from
a federally chartered mutual savings and loan association to a federally
chartered stock savings and loan association ("Conversion") and the formation
of the holding company, FPBB. The ESOP borrowed $4.2 million from FPBB and
purchased 1.8 million common shares issued in the Conversion of which 400,472
shares were not yet allocated to ESOP participants at December 31, 1997. All
shares were allocated as of December 31, 1998. The ESOP allocates shares to
participants based on the ESOP debt reduction during the corresponding period.
Compensation expense is recognized for the fair value of shares allocated to
participants. The dividends on unallocated shares were used to repay the ESOP
debt. FPBB made scheduled discretionary cash contributions to the ESOP and as
of December 31, 1998, there was no outstanding loan between the Company and the
plan, and all outstanding shares were allocated. The plan is expected to be
terminated in early 1999. In accordance with generally accepted accounting
principles, the unallocated common stock held by the ESOP is shown as a
reduction of stockholders' equity. During the fiscal years ended December 31,
1998 , 1997 and 1996, ESOP expenses were $2.8 million, $1.5 million and $1.3
million, respectively, which is included in employee compensation benefits on
the accompanying statement of operations.
RECOGNITION AND RETENTION PLANS--FPBB (a pooled company) established two
Recognition and Retention Plans ("RRPs") which purchased in the aggregate
887,450 shares of common stock in the Conversion. FPBB contributed $2.1 million
to fund the purchase of the RRP shares. Awards generally vest in three annual
installments commencing on the first anniversary date of the effective date of
the awards. The aggregate purchase price of these shares is amortized as
compensation expense as participants become vested. The unamortized cost, which
is comparable to deferred compensation, is reflected as a reduction of
stockholder's equity. RRP expense totaled $154,000, $44,000 and $460,000 for
the years ended December 31, 1998, 1997 and 1996, respectively. 10,645 shares
of FPBB which had not been awarded were not exchanged for the Company stock and
were therefore cancelled in the merger effective October 29, 1998. All
remaining shares will be vested and distributed by the third quarter of 1999.
13. CAPITAL COMPLIANCE
The Bank is subject to various regulatory capital requirements
administered by the federal banking agencies. Failure to meet minimum capital
requirements can initiate certain mandatory, and possible additional
discretionary, action by regulators that, if undertaken, could have a direct
material effect on the Bank's financial statements. Under capital adequacy
guidelines and the regulatory framework for prompt corrective action, the Bank
must meet specific capital guidelines that involve quantitative measures of the
Bank's assets, liabilities and certain off-balance-sheet items as calculated
under regulatory accounting practices. The Bank's capital amounts and
classification are also subject to quantitative judgements by the regulators
about components, risk weightings, and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Company and the Bank to maintain minimum amounts and ratios of
total and Tier 1 capital (as defined in the regulations) to risk-weighted
assets (as defined), and of Tier 1 capital (as defined) to average assets (as
defined). As of December 31, 1998, the Company and the Bank exceeded all
capital adequacy requirements to which they are subject.
As of December 31, 1998, the most recent notification from the Federal
Reserve Bank categorized the Bank as well capitalized under the regulatory
framework for prompt corrective action.
77
<PAGE>
REPUBLIC SECURITY FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
13. CAPITAL COMPLIANCE--(CONTINUED)
To be categorized as well capitalized the Bank must maintain minimum total
risk-based, Tier 1 risk-based, and Tier 1 leverage ratios as set forth in the
following table. There are no actual conditions or events since that
notification that management believes have changed the Bank's category.
The following table shows the actual capital amounts and ratios of the
Bank, minimum capital requirements and well capitalized requirements:
<TABLE>
<CAPTION>
MINIMUM FOR MINIMUM FOR
ACTUAL CAPITAL ADEQUACY WELL CAPITALIZED
---------------------- --------------------- ----------------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
----------- ---------- ----------- --------- ----------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
AS OF DECEMBER 31, 1998:
Total risk based capital ............... $214,694 11.9% $144,105 8.0% $180,132 10.0%
Tier 1 risk based capital .............. $191,918 10.7% $ 72,053 4.0% $108,079 6.0%
Leverage capital ....................... $191,918 6.7% $115,269 4.0% $144,087 5.0%
AS OF DECEMBER 31, 1997, AS RESTATED:
Total risk based capital ............... $216,843 13.4% $129,486 8.0% $161,857 10.0%
Tier 1 risk based capital .............. $203,667 12.6% $ 64,743 4.0% $ 97,114 6.0%
Leverage capital ....................... $203,667 7.7% $103,865 4.0% $129,831 5.0%
</TABLE>
14. COMMITMENTS AND CONTINGENCIES
The Bank is a party to financial instruments with off-balance sheet risk
in the normal course of business to meet the financing needs of its customers.
These financial instruments primarily include commitments to extend credit.
The Bank's exposure to credit loss in the event of nonperformance by the
other party to the financial instrument for commitments is represented by the
contractual notional amount of those instruments. The Bank uses the same credit
policies in making commitments as it does for on-balance sheet instruments.
Commitments to extend credit are agreements to lend to a customer as long
as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination clauses
and may require the payment of a fee. The total commitment amounts do not
necessarily represent future cash requirements as some commitments expire
without being drawn upon. The Bank evaluates each customer's credit worthiness
on a case by case basis. The amount of collateral obtained, if deemed necessary
by the Bank, upon extension of credit is based on management's credit
evaluation of the counterparty.
At December 31, 1998, the Bank had adjustable rate commitments to extend
credit and standby letters of credit of approximately $175.7 million excluding
the undisbursed portion of loans-in-process. These commitments are primarily
for commercial lines-of-credit secured by commercial real estate or other
business assets and one-to-four family residential properties.
78
<PAGE>
REPUBLIC SECURITY FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
14. COMMITMENTS AND CONTINGENCIES--(CONTINUED)
The Company and its subsidiaries have entered into noncancellable
operating leases (See Note 15 for related party transactions) with future
minimum lease payments of the following:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
1999 ................ $ 4,188
2000 ................ 3,278
2001 ................ 2,489
2002 ................ 2,108
2003 ................ 1,783
Thereafter .......... 7,953
-------
$21,799
=======
</TABLE>
Certain leases contain provisions for renewal and for rents to adjust with
the consumer price index. In addition, the Bank subleases portions of the
leased space. Future minimum lease payments to be received by the Bank amount
to $600,000, $150,000 and $7,000 in 1999, 2000 and 2001, respectively.
The Bank has a non-qualified unfunded retirement plan for three present
executives and one former executive of the Bank. Pension costs, consisting of
service costs and interest costs, amounted to approximately $108,000, $148,000
and $141,000, for the years ended December 31, 1998, 1997 and 1996,
respectively. The retirement benefit to the employees will range between 30% to
75% of their average base salary for the last three years of employment, will
be paid for 240 months and will commence no earlier than age 55 nor later than
age 62. A discount rate of 7% and a rate of compensation increase of 4% is used
to measure the projected benefit obligation. The net pension liability (all
vested) at December 31, 1998 and 1997 was approximately $698,000 and $321,000,
respectively.
The Bank established a non-qualified unfunded director retirement plan in
February 1997. Fourteen (14) directors of the Company currently participate in
the Plan. Benefit costs associated with the Plan amounted to approximately
$163,000 and $42,000 for the years ended December 31, 1998 and 1997,
respectively. The annual retirement benefit for the directors will be 75% of
the final fees paid in the calendar year of the director's termination of
service for a duration of 180 months.
The Bank established a 401(k) plan covering substantially all employees.
The rate of the employer contribution to the 401(k) plan is determined annually
by the Board of Directors. Expense under the plan for the years ended December
31, 1998, 1997 and 1996 amounted to $388,000, $355,000 and $364,000,
respectively.
PENSION PLAN--Substantially all FPBB employees participated in FPBB's
funded qualified defined benefit pension plan ("the plan"). Management is
currently in the process of terminating the plan and expects the plan
termination to be final during 1999. Management does not expect to incur any
losses associated with the termination of the plan. The Company recognized
pension (income) expense related to the plan of ($22,000), $377,000 and
$360,000 for the years ended December 31, 1998, 1997 and 1996, respectively.
EMPLOYMENT AGREEMENTS--The Company and the Bank or the Bank alone have
entered into employment agreements with ten senior officers. These agreements
have three, two or one year terms,
79
<PAGE>
REPUBLIC SECURITY FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
14. COMMITMENTS AND CONTINGENCIES--(CONTINUED)
and provide for payment to the officers of salary, bonus, and benefits upon
involuntary, and in certain circumstances voluntary, termination of employment.
Four of the agreements also provide for payments following a change of control.
Ten officers of the Bank, including the six whose employment agreements do not
include change of control provisions, have entered into change of control
agreements with the Bank, which generally provide for severance in the amount
of two years' salary and bonus, and continued benefits, in the event of a
change of control.
In addition to the above commitments and contingencies, there are various
matters of litigation pending against the Company that management has reviewed
with legal counsel. In the opinion of management of the Company, amounts
accrued for awards or assessments in connection with these matters are adequate
and the ultimate resolution of these matters will not have a material effect on
the Company's consolidated financial position, results of operations or cash
flows.
15. RELATED PARTY TRANSACTIONS
The Bank leases two of its branch locations from entities with which
former board members are directly affiliated. The leases have been accounted
for as operating leases. These leases provide for agreed-upon rent increases
over the lease terms, expire through 2018, and generally contain renewal
options. During the years ended December 31, 1998, 1997 and 1996, the Bank paid
the related parties approximately $208,000, $221,000 and $165,000,
respectively, under the terms of the leases.
Loans to directors, officers and associates of such persons totaled
approximately $3.5 million and $3.7 million at December 31, 1998 and 1997,
respectively.
16. FEDERAL DEPOSIT INSURANCE CORPORATION SPECIAL SAVINGS ASSOCIATION INSURANCE
FUND ASSESSMENT
On September 30, 1996, President Clinton signed into law a bill which
called for a one-time Federal Deposit Insurance Fund (FDIC) premium for
deposits insured by the Savings Association Insurance Fund. The Bank's one-time
premium expense associated with the bill was $8.6 million, which is reflected
in insurance expense in the consolidated statement of operations for the year
ended December 31, 1996.
80
<PAGE>
REPUBLIC SECURITY FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
17. INCOME TAXES
Significant components of the Company's deferred tax assets and
liabilities as of December 31, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1998 1997
-------------- -------------
(RESTATED)
(IN THOUSANDS)
<S> <C> <C>
DEFERRED TAX ASSETS:
Net operating loss carry forward ................................ $ 955 $1,483
Allowance for loan losses ....................................... 7,497 2,059
Deferred compensation ........................................... 430 515
OREO expenses ................................................... 380 848
Retirement plan ................................................. 103 289
Tax credits ..................................................... 100 148
Other ........................................................... 1
------ ------
9,466 5,342
Valuation allowance ............................................. (813) (813)
------ ------
Deferred tax assets, net of allowance ........................... 8,653 4,529
------ ------
DEFERRED TAX LIABILITIES:
Deferred loan fees, net ......................................... 721 1,463
FHLB Stock dividends ............................................ 332 417
Mark-to-market adjustments of securities available-for-sale ..... 1,038 (690)
Fixed assets .................................................... 1,903 509
Mortgage servicing .............................................. 293 11
Investment in partnership ....................................... 579
Other ........................................................... 203 227
------ ------
Total ........................................................... 4,490 2,516
------ ------
Net deferred tax asset .......................................... $4,163 $2,013
====== ======
</TABLE>
Net deferred tax assets are included in other assets on the consolidated
statements of financial condition at December 31, 1998 and 1997.
81
<PAGE>
REPUBLIC SECURITY FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
17. INCOME TAXES--(CONTINUED)
Significant components of the (benefit) provision for income taxes for the
years ended December 31, 1998, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------
1998 1997 1996
----------- ------------ -----------
(RESTATED) (RESTATED)
(IN THOUSANDS)
<S> <C> <C> <C>
CURRENT EXPENSE:
Federal ................................... $ 1,209 $2,207 $ 7,998
State ..................................... 129 233 1,338
-------- ------ --------
1,338 2,440 9,336
-------- ------ --------
DEFERRED (BENEFIT) EXPENSE:
Federal ................................... (3,957) 4,062 (4,490)
State ..................................... (423) 722 (724)
-------- ------ --------
(4,380) 4,784 (5,214)
-------- ------ --------
Total income tax (benefit) expense ......... $ (3,042) $7,224 $ 4,122
======== ====== ========
</TABLE>
A reconciliation of income tax (benefit) expense with the amount computed
by applying the statutory federal income tax rate of 34% to (loss) income
before income taxes is as follows for the years ended December 31, 1998, 1997
and 1996:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------
1998 1997 1996
------------ ------------ -----------
(RESTATED) (RESTATED)
(IN THOUSANDS)
<S> <C> <C> <C>
Income tax (benefit) expense at federal rate ............ $ (4,998) $ 6,352 $3,916
DIFFERENCES RESULTING FROM:
State income taxes, net of federal tax benefit ......... (369) 641 356
Change in valuation allowance .......................... (1,277) 4
Merger expenses ........................................ 1,929 1,029
Amortization of goodwill ............................... 272 258 209
Amortization of ESOP ................................... 557
Tax exempt interest income, net ........................ (515)
Other, net ............................................. 82 221 (363)
-------- -------- ------
Income tax (benefit) expense ............................ $ (3,042) $ 7,224 $4,122
======== ======== ======
</TABLE>
As of December 31, 1998, the Company has net operating loss carryforwards
of approximately $2.5 million for income tax purposes that, if not utilized,
expire in various years from 2005 through 2011. At December 31, 1998, a
valuation allowance of approximately $813,000 is recorded primarily to offset
the deferred tax assets related to the net operating loss carryforwards
resulting from the Governors Bank merger. If realized, the tax benefit for
these operating loss carryforwards will be applied to reduce goodwill related
to this merger. Goodwill was reduced $320,000 in 1996 due to the tax benefit
from the utilization of the Governors Bank net operating loss carryforward.
In accordance with SFAS 109, "ACCOUNTING FOR INCOME TAXES," a deferred tax
liability is not recognized for the tax bad debt reserves of thrift
institutions that arose in tax years beginning prior to
82
<PAGE>
REPUBLIC SECURITY FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
17. INCOME TAXES--(CONTINUED)
December 31, 1987. At December 31, 1998, the portion such tax bad debt reserves
was approximately $19.5 million. The amount of unrecognized deferred tax
liability related to these pre-1998 tax loan loss reserves at December 31,
1998, was approximately $7.3 million. This deferred tax liability could be
recognized if the bad debt reserve is used for any purpose other than absorbing
bad debt losses.
18. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted
earnings per share:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------
1998 1997 1996
------------- ------------ -----------
(RESTATED) (RESTATED)
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
NUMERATOR:
Net (loss) income ................................. $ (11,659) $11,457 $ 7,396
Preferred stock dividends ......................... (229) (764) (942)
--------- ------- -------
Numerator for basic earnings per share--
(loss) income applicable to common stock ......... (11,888) 10,693 6,454
Effect of dilutive securities:
Preferred stock dividends ........................ 162
--------- ------- -------
Numerator for diluted earnings per share--
(loss) income applicable to common stock after
assumed conversions .............................. $ (11,888) $10,693 $ 6,616
========= ======= =======
DENOMINATOR:
Denominator for basic earnings per share--
weighted-average shares .......................... 46,502 44,375 43,521
Effective of dilutive securities:
Employee stock options ........................... 1,522 1,553
Convertible preferred stock ...................... 462
--------- ------- -------
Dilutive potential common shares .................. 1,522 2,015
--------- ------- -------
Denominator for diluted earnings per share--
adjusted weighted-average shares and
assumed conversions .............................. 46,502 45,897 45,536
========= ======= =======
Basic (loss) earnings per share ................... $ (0.26) $ 0.24 $ 0.15
Diluted (loss) earnings per share ................. $ (0.26) $ 0.23 $ 0.15
</TABLE>
At December 31, 1998, 3,552,877 stock options and warrants were
outstanding that could potentially dilute basic earnings per share in the
future but were not included in the computation of diluted earnings per share
for the year ended December 31, 1998 (See Note 12). The effect of these shares
is antidilutive to diluted earnings per share for the year ended December 31,
1998.
83
<PAGE>
REPUBLIC SECURITY FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
19. PARENT COMPANY FINANCIAL INFORMATION
STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1998 1997
----------- -----------
(RESTATED)
(IN THOUSANDS)
<S> <C> <C>
ASSETS:
Investments in and advances to subsidiaries ........... $207,546 $219,952
Cash and cash equivalents ............................. 8,950 18,871
Investments available-for-sale ........................ 4,799 563
Property and equipment, net ........................... 2,809 2,898
Other assets .......................................... 4,505 1,226
-------- --------
Total ................................................. $228,609 $243,510
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Accounts payable and accrued expenses ................. $ 2,689 $ 2,459
Senior Debentures, net of issuance costs .............. 27,518 33,839
-------- --------
Total Liabilities ..................................... 30,207 36,298
Shareholders' Equity:
Preferred stock Series "C" ............................ 9,490
Preferred stock issued by pooled company .............. 796
Common stock .......................................... 474 449
Additional paid-in-capital ............................ 120,955 103,772
Retained earnings ..................................... 75,423 94,244
Common stock purchased by:
Employee stock ownership plan ........................ (955)
Recognition and retention plans ...................... (155) (117)
Accumulated other comprehensive income (loss) ......... 1,705 (467)
-------- --------
Total shareholders' equity ............................ 198,402 207,212
-------- --------
Total ................................................. $228,609 $243,510
======== ========
</TABLE>
84
<PAGE>
REPUBLIC SECURITY FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
19. PARENT COMPANY FINANCIAL INFORMATION--(CONTINUED)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------
1998 1997 1996
------------- ------------ -----------
(RESTATED) (RESTATED)
(IN THOUSANDS)
<S> <C> <C> <C>
INCOME:
Dividends from subsidiary .................. $ 6,865 $ 5,716 $3,729
Interest ................................... 898 855 740
Other ...................................... 576 424 102
--------- ------- ------
Total ...................................... 8,339 6,995 4,571
--------- ------- ------
EXPENSES:
Interest ................................... 3,716 967
General and administrative ................. 1,455 854 571
Merger expenses ............................ 404 98
--------- ------- ------
Total ...................................... 5,575 1,919 571
--------- ------- ------
Income before equity in undistributed (loss)
earnings of subsidiary and income tax
(benefit) expense ......................... 2,764 5,076 4,000
Income tax (benefit) expense ............... (1,468) (222) 102
--------- ------- ------
Income before equity in undistributed (loss)
earnings of subsidiary .................... 4,232 5,298 3,898
Equity in undistributed (loss) earnings
of subsidiary ............................. (15,891) 6,159 3,498
--------- ------- ------
Net (loss) income .......................... $ (11,659) $11,457 $7,396
========= ======= ======
</TABLE>
85
<PAGE>
REPUBLIC SECURITY FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
19. PARENT COMPANY FINANCIAL INFORMATION--(CONTINUED)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------
1998 1997 1996
------------ ------------ -----------
(RESTATED) (RESTATED)
(IN THOUSANDS)
<S> <C> <C> <C>
Net cash (used in) provided by operating activities ..... $ (3,430) $ 5,491 $ 1,936
Additional investment in subsidiary ..................... (26,339) (10,418)
Decrease in receivable from Bank ........................ 5,040 1,510 7,740
Sale of building to Bank ................................ 4,280
Principal payment received on ESOP loan ................. 748 814 740
Proceeds from sales of investments
available-for-sale ..................................... 7,728
Purchase of investment available-for-sale ............... (12,077) (500)
Other ................................................... (2) (345)
--------- --------- ---------
Net cash provided by (used in) investing activities ..... 1,439 (24,517) 1,997
--------- --------- ---------
Cash dividends--common and preferred .................... (8,781) (8,474) (5,690)
Proceeds of senior debentures-net of issuance cost ...... 33,778
Purchase of senior debentures ........................... (6,500)
Purchase of Treasury Stock at cost ...................... (2,668) (7,642)
Other, net .............................................. 4,172 3,295 1,362
--------- --------- ---------
Net cash (used in) provided by financing activities ..... (11,109) 25,931 (11,970)
--------- --------- ---------
(Decrease) increase in cash and cash equivalents ........ (13,100) 6,905 (8,037)
Net adjustment to reconcile for different year ends
of pooled companies (see Note 2) ....................... 3,179
Cash and cash equivalents at beginning of year .......... 18,871 11,966 20,003
--------- --------- ---------
Cash and cash equivalents at end of year ................ $ 8,950 $ 18,871 $ 11,966
========= ========= =========
</TABLE>
20. FAIR VALUES OF FINANCIAL INSTRUMENTS
The following is a disclosure of fair value information about financial
instruments, whether or not recognized in the statement of financial condition
for which it is practicable to estimate that value. In cases where quoted
market prices are not available, fair values are based on estimates using
present value or other valuation techniques. Those techniques are significantly
affected by the assumptions used, including the discount rate and estimates of
future cash flows. In that regard, the derived fair value estimates cannot be
substantiated by comparison to independent markets and, in many cases, could
not be realized in immediate settlement of the instrument. Certain financial
instruments and all non-financial instruments are excluded from SFAS 107
"Disclosure about Fair Value of Financial Investments" disclosure requirements.
Accordingly, the aggregate fair value amount presented does not represent the
underlying value of the Company.
86
<PAGE>
REPUBLIC SECURITY FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
20. FAIR VALUES OF FINANCIAL INSTRUMENTS--(CONTINUED)
The following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial instruments:
CASH AND CASH EQUIVALENTS: The carrying amounts reported in the statement
of financial condition for these assets approximate their fair values.
INVESTMENTS AVAILABLE-FOR-SALE AND HELD TO MATURITY: Fair values for
investments are based on quoted market prices, where available. If quoted
market prices are not available, fair values are based on quoted market prices
of comparable instruments.
LOANS RECEIVABLE--NET: For variable-rate loans that reprice frequently and
with no significant change in credit risk, fair values are based on carrying
values. The fair values for certain fixed rate mortgage loans (i.e.,
one-to-four family residential), and other consumer loans are based on quoted
market prices of similar loans sold in conjunction with securitization
transactions, adjusted for differences in loan characteristics. The fair values
for other loans (i.e., commercial real estate and rental property mortgage
loans) are estimated using discounted cash flow analysis, using interest rates
currently being offered for loans with similar terms to borrowers of similar
credit quality. The fair values of mortgage-backed securities are based on
quoted market prices.
LOANS HELD FOR SALE: The fair value represents the anticipated proceeds
from sale of the loans.
FEDERAL HOME LOAN BANK STOCK: Current carrying amounts approximate
estimated fair value. Off-balance-sheet instruments: Fair values for the
Company's loan commitments are based on estimated market prices of comparable
instruments taking into account the remaining terms of the agreements and the
counterparties' credit standing. The aggregate fair value of loan commitments
is not material.
DEPOSITS: The fair values disclosed for demand deposits (i.e., interest
and non-interest checking, statement savings, and certain types of money market
accounts) are, by definition, equal to the amount payable on demand at the
reporting date (i.e., their carrying amounts). The carrying amounts for
variable-rate, fixed-term money market accounts and certificates of deposits
approximate their fair values at the reporting date. Fair values for fixed-rate
certificates of deposit are estimated using a discounted cash flow calculation
that applies interest rates currently being offered on certificates to a
schedule of aggregated contractual monthly maturities on time deposits. The
fair value of demand deposits is the amount payable on demand, without
adjusting for any value derived from retaining those deposits for an expected
future period of time. That component, commonly referred to as a deposit base
intangible, is not considered in the above fair value amount nor is it recorded
as an intangible asset in the statement of financial condition.
FHLB ADVANCES AND OTHER BORROWINGS: The fair value is estimated using
rates currently offered for advances of similar remaining maturities.
SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE: Fair value is estimated
using rates currently offered for securities sold under agreements to
repurchase or similar remaining maturities.
SENIOR DEBENTURES: Fair value is estimated using rates currently offered
for debentures of similar remaining maturities.
87
<PAGE>
REPUBLIC SECURITY FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
20. FAIR VALUES OF FINANCIAL INSTRUMENTS--(CONTINUED)
BANK DRAFTS PAYABLE: The fair value of bank drafts payable is assumed to
equal its carrying value due to its short maturity.
The estimated fair values of the Company's financial instruments at
December 31 are as follows:
<TABLE>
<CAPTION>
1998 1997
---------------------------- ----------------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
------------ ------------- ------------ -------------
(RESTATED)
(IN THOUSANDS)
<S> <C> <C> <C> <C>
FINANCIAL ASSETS:
Cash and cash equivalents .................. $ 162,166 $ 162,166 $ 243,934 $ 243,934
Investments available-for-sale ............. 722,913 722,913 397,558 397,558
Investments held to maturity ............... 6,363 6,422 238,568 241,790
Loans receivable--net ...................... 1,959,300 1,953,136 1,873,625 1,857,543
Loans held for sale ........................ 16,000 16,272 13,565 13,828
Federal Home Loan Bank Stock ............... 23,754 23,754 25,009 25,009
FINANCIAL LIABILITIES:
Deposits ................................... $2,304,855 $2,227,702 $2,099,281 $2,079,686
FHLB advances and other borrowings ......... 410,368 344,316 454,322 453,565
Securities sold under agreements
to repurchase ............................. 9,144 9,144 43,389 43,406
Senior debentures .......................... 27,518 28,894 33,839 38,513
Bank drafts payable ........................ 27,706 27,706 18,511 18,511
</TABLE>
88
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors and Shareholders
Republic Security Financial Corporation
We have audited the consolidated statements of financial condition of
Republic Security Financial Corporation and subsidiaries as of December 31,
1998 and 1997 and the related consolidated statements of income, comprehensive
income, shareholders' equity, and cash flows for each of the three years in the
period ended December 31, 1998. These financial statements are the
responsibility of the management of Republic Security Financial Corporation.
Our responsibility is to express an opinion on these financial statements based
on our audits. We did not audit the financial statements of Unifirst Federal
Savings Bank which was acquired by Republic Security Financial Corporation in
1998 and accounted for under the pooling-of-interests method (see Note 2),
which statements reflect total assets constituting 4.9% for 1997 of the related
consolidated financial statement totals, and which reflect total revenues
constituting 5.2% and 5.5%, respectively, of the related consolidated financial
statement totals for the years ended December 31, 1997 and 1996. Those
statements were audited by other auditors whose report has been furnished to
us, and our opinion, insofar as it relates to data included for Unifirst
Federal Savings Bank, is based solely on the report of the other auditors. We
also did not audit the consolidated financial statements of County Financial
Corporation and subsidiaries which was acquired by Republic Security Financial
Corporation in 1997 and accounted for using the pooling-of-interests method,
which statements reflect total revenues constituting 10.8% of the related
consolidated financial statement totals for the year ended December 31, 1996.
Those statements were audited by other auditors whose report has been furnished
to us, and our opinion, insofar as it relates to data included for County
Financial Corporation and subsidiaries is based solely on the report of other
auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits and the reports of other
auditors provide a reasonable basis for our opinion.
In our opinion, based on our audits and the reports of other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the consolidated financial position of Republic Security
Financial Corporation and subsidiaries at December 31, 1998 and 1997 and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1998 in conformity with generally
accepted accounting principles.
Ernst & Young LLP
West Palm Beach, Florida
March 15, 1999
89
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Unifirst Federal Savings Bank:
We have audited the consolidated balance sheet of Unifirst Federal Savings
Bank and subsidiaries (the "Bank") as of September 30, 1997, and the related
consolidated statements of income, stockholders' equity and cash flows for the
years ended September 30, 1997 and 1996, respectively. These consolidated
financial statements are the responsibility of the Bank's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of the Bank at
September 30, 1997, and the result of their operations and their cash flows for
the years ended September 30, 1997 and 1996, respectively, in conformity with
generally accepted accounting principles.
KPMG Peat Marwick LLP
October 29, 1997
Ft. Lauderdale, Florida
90
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors of
County Financial Corporation
We have audited the consolidated statements of income, stockholders'
equity and cash flows for the year ended December 31, 1996 of County Financial
Corporation and subsidiaries (the "Company"). These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the results of operations and cash flows for the year
ended December 31, 1996 of the Company in conformity with generally accepted
accounting principles.
Deloitte & Touche LLP
Miami, Florida
February 21, 1997
91
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information relating to directors and executive officers of the Company
appears in the Company's definitive Proxy Statement, which was filed with the
SEC in connection with the Annual Meeting of Shareholders (the "Proxy
Statement"), to be held on April 28, 1999, at pages 5 through 8, 11 and 12 and
is incorporated herein by reference.
Information relating to the filing of reports required under Section 16(a)
of the Exchange Act by directors, executive officers and 1090 beneficial owners
of the Company's common stock appears in the Company's Proxy Statement at page
29 and is incorporated herein by reference.
ITEMS 11. EXECUTIVE COMPENSATION
The information relating to executive compensation appears in the Proxy
Statement at page 8 and pages 12 through 22 and is incorporated herein by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The information relating to security ownership of certain beneficial
owners and management appears in the Proxy Statement at pages 3 through 4 and
is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information relating to certain relationships and related transactions
appears in the Proxy Statement at page 10 and is incorporated herein by
reference.
92
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
a) DOCUMENTS FILED AS A PART OF THE REPORT:
1) FINANCIAL STATEMENTS:
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Consolidated Statements of Financial Condition
for the years ended December 31, 1998 and 1997. ............... F-1
Consolidated Statements of Operations
for the years ended December 31, 1998, 1997 and 1996. ......... F-2
Consolidated Statements of Comprehensive Income
for the years ended December 31, 1998, 1997 and 1996. ......... F-3
Consolidated Statements of Shareholders' Equity
for the years ended December 31, 1998, 1997 and 1996 .......... F-4
Consolidated Statements of Cash Flows
for the years ended December 31, 1998, 1997 and 1996. ......... F-6
Notes to Consolidated Financial Statements ..................... F-8
</TABLE>
2) FINANCIAL STATEMENT SCHEDULES:
All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are not
required under the related instructions or are inapplicable, and therefore have
been omitted.
3) EXHIBITS:
The following is a list of all exhibits filed as a part of this Report:
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION OF DOCUMENT
- ------------ ----------------------------------------------------------------------------------------------
<S> <C>
3.1(a) Articles of Incorporation of the Company (incorporated by reference to the Exhibits to
Form S-1 Registration Statement, initially filed August 7, 1985, Registration No. 2-99505)
3.1(b) Amendment to Articles of Incorporation of the Company (incorporated by reference to the
Exhibits to Form S-4 Registration Statement initially filed July 14, 1998, Registration
No. 333-59059)
3.2(a) Bylaws of the Company (incorporated by reference to the Exhibits to Form S-1 Registration
Statement initially filed August 7, 1985, File No. 2-99505)
3.2(b) Amendments to Bylaws of the Company (filed herewith)
4.1 Form of Common Stock Certificate of the Company (incorporated by reference to the
Exhibits to Form S-1 Registration Statement initially filed August 7, 1985, File No. 2-99505)
4.2 Rights Agreement by and between the Company and IBJ Schroder Bank and Trust Company
(incorporated by reference to Form 8-A filed on April 23, 1995, File No. 000-14671)
4.3 Indenture dated as of June 30, 1997 by and between First Palm Beach Bancorp, Inc. and The
Bank of New York, as Trustee, relating to the Company's 10.35% Senior Debentures due
June 30, 2002 (incorporated by reference to the Exhibits to Form S-4 Registration Statement
filed by First Palm Beach Bancorp, Inc. on September 11, 1997, Registration No. 333-35431)
</TABLE>
93
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION OF DOCUMENT
- --------- --------------------------------------------------------------------------------------------------
<S> <C>
4.4 Supplemental Indenture dated as of October 29, 1998 by and among the Company, First Palm
Beach Bancorp, Inc. and The Bank of New York, as Trustee, relating to the Company's
10.35% Senior Debentures due June 30, 2002 (incorporated by reference to Exhibits to
Form 8-K filed on November 2, 1998, File No. 000-14671)
4.5 Form of 10.35% Senior Debenture Due June 30, 2002 (included in the Indenture filed as
Exhibit 4.2 hereto)
4.6 Form of Series B 10.35% Senior Debenture Due June 30, 2002 (incorporated by reference to
Exhibit 4.5 to Form 10-K filed by First Palm Beach Bancorp, Inc. for the fiscal year ended
September 30, 1997, File No. 0-21942)
10.1 Amended and Restated Employment Agreement among the Company, Republic Security
Bank and Rudy E. Schupp dated as of January 1, 1999 (filed herewith)
10.2 Amended and Restated Employment Agreement among the Company, Republic Security
Bank and Richard J. Haskins dated as of January 27, 1999 (filed herewith)
10.3 Employment Agreement among the Company, Republic Security Bank and R. Michael
Strickland dated as of February 16, 1999 (filed herewith)
10.4 Employment Agreement among the Company, Republic Security Bank and Louis J. Dunham
dated as of February 26, 1999 (filed herewith)
10.5 Form of Employment Agreement between Republic Security Bank and each of Roger
Savage, John G. Primeau and Jose Vivero (filed herewith)
10.6 Employment Agreement between Republic Security Bank and Bruce Keir (incorporated by
reference to Form S-4 Registration Statement initially filed on April 9, 1997, Registration No.
333-24821)
10.7 Employment Agreement between Republic Security Bank and Richard Kuci, Jr.
(incorporated by reference to Form S-4 Registration Statement initially filed on
September 30, 1997, Registration No. 333-36717)
10.8 Employment Agreement between Republic Security Bank and Thomas Tribby dated as of
July 15, 1997 (filed herewith)
10.9 Form of Change of Control Agreement by and among the Company, Republic Security Bank
and each of Alissa E. Ballot, Bruce Keir, W. Andrew Kirkman, Richard Kuci, Carla Pollard,
John G. Primeau, Roger Savage, Joan Schimelman, Thomas Tribby and Jose Vivero (filed
herewith)
10.10 Consulting Agreement between Republic Security Bank and Carol Owen (incorporated by
reference to Form S-4 Registration Statement initially filed on April 9, 1997, Registration No.
333-24821)
10.11 Form of Amended and Restated Supplemental Retirement Plan Agreement dated as of July
1, 1997 by and between Republic Security Bank and each of Rudy E. Schupp and Richard J.
Haskins (filed herewith)
10.12 Supplemental Retirement Plan Agreement dated as of January 1, 1996 between Republic
Security Bank and Roger Savage (filed herewith)
10.13 Amended and Restated Stock Appreciation Rights Agreement dated as of June 24, 1998 by
and between the Company and Rudy E. Schupp (filed herewith)
10.14 Amended and Restated Stock Appreciation Rights Agreement dated as of June 24, 1998 by
and between the Company and Richard J. Haskins (filed herewith)
</TABLE>
94
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION OF DOCUMENT
- --------- -------------------------------------------------------------------------------------------
<S> <C>
10.15 Form of Amended and Restated Stock Appreciation Rights Agreement dated as of June 24,
1998 by and between the Company and each of Gearl Gore, Lennart Lindahl, Jr., Richard
Rathke, William Spitznagel, Dr. Bruce Wiita, and William Wolfson (filed herewith)
10.16 Republic Security Financial Corporation 1997 Performance Incentive Plan, as amended
(incorporated by reference to to the Exhibits to Form S-4 Registration Statement initially
filed July 14, 1998, Registration No. 333-59059)
10.17 Amendment No. 1 to the Republic Security Financial Corporation 1997 Performance
Incentive Plan, as amended (filed herewith)
10.18 Amendment No. 2 to the Republic Security Financial Corporation 1997 Performance
Incentive Plan, as amended (incorporated by reference to Appendix A to the proxy
statement)
10.19 Form of Directors Retirement Agreement between Republic Security Bank and each of
Paula Berliner, Thomas F. Carney, Joseph D. Cesarotti, Mary Anna Fowler, H. Gearl Gore,
Eugene W. Hughes, Thomas J. Langan, Jr., Lennart E. Lindahl, Jr., Mary A. McCarty, Carol
R. Owen, Richard C. Rathke, William F. Spitznagel, Bruce E. Wiita and William Wolfson
(filed herewith)
11 Statement re Computation of per share earnings as shown in Item 8, page 83
21 Subsidiaries of Republic Security Financial Corp. (filed herewith)
23 Consent of Ernst & Young LLP (filed herewith)
27 Financial Data Schedule (filed herewith)
</TABLE>
b) REPORTS ON FORM 8-K
During the last quarter of the year ending December 31, 1998, the Company
filed three reports on Form 8-K.
1) Report on Form 8-K dated October 29, 1998 reporting the completion of
the acquisition of First Palm Beach Bancorp, Inc., shareholder approval
of an amendment to the Company's Articles of Incorporation and
shareholder approval of an amendment to the Company's 1997 Performance
Incentive Plan.
2) Report on Form 8-K dated November 2, 1998 reporting the Company's
entering into a supplemental indenture with respect to its 10.35%
Senior Debentures due 2002.
3) Report on Form 8-K dated December 15, 1998 relating to interim combined
financial statements restated to include the accounts of First Palm
Beach Bancorp, Inc.
95
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
REPUBLIC SECURITY FINANCIAL CORPORATION
BY: /s/ RUDY E. SCHUPP
--------------------------------------
Rudy E. Schupp
Chairman of the Board
Chief Executive Officer
BY: /s/ RICHARD J. HASKINS
--------------------------------------
Richard J. Haskins
Senior Executive Vice President
Chief Financial and Accounting Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- ------------------------------------- ---------- ---------------
<S> <C> <C>
/s/ JOHNNY R. ADCOCK Director March 24, 1999
- -------------------------------------
Johnny R. Adcock
/s/ PAULA BERLINER Director March 24, 1999
- -------------------------------------
Paula Berliner
/s/ THOMAS F. CARNEY Director March 24, 1999
- -------------------------------------
Thomas F. Carney
/s/ JOSEPH D. CESAROTTI, SR. Director March 24, 1999
- -------------------------------------
Joseph D. Cesarotti, Sr.
/s/ MARY ANNA FOWLER Director March 24, 1999
- -------------------------------------
Mary Anna Fowler
/s/ H. GEARL GORE Director March 24, 1999
- -------------------------------------
H. Gearl Gore
/s/ FRED A. GREENE Director March 24, 1999
- -------------------------------------
Fred A. Greene
/s/ R. RANDY GUEMPLE Director March 24, 1999
- -------------------------------------
R. Randy Guemple
</TABLE>
96
<PAGE>
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- --------------------------------- ---------- ---------------
<S> <C> <C>
/s/ RICHARD J. HASKINS Director March 24, 1999
- -------------------------------------
Richard J. Haskins
/s/ EUGENE W. HUGHES, JR. Director March 24, 1999
- -------------------------------------
Eugene W. Hughes, Jr.
/s/ THOMAS J. LANGAN, JR. Director March 24, 1999
- -------------------------------------
Thomas J. Langan, Jr.
/s/ LENNART LINDAHL Director March 24, 1999
- -------------------------------------
Lennart Lindahl
/s/ MARY A. McCARTY Director March 24, 1999
- -------------------------------------
Mary A. McCarty
/s/ CAROL R. OWEN Director March 24, 1999
- -------------------------------------
Carol R. Owen
/s/ RICHARD C. RATHKE Director March 24, 1999
- -------------------------------------
Richard C. Rathke
/s/ DANIEL D. SOKOLOFF Director March 24, 1999
- -------------------------------------
Daniel D. Sokoloff, M.D.
/s/ RUDY E. SCHUPP Director March 24, 1999
- -------------------------------------
Rudy E. Schupp
/s/ WILLIAM F. SPITZNAGEL Director March 24, 1999
- -------------------------------------
William F. Spitznagel
/s/ BRUCE E. WIITA Director March 24, 1999
- -------------------------------------
Bruce E. Witta
/s/ WILLIAM WOLFSON Director March 24, 1999
- -------------------------------------
William Wolfson
</TABLE>
97
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION OF DOCUMENT
- ---------- ----------------------------------------------------------------------------------------------
<S> <C>
3.2(b) Amendments to Bylaws of the Company (filed herewith)
10.1 Amended and Restated Employment Agreement among the Company, Republic Security
Bank and Rudy E. Schupp dated as of January 1, 1999 (filed herewith)
10.2 Amended and Restated Employment Agreement among the Company, Republic Security
Bank and Richard J. Haskins dated as of January 27, 1999 (filed herewith)
10.3 Employment Agreement among the Company, Republic Security Bank and R. Michael
Strickland dated as of February 16, 1999 (filed herewith)
10.4 Employment Agreement among the Company, Republic Security Bank and Louis J. Dunham
dated as of February 26, 1999 (filed herewith)
10.5 Form of Employment Agreement between Republic Security Bank and each of Roger
Savage, John G. Primeau and Jose Vivero (filed herewith)
10.8 Employment Agreement between Republic Security Bank and Thomas Tribby dated as of
July 15, 1997 (filed herewith)
10.9 Form of Change of Control Agreement by and among the Company, Republic Security Bank
and each of Alissa E. Ballot, Bruce Keir, W. Andrew Kirkman, Richard Kuci, Carla Pollard,
John G. Primeau, Roger Savage, Joan Schimelman, Thomas Tribby and Jose Vivero (filed
herewith)
10.11 Form of Amended and Restated Supplemental Retirement Plan Agreement dated as of July
1, 1997 by and between Republic Security Bank and each of Rudy E. Schupp and Richard J.
Haskins (filed herewith)
10.12 Supplemental Retirement Plan Agreement dated as of January 1, 1996 between Republic
Security Bank and Roger Savage (filed herewith)
10.13 Amended and Restated Stock Appreciation Rights Agreement dated as of June 24, 1998 by
and between the Company and Rudy E. Schupp (filed herewith)
10.14 Amended and Restated Stock Appreciation Rights Agreement dated as of June 24, 1998 by
and between the Company and Richard J. Haskins (filed herewith)
10.15 Form of Amended and Restated Stock Appreciation Rights Agreement dated as of June 24,
1998 by and between the Company and each of Gearl Gore, Lennart Lindahl, Jr., Richard
Rathke, William Spitznagel, Dr. Bruce Wiita, and William Wolfson (filed herewith)
10.17 Amendment No. 1 to the Republic Security Financial Corporation 1997 Performance
Incentive Plan, as amended (filed herewith)
10.19 Form of Directors Retirement Agreement between Republic Security Bank and each of
Paula Berliner, Thomas F. Carney, Joseph D. Cesarotti, Mary Anna Fowler, H. Gearl Gore,
Eugene W. Hughes, Thomas J. Langan, Jr., Lennart E. Lindahl, Jr., Mary A. McCarty, Carol
R. Owen, Richard C. Rathke, William F. Spitznagel, Bruce E. Wiita and William Wolfson
(filed herewith)
21 Subsidiaries of Republic Security Financial Corp. (filed herewith)
23 Consent of Ernst & Young LLP (filed herewith)
27 Financial Data Schedule (filed herewith)
</TABLE>
EXHIBIT 3.2(B): AMENDMENTS TO BYLAWS OF THE COMPANY
- -------------------------------------------------------------------------------
The following resolution was adopted by the Board of Directors of the
Company on February 17, 1999:
RESOLVED, that, subject to the closing of the merger with Northside
Bank of Tampa, Section 3.03 of the Company's By-laws be amended, effective on
the day after such closing, by deleting the first sentence thereof in its
entirety and substituting the following therefor:
The Board of Directors shall consist of twenty directors.
The amendment set forth above was effective on February 27, 1999.
EXHIBIT 10.1 AMENDED AND RESTATED EMPLOYMENT AGREEMENT AMONG THE COMPANY,
REPUBLIC SECURITY BANK AND RUDY E. SCHUPP AS DATED
JANUARY 1, 1999
- -------------------------------------------------------------------------------
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the
"Agreement") is made and entered into as of January 1, 1999 by and
among REPUBLIC SECURITY FINANCIAL CORPORATION, a business corporation organized
and operating under the laws of the State of Florida and having an office at 450
South Australian Avenue, West Palm Beach, FL 33401 (the "Company"), REPUBLIC
SECURITY BANK, a commercial bank organized and operating under the laws of the
State of Florida and having an office at 450 S. Australian Ave., West Palm
Beach, FL 33401 (the "Bank") and RUDY E. SCHUPP, an individual residing at 11874
Lake Shore Place, North Palm Beach, FL 33408 (the "Executive"). The Agreement
amends and restates in its entirety that certain Employment Agreement by and
between Republic Security Financial Corporation and the Executive dated April 1,
1992, as amended January 1, 1997.
W I T N E S S E T H :
WHEREAS, the Executive currently serves the Company and the
Bank in the capacities of Chairman, President and Chief Executive Officer;
and
WHEREAS, the Company and the Bank desire to assure for
themselves the continued availability of the Executive's services and the
ability of the Executive to perform such services with a minimum of personal
distraction in the event of a pending or threatened Change of Control (as
hereinafter defined); and
WHEREAS, the Executive is willing to continue to serve the
Company and the Bank on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and conditions hereinafter set forth, the Company, the Bank and
the Executive hereby agree as follows:
SECTION 1. EMPLOYMENT.
Each of the Company and the Bank agrees to continue to employ
the Executive, and the Executive hereby agrees to such continued employment,
during the period and upon the terms and conditions set forth in this Agreement.
SECTION 2. EMPLOYMENT PERIOD; REMAINING UNEXPIRED EMPLOYMENT
PERIOD.
(a) The terms and conditions of this Agreement shall be and
remain in effect during the period of employment established under this section
2 ("Employment Period"). The Employment Period shall be for an initial term of
three years beginning on the date of this Agreement and ending on the third
anniversary date of this Agreement, plus such extensions, if any, as are
provided pursuant to section 2(b).
(b) Beginning on the date of this Agreement, the Employment
Period shall automatically be extended for one (1) additional day each day,
unless either the Company and the Bank, acting jointly, or the Executive, elects
not to extend the Agreement further by giving written notice to the other
parties, in which case the Employment Period shall end on the third anniversary
of the date on which such written notice is given. For all purposes of this
Agreement, the term "Remaining Unexpired Employment Period" as of any date shall
mean the period beginning on such date and ending on: (i) if a notice of
non-extension has been given in accordance with this section 2(b), the third
anniversary of the date on which such notice is given; and (ii) in all other
cases, the third anniversary of the date as of which the Remaining Unexpired
Employment Period is being determined. Upon termination of the Executive's
employment with the Company and the Bank for any reason whatsoever, any daily
extensions provided pursuant to this section 2(b), if not therefore
discontinued, shall automatically cease.
(c) Nothing in this Agreement shall be deemed to prohibit the
Company or the Bank from terminating the Executive's employment at any time
during the Employment Period with or without notice for any reason; PROVIDED,
HOWEVER, that the relative rights and obligations of the Company, the Bank and
the Executive in the event of any such termination shall be determined under
this Agreement.
SECTION 3. DUTIES.
The Executive shall serve as Chairman, President and Chief
Executive of each of the Company and the Bank, having such power, authority and
responsibility and performing such duties as are prescribed by or under the
By-Laws of the Company and the Bank and as are customarily associated with such
position. The Executive shall devote his full business time and attention (other
than during weekends, holidays, approved vacation periods, and periods of
illness or approved leaves of absence) to the business and affairs of the
Company and the Bank and shall use his best efforts to advance the interests of
the Company and the Bank.
SECTION 4. CASH COMPENSATION.
In consideration for the services to be rendered by the
Executive hereunder, the Company and/or the Bank, in such combination thereof as
may be agreed by the Boards of Directors of the Company and the Bank, shall pay
to Executive a salary at an initial annual rate of FOUR HUNDRED FIFTEEN THOUSAND
DOLLARS ($415,000), payable in approximately equal installments in accordance
with the Company's and/or the Bank's customary payroll practices for senior
officers. At least annually during the Employment Period, the Board of Directors
of the Bank and/or the Company, or the Compensation Committees thereof, shall
review the Executive's annual rate of salary and may, in its or their
discretion, approve an increase therein. In no event shall the Executive's
annual rate of salary
<PAGE>
under this Agreement in effect at a particular time be reduced without his prior
written consent. In addition to salary, the Executive may receive other cash
compensation from the Company for services hereunder at such times, in such
amounts and on such terms and conditions as the Board may determine from time to
time. Such amount shall generally be computed as a percentage (to be determined
by the mutual agreement of the Executive and the Company and the Bank) of the
Company's quarterly consolidated net income before taxes (excluding
extraordinary items as defined in APB #30 and excluding restructuring charges
and other charges relating to mergers, acquisitions or transactions of similar
effect).
SECTION 5. EMPLOYEE BENEFIT PLANS AND PROGRAMS.
(a) During the Employment Period, the Executive shall be
treated as an employee of the Company and the Bank and shall be entitled to
participate in and receive benefits under any and all qualified or non-qualified
retirement, pension, savings, profit-sharing or stock bonus plans, any and all
group life, health (including hospitalization, medical and major medical),
dental, accident and long term disability insurance plans, and any other
employee benefit and compensation plans (including, but not limited to, any
incentive compensation plans or programs, stock option and appreciation rights
plans and restricted stock plans) as may from time to time be maintained by, or
cover employees of, the Company or the Bank, in accordance with the terms and
conditions of such employee benefit plans and programs and compensation plans
and programs and consistent with the Company's and the Bank's customary
practices.
(b) During the Employment Period, the Executive shall be
entitled to five (5) weeks of vacation in each calendar year, and shall be
compensated with respect thereto in accordance with the Company's and the Bank's
normal vacation policies. The Executive shall also be entitled to all paid
holidays in accordance with the Company's and the Bank's normal holiday
policies.
(c) The Company or the Bank shall own and pay the costs of
premiums on life insurance insuring the life of the Executive in an amount not
less than $200,000, and the Company or Bank shall designate the beneficiary of
such policy as such person or persons named by the Executive from time to time.
SECTION 6. INDEMNIFICATION AND INSURANCE.
(a) During the Employment Period and for a period of six (6)
years thereafter, the Company and the Bank shall cause the Executive to be
covered by and named as an insured under any policy or contract of insurance
obtained by either to insure its directors and officers against personal
liability for acts or omissions in connection with service as an officer or
director of the Company or the Bank or service in other capacities at the
request of the Company or the Bank. The coverage provided to the Executive
pursuant to this section 6 shall be of the same scope and on the same terms and
conditions as the coverage (if any) provided to other officers or directors of
the Company and the Bank.
(b) To the maximum extent permitted under applicable law,
during the Employment Period and for a period of six (6) years thereafter, the
Company and the Bank shall indemnify the Executive against, and hold him
harmless from, any costs, liabilities, losses and exposures to the fullest
extent and on the most favorable terms and conditions that similar
indemnification is offered to any director or officer of the Company, the Bank
or any subsidiary or affiliate of either of them.
SECTION 7. OTHER ACTIVITIES.
(a) The Executive may serve as a member of the boards of
directors of such business, community and charitable organizations as he may
disclose to and as may be approved by the Board of Directors of the Company or
the Bank (which approval shall not be unreasonably withheld); PROVIDED, HOWEVER,
that such service shall not materially interfere with the performance of his
duties under this Agreement. The Executive may also engage in personal business
and investment activities which do not materially interfere with the performance
of his duties hereunder; PROVIDED, HOWEVER, that such activities are not
prohibited under any code of conduct or investment or securities trading policy
established by the Company or the Bank and generally applicable to all similarly
situated executives.
(b) If the Executive is discharged or suspended, or is subject
to any regulatory prohibition or restriction with respect to participation in
the affairs of the Bank, he shall (subject to the Company's powers of
termination hereunder) continue to perform services for the Company in
accordance with this Agreement but shall not directly or indirectly provide
services to or participate in the affairs of the Bank in a manner inconsistent
with the terms of such discharge or suspension or any applicable regulatory
order.
SECTION 8. WORKING FACILITIES AND EXPENSES.
The Executive's principal place of employment shall be at the
Company's and the Bank's executive offices at the address first above written,
or at such other location within Palm Beach County, Florida at which the Company
or the Bank shall maintain its principal executive offices, or at such other
location as the Company, the Bank and the Executive may mutually agree upon. The
Company and the Bank shall provide the Executive at his principal place of
employment with a private office, secretarial services and other support
services and facilities suitable to his positions with the Company and the Bank
and necessary or appropriate in connection with the performance of his assigned
duties under this Agreement. The Company or the Bank shall provide to the
Executive for his exclusive use an automobile owned or leased by the Company or
the Bank and appropriate to his position, to be used in the performance of his
duties hereunder, including commuting to and from his personal residence. All
costs of operation, maintenance and insurance shall be paid by the Company or
the Bank, and the Executive shall be an additional named insured on the
liability insurance maintained on such automobile. The Executive shall account
for the use and expenses of the automobile in accordance with the policies and
procedures of the Bank and the Company in effect from time to time. The Company
or the Bank shall reimburse the Executive for his ordinary and necessary
business expenses, including, without limitation, all expenses associated with
his business use of the aforementioned automobile, fees for memberships in such
clubs and organizations as the Executive and the Company and Bank shall mutually
agree are necessary and appropriate for business purposes, and his travel and
entertainment expenses incurred in connection with the performance of his duties
under this Agreement, in each case upon presentation to the Company or the Bank
of an itemized account of such expenses in such form as the Company or Bank may
reasonably require.
<PAGE>
SECTION 9. TERMINATION OF EMPLOYMENT WITH SEVERANCE BENEFITS.
(a) The Executive shall be entitled to the severance benefits
described herein in the event that his employment with the Company and the Bank
terminates during the Employment Period under any of the following
circumstances:
(i) the Executive's voluntary resignation from employment with
the Company and the Bank within ninety (90) days following:
(A) the failure of the Board of Directors of either
the Company or the Bank to appoint or re-appoint or elect or
re-elect the Executive to the offices of Chairman, President
and Chief Executive Officer (or a more senior office, if any)
of the Company and Bank;
(B) the failure of the stockholders of the Company or
Bank to elect or re-elect the Executive to the Board of
Directors of the Company or the Bank, respectively, or the
failure of the Board of Directors of the Company or the Bank
(or the nominating committees thereof) to nominate the
Executive for such election or re-election;
(C) the expiration of a thirty (30) day period
following the date on which the Executive gives written notice
to the Company or the Bank of its or their material failure,
whether by amendment of the Company's or the Bank's Articles
of Incorporation or By-laws, action of the Company's or the
Bank's Board of Directors or the Company's or the Bank's
stockholders or otherwise, to vest in the Executive the
functions, duties, or responsibilities prescribed in section 3
of this Agreement as of the date hereof, unless, during such
thirty (30) day period, the Company or the Bank cure such
failure in a manner determined by the Executive, in his
discretion, to be satisfactory;
(D) the expiration of a thirty (30) day period
following the date on which the Executive gives written notice
to the Company or the Bank of its material breach of any term,
condition or covenant contained in this Agreement (including,
without limitation, any reduction of the Executive's rate of
base salary in effect from time to time and any change in the
terms and conditions of any compensation or benefit program in
which the Executive participates which, either individually or
together with other changes, has a material adverse effect on
the aggregate value of his total compensation package),
unless, during such thirty (30) day period, the Company or the
Bank cures such failure in a manner determined by the
Executive, in his discretion, to be satisfactory; or
(E) the relocation of the Executive's principal place
of employment, without his written consent, to a location
outside of Palm Beach County, Florida;
(ii) the termination of the Executive's employment with the
Company or the Bank for any other reason not described in section
10(a).
In such event, the Company or the Bank shall provide the benefits and
pay to the Executive the amounts described in section 9(b).
(b) Upon the termination of the Executive's employment with
the Company and the Bank under circumstances described in section 9(a) of this
Agreement, the Company or the Bank shall pay and provide to the Executive (or,
in the event of his death following such termination, to his estate):
(i) his earned but unpaid compensation as of the date of the
termination of his employment with the Company and the Bank, such
payment to be made at the time and in the manner prescribed by law
applicable to the payment of wages but in no event later than thirty
(30) days after termination of employment;
(ii) the benefits, if any, to which he is entitled as a former
employee under the employee benefit plans and programs and compensation
plans and programs maintained for the benefit of the Company's or the
Bank's officers and employees;
(iii) continued group life, health (including hospitalization,
medical and major medical), dental, accident and long term disability
insurance benefits, in addition to that provided pursuant to section
9(b)(ii), and after taking into account the coverage provided by any
subsequent employer, if and to the extent necessary to provide for the
Executive, for a period of three years from the date his employment
terminates, coverage equivalent to the coverage to which he would have
been entitled under such plans (as in effect on the date of his
termination of employment, or, if his termination of employment occurs
after a Change of Control, on the date of such Change of Control,
whichever benefits are greater), if he had continued working for the
Company and the Bank during the Remaining Unexpired Employment Period
at the highest annual rate of compensation achieved during that portion
of the Employment Period which is prior to the Executive's termination
of employment with the Company and the Bank;
(iv) within thirty (30) days following his termination of
employment with the Company and the Bank, a lump sum payment in an
amount equal to the salary that the Executive would have earned if he
had continued working for the Company and the Bank for a period of
three years from the date his employment terminates at the highest
annual rate of salary achieved during that portion of the Employment
Period which is prior to the Executive's termination of employment with
the Company and the Bank, such lump sum to be paid in lieu of all other
payments of salary provided for under this Agreement in respect of the
period following any such termination;
(v) within thirty (30) days following his termination of
employment with the Company and the Bank, a lump sum payment in an
amount equal to the excess, if any, of:
<PAGE>
(A) the present value of the aggregate benefits to
which he would be entitled under any and all qualified and
non-qualified defined benefit pension plans maintained by, or
covering employees of, the Company or the Bank, if he were
100% vested thereunder and had continued working for the
Company or the Bank for a period of three years from the date
his employment terminates, such benefits to be determined as
of the date of termination of employment by adding to the
service actually recognized under such plans an additional
period equal to the Remaining Unexpired Employment Period and
by adding to the compensation recognized under such plans for
the most recent year recognized all amounts payable under
sections 9(b)(i), (iv), and (vii); over
(B) the present value of the benefits to which he is
actually entitled under such defined benefit pension plans as
of the date of his termination;
where such present values are to be determined using the mortality
tables prescribed under section 415(b)(2)(E)(v) of the Code and a
discount rate, compounded monthly, equal to the annualized rate of
interest prescribed by the Pension Benefit Guaranty Corporation for the
valuation of immediate annuities payable under terminating
single-employer defined benefit plans for the month in which the
Executive's termination of employment occurs ("Applicable PBGC Rate");
(vi) within thirty (30) days following his termination of
employment with the Company and the Bank, a lump sum payment in an
amount equal to the present value of the additional employer
contributions (or if greater in the case of a leveraged employee stock
ownership plan or similar arrangement, the additional assets allocable
to him through debt service, based on the fair market value of such
assets at termination of employment) to which he would have been
entitled under any and all qualified and non-qualified defined
contribution plans maintained by, or covering employees of, the Company
or the Bank, as if he were 100% vested thereunder and had continued
working for the Company and the Bank for a period of three years from
the date his employment terminates at the highest annual rate of
compensation achieved during that portion of the Employment Period
which is prior to the Executive's termination of employment with the
Company and the Bank, and making the maximum amount of employee
contributions, if any, required under such plan or plans, such present
value to be determined on the basis of a discount rate, compounded
using the compounding period that corresponds to the frequency with
which employer contributions are made to the relevant plan, equal to
the Applicable PBGC Rate;
(vii) within thirty (30) days following his termination of
employment with the Company and the Bank, a lump sum payment in an
amount equal to three times the higher of (A) the highest cash
incentive compensation or bonus (annualized, if paid for a period other
than annually) paid to the Executive during or accrued with respect to
the Executive for either (i) any of the three years immediately
preceding that in which, or (ii) the year in which, Executive's
employment with the Company and the Bank terminates, or (B) the highest
cash incentive compensation or bonus (annualized, if paid for a period
other than annually) so paid or accrued in respect of either (x) any of
the three years immediately preceding that in which, or (y) the year in
which, a Change of Control (as hereinafter defined) occurs.
The Company, the Bank and the Executive hereby stipulate that
the damages which may be incurred by the Executive following any such
termination of employment are not capable of accurate measurement as of the date
first above written and that the payments and benefits contemplated by this
section 9(b) constitute reasonable damages under the circumstances and shall be
payable without any requirement of proof of actual damage and without regard to
the Executive's efforts, if any, to mitigate damages. The Company, the Bank and
the Executive further agree that the Company and the Bank may condition the
payments and benefits (if any) due under sections 9(b)(iii), (iv), (v), (vi) and
(vii) on the receipt of the Executive's resignation from any and all positions
which he holds as an officer, director or committee member with respect to the
Company, the Bank or any subsidiary or affiliate of either of them.
SECTION 10. TERMINATION WITHOUT ADDITIONAL COMPANY OR BANK
LIABILITY.
(a) In the event that the Executive's employment with the
Company and the Bank shall terminate during the Employment Period on account of:
(i) the discharge of the Executive for "cause," which, for
purposes of this Agreement shall mean: (A) the Executive intentionally
engages in dishonest conduct in connection with his performance of
services for the Company or the Bank resulting in his conviction of a
felony; (B) the Executive is convicted of, or pleads guilty or NOLO
CONTENDERE to, a felony or any crime involving moral turpitude; (C) the
Executive willfully fails or refuses to perform his duties under this
Agreement and fails to cure such breach within sixty (60) days
following written notice thereof from the Company or the Bank; (D) the
Executive breaches his fiduciary duties to the Company or the Bank for
personal profit; or (E) the Executive's willful breach or violation of
any law, rule or regulation (other than traffic violations or similar
offenses), or final cease and desist order in connection with his
performance of services for the Company or the Bank;
(ii) the Executive's voluntary resignation from employment
with the Company and the Bank for reasons other than those specified in
section 9(a) or 11(b);
(iii) the Executive's death; or
(iv) a determination that the Executive is eligible for
long-term disability benefits under the Company's or the Bank's
long-term disability insurance program or, if there is no such program,
under the federal Social Security Act;
then the Company and the Bank shall have no further obligations under this
Agreement, other than the payment to the Executive (or, in the event of his
death, to his estate) of his earned but unpaid compensation as of the date of
the termination of his employment, and the provision of such other benefits, if
any, to which he is entitled as a former employee under the employee benefit
plans and programs and compensation plans and programs maintained by, or
covering employees of, the Company or the Bank; PROVIDED, HOWEVER, that, in the
event of the Executive's death, the Company or the Bank shall pay to his estate
an amount equal to three months' cash compensation within thirty days of the
appointment of the executor of such estate.
<PAGE>
(b) For purposes of section 10(a)(i), no act or failure to
act, on the part of the Executive, shall be considered "intentional" or
"willful" unless it is done, or omitted to be done, by the Executive in bad
faith or without reasonable belief that the Executive's action or omission was
in the best interests of the Company and the Bank. Any act, or failure to act,
based upon authority given pursuant to a resolution duly adopted by the Board of
Directors of the Company or the Bank or based upon the written advice of counsel
for the Company or the Bank shall be conclusively presumed to be done, or
omitted to be done, by the Executive in good faith and in the best interests of
the Company and the Bank. The cessation of employment of the Executive shall not
be deemed to be for "cause" within the meaning of section 10(a)(i) unless and
until there shall have been delivered to the Executive a copy of a resolution
duly adopted by the affirmative vote of three-fourths of the members of the
Board of Directors of the Company or the Bank, as the case may be, at a meeting
of such Board called and held for such purpose (after reasonable notice is
provided to the Executive and the Executive is given an opportunity, together
with counsel, to be heard before such Board), finding that, in the good faith
opinion of such Board, the Executive is guilty of the conduct described in
section 10(a)(i) above, and specifying the particulars thereof in detail.
SECTION 11. TERMINATION UPON OR FOLLOWING A CHANGE OF CONTROL
(a) A Change of Control ("Change of Control") shall be deemed
to have occurred upon the happening of any of the following events:
(i) approval by the stockholders of the Company of a
transaction that would result in the reorganization, merger or
consolidation of the Company with one or more other persons, other than
a transaction following which:
(A) at least 50.1% of the common stock or equity
ownership interests of the entity resulting from such
transaction are beneficially owned (within the meaning of Rule
13d-3 promulgated under the Exchange Act) in substantially the
same relative proportions by persons who, immediately prior to
such transaction, beneficially owned (within the meaning of
Rule 13d-3 promulgated under the Exchange Act) at least 50.1%
of the outstanding common stock or equity ownership interests
in the Company; and
At least 50.1% of the combined voting power of the
securities entitled to vote generally in the election of
directors of the entity resulting from such transaction are
beneficially owned (within the meaning of Rule 13d-3
promulgated under the Exchange Act) in substantially the same
relative proportions by persons who, immediately prior to such
transaction, beneficially owned (within the meaning of Rule
13d-3 promulgated under the Exchange Act) at least 50.1% of
the combined voting power of the securities entitled to vote
generally in the election of directors of the Company; and
No person, or persons acting in concert, beneficially own
(within the meaning of Rule 13d-3 promulgated under the
Exchange Act) 20% or more of the outstanding common stock or
equity ownership interests in, or 20% or more of the combined
voting power of the securities entitled to vote generally in
the election of directors of, the entity resulting from such
transaction; and
At least a majority of the members of the board of
directors of the entity resulting from such transaction are
individuals who were described in sections 11(a)(iv)(A) or (B)
of this Agreement as of the date of execution of the initial
definitive agreement providing for such transaction (or, if
earlier, as of the date on which the Board of Directors of the
Company authorized such transaction).
(ii) the acquisition of all or substantially all of the assets
of the Company or beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of 20% or more of the
outstanding securities or of the combined voting power of the
outstanding securities of the Company entitled to vote generally in the
election of directors by any person or by any persons acting in
concert, or approval by the stockholders of the Company of any
transaction which would result in such an acquisition;
(iii) a complete liquidation or dissolution of the Company, or
approval by the stockholders of the Company of a plan for such
liquidation or dissolution; or
(iv) the occurrence of any event if, immediately following
such event, at least 50% of the members of the board of directors of
the Company do not belong to any of the following groups:
(A) individuals who were members of the Board of the
Company on the date of this Agreement; or
(B) individuals who first became members of the Board
of the Company after the date of this Agreement either:
(I) upon election to serve as a member of
the Board of directors of the Company by affirmative
vote of three-quarters of the members of such Board,
or of a nominating committee thereof, in office at
the time of such first election; or
(II) upon election by the stockholders of
the Company to serve as a member of the Board of the
Company, but only if nominated for election by
affirmative vote of three-quarters of the members of
the board of directors of the Company, or of a
nominating committee thereof, in office at the time
of such first nomination;
PROVIDED, HOWEVER, that such individual's election or
nomination did not result from an actual or
threatened election contest (within the meaning of
Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act)
<PAGE>
or other actual or threatened solicitation of proxies
or consents (within the meaning of Rule 14a-11 of
Regulation 14A promulgated under the Exchange Act)
other than by or on behalf of the Board of the
Company; or
(v) any event which would be described in section 11(a)(i),
(ii), (iii) or (iv) if the term "Bank" were substituted for the term
"Company" therein.
In no event, however, shall a Change of Control be deemed to
have occurred as a result of any acquisition of securities or assets of the
Company, the Bank, or a subsidiary of either of them, by the Company, the Bank,
or a subsidiary of either of them, or by any employee benefit plan maintained by
any of them. For purposes of this section 11(a), the term "person" shall have
the meaning assigned to it under sections 13(d)(3) or 14(d)(2) of the Exchange
Act.
(b) In the event of a Change of Control, the Executive shall
be entitled to the payments and benefits contemplated by section 9(b) in the
event of his termination of employment with the Company or the Bank under any of
the circumstances described in section 9(a) of this Agreement or under any of
the following circumstances:
(i) resignation, voluntary or otherwise, by the Executive at
any time during the Employment Period following his demotion, loss of
title, office or significant authority or responsibility, or following
any reduction in any element of his package of compensation and
benefits;
(ii) resignation, voluntary or otherwise, by the Executive at
any time during the Employment Period following any relocation of his
principal place of employment or any change in working conditions at
such principal place of employment which the Executive, in his
reasonable discretion, determines to be embarrassing, derogatory or
otherwise adverse;
(iii) resignation, voluntary or otherwise, by the Executive at
any time during the Employment Period following the failure of any
successor to the Company in the Change of Control to include the
Executive in any compensation or benefit program maintained by it or
covering any of its executive officers, unless the Executive is already
covered by a substantially similar plan of the Company or the Bank
which is at least as favorable to him; or
(iv) resignation, voluntary or otherwise, for any reason
whatsoever following the effective date of the Change of Control.
SECTION 12. TAX INDEMNIFICATION.
(a) This section 12 shall apply if the Executive's employment
is terminated upon or following (i) a Change of Control (as defined in section
11 of this Agreement); or (ii) a change "in the ownership or effective control"
of the Company or the Bank or "in the ownership of a substantial portion of the
assets" of the Company or the Bank within the meaning of section 280G of the
Code. If this section 12 applies, then, if for any taxable year, the Executive
shall be liable for the payment of an excise tax under section 4999 of the Code
with respect to any payment in the nature of compensation made by the Company,
the Bank or any direct or indirect subsidiary or affiliate of the Company or the
Bank to (or for the benefit of) the Executive, the Company or the Bank shall pay
to the Executive an amount equal to X determined under the following formula:
X = E x P
-----------------------------------------
1 - [(FI x (1 - SLI)) + SLI + E + M]
where
E = the rate at which the excise tax is assessed under
section 4999 of the Code;
P = the amount with respect to which such excise tax is
assessed, determined without regard to this section
12;
FI = the highest marginal rate of income tax applicable
to the Executive under the Code for the taxable year
in question;
SLI = the sum of the highest marginal rates of income tax
applicable to the Executive under all applicable
state and local laws for the taxable year in
question; and
M = the highest marginal rate of Medicare tax
applicable to the Executive under the Code for the
taxable year in question.
With respect to any payment in the nature of compensation that is made to (or
for the benefit of) the Executive under the terms of this Agreement, or
otherwise, and on which an excise tax under section 4999 of the Code will be
assessed, the payment determined under this section 12(a) shall be made to the
Executive on the earlier of (i) the date the Company, the Bank or any direct or
indirect subsidiary or affiliate of the Company or the Bank is required to
withhold such tax, or (ii) the date the tax is required to be paid by the
Executive. The determination of the amount due hereunder shall be made by Ernst
& Young, or such other accounting firm as the parties may mutually agree upon
(the "Accounting Firm"). In the event that the Accounting Firm is serving as
accountant or auditor for the individual, entity or group effecting the Change
of Control the parties shall appoint another nationally recognized accounting
firm to make the determination required hereunder (which accounting firm shall
then be referred to as the Accounting Firm hereunder). All fees and expenses of
the Accounting Firm shall be borne solely by the Company.
<PAGE>
Notwithstanding anything in this section 12 to the
contrary, in the event that the Executive's liability for the excise tax under
section 4999 of the Code for a taxable year is subsequently determined to be
different than the amount determined by the formula (X + P) x E, where X, P and
E have the meanings provided in section 12(a), the Executive or the Company or
Bank, as the case may be, shall pay to the other party at the time that the
amount of such excise tax is finally determined, an appropriate amount, plus
interest, such that the payment made under section 12(a), when increased by the
amount of the payment made to the Executive under this section 12(b) by the
Company or the Bank, or when reduced by the amount of the payment made to the
Company or Bank under this section 12(b) by the Executive, equals the amount
that should have properly been paid to the Executive under section 12(a). The
interest paid under this section 12(b) shall be determined at the rate provided
under section 1274(b)(2)(B) of the Code. To confirm that the proper amount, if
any, was paid to the Executive under this section 12, the Executive shall
furnish to the Company and the Bank a copy of each tax return which reflects a
liability for an excise tax payment made by the Company or the Bank, at least 20
days before the date on which such return is required to be filed with the
Internal Revenue Service.
The Executive shall notify the Company and the Bank
in writing of any claim by the Internal Revenue Service that, if
successful, would require the payment by the Company of additional amounts
hereunder. Such notification shall be given as soon as practicable but no later
than ten business days after the Executive is informed in writing of such claim
and shall apprise the Company and the Bank of the nature of such claim and the
date on which such claim is requested to be paid. The Executive shall not pay
such claim prior to the expiration of the thirty day period following the date
on which it gives such notice that any payment of taxes with respect to such
claim is due. If the Company or the Bank notifies the Executive in writing prior
to the expiration of such period that it desires to contest such claim, the
Executive shall:
/bullet/ give the Company or the Bank any
information reasonably requested by
the Company or the Bank relating to
such claim;
/bullet/ take such action in connection with
contesting such claim as the Company
or the Bank shall reasonably request
in writing from time to time,
including, without limitation,
accepting legal representation with
respect to such claim by an attorney
reasonably selected by the Company
or the Bank;
/bullet/ cooperate with the Company or the
Bank in good faith in order
effectively to contest such claim;
and
/bullet/ permit the Company and the Bank to
participate in any proceedings
relating to such claim;
PROVIDED, HOWEVER, that the Company or the Bank shall bear and pay directly all
costs and expenses (including additional interest and penalties) incurred in
connection with such contest and shall indemnify and hold the Executive
harmless, on an after-tax basis, for any excise tax or income tax (including
interest and penalties with respect thereto) imposed as a result of such
representation and payment of costs and expenses. Notwithstanding the foregoing,
the Executive shall control the conduct of any such proceeding and all decisions
relating to the settlement or other disposition thereof.
(d) The provisions of this section 12 are designed to reflect the
provisions of applicable federal, state and local tax laws in effect on the date
of this Agreement. If, after the date hereof, there shall be any change in any
such laws, this section 12 shall be modified in such manner as the Executive and
the Company and the Bank may mutually agree upon if and to the extent necessary
to assure that the Executive is fully indemnified against the economic effects
of the tax imposed under section 4999 of the Code or any similar federal, state
or local tax.
SECTION 13. CONFIDENTIALITY.
Unless he obtains the prior written consent of the Company and
the Bank, the Executive shall keep confidential and shall refrain from using for
the benefit of himself, or any person or entity other than the Company or any
entity which is a subsidiary of the Company or of which the Company is a
subsidiary, any material document or information obtained from the Company, or
from its parent or subsidiaries, in the course of his employment with any of
them concerning their properties, operations or business (unless such document
or information is readily ascertainable from public or published information or
trade sources or has otherwise been made available to the public through no
fault of his own) until the same ceases to be material (or becomes so
ascertainable or available); PROVIDED, HOWEVER, that nothing in this section 13
shall prevent the Executive, with or without the Company's and the Bank's
consent, from participating in or disclosing documents or information in
connection with any judicial or administrative investigation, inquiry or
proceeding to the extent that such participation or disclosure is required under
applicable law.
SECTION 14. NO EFFECT ON EMPLOYEE BENEFIT PLANS OR PROGRAMS.
The termination of the Executive's employment during the term
of this Agreement or thereafter, whether by the Company, the Bank or by the
Executive, shall have no effect on the rights and obligations of the parties
hereto under the Company's or the Bank's qualified or non-qualified retirement,
pension, savings, thrift, profit-sharing or stock bonus plans, group life,
health (including hospitalization, medical and major medical), dental, accident
and long term disability insurance plans or such other employee benefit plans or
programs, or compensation plans or programs, as may be maintained by, or cover
employees of, the Company or the Bank from time to time.
SECTION 15. SUCCESSORS AND ASSIGNS.
This Agreement will inure to the benefit of and be binding
upon the Executive, his legal representatives and testate or intestate
distributees, and the Company and the Bank and their respective successors and
assigns, including any successor by merger or consolidation or a statutory
receiver or any other person or firm or corporation to which all or
substantially all of the assets and business of the Company or the Bank may be
sold or otherwise transferred. Failure of the Company and the Bank to obtain
from any successor(s) its or their express written assumption of the Company's
and the Bank's obligations hereunder at least sixty (60) days in advance of the
scheduled effective date of any such succession shall be deemed a material
breach of this Agreement.
SECTION 16. NOTICES.
<PAGE>
Any communication required or permitted to be given under this
Agreement, including any notice, direction, designation, consent,
instruction, objection or waiver, shall be in writing and shall be deemed to
have been given at such time as it is delivered personally, or five (5) days
after mailing if mailed, postage prepaid, by registered or certified mail,
return receipt requested, addressed to such party at the address listed below or
at such other address as one such party may by written notice specify to the
other party:
If to the Executive:
Rudy E. Schupp
11874 Lake Shore Place
North Palm Beach, FL 33408
If to the Company:
Republic Security Financial Corporation
450 S. Australian Avenue
West Palm Beach, FL 33401
Attention: Alissa E. Ballot, Secretary
If to the Bank:
Republic Security Bank
450 S. Australian Avenue
West Palm Beach, FL 33401
Attention: Alissa E. Ballot, Secretary
SECTION 17. INDEMNIFICATION FOR ATTORNEYS' FEES.
The Company and the Bank shall indemnify, hold harmless and
defend the Executive against reasonable costs, including legal fees, incurred by
him in connection with or arising out of any action, suit or proceeding in which
he may be involved, as a result of his efforts, in good faith, to defend or
enforce the terms of this Agreement.
SECTION 18. SEVERABILITY.
A determination that any provision of this Agreement is
invalid or unenforceable shall not affect the validity or enforceability of any
other provision hereof.
SECTION 19. WAIVER.
Failure to insist upon strict compliance with any of the
terms, covenants or conditions hereof shall not be deemed a waiver of such term,
covenant, or condition. A waiver of any provision of this Agreement must be made
in writing, designated as a waiver, and signed by the party against whom its
enforcement is sought. Any waiver or relinquishment of any right or power
hereunder at any one or more times shall not be deemed a waiver or
relinquishment of such right or power at any other time or times.
SECTION 20. COUNTERPARTS.
This Agreement may be executed in two (2) or more
counterparts, each of which shall be deemed an original, and all of which shall
constitute one and the same Agreement.
SECTION 21. GOVERNING LAW.
This Agreement shall be governed by and construed and enforced
in accordance with the laws of the State of Florida applicable to contracts
entered into and to be performed entirely within the State of Florida.
SECTION 22. HEADINGS AND CONSTRUCTION.
The headings of sections in this Agreement are for convenience
of reference only and are not intended to qualify the meaning of any section.
Any reference to a section number shall refer to a section of this Agreement,
unless otherwise stated.
SECTION 23. ENTIRE AGREEMENT; MODIFICATIONS.
This instrument contains the entire agreement of the parties
relating to the subject matter hereof, and supersedes in its entirety any and
all prior agreements, understandings or representations relating to the subject
matter hereof, provided, however, that any options granted to the Executive in
any agreement entered into prior to the date hereof in any agreement styled as
an Employment Agreement shall remain available for exercise by the Executive in
accordance with the terms thereof. No modifications of this Agreement shall be
valid unless made in writing and signed by the parties hereto.
SECTION 24. SURVIVAL.
The provisions of sections 6, 9, 10, 11, 12, 13, 14, 17, 19,
21, 25, 26, 27 and 28 shall survive the expiration of the Employment Period
<PAGE>
or termination of this Agreement.
SECTION 25. EQUITABLE REMEDIES.
The Company, the Bank and the Executive hereby stipulate that
money damages are an inadequate remedy for violations of sections 6(a), or 13 of
this Agreement and agree that equitable remedies, including, without
limitations, the remedies of specific performance and injunctive relief, shall
be available with respect to the enforcement of such provisions.
SECTION 26. REQUIRED REGULATORY PROVISION.
(a) Notwithstanding anything herein contained to the contrary,
any payments to the Executive by the Company or the Bank, whether pursuant to
this Agreement or otherwise, are subject to and conditioned upon their
compliance with section 18(k) of the Federal Deposit Insurance Act, 12 U.S.C.
ss.1828(k), and any regulations promulgated thereunder.
(b) Nothing in this Agreement shall be construed to subject
the Bank or its assets to any contractual obligation undertaken by the Company
hereunder or to liability for any breach by the Company.
SECTION 27. HEALTH AND MAJOR MEDICAL INSURANCE
(a) Notwithstanding anything herein to the contrary, upon the
first to occur of (i) a Change of Control (excluding a Change of Control in
connection with which Executive enters into any employment agreement with the
Company or the acquiring entity with a term of at least three years), (ii)
termination of Executive's employment hereunder by the Company or Bank other
than for cause, or (iii) termination of Executive's employment by reason of
retirement at age 65 (or at age 55 through age 64 provided that a majority of
the Board of Directors of the Company confirms that this subsection 27(a) shall
be effective in connection with the retirement), the Company or the Bank shall
thereafter provide Executive with health and major medical insurance through the
date on which Executive shall be eligible to receive Medicare (or any successor
governmental health insurance program) and, after such eligibility date,
Medicare supplemental insurance for life. The Company or the Bank shall not
provide such health and medical insurance during any period, after a termination
of Executive's employment by the Company or Bank other than for cause, during
which Executive is employed by an employer which provides health and major
medical insurance in which Executive is qualified to participate. If insurance
is provided to Executive under this subsection 27(a), the Company's or the
Bank's obligation to provide Executive any such health or major medical
insurance otherwise referred to in this Agreement shall terminate.
(b) The Company and the Bank shall not be obligated to provide
any insurance pursuant to subsection 27(a) to the extent that the cost thereof
exceeds the amount which would accrue at the rate of $7,700 per annum from
October 1, 1995. In the event the cost of such insurance exceeds such accrual,
Executive, at his option, may continue the insurance by paying, at his own
expense, the amount in excess of such accrual.
IN WITNESS WHEREOF, the Company and the Bank have caused this
Agreement to be executed and the Executive has hereunto set his hand, all as of
the day and year first above written.
REPUBLIC SECURITY FINANCIAL CORPORATION
By:
Name: _________________________________________
Title: _________________________________________
REPUBLIC SECURITY BANK
NAME: _________________________________________
TITLE: _________________________________________
_________________________________________
RUDY E. SCHUPP
EXHIBIT 10.2 AMENDED AND RESTATED EMPLOYMENT AGREEMENT AMONG THE COMPANY,
REPUBLIC SECURITY BANK AND RICHARD J. HASKINS AS DATED
JANUARY 27, 1999
- -------------------------------------------------------------------------------
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the
"Agreement") is made and entered into as of January 27, 1999
by and among REPUBLIC SECURITY FINANCIAL CORPORATION, a business corporation
organized and operating under the laws of the State of Florida and having an
office at 450 South Australian Avenue, West Palm Beach, FL 33401 (the
"Company"), REPUBLIC SECURITY BANK, a commercial bank organized and operating
under the laws of the State of Florida and having an office at 450 South
Australian Avenue, West Palm Beach, FL 33401 (the "Bank"), and RICHARD J.
HASKINS, an individual residing at 1181 Morse Blvd., Singer Island, FL 33404
(the "Executive"). The Agreement amends and restates in its entirety that
certain Employment Agreement by and between Republic Security Financial
Corporation and the Executive dated April 1, 1992, as amended February 1, 1998.
W I T N E S S E T H :
WHEREAS, the Executive has been elected as Senior Executive
Vice President and Chief Financial Officer of the Company and the Bank; and
WHEREAS, the Company and the Bank desire to assure for
themselves the continued availability of the Executive's services and the
ability of the Executive to perform such services with a minimum of personal
distraction in the event of a pending or threatened Change of Control (as
hereinafter defined); and
WHEREAS, the Executive is willing to serve the Company and the
Bank on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and conditions hereinafter set forth, the Company, the Bank and
the Executive hereby agree as follows:
SECTION 1. EMPLOYMENT.
The Company and the Bank agree to employ the Executive, and
the Executive hereby agrees to such employment, during the period and upon the
terms and conditions set forth in this Agreement.
SECTION 2. EMPLOYMENT PERIOD; REMAINING UNEXPIRED EMPLOYMENT
PERIOD.
(a) The terms and conditions of this Agreement shall be and
remain in effect during the period of employment established under this section
2 ("Employment Period"). The Employment Period shall be for an initial term of
three years beginning on the date of this Agreement and ending on the third
anniversary date of this Agreement, plus such extensions, if any, as are
provided pursuant to section 2(b).
(b) Beginning on the date of this Agreement, the Employment
Period shall automatically be extended for one (1) additional day each day,
unless either the Company and the Bank, acting jointly, or the Executive, elects
not to extend the Agreement further by giving written notice to the other
parties, in which case the Employment Period shall end on the third anniversary
of the date on which such written notice is given. For all purposes of this
Agreement, the term "Remaining Unexpired Employment Period" as of any date shall
mean the period beginning on such date and ending on: (i) if a notice of
non-extension has been given in accordance with this section 2(b), the third
anniversary of the date on which such notice is given; and (ii) in all other
cases, the third anniversary of the date as of which the Remaining Unexpired
Employment Period is being determined. Upon termination of the Executive's
employment with the Company and the Bank for any reason whatsoever, any daily
extensions provided pursuant to this section 2(b), if not therefore
discontinued, shall automatically cease.
(c) Nothing in this Agreement shall be deemed to prohibit the
Company and the Bank from terminating the Executive's employment at any time
during the Employment Period with or without notice for any reason; PROVIDED,
HOWEVER, that the relative rights and obligations of the Company, the Bank and
the Executive in the event of any such termination shall be determined under
this Agreement.
SECTION 3. DUTIES.
The Executive shall serve as Senior Executive Vice President
and Chief Financial Officer of the Company and the Bank, having such power,
authority and responsibility and performing such duties as are prescribed by or
under the By-Laws of the Bank, or assigned by the Board of Directors of the
Company or the Bank or the President of the Company or the Bank, and otherwise
as are customarily associated with such position. The Executive shall devote his
full business time and attention (other than during weekends, holidays, approved
vacation periods, and periods of illness or approved leaves of absence) to the
business and affairs of the Company and the Bank and shall use his best efforts
to advance the interests of the Company and the Bank.
SECTION 4. CASH COMPENSATION.
In consideration for the services to be rendered by the
Executive hereunder, the Company and the Bank shall pay to Executive a salary at
an initial annual rate of ONE HUNDRED SEVENTY THOUSAND DOLLARS ($170,000),
payable in approximately equal installments in accordance with the Company's and
the Bank's customary payroll practices for senior officers. At least annually
during the Employment Period, the Board of Directors of the Company and the
Bank, or the Compensation Committees thereof, shall review the Executive's
annual rate of salary and may, in its discretion, approve an increase therein.
<PAGE>
In no event shall the Executive's annual rate of salary under this Agreement in
effect at a particular time be reduced without his prior written consent. In
addition to salary, the Executive may receive other cash compensation from the
Company and the Bank for services hereunder at such times, in such amounts and
on such terms and conditions as the Board may determine from time to time. Such
amount shall generally be computed as a percentage (to be determined by the
mutual agreement of the Executive and the Company and the Bank) of the Company's
quarterly consolidated net income before taxes (excluding extraordinary items as
defined in APB #30 and excluding restructuring charges and other charges
relating to mergers, acquisitions or transactions of similar effect).
SECTION 5. EMPLOYEE BENEFIT PLANS AND PROGRAMS.
(a) During the Employment Period, the Executive shall be treated as an
employee of the Company and the Bank and shall be entitled to participate in and
receive benefits under any and all qualified or non-qualified retirement,
pension, savings, profit-sharing or stock bonus plans, any and all group life,
health (including hospitalization, medical and major medical), dental, accident
and long term disability insurance plans, and any other employee benefit and
compensation plans (including, but not limited to, any incentive compensation
plans or programs, stock option and appreciation rights plans and restricted
stock plans) as may from time to time be maintained by, or cover employees of,
the Company or the Bank, in accordance with the terms and conditions of such
employee benefit plans and programs and compensation plans and programs and
consistent with the Company's and the Bank's customary practices.
(b) The Company or the Bank shall own and pay the costs of premiums on
life insurance insuring the life of the Executive in an amount not less than
$200,000, and the Company or Bank shall designate the beneficiary of such policy
as such person or persons named by the Executive from time to time.
SECTION 6. INDEMNIFICATION AND INSURANCE.
(a) During the Employment Period, the Company and the Bank shall cause
the Executive to be covered by and named as an insured under any policy or
contract of insurance obtained by it to insure its directors and officers
against personal liability for acts or omissions in connection with service as
an officer or director of the Company and the Bank or service in other
capacities at the request of the Company or the Bank. The coverage provided to
the Executive pursuant to this section 6 shall be of the same scope and on the
same terms and conditions as the coverage (if any) provided to other officers or
directors of the Company and the Bank.
(b) To the maximum extent permitted under applicable law, during the
Employment Period, the Company and the Bank shall indemnify the Executive
against, and hold him harmless from, any costs, liabilities, losses and
exposures to the fullest extent and on the most favorable terms and conditions
that similar indemnification is offered to any director or officer of the
Company or the Bank or any subsidiary or affiliate of either of them.
SECTION 7. OTHER ACTIVITIES.
The Executive may serve as a member of the boards of directors
of such business, community and charitable organizations as he may disclose to
and as may be approved by the President of the Company or the Bank (which
approval shall not be unreasonably withheld); PROVIDED, HOWEVER, that such
service shall not materially interfere with the performance of his duties under
this Agreement. The Executive may also engage in personal business and
investment activities which do not materially interfere with the performance of
his duties hereunder; PROVIDED, HOWEVER, that such activities are not prohibited
under any code of conduct or investment or securities trading policy established
by the Company or the Bank and generally applicable to all similarly situated
executives.
SECTION 8. WORKING FACILITIES AND EXPENSES.
The Executive's principal place of employment shall be at the
Company's and the Bank's executive offices at the address first above written,
or at such other location within Palm Beach County or Broward County, Florida at
which the Bank shall maintain its principal executive offices, or at such other
location as the Company, the Bank and the Executive may mutually agree upon. The
Company and the Bank shall provide the Executive at his principal place of
employment with a private office, secretarial services and other support
services and facilities suitable to his positions with the Company and the Bank
and necessary or appropriate in connection with the performance of his assigned
duties under this Agreement. The Bank shall provide to the Executive for his
exclusive use an automobile owned or leased by the Bank and appropriate to his
position, to be used in the performance of his duties hereunder. All costs of
operation, maintenance and insurance shall be paid by the Bank. The Executive
shall account for the use and expenses of the automobile in accordance with the
policies and procedures of the Bank in effect from time to time. The Bank shall
reimburse the Executive for his ordinary and necessary business expenses,
including, without limitation, all expenses associated with his business use of
the aforementioned automobile, fees for memberships in such clubs and
organizations as the Executive and the Bank shall mutually agree are necessary
and appropriate for business purposes, and his travel and entertainment expenses
incurred in connection with the performance of his duties under this Agreement,
in each case upon presentation to the Bank of an itemized account of such
expenses in such form as the Bank may reasonably require.
SECTION 9. TERMINATION OF EMPLOYMENT WITH SEVERANCE BENEFITS.
(a) The Executive shall be entitled to the severance benefits
described herein in the event that his employment with the Company and the Bank
terminate during the Employment Period under any of the following circumstances:
(i) the Executive's voluntary resignation from employment
with the Company and the Bank within ninety (90) days following:
(A) the failure of the Board of Directors of the Company or
the Bank to appoint or re-appoint or elect or re-elect the
Executive to the offices of Senior Executive Vice President
and Chief Financial Officer (or a more senior office, if any)
of the Company and the Bank;
the expiration of a thirty (30) day period following the date
on which the Executive gives written notice to the Company and
the Bank of its material failure, whether by amendment of the
Company's or the Bank's Articles of Incorporation or By-laws,
<PAGE>
action of the Company's or the Bank's Board of Directors or
the Company's or the Bank's stockholders or otherwise, to vest
in the Executive the functions, duties, or responsibilities
prescribed in section 3 of this Agreement as of the date
hereof;
(C) the expiration of a thirty (30) day period following the
date on which the Executive gives written notice to the
Company or the Bank of its material breach of any term,
condition or covenant contained in this Agreement (including,
without limitation, any reduction of the Executive's rate of
base salary in effect from time to time and any change in the
terms and conditions of any compensation or benefit program in
which the Executive participates which, either individually or
together with other changes, has a material adverse effect on
the aggregate value of his total compensation package),
unless, during such thirty (30) day period, the Company or the
Bank cures such failure in a manner determined by the
Executive, in his discretion, to be satisfactory; or
(D) the relocation of the Executive's principal place of
employment, without his written consent, to a location outside
of Palm Beach County or Broward County, Florida; or
(E) the failure of the stockholders of the Company or Bank to
elect or re-elect the Executive to the Board of Directors of
the Company or the Bank, respectively, or the failure of the
Board of Directors of the Company or the Bank (or the
nominating committees thereof) to nominate the Executive for
such election or re-election;
(ii) the termination of the Executive's employment with the
Company or the Bank for any other reason not described in section
10(a).
In such event, the Company or the Bank (in such proportions as they may mutually
agree upon) shall provide the benefits and pay to the Executive the amounts
described in section 9(b).
(b) Upon the termination of the Executive's employment with
the Company and the Bank under circumstances described in section 9(a) of this
Agreement, the Company and the Bank (in such proportions as they may mutually
agree upon) shall pay and provide to the Executive (or, in the event of his
death following such termination, to his estate):
(i) his earned but unpaid compensation as of the date of the
termination of his employment with the Company and the Bank, such
payment to be made at the time and in the manner prescribed by law
applicable to the payment of wages but in no event later than thirty
(30) days after termination of employment;
(ii) the benefits, if any, to which he is entitled as a former
employee under the employee benefit plans and programs and compensation
plans and programs maintained for the benefit of the Company's or the
Bank's officers and employees;
(iii) continued group life, health (including hospitalization,
medical and major medical), dental, accident and long term disability
insurance benefits, in addition to that provided pursuant to section
9(b)(ii), and after taking into account the coverage provided by any
subsequent employer, if and to the extent necessary to provide for the
Executive, for a period of three years from the date his employment
terminates, coverage equivalent to the coverage to which he would have
been entitled under such plans (as in effect on the date of his
termination of employment, or, if his termination of employment occurs
after a Change of Control, on the date of such Change of Control,
whichever benefits are greater), if he had continued working for the
Company and Bank during the Remaining Unexpired Employment Period at
the highest annual rate of compensation achieved during that portion of
the Employment Period which is prior to the Executive's termination of
employment with the Company and the Bank;
(iv) within thirty (30) days following his termination of
employment with the Company and the Bank, a lump sum payment in an
amount equal to the salary that the Executive would have earned if he
had continued working for the Company and the Bank for a period of
three years from the date his employment terminates at the highest
annual rate of salary achieved during that portion of the Employment
Period which is prior to the Executive's termination of employment with
the Company and the Bank, such lump sum to be paid in lieu of all other
payments of salary provided for under this Agreement in respect of the
period following any such termination;
(v) within thirty (30) days following his termination of
employment with the Company and the Bank, a lump sum payment in an
amount equal to the excess, if any, of:
(A) the present value of the aggregate benefits to
which he would be entitled under any and all qualified and
non-qualified defined benefit pension plans maintained by, or
covering employees of, the Company or the Bank, if he were
100% vested thereunder and had continued working for the
Company and the Bank for a period of three years from the date
his employment terminates, such benefits to be determined as
of the date of termination of employment by adding to the
service actually recognized under such plans an additional
period equal to the Remaining Unexpired Employment Period and
by adding to the compensation recognized under such plans for
the most recent year recognized all amounts payable under
sections 9(b)(i), (iv), and (vii); over
(B) the present value of the benefits to which he is
actually entitled under such defined benefit pension plans as
of the date of his termination;
where such present values are to be determined using the mortality
tables prescribed under section 415(b)(2)(E)(v) of the Code and a
discount rate, compounded monthly, equal to the annualized rate of
interest prescribed by the Pension Benefit Guaranty Corporation
<PAGE>
for the valuation of immediate annuities payable under terminating
single-employer defined benefit plans for the month in which the
Executive's termination of employment occurs ("Applicable PBGC Rate");
(vi) within thirty (30) days following his termination of
employment with the Company and the Bank, a lump sum payment in an
amount equal to the present value of the additional employer
contributions (or if greater in the case of a leveraged employee stock
ownership plan or similar arrangement, the additional assets allocable
to him through debt service, based on the fair market value of such
assets at termination of employment) to which he would have been
entitled under any and all qualified and non-qualified defined
contribution plans maintained by, or covering employees of, the Company
or the Bank, as if he were 100% vested thereunder and had continued
working for the Company and the Bank for a period of three years from
the date his employment terminates at the highest annual rate of
compensation achieved during that portion of the Employment Period
which is prior to the Executive's termination of employment with the
Company and the Bank, and making the maximum amount of employee
contributions, if any, required under such plan or plans, such present
value to be determined on the basis of a discount rate, compounded
using the compounding period that corresponds to the frequency with
which employer contributions are made to the relevant plan, equal to
the Applicable PBGC Rate;
(vii) within thirty (30) days following his termination of
employment with the Company and the Bank, a lump sum payment in an
amount equal to three times the higher of (A) the highest cash
incentive compensation or bonus (annualized, if paid for a period other
than annually) paid to the Executive during or accrued with respect to
the Executive for either (i) any of the two years immediately preceding
that in which, or (ii) the year in which, Executive's employment with
the Company and the Bank terminates, or (B) the highest cash incentive
compensation or bonus (annualized, if paid for a period other than
annually) so paid or accrued in respect of either (x) any of the two
years immediately preceding that in which, or (y) the year in which, a
Change of Control (as hereinafter defined) occurs.
The Company, the Bank and the Executive hereby stipulate that the
damages which may be incurred by the Executive following any such termination of
employment are not capable of accurate measurement as of the date first above
written and that the payments and benefits contemplated by this section 9(b)
constitute reasonable damages under the circumstances and shall be payable
without any requirement of proof of actual damage and without regard to the
Executive's efforts, if any, to mitigate damages. The Company, the Bank and the
Executive further agree that the Company and the Bank may condition the payments
and benefits (if any) due under sections 9(b)(iii), (iv), (v), (vi) and (vii) on
the receipt of the Executive's resignation from any and all positions which he
holds as an officer, director or committee member with respect to the Company,
the Bank or any subsidiary or affiliate of either of them.
SECTION 10. TERMINATION WITHOUT ADDITIONAL COMPANY OR BANK
LIABILITY.
(a) In the event that the Executive's employment with the
Company and the Bank shall terminate during the Employment Period on account of:
(i) the discharge of the Executive for "cause," which, for
purposes of this Agreement (I) prior to a Change of Control (as
hereinafter defined) shall mean: (A) gross negligence or willful
misconduct by the Executive in connection with his employment hereunder
or the business of the Company and the Bank; (B) the Executive's
misappropriation of the Company's or the Bank's assets or property; (C)
the Executive willfully fails or refuses to perform his duties under
this Agreement, or fails to comply with any material term, covenant or
condition contained herein; (D) the Executive breaches his fiduciary
duties to the Company or the Bank for personal profit; or (E) the
Executive's willful breach or violation of any law, rule or regulation
(other than traffic violations or similar offenses), or final cease and
desist order in connection with his performance of services for the
Company or the Bank; and (II), upon and after a Change of Control,
shall mean (A) the Executive intentionally engages in dishonest conduct
in connection with his performance of services for the Company or the
Bank resulting in his conviction of a felony; (B) the Executive is
convicted of, or pleads guilty or NOLO CONTENDERE to, a felony or any
crime involving moral turpitude; (C) the Executive willfully fails or
refuses to perform his duties under this Agreement and fails to cure
such breach within sixty (60) days following written notice thereof
from the Company or the Bank; (D) the Executive breaches his fiduciary
duties to the Company or the Bank for personal profit; or (E) the
Executive's willful breach or violation of any law, rule or regulation
(other than traffic violations or similar offenses), or final cease and
desist order in connection with his performance of services for the
Company or the Bank;
(ii) the Executive's voluntary resignation from employment
with the Company and the Bank for reasons other than those specified in
section 9(a) or 11(b);
(iii) the Executive's death; or
(iv) a determination that the Executive is eligible for
long-term disability benefits under the Bank's long-term disability
insurance program or, if there is no such program, under the federal
Social Security Act;
then the Company and the Bank shall have no further obligations under this
Agreement, other than the payment to the Executive (or, in the event of his
death, to his estate) of his earned but unpaid compensation as of the date of
the termination of his employment, and the provision of such other benefits, if
any, to which he is entitled as a former employee under the employee benefit
plans and programs and compensation plans and programs maintained by, or
covering employees of, the Company or the Bank; PROVIDED, HOWEVER, that, in the
event of the Executive's death, the Company or the Bank shall pay to his estate
an amount equal to three months' cash compensation within thirty days of the
appointment of the executor of such estate.
<PAGE>
SECTION 11. TERMINATION UPON OR FOLLOWING A CHANGE OF CONTROL
(a) A Change of Control ("Change of Control") shall be deemed
to have occurred upon the happening of any of the following events:
(i) approval by the stockholders of the Company of a
transaction that would result in the reorganization, merger or
consolidation of the Company with one or more other persons, other than
a transaction following which:
(A) at least 50.1% of the common stock or equity
ownership interests of the entity resulting from such
transaction are beneficially owned (within the meaning of Rule
13d-3 promulgated under the Exchange Act) in substantially the
same relative proportions by persons who, immediately prior to
such transaction, beneficially owned (within the meaning of
Rule 13d-3 promulgated under the Exchange Act) at least 50.1%
of the outstanding common stock or equity ownership interests
in the Company; and
At least 50.1% of the combined voting power of the
securities entitled to vote generally in the election of
directors of the entity resulting from such transaction are
beneficially owned (within the meaning of Rule 13d-3
promulgated under the Exchange Act) in substantially the same
relative proportions by persons who, immediately prior to such
transaction, beneficially owned (within the meaning of Rule
13d-3 promulgated under the Exchange Act) at least 50.1% of
the combined voting power of the securities entitled to vote
generally in the election of directors of the Company; and
No person, or persons acting in concert, beneficially own
(within the meaning of Rule 13d-3 promulgated under the
Exchange Act) 20% or more of the outstanding common stock or
equity ownership interests in, or 20% or more of the combined
voting power of the securities entitled to vote generally in
the election of directors of, the entity resulting from such
transaction; and
At least a majority of the members of the board of
directors of the entity resulting from such transaction are
individuals who were described in sections 11(a)(iv)(A) or (B)
of this Agreement as of the date of execution of the initial
definitive agreement providing for such transaction (or, if
earlier, as of the date on which the Board of Directors of the
Company authorized such transaction).
(ii) the acquisition of all or substantially all of the assets
of the Company or beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of 20% or more of the
outstanding securities or of the combined voting power of the
outstanding securities of the Company entitled to vote generally in the
election of directors by any person or by any persons acting in
concert, or approval by the stockholders of the Company of any
transaction which would result in such an acquisition;
(iii) a complete liquidation or dissolution of the Company, or
approval by the stockholders of the Company of a plan for such
liquidation or dissolution; or
(iv) the occurrence of any event if, immediately following
such event, at least 50% of the members of the board of directors of
the Company do not belong to any of the following groups:
(A) individuals who were members of the Board of the
Company on the date of this Agreement; or
(B) individuals who first became members of the Board
of the Company after the date of this Agreement either:
(I) upon election to serve as a member of
the Board of directors of the Company by affirmative
vote of three-quarters of the members of such Board,
or of a nominating committee thereof, in office at
the time of such first election; or
(II) upon election by the stockholders of
the Company to serve as a member of the Board of the
Company, but only if nominated for election by
affirmative vote of three-quarters of the members of
the board of directors of the Company, or of a
nominating committee thereof, in office at the time
of such first nomination;
PROVIDED, HOWEVER, that such individual's election or
nomination did not result from an actual or threatened
election contest (within the meaning of Rule 14a-11 of
Regulation 14A promulgated under the Exchange Act) or other
actual or threatened solicitation of proxies or consents
(within the meaning of Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act) other than by or on behalf
of the Board of the Company; or
(v) any event which would be described in section 11(a)(i),
(ii), (iii) or (iv) if the term "Bank" were substituted for the term
"Company" therein.
In no event, however, shall a Change of Control be deemed to
have occurred as a result of any acquisition of securities or assets of the
Company, the Bank, or a subsidiary of either of them, by the Company, the Bank,
or a subsidiary of either of them, or by any employee benefit plan maintained by
any of them. For purposes of this section 11(a), the term "person" shall have
the meaning assigned to it under sections 13(d)(3) or 14(d)(2) of the Exchange
Act.
<PAGE>
(b) In the event of a Change of Control, the Executive shall
be entitled to the payments and benefits contemplated by section 9(b) in the
event of his termination of employment with the Bank under any of the
circumstances described in section 9(a) of this Agreement or under any of the
following circumstances:
(i) resignation, voluntary or otherwise, by the Executive at
any time during the Employment Period following his demotion, loss of
title, office or significant authority or responsibility, or following
any reduction in any element of his package of compensation and
benefits;
(ii) resignation, voluntary or otherwise, by the Executive at
any time during the Employment Period following any relocation of his
principal place of employment or any change in working conditions at
such principal place of employment which the Executive, in his
reasonable discretion, determines to be embarrassing, derogatory or
otherwise adverse;
(iii) resignation, voluntary or otherwise, by the Executive at
any time during the Employment Period following the failure of any
successor to the Company or the Bank in the Change of Control to
include the Executive in any compensation or benefit program maintained
by it or covering any of its executive officers, unless the Executive
is already covered by a substantially similar plan of the Company or
the Bank which is at least as favorable to him; or
(iv) resignation, voluntary or otherwise, for any reason
whatsoever within 90 days following the effective date of the Change of
Control, PROVIDED, HOWEVER, that if the Change of Control is of the
type described in Section 11(a) (1), such 90 day period shall not be
deemed to commence until the actual consummation of the transaction
approved by the stockholders.
SECTION 12. TAX LIMITATIONS.
(a) Notwithstanding any other provision of this Agreement, in
the event that any payment or benefit received or to be received by the
Executive in connection with a Change of Control of the Bank or the Company or
the termination of the Executive's employment (whether pursuant to the terms of
this Agreement or any other plan, arrangement or agreement with the Company or
the Bank, any person whose actions result in a Change of Control of the Company
or any person affiliated with the Company or the Bank or such person) (all such
payments and benefits, including the payments and benefits provided under this
Agreement (the "Severance Payments"), being hereinafter called "Total Payments")
would not be deductible (in whole or in part) by the Company, the Bank, an
affiliate or a person making such payment or providing such benefit as a result
of Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"),
then, to the extent necessary to make such portion of the Total Payments
deductible (and after taking into account any reduction in the Total Payments
provided in such other plan, arrangement or agreement), the cash Severance
Payments shall first be reduced (if necessary, to zero); provided, however, that
the Executive may elect (at any time prior to the payment of amounts payable
hereunder) to have the noncash severance payments reduced (or eliminated) prior
to any reduction of the cash Severance Payments.
(b) For purposes of the limitation contained in subsection (a)
of this section 12, (i) no portion of the Total Payments the receipt or
enjoyment of which Executive shall have effectively waived in writing prior to
the delivery of a notice of termination of employment shall be taken into
account, (ii) no portion of the Total Payments shall be taken into account
which, in the opinion of tax counsel ("Tax Counsel") reasonably acceptable to
the Executive and selected by the accounting firm which was, immediately prior
to the Change of Control of the Company or the Bank, the Company's independent
auditor (the "Auditor"), does not constitute a "parachute payment" within the
meaning of Section 280G(b)(2) of the Code, including by reason of Section
280G(b)(4)(A) of the Code, (iii) the Severance Payments shall be reduced only to
the extent necessary so that the Total Payments (other than those referred to in
clauses (i) or (ii)) in their entirety constitute reasonable compensation for
services actually rendered within the meaning of Section 280(G)(b)(4)(B) of the
Code or are otherwise not subject to disallowance as deductions by reason of
Section 280G of the Code, in the opinion of Tax Counsel, and (iv) the value of
any noncash benefit or any deferred payment or benefit included in the Total
Payments shall be determined by the Auditor in accordance with the principles of
Sections 280G(d)(3) and (4) of the Code.
(c) If it is established pursuant to a final determination of
a court or an Internal Revenue Service proceeding that, notwithstanding the good
faith of the Executive and the Bank and the Company in applying the terms of
this section 12, the aggregate "parachute payments" paid to of for the
Executive's benefit are in an amount that would result in any portion of such
"parachute payments" not being deductible by reason of Section 280G of the Code,
then the Executive shall have an obligation to pay the Bank upon demand an
amount equal to the sum of (i) the excess of the aggregate "parachute payments"
paid to or for the Executive's benefit over the aggregate "parachute payments"
that could have been paid to or for the Executive's benefit without any portion
of such "parachute payments" not being deductible by reason of Section 280G of
the Code; and (ii) interest on the amount set forth in clause (i) of this
sentence at 120% of the rate provided in Section 1274(b)(2)(B) of the Code from
the date of Executive's receipt of such excess until the date of such payment.
If the Severance Payments shall be decreased pursuant to section (a) hereof, and
the benefits under section 8(b)(iii) which remain payable after the application
of this section 12 are thereafter reduced pursuant thereto because of the
receipt by the Executive of substantially similar benefits, the Bank shall, at
the time of such reduction, pay to the Executive the lowest of (a) the amount of
the decrease made in the Severance Payments pursuant to this section 12, (b) the
amount of the subsequent reduction in such benefits, or (c) the maximum amount
which can be paid to the Executive without being, or causing any other payment
to be, nondeductible by reason of Section 280G of the Code.
SECTION 13. CONFIDENTIALITY.
Unless he obtains the prior written consent of the Company and
the Bank, the Executive shall keep confidential and shall refrain from using for
the benefit of himself, or any person or entity other than the Company or any
entity which is a subsidiary of the Company or of which the Company is a
subsidiary, any material document or information obtained from the Company, or
from its parent or subsidiaries, in the course of his employment with any of
them concerning their properties, operations or business (unless such document
or information is readily ascertainable from public or published information or
trade sources or has otherwise been made available to the public through no
fault of his own) until the same ceases to be material (or becomes so
ascertainable or available); provided, however, that nothing in this section 13
shall prevent the Executive, with or without the Company's consent, from
participating in or disclosing documents or information in connection with any
judicial or administrative investigation, inquiry or proceeding to the extent
that such participation or
<PAGE>
disclosure is required under applicable law.
SECTION 14. NO EFFECT ON EMPLOYEE BENEFIT PLANS OR PROGRAMS.
The termination of the Executive's employment during the term
of this Agreement or thereafter, whether by the Bank or by the Executive, shall
have no effect on the rights and obligations of the parties hereto under the
Bank's qualified or non-qualified retirement, pension, savings, thrift,
profit-sharing or stock bonus plans, group life, health (including
hospitalization, medical and major medical), dental, accident and long term
disability insurance plans or such other employee benefit plans or programs, or
compensation plans or programs, as may be maintained by, or cover employees of,
the Bank from time to time.
SECTION 15. HEALTH AND MAJOR MEDICAL INSURANCE
(a) Notwithstanding anything herein to the contrary, upon the
first to occur of (i) a Change of Control (excluding a Change of Control in
connection with which Executive enters into any employment agreement with the
Company or the acquiring entity with a term of at least three years), (ii)
termination of Executive's employment hereunder by the Company or Bank other
than for cause, or (iii) termination of Executive's employment by reason of
retirement at age 65 (or at age 55 through age 64 provided that a majority of
the Board of Directors of the Company confirms that this subsection 15(a) shall
be effective in connection with the retirement), the Company or the Bank shall
thereafter provide Executive with health and major medical insurance through the
date on which Executive shall be eligible to receive Medicare (or any successor
governmental health insurance program) and, after such eligibility date,
Medicare supplemental insurance for life. The Company or the Bank shall not
provide such health and medical insurance during any period, after a termination
of Executive's employment by the Company or Bank other than for cause, during
which Executive is employed by an employer which provides health and major
medical insurance in which Executive is qualified to participate. If insurance
is provided to Executive under this subsection 15(a), the Company's or the
Bank's obligation to provide Executive any such health or major medical
insurance otherwise referred to in this Agreement shall terminate.
(b) The Company and the Bank shall not be obligated to provide
any insurance pursuant to subsection 15(a) to the extent that the cost thereof
exceeds the amount which would accrue at the rate of $7,700 per annum from
October 1, 1995. In the event the cost of such insurance exceeds such accrual,
Executive, at his option, may continue the insurance by paying, at his own
expense, the amount in excess of such accrual.
SECTION 16. SUCCESSORS AND ASSIGNS.
This Agreement will inure to the benefit of and be binding
upon the Executive, his legal representatives and testate or intestate
distributees, and the Company and the Bank and their respective successors and
assigns, including any successor by merger or consolidation or a statutory
receiver or any other person or firm or corporation to which all or
substantially all of the assets and business of the Company or the Bank may be
sold or otherwise transferred.
SECTION 17. NOTICES.
Any communication required or permitted to be given under this
Agreement, including any notice, direction, designation, consent,
instruction, objection or waiver, shall be in writing and shall be deemed to
have been given at such time as it is delivered personally, or five (5) days
after mailing if mailed, postage prepaid, by registered or certified mail,
return receipt requested, or one (1) day after it is sent by reputable overnight
delivery service, addressed to such party at the address listed below or at such
other address as one such party may by written notice specify to the other
party:
If to the Executive:
Richard J. Haskins
1181 Morse Blvd.
Singer Island, West Palm Beach, FL 33404
If to the Company:
Republic Security Financial Corporation
450 S. Australian Avenue
West Palm Beach, FL 33401
Attention: Rudy E. Schupp, Chairman & CEO
If to the Bank:
Republic Security Bank
450 S. Australian Avenue
West Palm Beach, FL 33401
Attention: Rudy E. Schupp, Chairman & CEO
SECTION 18. INDEMNIFICATION FOR ATTORNEYS' FEES.
The Bank shall indemnify, hold harmless and defend the
Executive against reasonable costs, including legal fees, incurred by him in
connection with or arising out of any action, suit or proceeding in which he may
be involved, as a result of his efforts, in good faith, to defend or enforce the
terms of this Agreement.
SECTION 19. SEVERABILITY.
A determination that any provision of this Agreement is
invalid or unenforceable shall not affect the validity or enforceability of any
other
<PAGE>
provision hereof.
SECTION 20. WAIVER.
Failure to insist upon strict compliance with any of the
terms, covenants or conditions hereof shall not be deemed a waiver of such term,
covenant, or condition. A waiver of any provision of this Agreement must be made
in writing, designated as a waiver, and signed by the party against whom its
enforcement is sought. Any waiver or relinquishment of any right or power
hereunder at any one or more times shall not be deemed a waiver or
relinquishment of such right or power at any other time or times.
SECTION 21. COUNTERPARTS.
This Agreement may be executed in two (2) or more
counterparts, each of which shall be deemed an original, and all of which shall
constitute one and the same Agreement.
SECTION 22. GOVERNING LAW.
This Agreement shall be governed by and construed and enforced
in accordance with the laws of the State of Florida applicable to contracts
entered into and to be performed entirely within the State of Florida.
SECTION 23. HEADINGS AND CONSTRUCTION.
The headings of sections in this Agreement are for convenience
of reference only and are not intended to qualify the meaning of any section.
Any reference to a section number shall refer to a section of this Agreement,
unless otherwise stated.
SECTION 24. ENTIRE AGREEMENT; MODIFICATIONS.
This instrument contains the entire agreement of the parties
relating to the subject matter hereof, and supersedes in its entirety any and
all prior agreements, understandings or representations relating to the subject
matter hereof, provided, however, that any options granted to the Executive in
any agreement entered into prior to the date hereof in any agreement styled as
an Employment Agreement shall remain available for exercise by the Executive in
accordance with the terms thereof. No modifications of this Agreement shall be
valid unless made in writing and signed by the parties hereto.
SECTION 25. SURVIVAL.
The provisions of sections 6, 9, 10, 11, 12, 13, 14, 18, 20,
22, 26, 27 and 28 shall survive the expiration of the Employment Period or
termination of this Agreement.
SECTION 26. EQUITABLE REMEDIES.
The Company, the Bank and the Executive hereby stipulate that
money damages are an inadequate remedy for violations of sections 6(a), or 13 of
this Agreement and agree that equitable remedies, including, without
limitations, the remedies of specific performance and injunctive relief, shall
be available with respect to the enforcement of such provisions.
SECTION 27. REQUIRED REGULATORY PROVISION.
(a) Notwithstanding anything herein contained to the contrary,
any payments to the Executive by the Company or the Bank, whether pursuant to
this Agreement or otherwise, are subject to and conditioned upon their
compliance with section 18(k) of the Federal Deposit Insurance Act, 12 U.S.C.
ss.1828(k), and any regulations promulgated thereunder.
(b) Nothing in this Agreement shall be construed to subject
the Bank or its assets to any contractual obligation undertaken by the Company
hereunder or to liability for any breach by the Company.
IN WITNESS WHEREOF, the Company and the Bank have caused this
Agreement to be executed and the Executive has hereunto set his hand, all as of
the day and year first above written.
REPUBLIC SECURITY FINANCIAL CORPORATION
By:
Name: _________________________________________
Title: _________________________________________
REPUBLIC SECURITY BANK
By: ____________________________________________
<PAGE>
Name: _________________________________________
Title: _________________________________________
Richard J. Haskins
EXHIBIT 10.3 EMPLOYMENT AGREEMENT AMONG THE COMPANY, REPUBLIC SECURITY BANK
AND R. MICHAEL STRICKLAND AS DATED FEBRUARY 16, 1999
- -------------------------------------------------------------------------------
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (the "Agreement") is made and
entered into as of February 16, 1999 by and among Republic Security Financial
Corporation, a business corporation organized and operating under the laws of
the State of Florida and having an office at 450 South Australian Avenue, West
Palm Beach, FL 33401 (the "Company"), Republic Security Bank, a commercial bank
organized and operating under the laws of the State of Florida and having an
office at 450 South Australian Avenue, West Palm Beach, FL 33401 (the "Bank"),
and R. Michael Strickland, an individual residing at 239 Sanford Avenue, Palm
Beach, FL 33480 (the "Executive").
W I T N E S S E T H :
WHEREAS, the Executive has been elected as Senior Executive
Vice President and Chief Banking Officer of the Bank; and
WHEREAS, the Company and the Bank desire to assure for
themselves the continued availability of the Executive's services and the
ability of the Executive to perform such services with a minimum of personal
distraction in the event of a pending or threatened Change of Control (as
hereinafter defined); and
WHEREAS, the Executive is willing to serve the Bank on the
terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and conditions hereinafter set forth, the Company, the Bank and
the Executive hereby agree as follows:
Section 1. Employment.
The Bank agrees to employ the Executive, and the Executive
hereby agrees to such employment, during the period and upon the terms and
conditions set forth in this Agreement.
Section 2. Employment Period; Remaining Unexpired Employment
Period.
(a) The terms and conditions of this Agreement shall be and
remain in effect during the period of employment established under this section
2 ("Employment Period"). The Employment Period shall be for an initial term of
two years beginning on the date of this Agreement and ending on the second
anniversary date of this Agreement, plus such extensions, if any, as are
provided pursuant to section 2(b).
(b) Beginning on the date of this Agreement, the Employment
Period shall automatically be extended for one (1) additional day each day,
unless either the Company and the Bank, acting jointly, or the Executive, elects
not to extend the Agreement further by giving written notice to the other
parties, in which case the Employment Period shall end on the second anniversary
of the date on which such written notice is given. For all purposes of this
Agreement, the term "Remaining Unexpired Employment Period" as of any date shall
mean the period beginning on such date and ending on: (i) if a notice of
non-extension has been given in accordance with this section 2(b), the second
anniversary of the date on which such notice is given; and (ii) in all other
cases, the second anniversary of the date as of which the Remaining Unexpired
Employment Period is being determined. Upon termination of the Executive's
employment with the Bank for any reason whatsoever, any daily extensions
provided pursuant to this section 2(b), if not therefore discontinued, shall
automatically cease.
(c) Nothing in this Agreement shall be deemed to prohibit the
Bank from terminating the Executive's employment at any time during the
Employment Period with or without notice for any reason; provided, however, that
the relative rights and obligations of the Company, the Bank and the Executive
in the event of any such termination shall be determined under this Agreement.
Section 3. Duties.
The Executive shall serve as Senior Executive Vice President
and Chief Banking Officer of the Bank, having such power, authority and
responsibility and performing such duties as are prescribed by or under the
By-Laws of the Bank, or assigned by the Board of Directors of the Bank or the
President of the Bank, and otherwise as are customarily associated with such
position. The Executive shall devote his full business time and attention (other
than during weekends, holidays, approved vacation periods, and periods of
illness or approved leaves of absence) to the business and affairs of the Bank
and shall use his best efforts to advance the interests of the Bank.
Section 4. Cash Compensation.
In consideration for the services to be rendered by the
Executive hereunder, the Bank shall pay to Executive a salary at an initial
annual rate of TWO HUNDRED THOUSAND DOLLARS ($200,000), payable in approximately
equal installments in accordance with the Bank's customary payroll practices for
senior officers. At least annually during the Employment Period, the Board of
Directors of the Bank, or the Compensation Committee thereof, shall review the
Executive's annual rate of salary and may, in its discretion, approve an
increase therein. In no event shall the Executive's annual rate of salary under
this Agreement in effect at a particular time be reduced without his prior
written consent. In addition to salary, the Executive may receive other cash
compensation from the Bank for services hereunder at such times, in such amounts
and on such terms and conditions as the Board may determine from time to time.
The Executive and the Bank understand that the maximum amount available for such
other cash compensation for the first year of the term hereof shall be ONE
HUNDRED THOUSAND DOLLARS ($100,000), and the amount actually paid shall be at
the discretion of the Board or the President in accordance with goals to be
established by the President and/or the Board.
<PAGE>
Section 5. Employee Benefit Plans and Programs.
(a) During the Employment Period, the Executive shall be
treated as an employee of the Bank and shall be entitled to participate in and
receive benefits under any and all qualified or non-qualified retirement,
pension, savings, profit-sharing or stock bonus plans, any and all group life,
health (including hospitalization, medical and major medical), dental, accident
and long term disability insurance plans, and any other employee benefit and
compensation plans (including, but not limited to, any incentive compensation
plans or programs, stock option and appreciation rights plans and restricted
stock plans) as may from time to time be maintained by, or cover employees of,
the Bank, in accordance with the terms and conditions of such employee benefit
plans and programs and compensation plans and programs and consistent with the
Bank's customary practices.
(b) The Bank understands that the Executive will exercise his
right (under COBRA) to continue medical benefits under his previous employer's
plan until such time as he is eligible to receive such benefits under the Bank's
plan (the "Benefit Eligibility Date"). The Bank shall reimburse the Executive
for the cost of such benefit continuation, less the amount the Executive would
have had to pay with respect to medical benefits provided by the Bank, for a
period beginning on the date that the Executive's coverage under COBRA begins
and ending on the Benefit Eligibility Date.
Section 6. Indemnification and Insurance.
(a) During the Employment Period, the Bank shall cause the
Executive to be covered by and named as an insured under any policy or contract
of insurance obtained by it to insure its directors and officers against
personal liability for acts or omissions in connection with service as an
officer or director of the Bank or service in other capacities at the request of
the Company or the Bank. The coverage provided to the Executive pursuant to this
section 6 shall be of the same scope and on the same terms and conditions as the
coverage (if any) provided to other officers or directors of the Company and the
Bank.
(b) To the maximum extent permitted under applicable law,
during the Employment Period, the Bank shall indemnify the Executive against,
and hold him harmless from, any costs, liabilities, losses and exposures to the
fullest extent and on the most favorable terms and conditions that similar
indemnification is offered to any director or officer of the Bank or any
subsidiary or affiliate of either of them.
Section 7. Other Activities.
The Executive may serve as a member of the boards of directors
of such business, community and charitable organizations as he may disclose to
and as may be approved by the President of the Company or the Bank (which
approval shall not be unreasonably withheld); provided, however, that such
service shall not materially interfere with the performance of his duties under
this Agreement. The Executive may also engage in personal business and
investment activities which do not materially interfere with the performance of
his duties hereunder; provided, however, that such activities are not prohibited
under any code of conduct or investment or securities trading policy established
by the Company or the Bank and generally applicable to all similarly situated
executives.
Section 8. Working Facilities and Expenses.
The Executive's principal place of employment shall be at the
Bank's executive offices at the address first above written, or at such other
location within Palm Beach County or Broward County, Florida at which the Bank
shall maintain its principal executive offices, or at such other location as the
Company, the Bank and the Executive may mutually agree upon. The Bank shall
provide the Executive at his principal place of employment with a private
office, secretarial services and other support services and facilities suitable
to his position with the Bank and necessary or appropriate in connection with
the performance of his assigned duties under this Agreement. The Bank shall
provide to the Executive for his exclusive use an automobile owned or leased by
the Bank and appropriate to his position, to be used in the performance of his
duties hereunder. All costs of operation, maintenance and insurance shall be
paid by the Bank. The Executive shall account for the use and expenses of the
automobile in accordance with the policies and procedures of the Bank in effect
from time to time. The Bank shall reimburse the Executive for his ordinary and
necessary business expenses, including, without limitation, all expenses
associated with his business use of the aforementioned automobile, fees for
memberships in such clubs and organizations as the Executive and the Bank shall
mutually agree are necessary and appropriate for business purposes, and his
travel and entertainment expenses incurred in connection with the performance of
his duties under this Agreement, in each case upon presentation to the Bank of
an itemized account of such expenses in such form as the Bank may reasonably
require.
Section 9. Termination of Employment with Severance Benefits.
(a) The Executive shall be entitled to the severance benefits
described herein in the event that his employment with the Bank terminates
during the Employment Period under any of the following circumstances:
(i) the Executive's voluntary resignation from employment with
the Bank within ninety (90) days following:
(A) the failure of the Board of Directors of the Bank to
appoint or re-appoint or elect or re-elect the Executive to the offices of
Senior Executive Vice President and Chief Banking Officer (or a more senior
office) of the Bank;
(B) the expiration of a thirty (30) day period following the
date on which the Executive gives written notice to the Bank of its material
failure, whether by amendment of the Bank's Articles of Incorporation or
By-laws, action of the Bank's Board of Directors or the Bank's stockholders or
otherwise, to vest in the Executive the functions, duties, or responsibilities
prescribed in section 3 of this Agreement as of the date hereof, unless, during
such thirty (30) day period, the Bank cures such failure; or
(C) the relocation of the Executive's principal place of
employment, without his written consent, to a location outside of Palm Beach
County or Broward County, Florida;
(ii) the termination of the Executive's employment with the
Bank for any other reason not described in section 10(a).
In such event, the Bank shall provide the benefits and pay to the Executive the
amounts described in section 9(b).
<PAGE>
(b) Upon the termination of the Executive's employment with
the Bank under circumstances described in section 9(a) of this Agreement, the
Bank shall pay and provide to the Executive (or, in the event of his death
following such termination, to his estate):
(i) his earned but unpaid compensation as of the date of the
termination of his employment with the Bank, such payment to be made at the time
and in the manner prescribed by law applicable to the payment of wages but in no
event later than thirty (30) days after termination of employment;
(ii) the benefits, if any, to which he is entitled as a former
employee under the employee benefit plans and programs and compensation plans
and programs maintained for the benefit of the Bank's officers and employees;
(iii) continued group life, health (including hospitalization,
medical and major medical), dental, accident and long term disability insurance
benefits, in addition to that provided pursuant to section 9(b)(ii), and after
taking into account the coverage provided by any subsequent employer, if and to
the extent necessary to provide for the Executive, for a period of two years
from the date his employment terminates, coverage equivalent to the coverage to
which he would have been entitled under such plans (as in effect on the date of
his termination of employment, or, if his termination of employment occurs after
a Change of Control, on the date of such Change of Control, whichever benefits
are greater), if he had continued working for the Bank during the Remaining
Unexpired Employment Period at the highest annual rate of compensation achieved
during that portion of the Employment Period which is prior to the Executive's
termination of employment with the Bank;
(iv) within thirty (30) days following his termination of
employment with the Bank, a lump sum payment in an amount equal to the salary
that the Executive would have earned if he had continued working for the Bank
for a period of two years from the date his employment terminates at the highest
annual rate of salary achieved during that portion of the Employment Period
which is prior to the Executive's termination of employment with the Bank, such
lump sum to be paid in lieu of all other payments of salary provided for under
this Agreement in respect of the period following any such termination;
(v) within thirty (30) days following his termination of
employment with the Bank, a lump sum payment in an amount equal to the excess,
if any, of:
(A) the present value of the aggregate benefits to which he
would be entitled under any and all qualified and non-qualified defined benefit
pension plans maintained by, or covering employees of, the Bank, if he were 100%
vested thereunder and had continued working for the Bank for a period of two
years from the date his employment terminates, such benefits to be determined as
of the date of termination of employment by adding to the service actually
recognized under such plans an additional period equal to the Remaining
Unexpired Employment Period and by adding to the compensation recognized under
such plans for the most recent year recognized all amounts payable under
sections 9(b)(i), (iv), and (vii); over
(B) the present value of the benefits to which he is actually
entitled under such defined benefit pension plans as of the date of his
termination;
where such present values are to be determined using the mortality tables
prescribed under section 415(b)(2)(E)(v) of the Code and a discount rate,
compounded monthly, equal to the annualized rate of interest prescribed by the
Pension Benefit Guaranty Corporation for the valuation of immediate annuities
payable under terminating single-employer defined benefit plans for the month in
which the Executive's termination of employment occurs ("Applicable PBGC Rate");
(vi) within thirty (30) days following his termination of
employment with the Bank, a lump sum payment in an amount equal to the present
value of the additional employer contributions (or if greater in the case of a
leveraged employee stock ownership plan or similar arrangement, the additional
assets allocable to him through debt service, based on the fair market value of
such assets at termination of employment) to which he would have been entitled
under any and all qualified and non-qualified defined contribution plans
maintained by, or covering employees of, the Bank, as if he were 100% vested
thereunder and had continued working for the Bank for a period of two years from
the date his employment terminates at the highest annual rate of compensation
achieved during that portion of the Employment Period which is prior to the
Executive's termination of employment with the Bank, and making the maximum
amount of employee contributions, if any, required under such plan or plans,
such present value to be determined on the basis of a discount rate, compounded
using the compounding period that corresponds to the frequency with which
employer contributions are made to the relevant plan, equal to the Applicable
PBGC Rate;
(vii) within thirty (30) days following his termination of
employment with the Bank, a lump sum payment in an amount equal to two times the
higher of (A) the highest cash incentive compensation or bonus (annualized, if
paid for a period other than annually) paid to the Executive during or accrued
with respect to the Executive for either (i) any of the two years immediately
preceding that in which, or (ii) the year in which, Executive's employment with
the Bank terminates, or (B) the highest cash incentive compensation or bonus
(annualized, if paid for a period other than annually) so paid or accrued in
respect of either (x) any of the two years immediately preceding that in which,
or (y) the year in which, a Change of Control (as hereinafter defined) occurs.
The Company, the Bank and the Executive hereby stipulate that the damages which
may be incurred by the Executive following any such termination of employment
are not capable of accurate measurement as of the date first above written and
that the payments and benefits contemplated by this section 9(b) constitute
reasonable damages under the circumstances and shall be payable without any
requirement of proof of actual damage and without regard to the Executive's
efforts, if any, to mitigate damages. The Company, the Bank and the Executive
further agree that the Company and the Bank may condition the payments and
benefits (if any) due under sections 9(b)(iii), (iv), (v), (vi) and (vii) on the
receipt of the Executive's resignation from any and all positions which he holds
as an officer, director or committee member with respect to the Company, the
Bank or any subsidiary or affiliate of either of them.
Section 10. Termination without Additional Company or Bank
Liability.
(a) In the event that the Executive's employment with the Bank
shall terminate during the Employment Period on account of:
<PAGE>
(i) the discharge of the Executive for "cause," which, for
purposes of this Agreement (I) prior to a Change of Control (as hereinafter
defined) shall mean: (A) gross negligence or willful misconduct by the Executive
in connection with his employment hereunder or the business of the Bank; (B) the
Executive's misappropriation of the Bank's assets or property; (C) the Executive
willfully fails or refuses to perform his duties under this Agreement, or fails
to comply with any material term, covenant or condition contained herein; (D)
the Executive breaches his fiduciary duties to the Bank for personal profit; or
(E) the Executive's willful breach or violation of any law, rule or regulation
(other than traffic violations or similar offenses), or final cease and desist
order in connection with his performance of services for the Bank; and (II),
upon and after a Change of Control, shall mean (A) the Executive intentionally
engages in dishonest conduct in connection with his performance of services for
the Company or the Bank resulting in his conviction of a felony; (B) the
Executive is convicted of, or pleads guilty or nolo contendere to, a felony or
any crime involving moral turpitude; (C) the Executive willfully fails or
refuses to perform his duties under this Agreement and fails to cure such breach
within sixty (60) days following written notice thereof from the Bank; (D) the
Executive breaches his fiduciary duties to the Company or the Bank for personal
profit; or (E) the Executive's willful breach or violation of any law, rule or
regulation (other than traffic violations or similar offenses), or final cease
and desist order in connection with his performance of services for the Bank;
(ii) the Executive's voluntary resignation from employment
with the Bank for reasons other than those specified in section 9(a) or 11(b);
(iii) the Executive's death; or
(iv) a determination that the Executive is eligible for
long-term disability benefits under the Bank's long-term disability insurance
program or, if there is no such program, under the federal Social Security Act;
then the Company and the Bank shall have no further obligations under this
Agreement, other than the payment to the Executive (or, in the event of his
death, to his estate) of his earned but unpaid compensation as of the date of
the termination of his employment, and the provision of such other benefits, if
any, to which he is entitled as a former employee under the employee benefit
plans and programs and compensation plans and programs maintained by, or
covering employees of, the Bank.
Section 11. Termination Upon or Following a Change of Control
(a) A Change of Control ("Change of Control") shall be deemed
to have occurred upon the happening of any of the following events:
(i) approval by the stockholders of the Company of a
transaction that would result in the reorganization, merger or consolidation of
the Company with one or more other persons, other than a transaction following
which:
(A) at least 50.1% of the common stock or equity ownership
interests of the entity resulting from such transaction are beneficially owned
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) in
substantially the same relative proportions by persons who, immediately prior to
such transaction, beneficially owned (within the meaning of Rule 13d-3
promulgated under the Exchange Act) at least 50.1% of the outstanding common
stock or equity ownership interests in the Company; and
(B) At least 50.1% of the combined voting power of the
securities entitled to vote generally in the election of directors of the entity
resulting from such transaction are beneficially owned (within the meaning of
Rule 13d-3 promulgated under the Exchange Act) in substantially the same
relative proportions by persons who, immediately prior to such transaction,
beneficially owned (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) at least 50.1% of the combined voting power of the securities
entitled to vote generally in the election of directors of the Company; and
(C) No person, or persons acting in concert, beneficially own
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) 20% or
more of the outstanding common stock or equity ownership interests in, or 20% or
more of the combined voting power of the securities entitled to vote generally
in the election of directors of, the entity resulting from such transaction; and
(D) At least a majority of the members of the board of
directors of the entity resulting from such transaction are individuals who were
described in sections 11(a)(iv)(A) or (B) of this Agreement as of the date of
execution of the initial definitive agreement providing for such transaction
(or, if earlier, as of the date on which the Board of Directors of the Company
authorized such transaction).
(ii) the acquisition of all or substantially all of the assets
of the Company or beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 20% or more of the outstanding securities
or of the combined voting power of the outstanding securities of the Company
entitled to vote generally in the election of directors by any person or by any
persons acting in concert, or approval by the stockholders of the Company of any
transaction which would result in such an acquisition;
(iii) a complete liquidation or dissolution of the Company, or
approval by the stockholders of the Company of a plan for such liquidation or
dissolution; or
(iv) the occurrence of any event if, immediately following
such event, at least 50% of the members of the board of directors of the Company
do not belong to any of the following groups:
(A) individuals who were members of the Board of the Company
on the date of this Agreement; or
(B) individuals who first became members of the Board of the
Company after the date of this Agreement either:
(I) upon election to serve as a member of the Board of
directors of the Company by affirmative vote of three-quarters of the members of
such Board, or of a nominating committee thereof, in office at the time of such
first election; or
(II) upon election by the stockholders of the Company to serve
as a member of the Board of the Company, but only if
<PAGE>
nominated for election by affirmative vote of three-quarters of the members of
the board of directors of the Company, or of a nominating committee thereof, in
office at the time of such first nomination;
provided, however, that such individual's election or nomination did not result
from an actual or threatened election contest (within the meaning of Rule 14a-11
of Regulation 14A promulgated under the Exchange Act) or other actual or
threatened solicitation of proxies or consents (within the meaning of Rule
14a-11 of Regulation 14A promulgated under the Exchange Act) other than by or on
behalf of the Board of the Company; or
(v) any event which would be described in section 11(a)(i),
(ii), (iii) or (iv) if the term "Bank" were substituted for the term "Company"
therein.
In no event, however, shall a Change of Control be deemed to have occurred as a
result of any acquisition of securities or assets of the Company, the Bank, or a
subsidiary of either of them, by the Company, the Bank, or a subsidiary of
either of them, or by any employee benefit plan maintained by any of them. For
purposes of this section 11(a), the term "person" shall have the meaning
assigned to it under sections 13(d)(3) or 14(d)(2) of the Exchange Act.
(b) In the event of a Change of Control, the Executive shall
be entitled to the payments and benefits contemplated by section 9(b) in the
event of his termination of employment with the Bank under any of the
circumstances described in section 9(a) of this Agreement or under any of the
following circumstances:
(i) resignation, voluntary or otherwise, by the Executive at
any time during the Employment Period following his demotion, loss of title,
office or significant authority or responsibility, or following any reduction in
any element of his package of compensation and benefits;
(ii) resignation, voluntary or otherwise, by the Executive at
any time during the Employment Period following any relocation of his principal
place of employment or any change in working conditions at such principal place
of employment which the Executive, in his reasonable discretion, determines to
be embarrassing, derogatory or otherwise adverse;
(iii) resignation, voluntary or otherwise, by the Executive at
any time during the Employment Period following the failure of any successor to
the Company or the Bank in the Change of Control to include the Executive in any
compensation or benefit program maintained by it or covering any of its
executive officers, unless the Executive is already covered by a substantially
similar plan of the Company or the Bank which is at least as favorable to him;
or
(iv) resignation, voluntary or otherwise, for any reason
whatsoever within 90 days following the effective date of the Change of Control,
provided, however, that if the Change of Control is of the type described in
Section 11(a) (1), such 90 day period shall not be deemed to commence until the
actual consummation of the transaction approved by the stockholders.
Section 12. Tax Limitations.
(a) Notwithstanding any other provision of this Agreement, in
the event that any payment or benefit received or to be received by the
Executive in connection with a Change of Control of the Bank or the Company or
the termination of the Executive's employment (whether pursuant to the terms of
this Agreement or any other plan, arrangement or agreement with the Company or
the Bank, any person whose actions result in a Change of Control of the Company
or any person affiliated with the Company or the Bank or such person) (all such
payments and benefits, including the payments and benefits provided under this
Agreement (the "Severance Payments"), being hereinafter called "Total Payments")
would not be deductible (in whole or in part) by the Company, the Bank, an
affiliate or a person making such payment or providing such benefit as a result
of Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"),
then, to the extent necessary to make such portion of the Total Payments
deductible (and after taking into account any reduction in the Total Payments
provided in such other plan, arrangement or agreement), the cash Severance
Payments shall first be reduced (if necessary, to zero); provided, however, that
the Executive may elect (at any time prior to the payment of amounts payable
hereunder) to have the noncash severance payments reduced (or eliminated) prior
to any reduction of the cash Severance Payments.
(b) For purposes of the limitation contained in subsection (a)
of this section 12, (i) no portion of the Total Payments the receipt or
enjoyment of which Executive shall have effectively waived in writing prior to
the delivery of a notice of termination of employment shall be taken into
account, (ii) no portion of the Total Payments shall be taken into account
which, in the opinion of tax counsel ("Tax Counsel") reasonably acceptable to
the Executive and selected by the accounting firm which was, immediately prior
to the Change of Control of the Company or the Bank, the Company's independent
auditor (the "Auditor"), does not constitute a "parachute payment" within the
meaning of Section 280G(b)(2) of the Code, including by reason of Section
280G(b)(4)(A) of the Code, (iii) the Severance Payments shall be reduced only to
the extent necessary so that the Total Payments (other than those referred to in
clauses (i) or (ii)) in their entirety constitute reasonable compensation for
services actually rendered within the meaning of Section 280(G)(b)(4)(B) of the
Code or are otherwise not subject to disallowance as deductions by reason of
Section 280G of the Code, in the opinion of Tax Counsel, and (iv) the value of
any noncash benefit or any deferred payment or benefit included in the Total
Payments shall be determined by the Auditor in accordance with the principles of
Sections 280G(d)(3) and (4) of the Code.
(c) If it is established pursuant to a final determination of
a court or an Internal Revenue Service proceeding that, notwithstanding the good
faith of the Executive and the Bank and the Company in applying the terms of
this section 12, the aggregate "parachute payments" paid to of for the
Executive's benefit are in an amount that would result in any portion of such
"parachute payments" not being deductible by reason of Section 280G of the Code,
then the Executive shall have an obligation to pay the Bank upon demand an
amount equal to the sum of (i) the excess of the aggregate "parachute payments"
paid to or for the Executive's benefit over the aggregate "parachute payments"
that could have been paid to or for the Executive's benefit without any portion
of such "parachute payments" not being deductible by reason of Section 280G of
the Code; and (ii) interest on the amount set forth in clause (i) of this
sentence at 120% of the rate provided in Section 1274(b)(2)(B) of the Code from
the date of Executive's receipt of such excess until the date of such payment.
If the Severance Payments shall be decreased pursuant to section (a) hereof, and
the benefits under section 8(b)(iii) which remain payable after the application
of this section 12 are thereafter reduced pursuant thereto because of the
receipt by the Executive of substantially similar benefits, the Bank shall, at
the time of such reduction, pay to the Executive the lowest of (a) the amount of
the decrease made in the Severance Payments pursuant to this section 12, (b) the
amount of the subsequent reduction in such benefits, or (c) the maximum amount
which can be paid to the Executive without being, or causing any other payment
to be, nondeductible by reason of Section 280G of the Code.
<PAGE>
Section 13. Confidentiality.
Unless he obtains the prior written consent of the Company and
the Bank, the Executive shall keep confidential and shall refrain from using for
the benefit of himself, or any person or entity other than the Company or any
entity which is a subsidiary of the Company or of which the Company is a
subsidiary, any material document or information obtained from the Company, or
from its parent or subsidiaries, in the course of his employment with any of
them concerning their properties, operations or business (unless such document
or information is readily ascertainable from public or published information or
trade sources or has otherwise been made available to the public through no
fault of his own) until the same ceases to be material (or becomes so
ascertainable or available); provided, however, that nothing in this section 13
shall prevent the Executive, with or without the Company's consent, from
participating in or disclosing documents or information in connection with any
judicial or administrative investigation, inquiry or proceeding to the extent
that such participation or disclosure is required under applicable law.
Section 14. No Effect on Employee Benefit Plans or Programs.
The termination of the Executive's employment during the term
of this Agreement or thereafter, whether by the Bank or by the Executive, shall
have no effect on the rights and obligations of the parties hereto under the
Bank's qualified or non-qualified retirement, pension, savings, thrift,
profit-sharing or stock bonus plans, group life, health (including
hospitalization, medical and major medical), dental, accident and long term
disability insurance plans or such other employee benefit plans or programs, or
compensation plans or programs, as may be maintained by, or cover employees of,
the Bank from time to time.
Section 15. Non-Competition and Non-Solicitation.
(a) Non-competition. During the Employment Period, the
Executive agrees not to engage, directly or indirectly, in any aspect of the
financial institutions business, including without limitation engaging in
business activities for or on behalf of state, national or foreign banks, state
or federal savings associations or savings banks, credit unions, mortgage or
loan companies or any other entity which makes or acquires loans or takes
deposits or engages in any other business engaged in by the Bank on the date
hereof (the "Banking Business"), other than the Bank, whether as stockholder
(except for immaterial interests in publicly-traded institutions), partner,
director, officer, employee, agent, consultant or otherwise. In the event of
termination of the Executive's employment hereunder prior to a Change of
Control, the Executive, until one (1) year after the date of such termination,
agrees not to engage, directly or indirectly, in the Banking Business in any
capacity in any city, town or county in which the Bank or the Company has an
office or has filed an application for regulatory approval to establish an
office, determined as of the date of this Agreement.
(b) Non-solicitation. The Executive hereby covenants and
agrees that, for a period of one (1) year following his termination of
employment with the Bank, he shall not, without the written consent of the Bank,
either directly or indirectly:
(i) solicit, offer employment to, or take any other action
intended, or that a reasonable person acting in like circumstances would expect,
to have the effect of causing any officer or employee of the Company, the Bank
or any affiliate, as of the date of this Agreement, of either of them, to
terminate his or her employment and accept employment or become affiliated with,
or provide services for compensation in any capacity whatsoever to, any savings
bank, savings and loan association, bank, bank holding company, savings and loan
holding company, or other institution engaged in the business of accepting
deposits, making loans or doing other business done by the Bank, doing business
in any city, town or county in which the Bank or the Company has an office or
has filed an application for regulatory approval to establish an office,
determined as of the date of this Agreement;
(ii) provide any information, advice or recommendation with
respect to any such officer or employee to any savings bank, savings and loan
association, bank, bank holding company, savings and loan holding company, or
other institution engaged in the business of accepting deposits and making
loans, doing business in any city, town or county in which the Bank or the
Company has an office or has filed an application for regulatory approval to
establish an office, determined as of the date of this Agreement, that is
intended, or that a reasonable person acting in like circumstances would expect,
to have the effect of causing any officer or employee of the Company, the Bank,
or any affiliate, as of the date of this Agreement, of either of them, to
terminate his or her employment and accept employment or become affiliated with,
or provide services for compensation in any capacity whatsoever to, any such
savings bank, savings and loan association, bank, bank holding company, savings
and loan holding company, or other institution engaged in the business of
accepting deposits and making loans; or
(iii) solicit, provide any information, advice or
recommendation or take any other action intended, or that a reasonable person
acting in like circumstances would expect, to have the effect of causing any
customer of the Bank to terminate an existing business or commercial
relationship with the Bank.
Section 16. Successors and Assigns.
This Agreement will inure to the benefit of and be binding
upon the Executive, his legal representatives and testate or intestate
distributees, and the Company and the Bank and their respective successors and
assigns, including any successor by merger or consolidation or a statutory
receiver or any other person or firm or corporation to which all or
substantially all of the assets and business of the Company or the Bank may be
sold or otherwise transferred.
Section 17. Notices.
Any communication required or permitted to be given under this
Agreement, including any notice, direction, designation, consent, instruction,
objection or waiver, shall be in writing and shall be deemed to have been given
at such time as it is delivered personally, or five (5) days after mailing if
mailed, postage prepaid, by registered or certified mail, return receipt
requested, or one (1) day after it is sent by reputable overnight delivery
service, addressed to such party at the address listed below or at such other
address as one such party may by written notice specify to the other party:
If to the Executive:
R. Michael Strickland
239 Sanford Avenue
Palm Beach, FL 33480
<PAGE>
If to the Company:
Republic Security Financial Corporation
450 S. Australian Avenue
West Palm Beach, FL 33401
Attention: Rudy E. Schupp, Chairman & CEO
If to the Bank:
Republic Security Bank
450 S. Australian Avenue
West Palm Beach, FL 33401
Attention: Rudy E. Schupp, Chairman & CEO
Section 18. Indemnification for Attorneys' Fees.
The Bank shall indemnify, hold harmless and defend the
Executive against reasonable costs, including legal fees, incurred by him in
connection with or arising out of any action, suit or proceeding in which he may
be involved, as a result of his efforts, in good faith, to defend or enforce the
terms of this Agreement.
Section 19. Severability.
A determination that any provision of this Agreement is
invalid or unenforceable shall not affect the validity or enforceability of any
other provision hereof.
Section 20. Waiver.
Failure to insist upon strict compliance with any of the
terms, covenants or conditions hereof shall not be deemed a waiver of such term,
covenant, or condition. A waiver of any provision of this Agreement must be made
in writing, designated as a waiver, and signed by the party against whom its
enforcement is sought. Any waiver or relinquishment of any right or power
hereunder at any one or more times shall not be deemed a waiver or
relinquishment of such right or power at any other time or times.
Section 21. Counterparts.
This Agreement may be executed in two (2) or more
counterparts, each of which shall be deemed an original, and all of which shall
constitute one and the same Agreement.
Section 22. Governing Law.
This Agreement shall be governed by and construed and enforced
in accordance with the laws of the State of Florida applicable to contracts
entered into and to be performed entirely within the State of Florida.
Section 23. Headings and Construction.
The headings of sections in this Agreement are for convenience
of reference only and are not intended to qualify the meaning of any section.
Any reference to a section number shall refer to a section of this Agreement,
unless otherwise stated.
Section 24. Entire Agreement; Modifications.
This instrument contains the entire agreement of the parties
relating to the subject matter hereof, and supersedes in its entirety any and
all prior agreements, understandings or representations relating to the subject
matter hereof. No modifications of this Agreement shall be valid unless made in
writing and signed by the parties hereto.
Section 25. Survival.
The provisions of sections 6, 9, 10, 11, 12, 13, 14, 18, 20,
22, 26, 27 and 28 shall survive the expiration of the Employment Period or
termination of this Agreement.
Section 26. Equitable Remedies.
The Company, the Bank and the Executive hereby stipulate that
money damages are an inadequate remedy for violations of
sections 6(a), or 13 of this Agreement and agree that equitable remedies,
including, without limitations, the remedies of specific performance and
injunctive relief, shall be available with respect to the enforcement of such
provisions.
Section 27. Required Regulatory Provision.
(a) Notwithstanding anything herein contained to the contrary,
any payments to the Executive by the Company or the Bank, whether pursuant to
this Agreement or otherwise, are subject to and conditioned upon their
compliance with section 18(k) of the Federal Deposit Insurance Act, 12 U.S.C.
ss.1828(k), and any regulations promulgated thereunder.
(b) Nothing in this Agreement shall be construed to subject
the Bank or its assets to any contractual obligation undertaken by the Company
hereunder or to liability for any breach by the Company.
<PAGE>
Section 28. Guarantee.
The Company hereby irrevocably and unconditionally guarantees
to the Executive the payment of all amounts, and the performance of all other
obligations, due from the Bank in accordance with the terms of this Agreement as
and when due without any requirement of presentment, demand of payment, protest
or notice of dishonor or nonpayment.
IN WITNESS WHEREOF, the Company and the Bank have caused this
Agreement to be executed and the Executive has hereunto set his hand, all as of
the day and year first above written.
REPUBLIC SECURITY FINANCIAL CORPORATION
By:
Name: _________________________________________
Title: _________________________________________
REPUBLIC SECURITY BANK
By: ____________________________________________
Name: _________________________________________
Title: _________________________________________
R. Michael Strickland
EXHIBIT 10.4 EMPLOYMENT AGREEMENT AMONG THE COMPANY, REPUBLIC SECURITY BANK
AND J. DUNHAM AS DATED FEBRUARY 26, 1999
- -------------------------------------------------------------------------------
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (the "Agreement") is made and
entered into as of February 26, 1999 by and among Republic Security Financial
Corporation, a business corporation organized and operating under the laws of
the State of Florida and having an office at 450 South Australian Avenue, West
Palm Beach, FL 33401 (the "Company"), Republic Security Bank, a commercial bank
organized and operating under the laws of the State of Florida and having an
office at 450 South Australian Avenue, West Palm Beach, FL 33401 (the "Bank"),
and Louis J. Dunham, an individual residing at _________________________ (the
"Executive").
W I T N E S S E T H :
WHEREAS, the Executive has been elected as Senior Executive
Vice President and Chief Credit Officer of the Bank; and
WHEREAS, the Company and the Bank desire to assure for
themselves the continued availability of the Executive's services and the
ability of the Executive to perform such services with a minimum of personal
distraction in the event of a pending or threatened Change of Control (as
hereinafter defined); and
WHEREAS, the Executive is willing to serve the Bank on the
terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and conditions hereinafter set forth, the Company, the Bank and
the Executive hereby agree as follows:
Section 1. Employment.
The Bank agrees to employ the Executive, and the Executive
hereby agrees to such employment, during the period and upon the terms and
conditions set forth in this Agreement.
Section 2. Employment Period; Remaining Unexpired Employment
Period.
(a) The terms and conditions of this Agreement shall be and
remain in effect during the period of employment established under this section
2 ("Employment Period"). The Employment Period shall be for an initial term of
two years beginning on the date of this Agreement and ending on the second
anniversary date of this Agreement, plus such extensions, if any, as are
provided pursuant to section 2(b).
(b) Beginning on the date of this Agreement, the Employment
Period shall automatically be extended for one (1) additional day each day,
unless either the Company and the Bank, acting jointly, or the Executive, elects
not to extend the Agreement further by giving written notice to the other
parties, in which case the Employment Period shall end on the second anniversary
of the date on which such written notice is given. For all purposes of this
Agreement, the term "Remaining Unexpired Employment Period" as of any date shall
mean the period beginning on such date and ending on: (i) if a notice of
non-extension has been given in accordance with this section 2(b), the second
anniversary of the date on which such notice is given; and (ii) in all other
cases, the second anniversary of the date as of which the Remaining Unexpired
Employment Period is being determined. Upon termination of the Executive's
employment with the Bank for any reason whatsoever, any daily extensions
provided pursuant to this section 2(b), if not therefore discontinued, shall
automatically cease.
(c) Nothing in this Agreement shall be deemed to prohibit the
Bank from terminating the Executive's employment at any time during the
Employment Period with or without notice for any reason; provided, however, that
the relative rights and obligations of the Company, the Bank and the Executive
in the event of any such termination shall be determined under this Agreement.
Section 3. Duties.
The Executive shall serve as Senior Executive Vice President
and Chief Credit Officer of the Bank, having such power, authority and
responsibility and performing such duties as are prescribed by or under the
By-Laws of the Bank, or assigned by the Board of Directors of the Bank or the
President of the Bank, and otherwise as are customarily associated with such
position. The Executive shall devote his full business time and attention (other
than during weekends, holidays, approved vacation periods, and periods of
illness or approved leaves of absence) to the business and affairs of the Bank
and shall use his best efforts to advance the interests of the Bank.
Section 4. Cash Compensation.
(a) In consideration for the services to be rendered by the
Executive hereunder, the Bank shall pay to Executive a salary at an initial
annual rate of ONE HUNDRED FIFTY THOUSAND DOLLARS ($150,000), payable in
approximately equal installments in accordance with the Bank's customary payroll
practices for senior officers. At least annually during the Employment Period,
the Board of Directors of the Bank, or the Compensation Committee thereof, shall
review the Executive's annual rate of salary and may, in its discretion, approve
an increase therein. In no event shall the Executive's annual rate of salary
under this Agreement in effect at a particular time be reduced without his prior
written consent. In addition to salary, the Executive may receive other cash
compensation from the Bank for services hereunder at such times, in such amounts
and on such terms and conditions as the Board may determine from time to time.
The Executive and the Bank understand that the maximum amount available for such
other cash compensation for the first year of the term hereof shall be FIFTY
THOUSAND DOLLARS ($50,000), and the amount actually paid shall be at the
discretion of the Board or the President in accordance with goals to be
established by the President and/or the Board.
<PAGE>
(b) As soon as practicable following the commencement of the
Executive's employment hereunder, the Bank shall pay to the Executive a one-time
signing bonus in an amount such that, after deduction of all applicable
withholding, the net payment to the Executive will be $20,000.
Section 5. Employee Benefit Plans and Programs.
During the Employment Period, the Executive shall be treated as an employee of
the Bank and shall be entitled to participate in and receive benefits under any
and all qualified or non-qualified retirement, pension, savings, profit-sharing
or stock bonus plans, any and all group life, health (including hospitalization,
medical and major medical), dental, accident and long term disability insurance
plans, and any other employee benefit and compensation plans (including, but not
limited to, any incentive compensation plans or programs, stock option and
appreciation rights plans and restricted stock plans) as may from time to time
be maintained by, or cover employees of, the Bank, in accordance with the terms
and conditions of such employee benefit plans and programs and compensation
plans and programs and consistent with the Bank's customary practices.
Section 6. Indemnification and Insurance.
(a) During the Employment Period, the Bank shall cause the
Executive to be covered by and named as an insured under any policy or contract
of insurance obtained by it to insure its directors and officers against
personal liability for acts or omissions in connection with service as an
officer or director of the Bank or service in other capacities at the request of
the Company or the Bank. The coverage provided to the Executive pursuant to this
section 6 shall be of the same scope and on the same terms and conditions as the
coverage (if any) provided to other officers or directors of the Company and the
Bank.
(b) To the maximum extent permitted under applicable law,
during the Employment Period, the Bank shall indemnify the Executive against,
and hold him harmless from, any costs, liabilities, losses and exposures to the
fullest extent and on the most favorable terms and conditions that similar
indemnification is offered to any director or officer of the Bank or any
subsidiary or affiliate of either of them.
Section 7. Other Activities.
The Executive may serve as a member of the boards of directors
of such business, community and charitable organizations as he may disclose to
and as may be approved by the President of the Company or the Bank (which
approval shall not be unreasonably withheld); provided, however, that such
service shall not materially interfere with the performance of his duties under
this Agreement. The Executive may also engage in personal business and
investment activities which do not materially interfere with the performance of
his duties hereunder; provided, however, that such activities are not prohibited
under any code of conduct or investment or securities trading policy established
by the Company or the Bank and generally applicable to all similarly situated
executives.
Section 8. Working Facilities and Expenses.
The Executive's principal place of employment shall be at the
Bank's executive offices at the address first above written, or at such other
location within Palm Beach County or Broward County, Florida at which the Bank
shall maintain its principal executive offices, or at such other location as the
Company, the Bank and the Executive may mutually agree upon. The Bank shall
provide the Executive at his principal place of employment with a private
office, secretarial services and other support services and facilities suitable
to his position with the Bank and necessary or appropriate in connection with
the performance of his assigned duties under this Agreement. The Bank shall
reimburse the Executive for his ordinary and necessary business expenses,
including, without limitation, fees for memberships in a dining club for
business purposes, and his travel and entertainment expenses incurred in
connection with the performance of his duties under this Agreement, in each case
upon presentation to the Bank of an itemized account of such expenses in such
form as the Bank may reasonably require.
Section 9. Termination of Employment with Severance Benefits.
(a) The Executive shall be entitled to the severance benefits
described herein in the event that his employment with the Bank terminates
during the Employment Period under any of the following circumstances:
(i) the Executive's voluntary resignation from employment with
the Bank within ninety (90) days following:
(A) the failure of the Board of Directors of the Bank to
appoint or re-appoint or elect or re-elect the Executive to the offices of
Senior Executive Vice President and Chief Credit Officer (or a more senior
office) of the Bank;
(B) the expiration of a thirty (30) day period following the
date on which the Executive gives written notice to the Bank of its material
failure, whether by amendment of the Bank's Articles of Incorporation or
By-laws, action of the Bank's Board of Directors or the Bank's stockholders or
otherwise, to vest in the Executive the functions, duties, or responsibilities
prescribed in section 3 of this Agreement as of the date hereof, unless, during
such thirty (30) day period, the Bank cures such failure; or
(C) the relocation of the Executive's principal place of
employment, without his written consent, to a location outside of Palm Beach
County or Broward County, Florida;
(ii) the termination of the Executive's employment with the
Bank for any other reason not described in section 10(a).
In such event, the Bank shall provide the benefits and pay to
the Executive the amounts described in section 9(b).
(b) Upon the termination of the Executive's employment with
the Bank under circumstances described in section 9(a) of this Agreement, the
Bank shall pay and provide to the Executive (or, in the event of his death
following such termination, to his estate):
<PAGE>
(i) his earned but unpaid compensation as of the date of the
termination of his employment with the Bank, such payment to be made at the time
and in the manner prescribed by law applicable to the payment of wages but in no
event later than thirty (30) days after termination of employment;
(ii) the benefits, if any, to which he is entitled as a former
employee under the employee benefit plans and programs and compensation plans
and programs maintained for the benefit of the Bank's officers and employees;
(iii) continued group life, health (including hospitalization,
medical and major medical), dental, accident and long term disability insurance
benefits, in addition to that provided pursuant to section 9(b)(ii), and after
taking into account the coverage provided by any subsequent employer, if and to
the extent necessary to provide for the Executive, for a period of two years
from the date his employment terminates, coverage equivalent to the coverage to
which he would have been entitled under such plans (as in effect on the date of
his termination of employment, or, if his termination of employment occurs after
a Change of Control, on the date of such Change of Control, whichever benefits
are greater), if he had continued working for the Bank during the Remaining
Unexpired Employment Period at the highest annual rate of compensation achieved
during that portion of the Employment Period which is prior to the Executive's
termination of employment with the Bank;
(iv) within thirty (30) days following his termination of
employment with the Bank, a lump sum payment in an amount equal to the salary
that the Executive would have earned if he had continued working for the Bank
for a period of two years from the date his employment terminates at the highest
annual rate of salary achieved during that portion of the Employment Period
which is prior to the Executive's termination of employment with the Bank, such
lump sum to be paid in lieu of all other payments of salary provided for under
this Agreement in respect of the period following any such termination;
(v) within thirty (30) days following his termination of
employment with the Bank, a lump sum payment in an amount equal to the excess,
if any, of:
(A) the present value of the aggregate benefits to which he
would be entitled under any and all qualified and non-qualified defined benefit
pension plans maintained by, or covering employees of, the Bank, if he were 100%
vested thereunder and had continued working for the Bank for a period of two
years from the date his employment terminates, such benefits to be determined as
of the date of termination of employment by adding to the service actually
recognized under such plans an additional period equal to the Remaining
Unexpired Employment Period and by adding to the compensation recognized under
such plans for the most recent year recognized all amounts payable under
sections 9(b)(i), (iv), and (vii); over
(B) the present value of the benefits to which he is actually
entitled under such defined benefit pension plans as of the date of his
termination;
where such present values are to be determined using the mortality tables
prescribed under section 415(b)(2)(E)(v) of the Code and a discount rate,
compounded monthly, equal to the annualized rate of interest prescribed by the
Pension Benefit Guaranty Corporation for the valuation of immediate annuities
payable under terminating single-employer defined benefit plans for the month in
which the Executive's termination of employment occurs ("Applicable PBGC Rate");
(vi) within thirty (30) days following his termination of
employment with the Bank, a lump sum payment in an amount equal to the present
value of the additional employer contributions (or if greater in the case of a
leveraged employee stock ownership plan or similar arrangement, the additional
assets allocable to him through debt service, based on the fair market value of
such assets at termination of employment) to which he would have been entitled
under any and all qualified and non-qualified defined contribution plans
maintained by, or covering employees of, the Bank, as if he were 100% vested
thereunder and had continued working for the Bank for a period of two years from
the date his employment terminates at the highest annual rate of compensation
achieved during that portion of the Employment Period which is prior to the
Executive's termination of employment with the Bank, and making the maximum
amount of employee contributions, if any, required under such plan or plans,
such present value to be determined on the basis of a discount rate, compounded
using the compounding period that corresponds to the frequency with which
employer contributions are made to the relevant plan, equal to the Applicable
PBGC Rate;
(vii) within thirty (30) days following his termination of
employment with the Bank, a lump sum payment in an amount equal to two times the
higher of (A) the highest cash incentive compensation or bonus (annualized, if
paid for a period other than annually) paid to the Executive during or accrued
with respect to the Executive for either (i) any of the two years immediately
preceding that in which, or (ii) the year in which, Executive's employment with
the Bank terminates, or (B) the highest cash incentive compensation or bonus
(annualized, if paid for a period other than annually) so paid or accrued in
respect of either (x) any of the two years immediately preceding that in which,
or (y) the year in which, a Change of Control (as hereinafter defined) occurs.
The Company, the Bank and the Executive hereby stipulate that
the damages which may be incurred by the Executive following any such
termination of employment are not capable of accurate measurement as of the date
first above written and that the payments and benefits contemplated by this
section 9(b) constitute reasonable damages under the circumstances and shall be
payable without any requirement of proof of actual damage and without regard to
the Executive's efforts, if any, to mitigate damages. The Company, the Bank and
the Executive further agree that the Company and the Bank may condition the
payments and benefits (if any) due under sections 9(b)(iii), (iv), (v), (vi) and
(vii) on the receipt of the Executive's resignation from any and all positions
which he holds as an officer, director or committee member with respect to the
Company, the Bank or any subsidiary or affiliate of either of them.
Section 10. Termination without Additional Company or Bank
Liability.
(a) In the event that the Executive's employment with the Bank
shall terminate during the Employment Period on account of:
(i) the discharge of the Executive for "cause," which, for
purposes of this Agreement (I) prior to a Change of Control (as hereinafter
defined) shall mean: (A) gross negligence or willful misconduct by the Executive
in connection with his employment hereunder or the business of the Bank; (B) the
Executive's misappropriation of the Bank's assets or property; (C) the Executive
willfully fails or refuses to perform his duties under
<PAGE>
this Agreement, or fails to comply with any material term, covenant or condition
contained herein; (D) the Executive breaches his fiduciary duties to the Bank
for personal profit; or (E) the Executive's willful breach or violation of any
law, rule or regulation (other than traffic violations or similar offenses), or
final cease and desist order in connection with his performance of services for
the Bank; and (II), upon and after a Change of Control, shall mean (A) the
Executive intentionally engages in dishonest conduct in connection with his
performance of services for the Company or the Bank resulting in his conviction
of a felony; (B) the Executive is convicted of, or pleads guilty or nolo
contendere to, a felony or any crime involving moral turpitude; (C) the
Executive willfully fails or refuses to perform his duties under this Agreement
and fails to cure such breach within sixty (60) days following written notice
thereof from the Bank; (D) the Executive breaches his fiduciary duties to the
Company or the Bank for personal profit; or (E) the Executive's willful breach
or violation of any law, rule or regulation (other than traffic violations or
similar offenses), or final cease and desist order in connection with his
performance of services for the Bank;
(ii) the Executive's voluntary resignation from employment
with the Bank for reasons other than those specified in section 9(a) or 11(b);
(iii) the Executive's death; or
(iv) a determination that the Executive is eligible for
long-term disability benefits under the Bank's long-term disability insurance
program or, if there is no such program, under the federal Social Security Act;
then the Company and the Bank shall have no further obligations under
this Agreement, other than the payment to the Executive (or, in the event of his
death, to his estate) of his earned but unpaid compensation as of the date of
the termination of his employment, and the provision of such other benefits, if
any, to which he is entitled as a former employee under the employee benefit
plans and programs and compensation plans and programs maintained by, or
covering employees of, the Bank.
Section 11. Termination Upon or Following a Change of Control
(a) A Change of Control ("Change of Control") shall be deemed
to have occurred upon the happening of any of the following events:
(i) approval by the stockholders of the Company of a
transaction that would result in the reorganization, merger or consolidation of
the Company with one or more other persons, other than a transaction following
which:
(A) at least 50.1% of the common stock or equity ownership
interests of the entity resulting from such transaction are beneficially owned
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) in
substantially the same relative proportions by persons who, immediately prior to
such transaction, beneficially owned (within the meaning of Rule 13d-3
promulgated under the Exchange Act) at least 50.1% of the outstanding common
stock or equity ownership interests in the Company; and
(B) At least 50.1% of the combined voting power of the
securities entitled to vote generally in the election of directors of the entity
resulting from such transaction are beneficially owned (within the meaning of
Rule 13d-3 promulgated under the Exchange Act) in substantially the same
relative proportions by persons who, immediately prior to such transaction,
beneficially owned (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) at least 50.1% of the combined voting power of the securities
entitled to vote generally in the election of directors of the Company; and
(C) No person, or persons acting in concert, beneficially own
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) 20% or
more of the outstanding common stock or equity ownership interests in, or 20% or
more of the combined voting power of the securities entitled to vote generally
in the election of directors of, the entity resulting from such transaction; and
(D) At least a majority of the members of the board of
directors of the entity resulting from such transaction are individuals who were
described in sections 11(a)(iv)(A) or (B) of this Agreement as of the date of
execution of the initial definitive agreement providing for such transaction
(or, if earlier, as of the date on which the Board of Directors of the Company
authorized such transaction).
(ii) the acquisition of all or substantially all of the assets
of the Company or beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 20% or more of the outstanding securities
or of the combined voting power of the outstanding securities of the Company
entitled to vote generally in the election of directors by any person or by any
persons acting in concert, or approval by the stockholders of the Company of any
transaction which would result in such an acquisition;
(iii) a complete liquidation or dissolution of the Company, or
approval by the stockholders of the Company of a plan for such liquidation or
dissolution; or
(iv) the occurrence of any event if, immediately following
such event, at least 50% of the members of the board of directors of the Company
do not belong to any of the following groups:
(A) individuals who were members of the Board of the Company
on the date of this Agreement; or
(B) individuals who first became members of the Board of the
Company after the date of this Agreement either:
(I) upon election to serve as a member of the Board of
directors of the Company by affirmative vote of three-quarters of the members of
such Board, or of a nominating committee thereof, in office at the time of such
first election; or
(II) upon election by the stockholders of the Company to serve
as a member of the Board of the Company, but only if nominated for election by
affirmative vote of three-quarters of the members of the board of directors of
the Company, or of a nominating committee thereof, in office at the time of such
first nomination;
<PAGE>
provided, however, that such individual's election or nomination did
not result from an actual or threatened election contest (within the meaning of
Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other
actual or threatened solicitation of proxies or consents (within the meaning of
Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) other than by
or on behalf of the Board of the Company; or
(v) any event which would be described in section 11(a)(i),
(ii), (iii) or (iv) if the term "Bank" were substituted for the term "Company"
therein.
In no event, however, shall a Change of Control be deemed to have
occurred as a result of any acquisition of securities or assets of the Company,
the Bank, or a subsidiary of either of them, by the Company, the Bank, or a
subsidiary of either of them, or by any employee benefit plan maintained by any
of them. For purposes of this section 11(a), the term "person" shall have the
meaning assigned to it under sections 13(d)(3) or 14(d)(2) of the Exchange Act.
(b) In the event of a Change of Control, the Executive shall
be entitled to the payments and benefits contemplated by section 9(b) in the
event of his termination of employment with the Bank under any of the
circumstances described in section 9(a) of this Agreement or under any of the
following circumstances:
(i) resignation, voluntary or otherwise, by the Executive at
any time during the Employment Period following his demotion, loss of title,
office or significant authority or responsibility, or following any reduction in
any element of his package of compensation and benefits;
(ii) resignation, voluntary or otherwise, by the Executive at
any time during the Employment Period following any relocation of his principal
place of employment or any change in working conditions at such principal place
of employment which the Executive, in his reasonable discretion, determines to
be embarrassing, derogatory or otherwise adverse;
(iii) resignation, voluntary or otherwise, by the Executive at
any time during the Employment Period following the failure of any successor to
the Company or the Bank in the Change of Control to include the Executive in any
compensation or benefit program maintained by it or covering any of its
executive officers, unless the Executive is already covered by a substantially
similar plan of the Company or the Bank which is at least as favorable to him;
or
(iv) resignation, voluntary or otherwise, for any reason
whatsoever within 90 days following the effective date of the Change of Control,
provided, however, that if the Change of Control is of the type described in
Section 11(a) (1), such 90 day period shall not be deemed to commence until the
actual consummation of the transaction approved by the stockholders.
Section 12. Tax Limitations.
(a) Notwithstanding any other provision of this Agreement, in
the event that any payment or benefit received or to be received by the
Executive in connection with a Change of Control of the Bank or the Company or
the termination of the Executive's employment (whether pursuant to the terms of
this Agreement or any other plan, arrangement or agreement with the Company or
the Bank, any person whose actions result in a Change of Control of the Company
or any person affiliated with the Company or the Bank or such person) (all such
payments and benefits, including the payments and benefits provided under this
Agreement (the "Severance Payments"), being hereinafter called "Total Payments")
would not be deductible (in whole or in part) by the Company, the Bank, an
affiliate or a person making such payment or providing such benefit as a result
of Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"),
then, to the extent necessary to make such portion of the Total Payments
deductible (and after taking into account any reduction in the Total Payments
provided in such other plan, arrangement or agreement), the cash Severance
Payments shall first be reduced (if necessary, to zero); provided, however, that
the Executive may elect (at any time prior to the payment of amounts payable
hereunder) to have the noncash severance payments reduced (or eliminated) prior
to any reduction of the cash Severance Payments.
(b) For purposes of the limitation contained in subsection (a)
of this section 12, (i) no portion of the Total Payments the receipt or
enjoyment of which Executive shall have effectively waived in writing prior to
the delivery of a notice of termination of employment shall be taken into
account, (ii) no portion of the Total Payments shall be taken into account
which, in the opinion of tax counsel ("Tax Counsel") reasonably acceptable to
the Executive and selected by the accounting firm which was, immediately prior
to the Change of Control of the Company or the Bank, the Company's independent
auditor (the "Auditor"), does not constitute a "parachute payment" within the
meaning of Section 280G(b)(2) of the Code, including by reason of Section
280G(b)(4)(A) of the Code, (iii) the Severance Payments shall be reduced only to
the extent necessary so that the Total Payments (other than those referred to in
clauses (i) or (ii)) in their entirety constitute reasonable compensation for
services actually rendered within the meaning of Section 280(G)(b)(4)(B) of the
Code or are otherwise not subject to disallowance as deductions by reason of
Section 280G of the Code, in the opinion of Tax Counsel, and (iv) the value of
any noncash benefit or any deferred payment or benefit included in the Total
Payments shall be determined by the Auditor in accordance with the principles of
Sections 280G(d)(3) and (4) of the Code.
(c) If it is established pursuant to a final determination of
a court or an Internal Revenue Service proceeding that, notwithstanding the good
faith of the Executive and the Bank and the Company in applying the terms of
this section 12, the aggregate "parachute payments" paid to of for the
Executive's benefit are in an amount that would result in any portion of such
"parachute payments" not being deductible by reason of Section 280G of the Code,
then the Executive shall have an obligation to pay the Bank upon demand an
amount equal to the sum of (i) the excess of the aggregate "parachute payments"
paid to or for the Executive's benefit over the aggregate "parachute payments"
that could have been paid to or for the Executive's benefit without any portion
of such "parachute payments" not being deductible by reason of Section 280G of
the Code; and (ii) interest on the amount set forth in clause (i) of this
sentence at 120% of the rate provided in Section 1274(b)(2)(B) of the Code from
the date of Executive's receipt of such excess until the date of such payment.
If the Severance Payments shall be decreased pursuant to section (a) hereof, and
the benefits under section 8(b)(iii) which remain payable after the application
of this section 12 are thereafter reduced pursuant thereto because of the
receipt by the Executive of substantially similar benefits, the Bank shall, at
the time of such reduction, pay to the Executive the lowest of (a) the amount of
the decrease made in the Severance Payments pursuant to this section 12, (b) the
amount of the subsequent reduction in such benefits, or (c) the maximum amount
which can be paid to the Executive without being, or causing any other payment
to be, nondeductible by reason of Section 280G of the Code.
<PAGE>
Section 13. Confidentiality.
Unless he obtains the prior written consent of the Company and
the Bank, the Executive shall keep confidential and shall refrain from using for
the benefit of himself, or any person or entity other than the Company or any
entity which is a subsidiary of the Company or of which the Company is a
subsidiary, any material document or information obtained from the Company, or
from its parent or subsidiaries, in the course of his employment with any of
them concerning their properties, operations or business (unless such document
or information is readily ascertainable from public or published information or
trade sources or has otherwise been made available to the public through no
fault of his own) until the same ceases to be material (or becomes so
ascertainable or available); provided, however, that nothing in this section 13
shall prevent the Executive, with or without the Company's consent, from
participating in or disclosing documents or information in connection with any
judicial or administrative investigation, inquiry or proceeding to the extent
that such participation or disclosure is required under applicable law.
Section 14. No Effect on Employee Benefit Plans or Programs.
The termination of the Executive's employment during the term
of this Agreement or thereafter, whether by the Bank or by the Executive, shall
have no effect on the rights and obligations of the parties hereto under the
Bank's qualified or non-qualified retirement, pension, savings, thrift,
profit-sharing or stock bonus plans, group life, health (including
hospitalization, medical and major medical), dental, accident and long term
disability insurance plans or such other employee benefit plans or programs, or
compensation plans or programs, as may be maintained by, or cover employees of,
the Bank from time to time.
Section 15. Non-Competition and Non-Solicitation.
(a) Non-competition. During the Employment Period, the
Executive agrees not to engage, directly or indirectly, in any aspect of the
financial institutions business, including without limitation engaging in
business activities for or on behalf of state, national or foreign banks, state
or federal savings associations or savings banks, credit unions, mortgage or
loan companies or any other entity which makes or acquires loans or takes
deposits or engages in any other business engaged in by the Bank on the date
hereof (the "Banking Business"), other than the Bank, whether as stockholder
(except for immaterial interests in publicly-traded institutions), partner,
director, officer, employee, agent, consultant or otherwise. In the event of
termination of the Executive's employment hereunder prior to a Change of
Control, the Executive, until one (1) year after the date of such termination,
agrees not to engage, directly or indirectly, in the Banking Business in any
capacity in any city, town or county in which the Bank or the Company has an
office or has filed an application for regulatory approval to establish an
office, determined as of the date of this Agreement.
(b) Non-solicitation. The Executive hereby covenants and
agrees that, for a period of one (1) year following his termination of
employment with the Bank, he shall not, without the written consent of the Bank,
either directly or indirectly:
(i) solicit, offer employment to, or take any other action
intended, or that a reasonable person acting in like circumstances would expect,
to have the effect of causing any officer or employee of the Company, the Bank
or any affiliate, as of the date of this Agreement, of either of them, to
terminate his or her employment and accept employment or become affiliated with,
or provide services for compensation in any capacity whatsoever to, any savings
bank, savings and loan association, bank, bank holding company, savings and loan
holding company, or other institution engaged in the business of accepting
deposits, making loans or doing other business done by the Bank, doing business
in any city, town or county in which the Bank or the Company has an office or
has filed an application for regulatory approval to establish an office,
determined as of the date of this Agreement;
(ii) provide any information, advice or recommendation with
respect to any such officer or employee to any savings bank, savings and loan
association, bank, bank holding company, savings and loan holding company, or
other institution engaged in the business of accepting deposits and making
loans, doing business in any city, town or county in which the Bank or the
Company has an office or has filed an application for regulatory approval to
establish an office, determined as of the date of this Agreement, that is
intended, or that a reasonable person acting in like circumstances would expect,
to have the effect of causing any officer or employee of the Company, the Bank,
or any affiliate, as of the date of this Agreement, of either of them, to
terminate his or her employment and accept employment or become affiliated with,
or provide services for compensation in any capacity whatsoever to, any such
savings bank, savings and loan association, bank, bank holding company, savings
and loan holding company, or other institution engaged in the business of
accepting deposits and making loans; or
(iii) solicit, provide any information, advice or
recommendation or take any other action intended, or that a reasonable person
acting in like circumstances would expect, to have the effect of causing any
customer of the Bank to terminate an existing business or commercial
relationship with the Bank.
Section 16. Successors and Assigns.
This Agreement will inure to the benefit of and be binding
upon the Executive, his legal representatives and testate or intestate
distributees, and the Company and the Bank and their respective successors and
assigns, including any successor by merger or consolidation or a statutory
receiver or any other person or firm or corporation to which all or
substantially all of the assets and business of the Company or the Bank may be
sold or otherwise transferred.
Section 17. Notices.
Any communication required or permitted to be given under this
Agreement, including any notice, direction, designation, consent, instruction,
objection or waiver, shall be in writing and shall be deemed to have been given
at such time as it is delivered personally, or five (5) days after mailing if
mailed, postage prepaid, by registered or certified mail, return receipt
requested, or one (1) day after it is sent by reputable overnight delivery
service, addressed to such party at the address listed below or at such other
address as one such party may by written notice specify to the other party:
If to the Executive:
Louis J. Dunham
[address]
________, FL _____
<PAGE>
If to the Company:
Republic Security Financial Corporation
450 S. Australian Avenue
West Palm Beach, FL 33401
Attention: Rudy E. Schupp, Chairman & CEO
If to the Bank:
Republic Security Bank
450 S. Australian Avenue
West Palm Beach, FL 33401
Attention: Rudy E. Schupp, Chairman & CEO
Section 18. Indemnification for Attorneys' Fees.
The Bank shall indemnify, hold harmless and defend the
Executive against reasonable costs, including legal fees, incurred by him in
connection with or arising out of any action, suit or proceeding in which he may
be involved, as a result of his efforts, in good faith, to defend or enforce the
terms of this Agreement.
Section 19. Severability.
A determination that any provision of this Agreement is
invalid or unenforceable shall not affect the validity or enforceability of any
other provision hereof.
Section 20. Waiver.
Failure to insist upon strict compliance with any of the
terms, covenants or conditions hereof shall not be deemed a waiver of such term,
covenant, or condition. A waiver of any provision of this Agreement must be made
in writing, designated as a waiver, and signed by the party against whom its
enforcement is sought. Any waiver or relinquishment of any right or power
hereunder at any one or more times shall not be deemed a waiver or
relinquishment of such right or power at any other time or times.
Section 21. Counterparts.
This Agreement may be executed in two (2) or more
counterparts, each of which shall be deemed an original, and all of which shall
constitute one and the same Agreement.
Section 22. Governing Law.
This Agreement shall be governed by and construed and enforced
in accordance with the laws of the State of Florida applicable to contracts
entered into and to be performed entirely within the State of Florida.
Section 23. Headings and Construction.
The headings of sections in this Agreement are for convenience
of reference only and are not intended to qualify the meaning of any section.
Any reference to a section number shall refer to a section of this Agreement,
unless otherwise stated.
Section 24. Entire Agreement; Modifications.
This instrument contains the entire agreement of the parties
relating to the subject matter hereof, and supersedes in its entirety any and
all prior agreements, understandings or representations relating to the subject
matter hereof. No modifications of this Agreement shall be valid unless made in
writing and signed by the parties hereto.
Section 25. Survival.
The provisions of sections 6, 9, 10, 11, 12, 13, 14, 18, 20,
22, 26, 27 and 28 shall survive the expiration of the Employment Period or
termination of this Agreement.
Section 26. Equitable Remedies.
The Company, the Bank and the Executive hereby stipulate that
money damages are an inadequate remedy for violations of
sections 6(a), or 13 of this Agreement and agree that equitable remedies,
including, without limitations, the remedies of specific performance and
injunctive relief, shall be available with respect to the enforcement of such
provisions.
Section 27. Required Regulatory Provision.
(a) Notwithstanding anything herein contained to the contrary,
any payments to the Executive by the Company or the Bank, whether pursuant to
this Agreement or otherwise, are subject to and conditioned upon their
compliance with section 18(k) of the Federal Deposit Insurance Act, 12 U.S.C.
ss.1828(k), and any regulations promulgated thereunder.
<PAGE>
(b) Nothing in this Agreement shall be construed to subject
the Bank or its assets to any contractual obligation undertaken by the Company
hereunder or to liability for any breach by the Company.
Section 28. Guarantee.
The Company hereby irrevocably and unconditionally guarantees
to the Executive the payment of all amounts, and the performance of all other
obligations, due from the Bank in accordance with the terms of this Agreement as
and when due without any requirement of presentment, demand of payment, protest
or notice of dishonor or nonpayment.
Section 29. Relocation.
In connection with the Executive's relocation from
Brattleboro, Vermont to the West Palm Beach, Florida area, the Bank shall pay to
the Executive, upon receipt of appropriate receipts therefor, moving expenses
actually incurred, up to a maximum of $20,000. In addition, the Bank will
provide the Executive with up to $6,000 for expenses incurred in connection with
temporary housing in the West Palm Beach area.
IN WITNESS WHEREOF, the Company and the Bank have caused this
Agreement to be executed and the Executive has hereunto set his hand, all as of
the day and year first above written.
REPUBLIC SECURITY FINANCIAL CORPORATION
By: ______________________________________
Name: _________________________________________
Title: _________________________________________
REPUBLIC SECURITY BANK
By: ______________________________________
Name: _______________________________________
Title: _______________________________________
_______________________________________
Louis J. Dunham
EXHIBIT 10.5 FORM OF EMPLOYMENT AGREEMENT BETWEEN REPUBLIC SECURITY BANK
AND EACH OF ROGER SAVAGE, JOHN G. PRIMEAU AND JOSE VIVERO
- -------------------------------------------------------------------------------
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into
on _________ ________ by and between REPUBLIC SECURITY BANK, a Florida state
bank (the "Bank"), and ___________ ("Executive").
W I T N E S S E T H:
WHEREAS, the Bank desires to employ Executive upon the terms
and conditions set forth herein and is willing to agree to the employment terms
and conditions set forth herein, but only on the condition that Executive agrees
to enter into the non-competition, non-disclosure and non-solicitation covenants
contained herein; and
WHEREAS, Executive desires to be employed by the Bank upon the
terms and conditions set forth herein, including such non-competition,
non-disclosure and non-solicitation covenants, and has negotiated with the Bank
for the compensation, benefits and conditions set forth herein; and
NOW, THEREFORE, in consideration of the mutual agreements
contained herein and other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follow:
1. EMPLOYMENT. This Agreement shall be effective as of the
date of (the "Effective Date"). Subject to the terms and upon the conditions set
forth herein, the Bank agrees to employ Executive, and Executive accepts and
agrees to such employment, as of the Effective Date, in the capacity and for the
term of employment specified herein.
2. SCOPE OF EMPLOYMENT. Executive shall be employed as
______________________. As such, Executive shall be responsible for business
development of the Bank in the _________ region and shall have administrative
responsibility for the Bank's branches located in the _____________ region and
shall maintain his office in __________ County. The Florida counties to
constitute the ___________ region shall be as determined by the President of the
Bank from time to time. He will serve on the Bank's Management Loan Committee
and such other committees as the Bank may determine from time to time. He shall
have such other responsibilities, duties and authority as the President of the
Bank may from time to time determine. Executive shall be obligated to devote his
full working time to the performance of his duties hereunder.
Executive shall at all times be subject to the direction and
control of the President and Board of Directors of the Bank, and all acts of
Executive in the performance of his duties hereunder shall be carried out in
conformity with the policies, directions and limitations as from time to time
established by the President or Board of Directors.
3. COMPENSATION. Executive shall be entitled to the following
compensation:
(a) BASE SALARY. During the Term, the Bank shall pay Executive
a base salary at the rate of $_______ per annum, payable in accordance with the
customary practices of the Bank. The rate of base salary may be adjusted (but
not to less than $_______) from time to time at the sole discretion of the Board
of Directors.
(b) CASH INCENTIVE COMPENSATION. The Bank shall pay to the
Executive an additional amount over and above the Base Salary to which he is
entitled, for all periods during which this Agreement shall be in effect. Such
additional amount shall be the "Cash Incentive Compensation" which shall be in
an amount up to __% of the Executive's base salary, __% of which is dependent on
the President's judgement as to whether or not the Executive has achieved the
goals specifically assigned for his business unit for the fiscal year and __% of
which is dependent on achievement of the Bank's consolidated budget for the
fiscal year. Such goals shall be expressed for each quarter of the fiscal year.
Accordingly, __% of the maximum overall __% Cash Incentive Compensation shall be
available to the Executive in four equal amounts for quarterly determination,
with the remaining __% of the overall __% Cash Incentive Compensation available
after the conclusion of the fiscal year for determination based on achievement
of the Bank's consolidated budget for the fiscal year. If the Executive does not
earn the entire Cash Incentive Compensation available for any given fiscal
quarter or fiscal year, it shall be understood that the unearned amount does not
carry over to any subsequent fiscal quarter. In the event Executive is not in
the employ of the Bank on the last day of any fiscal quarter, Executive shall be
entitled to receive his pro rata share of such Cash Incentive Compensation for
such quarter through the termination date of his employment.
(c) AUTOMOBILE The Bank shall furnish the Executive with the
use of an automobile at the Bank's expense for the performance of his duties on
behalf of the Bank and Executive shall use such automobile for that purpose. The
costs of operation, maintenance and insurance shall be paid by the Bank in
accordance with Bank policies and procedures in effect from time to time. Future
automobiles shall be of equivalent make and model. The Executive shall be an
additional named insured on the liability insurance. Executive shall account for
the use and expenses of the automobile in accordance with the policies and
procedures of the Bank.
4. BENEFITS. During the Term, the Bank shall provide Executive
with such fringe benefits as shall be available generally to all executives of
the Bank from time to time.
5. REIMBURSEMENT OF EXPENSES. The Bank shall promptly
reimburse Executive for all reasonable and ordinary expenses incurred by him in
the performance of his duties hereunder, provided that Executive accounts to the
Bank therefor in the manner prescribed by the Bank.
6. TERM OF EMPLOYMENT. The term of employment pursuant to this
Agreement (the "Term") shall commence on the Effective Date and shall continue
until the first to occur of the following:
(a) December 31, 1999, unless sooner terminated as hereinafter
provided. On December 31, 1999, and on the last day of December of each year
thereafter, the term of the Executive's employment pursuant to this Agreement
shall be extended one additional year only upon the mutual consent of the
Executive and the Company. The Company's consent shall require the explicit
review of this Agreement and approval thereof by the Company's Board of
Directors during the period 60 days prior to such last day of December. In the
event that the Board of Directors fails to explicitly
<PAGE>
review and communicate its decision to renew this Agreement for one additional
year or terminate this Agreement, this Agreement shall automatically renew for
one additional year.
(b) Executive's resignation. Executive agrees to provide the
Bank written notice at least 60 days in advance of the effective date of
resignation.
(c) Executive's death or disability. "Disability" shall mean
such physical or mental incapacity which renders Executive incapable of fully
performing his duties pursuant to this Agreement for a continuous period of 90
days.
(d) Termination of employment by the Bank for Cause.
(e) Termination of employment by the Bank without Cause.
"Cause" as used in this Agreement shall mean:
(i) gross negligence or willful misconduct by
Executive in connection with his employment hereunder or the business
of the Bank;
(ii) Executive's misappropriation of the Bank's
assets or property;
(iii) Executive's conviction of, or plea of guilty
to, a crime involving fraud or any felony; or
(iv) Executive's failure to comply with any material
term, covenant or condition contained herein.
7. RIGHTS OF EXECUTIVE UPON TERMINATION. Executive shall not
be entitled to any compensation or benefits upon any termination of this
Agreement except to the extent provided in this Section 7.
In the event of termination as a result of Executive's
resignation, Executive shall receive only compensation through the effective
date of the resignation as set forth in the notice provided for in Section 6(b).
In the event of termination by the Bank for Cause, the Bank
shall pay Executive an amount equal to the Executive's annual base salary as
defined in Section 3(a) hereof through the December 31, 1999 or, if such
termination occurs after December 31, 1999, through the December 31st following
the date of termination.
In the event of termination by the Bank without Cause, the
Bank shall pay Executive, an amount equal to Executive's then current annual
base salary.
Executive agrees that such payments shall be Executive's sole
and exclusive remedy for any termination, with or without Cause. Such payments
may be paid, at the Executive's option, in a lump sum or in equal installments
through the Bank's normal payroll system over the course
of the ensuing year or period.
8. NON-COMPETITION, NON-DISCLOSURE AND NON-SOLICITATION. In
consideration of the Bank entering into this Agreement, Executive agrees to each
of the following covenants:
(a) NON-COMPETITION. During the Term, Executive agrees not to
engage, directly or indirectly, in any aspect of the financial institutions
business, including for state, national or foreign banks, state or federal
savings associations, credit unions, mortgage or loan companies or any other
entity in the business of making or acquiring loans or taking deposits (the
"Banking Business") other than the Bank, whether as shareholder, partner,
director, employee, agent, consultant or otherwise. In the event of termination
of Executive's employment hereunder, other than termination by the Bank without
Cause, Executive, until 12 months after the date of termination, agrees not to
engage, directly or indirectly, in the Banking Business in any capacity in
Hillsborough and Pinellas Counties, Florida; PROVIDED, HOWEVER, in the event the
Bank elects not to renew this Agreement pursuant to Section 6(a) hereof, the
obligation under this Section 8(a) shall be null and void.
(b) NON-DISCLOSURE. Executive agrees to (i) hold all trade
secrets and other confidential or proprietary information of the Bank, including
the names and circumstances of loan and deposit customers of the Bank, in trust
and confidence for the Bank and shall not use or disclose any such information
except in connection with the business of the Bank and (ii) be liable for
damages incurred by the Bank as a result of disclosure of any such information
by Executive (without the prior written consent of the President) for any
purpose other than the business of the Bank, either during his employment or at
any time after termination of his employment with the Bank for any reason
whatsoever (including without Cause). Notwithstanding the foregoing, Executive
may disclose any such information to the extent such disclosure is compelled by
applicable law or to the extent such information becomes publicly available
other than by unauthorized disclosure by Executive.
(c) NON-SOLICITATION. For a period of 12 months after the
Term, Executive agrees not, directly or indirectly, on behalf of any trade or
business, to aid or endeavor to solicit, induce or recommend any employees of
the Bank to leave their employment with the Bank.
(d) COVENANTS NOT EXCLUSIVE. Executive agrees that the
covenants set forth in Sections 8(a), (b) and (c) hereof are in addition to any
rights the Bank may have in law or at equity.
(e) NO ADEQUATE REMEDY AT LAW. Executive acknowledges and
agrees that it may be impossible to measure in money the damages which the Bank
will suffer in the event Executive breaches any of the covenants in this Section
8. Therefore, if the Bank shall institute any action or proceeding to enforce
the provisions hereof, Executive hereby waives and agrees not to assert in any
such action or proceeding the claim or defense that the Bank has an adequate
remedy at law. The foregoing shall not prejudice the right of the Bank to
require Executive to account for and pay over to the Bank the compensation,
profits, monies, accruals or other benefits derived or received by Executive as
a result of any transaction constituting a breach of the covenants set forth in
this Section 8.
9. SEVERABILITY. Each provision hereof is severable from this
Agreement, and if one or more provisions hereof are declared invalid, the
remaining provisions shall nevertheless remain in full force and effect. If any
provision of this Agreement is so broad, in scope or
<PAGE>
duration or otherwise as to be unenforceable, such provision shall be
interpreted to be only so broad as is enforceable.
10. OTHER AGREEMENTS. Executive agrees that, on the Effective
Date, any employment agreement, severance agreement or other oral or written
agreement regarding his compensation or benefits with _________ shall
automatically terminate without payment of any amount on account of such
termination or of the merger of _________ into the Bank, except for Executive's
current Salary Continuation Plan with _________. Notwithstanding anything in
this Agreement to the contrary, nothing herein shall be deemed to terminate or
nullify Executive's right to receive any change- in-control payment or
accelerated vesting of any current plan or agreement with _________.
11. NOTICE. Any notice to be given hereunder shall be given in
writing. Notice shall be deemed to be given when delivered by hand to, or one
business day after being delivered to an overnight courier service, addressed
to:
If to the Bank:
Republic Security Bank
4400 Congress Avenue
West Palm Beach, Florida 33407
Attn: Rudy E. Schupp, President
and Chairman of the Board
If to Executive:
or to such other address as either party
may give notice of to the other.
12. NO WAIVER. The failure to enforce at any time any of the
provisions of this Agreement, or to require at any time performance by the other
party of any of the provisions hereof, shall in no way be construed to be a
waiver of such provisions or to affect the validity of this Agreement, or any
part hereof, or the right of either party thereafter to enforce each and every
such provision in accordance with the terms of this Agreement.
13. ENTIRE AGREEMENT. This Agreement contains the entire
agreement between the parties with respect to the subject matter hereof and
supersedes any and all prior understandings, agreements or correspondence
between the parties. It may not be amended or extended in any respect except by
a writing signed by all parties hereto.
14. GOVERNING LAW. This Agreement shall be governed by, and
interpreted in accordance with, the laws of the State of Florida.
15. PREVAILING PARTY. In the event that any litigation or
other dispute arises to enforce or interpret any term or terms of this
Agreement, the prevailing party shall be entitled, in addition to any other
damages or remedy, to receive from the other party its reasonable attorneys=
fees and costs.
16. ASSIGNMENT; BINDING EFFECT. Neither this Agreement nor any
right, remedy, obligation or liability arising hereunder or by reason hereof may
be assigned or delegated by either party without the prior written consent of
the other party. This Agreement shall inure to the benefit of and shall be
binding upon the parties hereto and their respective heirs, successors and
permitted assigns.
IN WITNESS WHEREOF, the parties have entered into this
Agreement as of the date first above written.
REPUBLIC SECURITY BANK
By
---------------------------------------
Rudy E. Schupp,
Chairman of the Board and President
------------------------------------------
EXECUTIVE
EXHIBIT 10.8 FORM OF EMPLOYMENT AGREEMENT BETWEEN REPUBLIC SECURITY BANK
AND THOMAS TRIBBY DATED AS OF JULY 15, 1997
- -------------------------------------------------------------------------------
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (this "Agreement") is made and
entered into as of July 15, 1997 by and between REPUBLIC SECURITY BANK, a
Florida state bank (the "Bank"), and THOMAS TRIBBY ("Executive").
W I T N E S S E T H:
WHEREAS, the Bank desires to employ Executive upon the terms
and conditions set forth herein and is willing to agree to the employment terms
and conditions set forth herein, but only on the condition that Executive agrees
to enter into the non-competition, non-disclosure and non-solicitation covenants
contained herein; and
WHEREAS, Executive desires to be employed by the Bank upon the
terms and conditions set forth herein, including such non-competition,
non-disclosure and non-solicitation covenants, and has negotiated with the Bank
for the compensation, benefits and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual agreements
contained herein and other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follow:
1. EMPLOYMENT. Subject to the terms and upon the conditions
set forth herein, the Bank agrees to employ Executive, and Executive accepts and
agrees to such employment, in the capacity and for the term of employment
specified herein.
2. SCOPE OF EMPLOYMENT. Executive shall be employed as
President and Senior Executive of the Trust Division of the Bank. He shall have
such other responsibilities, duties and authority as the President of the Bank
may from time to time determine. Executive shall be obligated to devote his full
working time to the performance of his duties hereunder.
Executive shall at all times be subject to the direction and
control of the President and Board of Directors of the Bank, and all acts of
Executive in the performance of his duties hereunder shall be carried out in
conformity with the policies, directions and limitations as from time to time
established by the President or Board of Directors.
3. COMPENSATION. Executive shall be entitled to the following
compensation:
(a) SIGN-ON BONUS. A sign-on bonus of $40,000 payable on
execution of this Agreement by all parties and commencement of employment with
Republic Security Bank by the Executive in West Palm Beach, Florida.
(b) BASE SALARY. During the Term, the Bank shall pay Executive
a base salary at the rate of $110,000 per annum, payable in accordance with the
customary practices of the Bank. The rate of base salary may be adjusted (but
not to less than $110,000) from time to time at the sole discretion of the Board
of Directors.
(c) INCENTIVE COMPENSATION. During the Term, the Bank shall
pay Executive incentive compensation in addition to base salary. The incentive
compensation shall be paid with respect to each calendar quarter ending during
the Term in an amount equal to the lesser of (i) 10% of the aggregate New Fee
Income of the Trust Division during the quarter or (ii) 25% of the amount of
base salary paid to Executive during the quarter. "New Fee Income" shall mean
the fees which are scheduled to be paid to the Bank from a newly opened trust
account during the 12-month period following the date the account is opened. No
amount of incentive compensation above or below the limit described above in
this Section 3(b) shall carry over to any subsequent quarter or year. No
incentive compensation shall be payable for any fiscal quarter for which
Executive is not in the employ of the Bank on the last day thereof.
(d) PERFORMANCE INCENTIVE PLAN. Executive shall be eligible to
participate in the Republic Security Financial Corporation 1997 Performance
Incentive Plan in such amounts, if any, as the Compensation Committee may
determine from time to time.
4. BENEFITS.
(a) FRINGE BENEFITS. During the Term, the Bank shall provide
Executive with such fringe benefits as shall be available generally to all
executives of the Bank from time to time (medical, dental, life and disability
insurance to commence on August 1, 1997).
(b) AUTOMOBILE. During the Term, the Bank shall furnish the
Executive with the use of an automobile at the Bank's expense for the
performance of his duties on behalf of the Bank and Executive shall use such
automobile for that purpose. The costs of operation, maintenance and insurance
shall be paid by the Bank in accordance with Bank policies and procedures in
effect from time to time. The Executive shall be an additional named insured on
the Bank's liability insurance coverage. Executive shall account for the use and
expenses of the automobile in accordance with the policies and procedures of the
Bank.
(c) CLUB MEMBERSHIPS. The Bank agrees to provide Executive
memberships paid by the Bank during the Term to the Governor's Club and the
Beach Club.
5. REIMBURSEMENT OF EXPENSES.
(a) The Bank shall promptly reimburse Executive for all
reasonable and ordinary business-related expenses incurred by him in the
performance of his duties hereunder, provided that Executive accounts to the
Bank therefor in the manner prescribed by the Bank from time to time.
(b) The Bank shall promptly reimburse Executive reasonable
expenses of relocation of his household from Arizona in
<PAGE>
an aggregate amount not to exceed $20,000 and the rent of temporary housing for
up to 90 days in an aggregate amount not to exceed $3,000, each upon
presentation to the Bank of receipts evidencing payment of such expenses. No
relocation expense will be reimbursed for which the receipt is not presented to
the Bank prior to November 1, 1997.
6. TERM OF EMPLOYMENT. The term of employment pursuant to this
Agreement (the "Term") shall commence on July 15, 1997 and shall continue until
the first to occur of the following:
(a) December 31, 1999, unless sooner terminated as hereinafter
provided. On December 31, 1999, and on the last day of December of each year
thereafter, the term of the Executive's employment pursuant to this Agreement
shall be extended one additional year only upon the mutual consent of the
Executive and the Bank. The Bank's consent shall require the explicit review of
this Agreement and approval thereof by the Bank's Board of Directors during the
period 60 days prior to such last day of December. In the event that the Board
of Directors fails to explicitly review or not renew the term of employment
pursuant to this Agreement for one additional year, such term of employment
shall automatically renew for one additional year.
(b) Executive's resignation. Executive agrees to provide the
Bank written notice at least 60 days in advance of the effective date of
resignation. If Executive resigns employment with the Bank prior to July 15,
1999, he agrees to promptly reimburse the Bank the amount of the sign-on bonus
and the aggregate amount of relocation and temporary housing expenses reimbursed
or advanced by the Bank in accordance with this Agreement.
(c) Executive's death or disability. "Disability" shall mean
such physical or mental incapacity which renders Executive incapable of fully
performing his duties pursuant to this Agreement for a continuous period of 90
days.
(d) Termination of employment by the Bank for Cause.
(e) Termination of employment by the Bank without Cause.
"Cause" as used in this Agreement shall mean:
(i) gross negligence or willful misconduct by
Executive in connection with his employment hereunder or
the business of the Bank;
(ii) Executive's misappropriation of the Bank's
assets or property;
(iii) Executive's conviction of, or plea of guilty
to, a crime involving fraud or any felony; or
(iv) Executive's failure to comply with any material
term, covenant or condition contained herein.
7. RIGHTS OF EXECUTIVE UPON TERMINATION. Executive shall not
be entitled to any compensation or benefits upon any termination of employment
by the Bank except to the extent provided in this Section 7.
In the event of termination by the Bank without Cause during
the Term, the Bank shall pay Executive, and Executive agrees to accept from the
Bank, as Executive's sole and exclusive remedy for termination, an amount
equivalent to the lesser of (i) the Executive's current annual base salary as
defined in Section 3(a) hereof or (ii) the amount of base salary payable to
Executive through the end of the Term, which amount may be paid, at the Bank's
option, in a lump sum or in equal installments through the Bank's normal payroll
system over the course of the ensuing year. A failure to renew the term of
employment hereunder for an additional one-year term shall not be deemed for
purposes of this Agreement to be termination without Cause.
In the event of termination of employment hereunder for any
reason other than termination by the Bank without Cause, Executive shall receive
only the compensation and benefits accrued through the date of termination.
8. NON-COMPETITION, NON-DISCLOSURE AND NON-SOLICITATION. In
consideration of the Bank entering into this Agreement, Executive agrees to each
of the following covenants:
(a) NON-COMPETITION. During his employment by the Bank,
Executive agrees not to engage, directly or indirectly, in any aspect of the
trust business, including for state, national or foreign banks, state or federal
savings associations, trust companies or any other entity in the trust business
(the "Trust Business"), whether as shareholder, partner, director, employee,
agent, consultant or otherwise. In the event of termination of Executive's
employment with the Bank, other than termination by the Bank without Cause,
Executive, until 24 months after the date of termination, agrees not to engage,
directly or indirectly, in the Trust Business in any capacity in Palm Beach and
Broward Counties, Florida.
(b) NON-DISCLOSURE. Executive agrees to (i) hold all trade
secrets and other confidential or proprietary information of the Bank, including
the names and circumstances of loan and deposit customers of the Bank, in trust
and confidence for the Bank and shall not use or disclose any such information
except in connection with the business of the Bank and (ii) be liable for
damages incurred by the Bank as a result of disclosure of any such information
by Executive (without the prior written consent of the President) for any
purpose other than the business of the Bank, either during his employment or at
any time after termination of his employment with the Bank for any reason
whatsoever (including without Cause). Notwithstanding the foregoing, Executive
may disclose any such information to the extent such disclosure is compelled by
applicable law or to the extent such information becomes publicly available
other than by unauthorized disclosure by Executive.
(c) NON-SOLICITATION. For a period of 24 months after
termination of his employment with the Bank for any reason whatsoever (including
without Cause), Executive agrees not, directly or indirectly, on behalf of any
trade or business, to aid or endeavor to solicit, induce or recommend any
employees of the Bank to leave their employment with the Bank.
(d) COVENANTS NOT EXCLUSIVE. Executive agrees that the
covenants set forth in Sections 8(a), (b) and (c) hereof are in addition to any
rights the Bank may have in law or at equity.
(e) NO ADEQUATE REMEDY AT LAW. Executive acknowledges and
agrees that it may be impossible to measure in money
<PAGE>
the damages which the Bank will suffer in the event Executive breaches any of
the covenants in this Section 8. Therefore, if the Bank shall institute any
action or proceeding to enforce the provisions hereof, Executive hereby waives
and agrees not to assert in any such action or proceeding the claim or defense
that the Bank has an adequate remedy at law. The foregoing shall not prejudice
the right of the Bank to require Executive to account for and pay over to the
Bank the compensation, profits, monies, accruals or other benefits derived or
received by Executive as a result of any transaction constituting a breach of
the covenants set forth in this Section 8.
9. SEVERABILITY. Each provision hereof is severable from this
Agreement, and if one or more provisions hereof are declared invalid, the
remaining provisions shall nevertheless remain in full force and effect. If any
provision of this Agreement is so broad, in scope or duration or otherwise as to
be unenforceable, such provision shall be interpreted to be only so broad as is
enforceable.
10. OTHER AGREEMENTS. Executive represents and warrants that
this Agreement and the performance of Executive's obligations hereunder will not
conflict with, result in the breach of any provision of, or the termination of,
or constitute a default under, any agreement to which Executive is a party or by
which Executive is bound.
11. NOTICE. Any notice to be given hereunder shall be given in
writing. Notice shall be deemed to be given when delivered in person, or one
business day after being delivered to an overnight courier service, addressed
to:
If to the Bank:
Republic Security Bank
4400 Congress Avenue
West Palm Beach, Florida 33407
Attn: Rudy E. Schupp, President
and Chairman of the Board
If to Executive:
At such address as the Bank is notified
is Executive's residential address
or to such other address as either party
may give notice of to the other.
12. NO WAIVER. The failure to enforce at any time any of the
provisions of this Agreement, or to require at any time performance by the other
party of any of the provisions hereof, shall in no way be construed to be a
waiver of such provisions or to affect the validity of this Agreement, or any
part hereof, or the right of either party thereafter to enforce each and every
such provision in accordance with the terms of this Agreement.
13. ENTIRE AGREEMENT. This Agreement contains the entire
agreement between the parties with respect to the subject matter hereof and
supersedes any and all prior understandings, agreements or correspondence
between the parties. It may not be amended or extended in any respect except by
a writing signed by all parties hereto.
14. GOVERNING LAW. This Agreement shall be governed by, and
interpreted in accordance with, the laws of the State of Florida.
15. PREVAILING PARTY. In the event that any litigation or
other dispute arises to enforce or interpret any term or terms of this
Agreement, the prevailing party shall be entitled, in addition to any other
damages or remedy, to receive from the other party its reasonable attorneys'
fees and costs.
16. ASSIGNMENT. Neither this Agreement nor any right, remedy,
obligation or liability arising hereunder or by reason hereof may be assigned or
delegated by either party without the prior written consent of the other party.
IN WITNESS WHEREOF, the parties have entered into this
Agreement as of the date first above written.
REPUBLIC SECURITY BANK
By
------------------------
Rudy E. Schupp,
President and
Chairman of the Board
--------------------------
THOMAS TRIBBY
EXHIBIT 10.9 FORM OF CHANGE OF CONTROL AGREEMENT BY AND AMONG THE COMPANY,
REPUBLIC SECURITY BANK AND EACH OF ALISSA E. BALLOT, BRUCE
KEIR, W. ANDREW KIRKMAN, RICHARD KUCI, CARLA POLLARD, JOHN G.
PRIMEAU, ROGER SAVAGE, JOAN SCHIMELMAN, THOMAS TRIBBY AND JOSE
VIVERO (FILED HEREWITH)
- -------------------------------------------------------------------------------
CHANGE OF CONTROL AGREEMENT
This Change of Control Agreement ("Agreement") is made and entered into as of
January 27, 1999 by and among Republic Security Bank, a commercial bank
organized and operating under the laws of the State of Florida and having its
executive offices at 450 South Australian Avenue, West Palm Beach, FL 33401 (
the "Bank"); Republic Security Financial Corporation, a business corporation
organized and existing under the laws of the State of Florida and having its
executive offices at 450 South Australian Avenue, West Palm Beach, FL 33401 (the
"Company"); and _______, an individual residing at _________________ (the
"Executive").
WITNESSETH:
WHEREAS, the Company and the Bank consider it essential to the best interest of
their respective shareholders to foster the continued employment of the key
management personnel of the Company and the Bank; and
WHEREAS, the Company and the Bank recognize that a third party may at some time
in the future pursue a Change of Control of the Bank or the Company and that
this possibility may result in the departure or distraction of the Bank's or the
Company's officers; and
WHEREAS, the Boards of Directors of the Company and the Bank have determined
that appropriate steps should be taken to encourage the continued attention and
dedication of the Bank's and the Company's officers, including the Executive, to
their duties without the distraction that may arise from the possibility of a
Change of Control of the Bank or the Company; and
WHEREAS, the Bank and the Company believe that, by assuring certain officers,
including the Executive, of reasonable financial security in the event of a
Change of Control of the Bank or the Company, such officers will be in a
position to perform their duties free from financial self interest and in the
best interests of the Bank, the Company and their respective shareholders; and
WHEREAS, for purposes of securing the Executive's services for the Bank (and the
Company, if applicable), the Board of Directors of the Bank ("Board") has
authorized the proper officers of the Bank, and the Board of Directors of the
Company has authorized the proper officers of the Company, to enter into a
change of control agreement with the Executive on the terms and conditions set
forth herein; and
WHEREAS, the Board of Directors of the Company has authorized the Company to
guarantee the Bank's obligations under such a change of control agreement; and
WHEREAS, the Executive is willing to make the Executive's services available to
the Bank on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and the mutual covenants and
obligations hereinafter set forth, the Bank, the Company and the Executive
hereby agree as follows:
Section 1. EFFECTIVE DATE.
(a) This Agreement shall be effective as of the date first above written and
shall remain in effect for a period of two (2) years commencing on the date of
this Agreement, unless otherwise extended as hereinafter set forth. On the first
anniversary of the date first above written and on each anniversary thereafter
("Annual Anniversary Date"), the term of this Agreement shall be extended
automatically for an additional year, unless either the Board or the Executive
gives contrary written notice to the other not less than sixty (60) days in
advance of such anniversary date. If the term of this Agreement has not
otherwise terminated and if no Change of Control (as defined in section 10
hereof) has occurred or be pending, the term of this Agreement will terminate on
the date of the Executive's termination of employment with the Bank; provided
that the obligations under section 8 of this Agreement shall survive the
termination of this Agreement if payments become due hereunder.
(b) Notwithstanding anything herein contained to the contrary: (i) the
Executive's employment with the Bank may be terminated at any time, subject to
the terms and conditions of this Agreement; and (ii) nothing in this Agreement
shall mandate or prohibit a continuation of the Executive's employment following
the expiration of the Assurance Period (as hereinafter defined) upon such terms
and conditions as the Bank and the Executive may mutually agree upon.
Section 2. ASSURANCE PERIOD.
(a) The assurance period ("Assurance Period") shall be for a period commencing
on the date of a Change of Control, as defined in section 10 of this Agreement,
and ending on the second anniversary of the date on which the Assurance Period
commences, plus such extensions as are provided pursuant to the following
sentence. The Assurance Period shall be automatically extended for one (1)
additional day each day, unless either the Bank or the Executive elects not to
extend the Assurance Period further by giving written notice to the other party,
in which case the Assurance Period shall become fixed and shall end on the
second anniversary of the date on which such written notice is given.
(b) Upon termination of the Executive's employment with the Bank and, if
applicable, the Company, any daily extensions provided pursuant to the preceding
sentence, if not theretofore discontinued, shall cease and the remaining
unexpired Assurance Period under this Agreement shall be a fixed period ending
on the later of the second anniversary of the date of the Change of Control, as
defined in section 10 of this Agreement, or the second anniversary of the date
on which the daily extensions were discontinued.
<PAGE>
Section 3. DUTIES.
During the period of the Executive's employment that falls within the Assurance
Period, the Executive shall: (a) except to the extent allowed under section 6 of
this Agreement, devote his full business time and attention (other than during
weekends, holidays, vacation periods, and periods of illness, disability or
approved leave of absence) to the business and affairs of the Bank and use his
best efforts to advance the Bank's interests; (b) serve in the position to which
the Executive is appointed by the Bank, which, during the Assurance Period,
shall be the position that the Executive held on the day before the Assurance
Period commenced or any higher office at the Bank to which he may subsequently
be appointed; and (c) subject to the direction of the Board and the By-laws of
the Bank, have such functions, duties, responsibilities and authority commonly
associated with such position.
Section 4. Compensation. In consideration for the services rendered by the
Executive during the Assurance Period, the Bank (and the Company, if applicable)
shall pay to the Executive during the Assurance Period a salary at an annual
rate equal to the greater of:
(a) the annual rate of salary in effect for the Executive on the day
before the Assurance Period commenced; or
(b) such higher annual rate as may be prescribed by or under the
authority of the Board;
provided, however, that in no event shall the Executive's annual rate of salary
under this Agreement in effect at a particular time during the Assurance Period
be reduced without the Executive's prior written consent. The annual salary
payable under this section 4 shall be subject to review at least once annually
and shall be paid in approximately equal installments in accordance with the
Bank's (and the Company's, if applicable) customary payroll practices. Nothing
in this section 4 shall be deemed to prevent the Executive from receiving
additional compensation other than salary for his services to the Bank, or
additional compensation for his services to the Company, upon such terms and
conditions as may be prescribed by or under the authority of the Board or the
Board of Directors of the Company.
Section 5. EMPLOYEE BENEFIT PLANS AND Programs. Except as otherwise provided in
this Agreement, the Executive shall, during the Assurance Period, be treated as
an employee of the Bank (and the Company, if applicable) and be eligible to
participate in and receive benefits under any qualified or non-qualified defined
benefit or defined contribution retirement plan, group life, health (including
hospitalization, medical and major medical), dental, accident and short and long
term disability insurance plans, and such other employee benefit plans and
programs, including, but not limited to, any incentive compensation plans or
programs (whether or not employee benefit plans or programs), any stock option
and appreciation rights plan, employee stock ownership plan and restricted stock
plan, as may from time to time be maintained by, or cover employees of, the
Bank, in accordance with the terms and conditions of such employee benefit plans
and programs and compensation plans and programs and with the Bank's (and the
Company's, if applicable) customary practices.
Section 6. BOARD Memberships. The Executive may serve as a member of the boards
of directors of such business, community and charitable organizations as he may
disclose to and as may be approved by the Board (which approval shall not be
unreasonably withheld), and he may engage in personal business and investment
activities for his own account; provided, however, that such service and
personal business and investment activities shall not materially interfere with
the performance of his duties under this Agreement.
Section 7. WORKING FACILITIES AND Expenses. During the Assurance Period, the
Executive's principal place of employment shall be at the location to which the
Executive is assigned on the day prior to the commencement of the Assurance
Period or within a 15 mile radius of such location, or at such other location as
the Bank and the Executive may mutually agree upon. The Bank shall provide the
Executive, at his principal place of employment, with a private office and
support services and facilities suitable to his position with the Bank and
necessary or appropriate in connection with the performance of his assigned
duties under this Agreement. The Bank shall reimburse the Executive for his
ordinary and necessary business expenses, including, without limitation, the
Executive's travel and entertainment expenses, incurred in connection with the
performance of the Executive's duties under this Agreement, upon presentation to
the Bank of an itemized account of such expenses in such form as the Bank may
reasonably require.
Section 8. TERMINATION OF EMPLOYMENT WITH SEVERANCE BENEFITS.(a) In the event
that the Executive's employment with the Bank shall terminate during the
Assurance Period, or prior to the commencement of the Assurance Period but
within three (3) months of and in connection with a Change of Control as defined
in section 10 of this Agreement on account of:
(i) The Executive's voluntary resignation from employment with the
Bank within ninety (90) days following:
(A) the failure of the Bank's Board to appoint or
re-appoint or elect or re-elect the Executive to serve in the same (or the
equivalent) position in which the Executive was serving on the day before the
Assurance Period commenced or a more senior office;
(B) the expiration of a thirty (30) day period following
the date on which the Executive gives written notice to the Bank of its material
failure, whether by amendment of the Bank's Organization Certificate or By-laws,
action of the Board or the Company's shareholders or otherwise, to vest in the
Executive the functions, duties, or responsibilities vested in the Executive on
the day before the Assurance Period commenced (or the functions, duties and
responsibilities of a more senior office to which the Executive may be
appointed), unless during such thirty (30) day period, the Bank fully cures such
failure;
(C) the failure of the Bank to cure a material breach of
this Agreement by the Bank, within thirty (30) days following written notice
from the Executive of such material breach;
(D) a reduction in the compensation provided to the
Executive, or a material reduction in the benefits provided to the Executive
under the Bank's program of employee benefits, compared with the compensation
and benefits that were provided to the Executive on the day before the Assurance
Period commenced;
(E) a change in the Executive's principal place of
employment to a location outside of Palm Beach County, Florida, or, if the
Executive's principal place of employment on the day before the Assurance Period
begins is outside Palm Beach County, Florida, then to a location outside of the
county in which the Executive's principal place of employment is located on the
day before the Assurance Period begins, without the Executive's consent; or
(ii) the discharge of the Executive by the Bank for any reason other
than for "cause" as provided in section 9(a); or
(iii) the Executive's resignation, voluntary or otherwise, for any
reason whatsoever within 90 days following the effective date of the Change of
<PAGE>
Control, PROVIDED, HOWEVER, that if the Change of Control is of the type
described in Section 10(a) (1), such 90 day period shall not be deemed to
commence until the actual consummation of the transaction approved by the
stockholders;
then, subject to section 22, the Bank shall provide the benefits and pay to the
Executive the amounts provided for under section 8(b) of this Agreement;
provided, however, that if benefits or payments become due hereunder as a result
of the Executive's termination of employment within the three month period prior
to the commencement of the Assurance Period, the benefits and payments provided
for under section 8(b) of this Agreement shall be determined as though the
Executive had remained in the service of the Bank (upon the terms and conditions
in effect at the time of his actual termination of service) and had not
terminated employment with the Bank until the date on which the Executive's
Assurance Period would have commenced.
(b) Upon the termination of the Executive's employment with the Bank (or the
Company, to the extent the Company was making such payments prior to the
Executive's termination of employment) under circumstances described in section
8(a) of this Agreement, the Bank shall pay and provide to the Executive (or, in
the event of the Executive's death following such termination, to the
Executive's estate):
(i) the Executive's earned but unpaid compensation (including,
without limitation, all items which constitute wages under Florida law and the
payment of which is not otherwise provided for under this section 8(b)) as of
the date of the termination of the Executive's employment with the Bank, such
payment to be made at the time and in the manner prescribed by law applicable to
the payment of wages but in no event later than five (5) days after termination
of employment;
(ii) the benefits, if any, to which the Executive is entitled as a
former employee under the employee benefit plans and programs and compensation
plans and programs maintained for the benefit of the Bank's officers and
employees;
(iii) continued group life, health (including hospitalization,
medical and major medical), accident and short and long term disability
insurance benefits, in addition to that provided pursuant to section 8(b)(ii)
and, after taking into account the coverage provided by any subsequent employer,
if and to the extent necessary to provide for the Executive, for a period of two
years from the date his employments terminates, coverage equivalent to the
coverage to which the Executive would have been entitled under such plans (as in
effect on the date of his termination of employment, or on the date of the
Change of Control, whichever benefits are greater) if the Executive had
continued working for the Bank during the remaining unexpired Assurance Period
at the highest annual rate of compensation achieved during the Executive's
period of actual employment with the Bank;
(iv) within five (5) days following the Executive's termination of
employment with the Bank, a lump sum payment, in an amount equal to the salary
that the Executive would have earned if the Executive had continued working for
the Bank (and the Company, if applicable) for a period of two years from the
date his employment terminates at the highest annual rate of salary achieved
during that portion of the term of this Agreement which is prior to the
Executive's termination of employment with the Bank, such lump sum to be paid in
lieu of all other payments of salary provided for under this Agreement in
respect of the period following any such termination;
(v) within five (5) days following the Executive's termination of
employment with the Bank, a lump sum payment in an amount equal to the excess,
if any, of:
(A) the present value of the aggregate benefits to which
the Executive would be entitled under any and all qualified and non-qualified
defined benefit pension plans maintained by, or covering employees of, the Bank
if the Executive were 100% vested thereunder and had continued working for the
Bank during the remaining unexpired Assurance Period, such benefits to be
determined as of the date of termination of employment by adding to the service
actually recognized under such plans an additional period equal to the remaining
unexpired Assurance Period and by adding to the compensation recognized under
such plans for the year in which termination of employment occurs all amounts
payable under sections 8(b)(i), (iv) and (vii); over
(B) the present value of the benefits to which the
Executive is actually entitled under such defined benefit pension plans as of
the date of his termination; where such present values are to be determined
using the mortality tables prescribed under section 415(b)(2)(E)(v) of the Code
and a discount rate, compounded monthly, equal to the annualized rate of
interest prescribed by the Pension Benefit Guaranty Corporation for the
valuation of immediate annuities payable under terminating single-employer
defined benefit plans for the month in which the Executive's termination of
employment occurs ("Applicable PBGC Rate");
(vi) within five (5) days following the Executive's termination of
employment with the Bank, a lump sum payment in an amount equal to the present
value of the additional employer contributions (or if greater in the case of a
leveraged employee stock ownership plan or similar arrangement, the additional
assets allocable to him through debt service, based on the fair market value of
such assets at termination of employment) to which he would have been entitled
under any and all qualified and non-qualified defined contribution plans
maintained by, or covering employees of, the Bank, if he were 100% vested
thereunder and had continued working for the Bank during the remaining unexpired
Assurance Period at the highest annual rate of compensation achieved during the
Executive's period of actual employment with the Bank, and making the maximum
amount of employee contributions, if any, required under such plan or plans,
such present value to be determined on the basis of the discount rate,
compounded using the compounding period that corresponds to the frequency with
which employer contributions are made to the relevant plan, equal to the
Applicable PBGC Rate;
(vii) the payments that would have been made to the Executive under
any cash bonus or long-term or short-term cash incentive compensation plan
maintained by, or covering employees of, the Bank (and the Company, if
applicable), if he had continued working for the Bank (and the Company, if
applicable) during the remaining unexpired Assurance Period and had earned the
maximum bonus or incentive award in each calendar year that ends during the
remaining unexpired Assurance Period, such payments to be equal to the product
of:
(A) the maximum percentage rate at which an award was ever
available to the Executive under such incentive compensation plan; multiplied by
(B) the salary that would have been paid to the Executive
during each such calendar year at the highest annual rate of salary achieved
during the remaining unexpired Assurance Period, provided that such payments in
any event shall be in an aggregate amount not less than two (2) times the
highest annual (or annualized, if paid other than annually) cash bonus paid to
or earned by the Executive within 2 years prior to the commencement of the
Assurance Period, such payments to be made within five (5) days following the
Executive's termination of employment.
The Bank and the Executive hereby stipulate that the damages which may be
incurred by the Executive following any such termination of employment are not
capable of accurate measurement as of the date first above written and that the
payments and benefits contemplated by this section 8(b) constitute
<PAGE>
a reasonable estimate under the circumstances of all damages sustained as a
consequence of any such termination of employment, other than damages arising
under or out of any stock option, restricted stock or other non-qualified stock
acquisition or investment plan or program, it being understood and agreed that
this Agreement shall not determine the measurement of damages under any such
plan or program in respect of any termination of employment. Such damages shall
be payable without any requirement of proof of actual damage and without regard
to the Executive's efforts, if any, to mitigate damages. The Bank and the
Executive further agree that the Bank may condition the payments and benefits
(if any) due under sections 8(b)(iii), (iv), (v), (vi) and (vii) on the receipt
of the Executive's resignation from any and all positions which he holds as an
Executive, director or committee member with respect to the Bank, the Company or
any subsidiary or affiliate of either of them.
Section 9. TERMINATION WITHOUT SEVERANCE Benefits. In the event that the
Executive's employment with the Bank (and the Company, if applicable) shall
terminate during the Assurance Period on account of:
(a) the discharge of the Executive for "cause," which, for purposes
of this Agreement shall mean willful misconduct that is materially injurious to
the financial condition of the Bank or the Company, breach of fiduciary duty
involving personal profit, conviction for a felony or the agreement of the
Executive to plead guilty to a felony or the entering of a final cease and
desist order by the appropriate regulatory authority; provided, however, that
the Executive shall not be deemed to have been discharged for cause unless and
until he shall have received a written notice of termination from the Board,
accompanied by a resolution duly adopted by affirmative vote of three quarters
of the entire Board at a meeting called and held for such purpose (after
reasonable notice to the Executive and a reasonable opportunity for the
Executive to make oral and written presentations to the members of the Board, on
his own behalf, or through a representative, who may be his legal counsel, to
refute the grounds for the proposed determination) finding that in the good
faith opinion of the Board grounds exist for discharging the Executive for
cause; or
(b) the Executive's voluntary resignation from employment with the
Bank for reasons other than those specified in section 8(a)(i) or 8(a) (iii); or
(c) the Executive's death; or
(d) a determination that the Executive is eligible for long-term
disability benefits under the Bank's long-term disability insurance program or,
if there is no such program, under the federal Social Security Act;
then the Bank and the Company shall have no further obligations under this
Agreement, other than the payment to the Executive (or, in the event of his
death, to his estate) of his earned but unpaid salary as of the date of the
termination of his employment, and the provision of such other benefits, if any,
to which the Executive is entitled as a former employee under the employee
benefit plans and programs and compensation plans and programs maintained by, or
covering employees of, the Bank (and the Company, if applicable).
Section 10. CHANGE OF CONTROL.(a) A Change of Control of the Bank ("Change of
Control") shall be deemed to have occurred upon the happening of any of the
following events:
(i) approval by the stockholders of the Company of a
transaction that would result in the reorganization, merger or
consolidation of the Company with one or more other persons, other
than a transaction following which:
(A) at least 50.1% of the common stock or equity
ownership interests of the entity resulting from such
transaction are beneficially owned (within the meaning of Rule
13d-3 promulgated under the Exchange Act) in substantially the
same relative proportions by persons who, immediately prior to
such transaction, beneficially owned (within the meaning of
Rule 13d-3 promulgated under the Exchange Act) at least 50.1%
of the outstanding common stock or equity ownership interests
in the Company; and
At least 50.1% of the combined voting power of the
securities entitled to vote generally in the election
of directors of the entity resulting from such
transaction are beneficially owned (within the
meaning of Rule 13d-3 promulgated under the Exchange
Act) in substantially the same relative proportions
by persons who, immediately prior to such
transaction, beneficially owned (within the meaning
of Rule 13d- 3 promulgated under the Exchange Act) at
least 50.1% of the combined voting power of the
securities entitled to vote generally in the election
of directors of the Company; and
No person, or persons acting in concert, beneficially
own (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) 20% or more of the
outstanding common stock or equity ownership
interests in, or 20% or more of the combined voting
power of the securities entitled to vote generally in
the election of directors of, the entity resulting
from such transaction; and
At least a majority of the members of the board of
directors of the entity resulting from such
transaction are individuals who were described in
sections 11(a)(iv)(A) or (B) of this Agreement as of
the date of execution of the initial definitive
agreement providing for such transaction (or, if
earlier, as of the date on which the Board of
Directors of the Company authorized such
transaction).
(ii) the acquisition of all or substantially all of the assets
of the Company or beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of 20% or more of the
outstanding securities or of the combined voting power of the
outstanding securities of the Company entitled to vote generally in the
election of directors by any person or by any persons acting in
concert, or approval by the stockholders of the Company of any
transaction which would result in such an acquisition;
(iii) a complete liquidation or dissolution of the Company, or
approval by the stockholders of the Company of a plan for such
liquidation or dissolution; or
(iv) the occurrence of any event if, immediately following
such event, at least 50% of the members of the board of directors of
the Company do not belong to any of the following groups:
(A) individuals who were members of the Board of the
Company on the date of this Agreement; or
<PAGE>
(B) individuals who first became members of the Board
of the Company after the date of this Agreement either:
(I) upon election to serve as a member of
the Board of directors of the Company by affirmative
vote of three-quarters of the members of such Board,
or of a nominating committee thereof, in office at
the time of such first election; or
(II) upon election by the stockholders of
the Company to serve as a member of the Board of the
Company, but only if nominated for election by
affirmative vote of three-quarters of the members of
the board of directors of the Company, or of a
nominating committee thereof, in office at the time
of such first nomination;
PROVIDED, HOWEVER, that such individual's election or
nomination did not result from an actual or threatened
election contest (within the meaning of Rule 14a-11 of
Regulation 14A promulgated under the Exchange Act) or other
actual or threatened solicitation of proxies or consents
(within the meaning of Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act) other than by or on behalf
of the Board of the Company; or
any event which would be described in section 10(a)(i), (ii),
(iii) or (iv) if the term "Bank" were substituted for the term
"Company" therein.
(b) In no event, however, shall a Change of Control be deemed to have
occurred as a result of any acquisition of securities or assets of the Company,
the Bank or any subsidiary of either of them, by the Company, the Bank or any
subsidiary of either of them, or by any employee benefit plan maintained by any
of them.
Section 11. NO EFFECT ON EMPLOYEE BENEFIT PLANS OR Programs. The termination of
the Executive's employment during the Assurance Period or thereafter, whether by
the Bank or by the Executive, shall have no effect on the rights and obligations
of the parties hereto under the Bank's qualified and non-qualified defined
benefit or defined contribution retirement plans, group life, health (including
hospitalization, medical and major medical), dental, accident and short and long
term disability insurance plans or such other employee benefit plans or
programs, or compensation plans or programs (whether or not employee benefit
plans or programs) and any defined contribution plan, employee stock ownership
plan, stock option and appreciation rights plan, and restricted stock plan, as
may be maintained by, or cover employees of, the Bank from time to time;
provided, however, that nothing in this Agreement shall be deemed to duplicate
any compensation or benefits provided under any agreement, plan or program
covering the Executive to which the Bank or the Company is a party and any
duplicative amount payable under any such agreement, plan or program shall be
applied as an offset to reduce the amounts otherwise payable hereunder.
Section 12. SUCCESSORS AND Assigns. This Agreement will inure to the benefit of
and be binding upon the Executive, his legal representatives and testate or
intestate distributees, and the Bank and the Company, their respective
successors and assigns, including any successor by merger or consolidation or a
statutory receiver or any other person or firm or corporation to which all or
substantially all of the respective assets and business of the Bank or the
Company may be sold or otherwise transferred.
Section 13. Notices. Any communication required or permitted to be given under
this Agreement, including any notice, direction, designation, consent,
instruction, objection or waiver, shall be in writing and shall be deemed to
have been given at such time as it is delivered personally, or five (5) days
after mailing if mailed, postage prepaid, by registered or certified mail,
return receipt requested, or one (1) day after it is sent by reputable overnight
delivery service, addressed to such party at the address listed below or at such
other address as one such party may by written notice specify to the other
party:
If to the Executive:
If to the Bank:
Republic Security Bank
450 South Australian Avenue
West Palm Beach, FL 33401
Attention: President
If to the Company:
Republic Security Financial Corporation
450 South Australian Avenue
West Palm Beach, FL 33401
Attention: President
Section 14. INDEMNIFICATION AND ATTORNEYS' FEES.
The Bank shall indemnify, hold harmless and defend the Executive against
reasonable costs, including legal fees, incurred by the Executive in connection
with or arising out of any action, suit or proceeding in which the Executive may
be involved, as a result of the Executive's efforts, in good faith, to defend or
enforce the terms of this Agreement. For purposes of this Agreement, any
settlement agreement which provides for payment of any amounts in settlement of
the Bank's obligations hereunder shall be conclusive evidence of the Executive's
entitlement to indemnification hereunder, and any such indemnification payments
shall be in addition to amounts payable pursuant to such settlement agreement,
unless such settlement agreement expressly provides otherwise.
<PAGE>
Section 15. SEVERABILITY A determination that any provision of this Agreement is
invalid or unenforceable shall not affect the validity or enforceability of any
other provision hereof.
Section 16. WAIVER. Failure to insist upon strict compliance with any of the
terms, covenants or conditions hereof shall not be deemed a waiver of such term,
covenant, or condition. A waiver of any provision of this Agreement must be made
in writing, designated as a waiver, and signed by the party against whom its
enforcement is sought. Any waiver or relinquishment of any right or power
hereunder at any one or more times shall not be deemed a waiver or
relinquishment of such right or power at any other time or times.
Section 17. COUNTERPARTS.
This Agreement may be executed in two (2) or more counterparts, each of which
shall be deemed an original, and all of which shall constitute one and the same
Agreement.
Section 18. GOVERNING LAW.
This Agreement shall be governed by and construed and enforced in accordance
with the laws of the State of Florida, without reference to conflicts of law
principles.
Section 19. HEADINGS AND CONSTRUCTION.
The headings of sections in this Agreement are for convenience of reference only
and are not intended to qualify the meaning of any section. Any reference to a
section number shall refer to a section of this Agreement, unless otherwise
stated.
Section 20. ENTIRE AGREEMENT; MODIFICATIONS.
(a) Except as set forth in Section 20(b), below, this instrument contains the
entire agreement of the parties relating to the subject matter hereof, and
supersedes in its entirety any and all prior agreements, understandings or
representations relating to the subject matter hereof. No modifications of this
Agreement shall be valid unless made in writing and signed by the parties
hereto.
(b) The parties understand that the Bank and the Executive are also parties to
an Employment Agreement dated __________ (the "Employment Agreement"). From and
after the occurrence of a Change of Control, the terms of this Agreement shall
supersede the terms of the Employment Agreement and shall control. The parties
understand and agree that it is their intent that, from and after the occurrence
of a Change of Control, the obligations of the Bank and the Company shall be
those set forth in this Agreement only, and, to the extent necessary to
accomplish this intent, this Section 20(b) shall be an amendment to the
Employment Agreement, with the effect of terminating all rights and all
obligations of all parties under the Employment Agreement upon the occurrence of
a Change of Control.
Section 21. GUARANTEE.
The Company hereby irrevocably and unconditionally guarantees to the Executive
the payment of all amounts, and the performance of all other obligations, due
from the Bank in accordance with the terms of this Agreement as and when due
without any requirement of presentment, demand of payment, protest or notice of
dishonor or nonpayment.
Section 22. MAXIMUM LIMITATIONS ON SEVERANCE BENEFITS.
Notwithstanding any other provision of this Agreement, in the event that any
payment or benefit received or to be received by the Executive in connection
with a Change of Control of the Bank or the Company or the termination of the
Executive's employment (whether pursuant to the terms of this Agreement or any
other plan, arrangement or agreement with the Company or the Bank, any person
whose actions result in a Change of Control of the Company or any person
affiliated with the Company or the Bank or such person) (all such payments and
benefits, including the payments and benefits provided under this Agreement (the
"Severance Payments"), being hereinafter called "Total Payments") would not be
deductible (in whole or in part) by the Company, the Bank, an affiliate or a
person making such payment or providing such benefit as a result of Section 280G
of the Internal Revenue Code of 1986, as amended (the "Code"), then, to the
extent necessary to make such portion of the Total Payments deductible (and
after taking into account any reduction in the Total Payments provided in such
other plan, arrangement or agreement), the cash Severance Payments shall first
be reduced (if necessary, to zero); provided, however, that Executive may elect
(at any time prior to the payment of amounts payable hereunder) to have the
noncash severance payments reduced (or eliminated) prior to any reduction of the
cash Severance Payments.
For purposes of the limitation contained in subsection (a) of this section 22,
(i) no portion of the Total Payments the receipt or enjoyment of which the
Executive shall have effectively waived in writing prior to the delivery of a
notice of termination of employment shall be taken into account, (ii) no portion
of the Total Payments shall be taken into account which, in the opinion of tax
counsel ("Tax Counsel") reasonably acceptable to Executive and selected by the
accounting firm which was, immediately prior to the Change of Control of the
Company or the Bank, the Company's independent auditor (the "Auditor"), does not
constitute a "parachute payment" within the meaning of Section 280G(b)(2) of the
Code, including by reason of Section 280G(b)(4)(A) of the Code, (iii) the
Severance Payments shall be reduced only to the extent necessary so that the
Total Payments (other than those referred to in clauses (i) or (ii)) in their
entirety constitute reasonable compensation for services actually rendered
within the meaning of Section 280(G)(b)(4)(B) of the Code or are otherwise not
subject to disallowance as deductions by reason of Section 280G of the Code, in
the opinion of Tax Counsel, and (iv) the value of any noncash benefit or any
deferred payment or benefit included in the Total Payments shall be determined
by the Auditor in accordance with the principles of Sections 280G(d)(3) and (4)
of the Code.
(c) If it is established pursuant to a final determination of a court or an
Internal Revenue Service proceeding that, notwithstanding the good faith of
Executive and the Bank and Company in applying the terms of this section 22, the
aggregate "parachute payments" paid to or for the Executive's benefit are in an
amount that would result in any portion of such "parachute payments" not being
deductible by reason of Section 280G of the Code, then the Executive shall have
an obligation to pay the Bank upon demand an amount equal to the sum of (i) the
excess of the aggregate "parachute payments" paid to or for the Executive's
benefit over the aggregate "parachute payments" that could have been paid to or
for the Executive's benefit without any portion of such "parachute payments" not
being deductible by reason of Section 280G of the Code; and (ii) interest on the
amount set forth in clause (i) of this sentence at 120% of the rate provided in
Section 1274(b)(2)(B) of the Code from the date of the Executive's receipt of
such excess until the date of such payment. If the Severance Payments shall be
decreased pursuant to section (a) hereof, and the benefits under section
8(b)(iii) which remain payable after the application of this section 22 are
thereafter reduced pursuant thereto because of the receipt by the Executive of
substantially similar benefits, the Bank shall, at the time of such reduction,
pay to the Executive the lowest of (a) the amount of the decrease made in the
Severance Payments pursuant to this section 22 hereof, (b) the amount of the
subsequent reduction in such benefits,
<PAGE>
or (c) the maximum amount which can be paid to the Executive without being, or
causing any other payment to be, nondeductible by reason of Section 280G of the
Code.
Section 23. DUAL SERVICE WITH BANK AND COMPANY.
If the Executive performs services for the Company in addition
to the Bank, the Company shall, with respect to such services and the
compensation therefor and with respect to any termination of the Executive's
employment, have all of the same obligations imposed on the Bank under this
Agreement to the same extent and as though the name of the Company were
substituted for the name of the Bank herein and the Executive shall, with
respect to such services and the compensation therefor and with respect to any
termination of the Executive's employment, have the same rights, privileges and
duties relative to the Company as though the name of the Company were
substituted for the name of the Bank herein. Any entitlement of the Executive to
severance compensation and other termination benefits under this Agreement shall
be determined on the basis of the aggregate compensation payable to the
Executive by the Bank and the Company, and liability therefor shall be
apportioned between the Bank and the Company in the same manner as compensation
paid to the Executive for services to each of them; PROVIDED, HOWEVER, that in
no event shall the Bank bear any liability for actions of, or obligations
undertaken by, the Company under this Agreement. It is the intent and purpose of
this Section 23 that the Executive have the same legal and economic rights that
he would have if all of his services were rendered to and all of his
compensation were paid by either the Bank or the Company, but only by one of
them. This Section 23 shall be construed and enforced to give effect to such
intent and purpose.
IN WITNESS WHEREOF, the Bank and the Company have caused this Agreement to be
executed and the Executive has hereunto set his hand, all as of the day and year
first above written.
---------------------------------
Executive
REPUBLIC SECURITY BANK
By: _________________________________
Name: Rudy E. Schupp
Title: Chairman, President & CEO
REPUBLIC SECURITY FINANCIAL CORPORATION
By: ________________________________________
Name: Rudy E. Schupp
Title: Chairman, President & CEO
EXHIBIT 10.11 FORM OF AMENDED AND RESTATED SUPPLEMENTAL RETIREMENT
PLAN AGREEMENT DATED AS OF JULY 1, 1997 BY AND BETWEEN
REPUBLIC SECURITY BANK AND EACH OF RUDY E. SCHUPP AND RICHARD
J. HASKINS (FILED HEREWITH)
- -------------------------------------------------------------------------------
AMENDED AND RESTATED
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN AGREEMENT
THIS AGREEMENT, made and entered into as of the 1st day of
July, 1997, by and between REPUBLIC SECURITY BANK, a Florida state bank (the
"Bank"), and ______________ (the "Executive"), amends and restates that certain
Amended and Restated Supplemental Executive Retirement Plan Agreement between
the parties dated as of August 1, 1996.
WITNESSETH:
WHEREAS, the Executive has been a participant in the
Supplemental Executive Retirement Plan of Republic Security Financial
Corporation (the "Corporation Plan") and in the employ of the Corporation and
the Bank for more than three years, and is now serving the Corporation and the
Bank as ________; and
WHEREAS, the Boards of Directors of the Corporation and the
Bank have determined, and the Executive has agreed, that the Corporation Plan
should be transferred to the Bank; and
WHEREAS, the Board of Directors of the Bank has adopted a
Supplemental Executive Retirement Plan (the "Plan"), in form and substance
substantially similar to the Corporation Plan; and
WHEREAS, the Bank has agreed to assume all responsibilities of
the Corporation accrued under the Corporation Plan and to assure that all
benefits accrued to the Executive under the Corporation Plan continue unaffected
under the Plan; and
WHEREAS, it is the consensus of the Board of Directors that
the Executive's services to the Bank in the past have been of exceptional merit
and have constituted an invaluable contribution to the general welfare of the
Bank and in bringing it to its present status of operating efficiency; and
WHEREAS, the experience of the Executive, his knowledge of the
affairs of the Bank, his reputation and contacts in the industry are so valuable
that assurance of his continued services is essential for the future growth and
profits of the Bank and it is in the best interests of the Bank to reasonably
assure his continuing good service so as to allow him to remain in the employ of
the Bank during his lifetime or until the age of retirement; and
WHEREAS, it is the desire of the Bank that his services be
supplementally remunerated as herein provided;
NOW THEREFORE, it is agreed as follows:
ARTICLE ONE
1.01 EFFECTIVE DATES. For purposes of entry into the Plan, the
effective date of this Agreement shall be April 1, 1990; however, the effective
date for accrual of benefits hereunder shall be April 1, 1987 ("Benefit
Effective Date").
1.02 EMPLOYMENT. Executive and the Corporation and/or the Bank
have otherwise agreed to the extent, terms and duration of employment and this
Agreement shall not, either explicitly or impliedly, create, nor give rise to
any right of employment.
The salary continuation benefits provided by this Agreement
are granted by the Bank as a fringe benefit to the Executive and are not part of
any salary reduction plan or an arrangement deferring a bonus or a salary
increase. The Executive has no option to take any current payment or bonus in
lieu of these salary continuation benefits.
ARTICLE TWO
2.01 RETIREMENT BENEFIT.
(a) The Executive may retire from the employ of the
Corporation and/or the Bank at any time after he attains age fifty-five. If the
Executive retires at age fifty-five, then the Bank shall pay to the Executive,
upon the attainment of such age, a retirement benefit equal to sixty percent of
the Executive's Final Base Salary, as defined in Section 2.01(c), on a monthly
basis during his lifetime for twenty years, subject to the terms and conditions
of this Agreement. In the event that the Executive retires from the employ of
the Corporation and/or the Bank subsequent to age fifty-five, he shall be
entitled to the Vested Retirement Benefit, set forth in Section 2.02(c), to be
paid to the Executive on a monthly basis during his lifetime for twenty years.
Notwithstanding the foregoing, the Executive's Vested Retirement Benefit shall
not exceed seventy-five percent of his Final Base Salary (the "Maximum Vested
Retirement Benefit").
(b) The date for the first payment to the Executive under this
Section 2.01 shall be the first day of the month next following the latest of
(i) attainment of age fifty-five, (ii) the date upon which the Executive retires
from the employ of the Corporation and/or the Bank, or (iii) upon such later
date as may be mutually agreed by the Executive and the Bank.
(c) "Final Base Salary" shall mean the average Base Salary of
the highest three of the last five years in which the Executive is employed by
the Corporation and/or the Bank. "Base Salary" shall mean the annual base salary
paid to the Executive by the Corporation, the Bank and any subsidiaries of the
Corporation and the Bank, excluding bonuses, commissions, fringe benefits and
incentive compensation.
2.02 VESTED RETIREMENT BENEFIT. The Executive's retirement
benefit set forth in Section 2.01 hereof shall vest in the following increments
as the Executive attains the ages set forth below, provided that the Executive
is employed by the Corporation and/or the Bank on the date of attaining such
age:
<PAGE>
(a) Upon the attainment by the Executive of age thirty-nine,
thirty percent of his Final Base Salary shall vest;
(b) For each year commencing with age forty and continuing
through age fifty-five, on the birth date of the Executive in each such year, an
additional 2% of the Final Base Salary shall vest, e.g. upon attainment by the
Executive of age fifty-five, sixty percent of his Final Base Salary shall vest;
and
(c) For each year commencing with age fifty-six and continuing
through age sixty-two, on the birth date of the Executive in each such year, an
additional 1.4% of the Final Base Salary shall vest, until the Executive attains
the age of sixty-two, at which time the Maximum Vested Retirement Benefit shall
vest.
The vested amount of retirement benefit provided for in this
Section 2.02, measured upon any particular date, shall be referred to herein as
the "Vested Retirement Benefit."
2.03 RETIREMENT DEATH BENEFIT. The Bank agrees that if the
Executive shall have retired as provided in Section 2.01, but shall die before
receiving all payments under Section 2.01, the Bank will continue to make such
payments to such individual or individuals as the Executive may have designated
in writing, filed with and receipt acknowledged by the Bank, until the
expiration of twenty years from the date of the first payment under this
Agreement. In the absence of any effective designation of beneficiary, any such
amounts becoming due and payable upon the death of the Executive shall be
payable to his duly qualified executor, administrator, or personal
representative.
ARTICLE THREE
3.01 DEATH PRIOR TO BENEFIT PAYMENT INCEPTION. In the event
the Executive should die while employed by the Corporation and/or the Bank at
any time after the effective date of this Agreement, but prior to qualifying for
living benefits under Section 2.01, the Bank will pay the Vested Retirement
Benefit, but in no event less than thirty percent of the Final Base Salary, for
a period of 240 months to such individual or individuals as the Executive may
have designated in writing, filed with and receipt acknowledged by the Bank. The
said monthly payments shall begin the first day of the month following the month
of the death of the Executive. In the absence of any effective designation of
beneficiary, any such amounts becoming due and payable upon the death of the
Executive shall be payable to his duly qualified executor, administrator, or
personal representative.
ARTICLE FOUR
4.01 DISABILITY PRIOR TO RETIREMENT. In the event that the
Executive shall become permanently and totally disabled, as defined in this
Article, this Agreement shall continue subject to the limitations hereinafter
provided. If the Executive shall become disabled (as defined) during his
employment, but not necessarily as a result thereof, and should live to
otherwise qualify for benefits under Article Two, those benefits shall be
payable as if the Executive had remained in the employment of the Corporation
and/or the Bank during his disability. If the Executive should die after
becoming disabled but would otherwise have qualified for death benefits payable
under Articles Two or Three, those benefits shall be payable as if the Executive
had remained in the employment of the Corporation and/or the Bank during his
disability.
4.02 DEFINITION OF DISABILITY. "Disability" means that the
Executive has become permanently and totally disabled, mentally or physically,
such that his disability renders him unable to perform his duties in a manner
satisfactory to the Bank, and the Bank by a resolution adopted at any regular or
special meeting of its Board of Directors terminates the employment of the
Executive as a result of his disability. The Bank retains the right to have the
Executive examined medically at the Bank's expense to determine the extent of
his disability and the likelihood of his recovery.
4.03 DISABILITY BENEFIT OPTION. If the Bank elects to make any
disability payments to the Executive which are not provided either by any
corporate or personal disability income insurance or any separate disability
salary continuation agreement, then the total payout of any subsequent benefits
under Article Two or Article Three shall be reduced to the extent of any
disability payments so made.
ARTICLE FIVE
5.01 VOLUNTARY TERMINATION OF EMPLOYMENT. If the Executive
voluntarily terminates his employment prior to becoming entitled to receive
benefits under Section 2.01, his participation in the Plan shall cease and he
shall be entitled to receive his Vested Retirement Benefit, as deter mined in
accordance with Section 2.02. Except as otherwise provided in this Agreement,
the Vested Retirement Benefit due to the Executive pursuant to this Section 5.01
shall be payable to the Executive upon his attainment of age fifty-five, to be
paid to the Executive on a monthly basis for twenty years.
5.02 CHANGE OF CONTROL. A "Change in Control" shall mean the
occurrence of any of the following: (1) the merger or consolidation by virtue of
which the Corporation or the Bank shall not be the surviving entity; (2) the
sale of substantially all the assets of the Corporation or the Bank; or (3) the
change of control of the Corporation or the Bank such that any person (as
defined in Section 13(d)(3) and 14(d)(2) of the Securities Exchange Act of 1934,
as amended) becomes a beneficial owner, directly or indirectly, of securities
representing 25% or more of the combined voting power of the then outstanding
securities of either the Corporation or the Bank. Notwithstanding any provision
of this Agreement to the contrary, the Executive shall be entitled to the
Maximum Vested Retirement Benefit immediately upon the occurrence of a Change of
Control. Upon the occurrence of a Change of Control, Executive shall, at his
option, receive the Maximum Vested Retirement Benefit either (i) at retirement
subsequent to age fifty-five in the manner provided in Section 2.01 hereof or
(ii) upon written demand to the Corporation prior to the date of first payment
provided in Section 2.01(b) hereof, in a single payment in an amount equal to
the present value (computed at a rate of 8% interest per annum) of Maximum
Vested Retirement Benefit payable as provided in Section 2.01 hereof.
5.03 DISCHARGE FROM EMPLOYMENT FOR CAUSE. In the event that
the Executive's employment shall have been terminated for cause and the Board of
Directors of the Corporation or the Bank shall determine that the Executive
shall have engaged in "conduct inimical to the interest of the corporation" (as
herein defined), this Agreement may be terminated by resolution of the Board of
Directors, and in such event, all benefits and payments of any kind hereunder,
and all right or rights thereto, shall be terminated and canceled. "Conduct
inimical to the interest of the corporation" shall mean: actions engaged in by
the Executive which constitute the commission of a felony, the commission of
gross negligence resulting in significant damage to the Bank or its properties
or assets (including goodwill) or the commission of willful misconduct relating
to the affairs of the Bank.
5.04 OTHER TERMINATION OF SERVICE. The Corporation and/or the
Bank reserves the right to terminate the employment of the Executive at any
time. In the event that the employment of the Executive shall terminate prior to
the Executive's entitlement to receive benefits under Section 2.01, other than
by his disability, his death or his discharge for cause and the determination of
"conduct inimical to the interests of the corporation" pursuant
<PAGE>
to Section 5.03, then the Executive or his legal representative shall have
ninety days from the date of his termination of employment to file a written
notice with the Bank and electing the termination benefit defined in Section
15.03. If the Executive does not make the election described in this Section,
this Agreement shall continue with the following limitations: the Executive's
Final Base Salary for purposes of determining Vested Retirement Benefits shall
be his Base Salary on the date of termination of employment, provided, however,
that such Base Salary shall not be less than the Executive's Final Base Salary,
as calculated pursuant to Section 2.01.
ARTICLE SIX
6.01 ALIENABILITY. Neither the Executive, his widow, nor any
other beneficiary under this Agreement shall have any power or right to
transfer, assign, anticipate, hypothecate, mortgage, commute, modify, or
otherwise encumber in advance any of the benefits payable hereunder, nor shall
any of said benefits be subject to seizure for the payment of any debts,
judgments, alimony or separate maintenance, owed by the Executive or his
beneficiary or any of them, or be transferable by operation of law in the event
of bankruptcy, insolvency, or otherwise. In the event the Executive or any
beneficiary attempts assignment, commutation, hypothecation, transfer, or
disposal of the benefit hereunder the Bank's liabilities shall forthwith cease
and terminate.
ARTICLE SEVEN
7.01 PARTICIPATION IN OTHER PLANS. Nothing contained in this
Agreement shall be construed to alter, abridge, amend, modify or in any manner
affect the rights and privileges of the Executive to participate in and be
covered by any pension, profit-sharing, group insurance, bonus or other employee
plans which the Bank or the Corporation may now or hereafter have.
ARTICLE EIGHT
8.01 PURCHASE OF ASSETS BY BANK. The Bank reserves the
absolute right at its sole and exclusive discretion either to purchase assets to
provide for the obligations of the Bank undertaken by this Agreement or to
refrain from the purchase of such assets, and to determine the extent, nature,
and method of any such purchases. Should the Bank elect to purchase assets to
provide for obligations under this Agreement, in whole or in part, the Bank
shall be the unrestricted owner of any assets acquired. The Bank reserves the
absolute right, in its sole discretion, to terminate any such funding program,
at any time, either in whole or in part. At no time shall the Executive be
deemed to have any right, title, or interest in or to any specified asset or
assets of the Bank.
8.02 RIGHTS AS UNSECURED CREDITOR. This Article shall not be
construed as giving the Executive or his beneficiary any greater rights than
those of any other unsecured creditor of the Bank.
ARTICLE NINE
9.01 REORGANIZATION. In the event that the Bank shall merge,
consolidate into or with another bank, reorganize, or sell substantially all of
its assets to another corporation, firm, or person, such succeeding or
continuing corporation, firm, or person shall assume and discharge the
obligations of the Bank under this Agreement. Upon the occurrence of such event,
the term "Bank" as used in this Agreement shall be deemed to refer to such
successor or survivor.
ARTICLE TEN
10.01 BENEFITS AND BURDENS. This Agreement shall be binding
upon and inure to the benefit of the Executive and his personal representatives
and the Bank, and any successor organization which shall succeed to
substantially all of its assets and business.
ARTICLE ELEVEN
11.01 COMMUNICATIONS. Any notice or communication required of
either party with respect to this Agreement shall be made in writing and may
either be delivered personally or sent by certified mail to: For Bank, Republic
Security Bank, 4400 Congress Avenue, West Palm Beach, Florida 33407-3288; For
Executive,_____ , at his address as last shown on the records of the Bank, as
the case may be. Each party shall have the right by written notice to the other
in the manner provided herein to change the place to which any notice may be
addressed.
ARTICLE TWELVE
12.01 NOT A CONTRACT OF EMPLOYMENT. This Agreement shall not
be deemed to constitute a contract of employment between the parties hereto, nor
shall any provision hereof restrict the right of the Bank or the Corporation to
discharge the Executive, either with or without cause, or restrict the right of
the Executive to terminate his employment.
ARTICLE THIRTEEN
13.01 CLAIMS PROCEDURE. In the event that benefits under this
Agreement are not paid to the Executive (or his beneficiary in the case of the
Executive's death), and such person feels entitled to receive them, a claim
shall be made in writing to the Plan Administrator within sixty days from the
date payments are claimed to have been due. Such claim shall be reviewed by the
Plan Administrator and the Bank. If the claim is denied, in full or in part, the
Plan Administrator shall provide a written notice within ninety days from
receipt of the claim setting forth the specific reasons for denial, specific
reference to the provisions of this Agreement upon which the denial is based,
and any additional material or information necessary to perfect the claim if
any. Also, such written notice shall indicate the steps to be taken if a review
of the denial is desired.
13.02 REVIEW OF A CLAIM DENIAL. If a claim is denied and a
review of the denial is desired, the Executive (or his beneficiary in the case
of the Executive's death), shall notify the Plan Administrator in writing within
sixty days (and a claim shall be deemed denied if the Plan Administrator does
not take any action within the aforesaid ninety-day period). In requesting a
review, the Executive or his beneficiary may review this Agreement or any
documents relating to it and submit any written issues and comments he or she
may feel appropriate. In its sole discretion the Plan Administrator shall then
review the claim and provide a written decision within sixty days. This decision
likewise shall state the specific reasons for the decision and shall include
reference to specific provisions of this Agreement on which the decision is
based.
Upon exhausting the remedies available under this Article
Thirteen, the Executive or his beneficiary may wish to seek arbitration as
<PAGE>
provided under Article Sixteen. For purposes of implementing this claim
procedure (but not for any other purpose), the Chief Financial Officer of the
Bank is hereby designated as the Named Fiduciary and Plan Administrator of this
Agreement.
ARTICLE FOURTEEN
14.01 ADMINISTRATION. Any payment required to be made pursuant
to this Agreement to a person who is under a legal disability at the time such
payment is due may be made by the Bank to or for the benefit of such person in
such of the following ways as the Bank shall determine: (a) directly to the
person entitled to the payment; (b) to the legal representative of such person;
(c) to some near relative of such person to be used for latter's benefit; (d)
directly in payment of expenses of support, maintenance or education of such
person. Any such payment by the Bank shall, to the extent thereof, be a complete
discharge of any liability under this Agreement with respect to such payment.
The Bank shall not be required to see to the application by any third party of
any payments made pursuant to this paragraph.
14.02 MARITAL DEDUCTION. If the Executive designates his wife
to receive payments to be made after his death, she shall have the right to
direct the Bank as to the distribution of the sums, if any, payable after her
death. The Executive's wife has the right to direct that any such payments which
may be payable after her death be paid to such person or persons or to her own
estate as she appoints and directs by a written direction filed with the Bank
during her lifetime or by her last will and testament specifically referring to
this power of appointment. To the extent the Executive's wife does not
effectively exercise the power of appointment such sums shall upon her death be
distributed to her estate.
ARTICLE FIFTEEN
15.01 EVENTS OF DEFAULT. For purposes of this Agreement, the
words "Event of Default" shall mean:
(a) Nonpayment of any benefit provided herein when due;
(b) Adjudication of the Bank as a bankrupt or insolvent or
entry of an order, remaining unstayed by appeal or otherwise for forty-five
days, appointing a receiver or trustee for the Bank, or for all or any of its
property or approving a petition seeking reorganization or other similar relief
under the bankruptcy or other similar laws of the United States of America or
any state or any other competent jurisdiction, or the filing by the Bank of a
petition seeking any of the foregoing or consenting thereto, or the filing of a
petition to take advantage of any debtor's act, or making a general agreement
for the benefit of creditors, or admitting in writing its inability to pay its
debts as they mature; or
(c) Dissolution or liquidation of the Bank.
The Executive shall be notified in writing within seven days
of any occurrence described in Section 15.01(b) or (c) above.
15.02 NOTICE OF TERMINATION. Upon the occurrence of an Event
of Default, the Executive or his legal representative may in his sole discretion
terminate this Agreement by filing written notice of the Executive's election to
receive the benefits provided in Section 15.03.
15.03 LUMP SUM SETTLEMENT. In the event the Executive shall be
entitled to elect the benefits provided in this Section 15.03 pursuant to the
provisions of Sections 5.04 or 15.02 hereof, and the Executive shall have made
such election, the Executive shall be entitled to receive a single sum payment
in an amount equal to the present value (computed at a rate of 8% interest) of
the retirement, disability, or severance benefits otherwise payable hereunder,
and which are unpaid at the date at which the election is made. Said single sum
shall be due and payable upon the date of such election and amounts remaining
unpaid for thirty days thereafter shall bear interest at the rate of 8%
compounded annually. This Agreement shall terminate upon payment in full of the
benefits provided herein.
15.04 CESSATION OF BENEFITS. In the event this Agreement is
terminated pursuant to Sections 5.04 or 15.02, the Executive shall not be and
shall cease to be entitled to receive any benefits hereunder except those
specifically set forth in this Article Fifteen.
15.05 LUMP SUM UPON DEATH. In the event of the death of the
Executive and at any time during which the Bank shall be obligated to make
payments constituting death benefits pursuant to either Section 2.03 or Section
3.01, the Bank shall have the right to elect to pay the balance of all benefits
to which the Executive's beneficiaries shall be entitled under this Agreement,
in an alternative manner by lump sum payment consisting of the present value of
all benefits then unpaid (computed at a rate of 8% interest). The Bank shall
make such election by notice to the beneficiaries and shall make payment in full
within thirty days, in which event this Agreement shall terminate.
ARTICLE SIXTEEN
16.01 ARBITRATION. In the event of any dispute, controversy or
misunderstanding arising between the parties hereto, which may, directly or
indirectly concern or involve any of the terms, covenants or conditions hereof,
the parties agree that such controversy shall be settled by arbitration in the
city of West Palm Beach, Florida in accordance with the Rules of American
Arbitration Association. One arbitrator shall be named by each party involved in
the dispute and then an additional arbitrator shall be named by the arbitrators
so chosen. Judgment upon the award rendered by the arbitrators may be entered in
any court having jurisdiction thereof. The costs of the arbitration shall be
borne by the party or parties designated by the arbitrators.
16.02 SEVERABILITY. If any provision of this Agreement, or the
application thereof to any person or circumstance, shall for any reason and to
any extent be invalid or unenforceable, neither the remainder of this Agreement
nor the application of such provision to any other person or circumstance shall
be affected thereby, but rather the same shall be enforced to the greatest
extent permitted by law.
16.03 HEADINGS. The captioned headings used have been inserted
as a matter of convenience and shall not be considered or construed to in any
manner explain or otherwise affect the provisions herein contained.
16.04 INTEGRATED AGREEMENT. This Agreement represents the
entire, complete, and exclusive understanding of the parties hereto and reduces
to writing all oral negotiations and agreements of the parties and shall not be
changed, varied, or otherwise amended unless made in writing signed by each of
the parties hereto.
<PAGE>
16.05 GOVERNING LAW. This Agreement shall be governed by the
laws of the State of Florida.
IN WITNESS WHEREOF, the parties hereto have duly entered into
this Agreement as of the date first above written.
EXECUTIVE:
---------------------------------------
ATTEST: REPUBLIC SECURITY BANK
- ---------------------- By ------------------------------------
Secretary
EXHIBIT 10.12 SUPPLEMENTAL RETIREMENT PLAN AGREEMENT DATED AS OF
JANUARY 1, 1996 BETWEEN REPUBLIC SECURITY BANK AND
ROGER SAVAGE (FILED HEREWITH)
- -------------------------------------------------------------------------------
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN AGREEMENT
THIS AGREEMENT is made and entered into as of January 1, 1996,
by and between REPUBLIC SECURITY BANK, a Florida state bank (the "Bank"), and
ROGER SAVAGE (the "Executive").
WITNESSETH:
WHEREAS, the Board of Directors has determined to supplement
Executive's compensation by providing him benefits of the Bank's Supplemental
Executive Retirement Plan upon the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the
mutual agreements contained herein, the parties hereto hereby agree as follows:
ARTICLE ONE
1.01 EFFECTIVE DATES. For purposes of entry into the Plan, the
effective date of this Agreement shall be January 1, 1996 ("Benefit Effective
Date").
1.02 EMPLOYMENT. Executive and Republic Security Financial
Corporation (the "Corporation") and/or the Bank have otherwise agreed to the
extent, terms and duration of employment and this Agreement shall not, either
explicitly or impliedly, create, nor give rise to any right of employment.
The salary continuation benefits provided by this Agreement
are granted by the Bank as a fringe benefit to the Executive and are not part of
any salary reduction plan or an arrangement deferring a bonus or a salary
increase. The Executive has no option to take any current payment or bonus in
lieu of these salary continuation benefits.
ARTICLE TWO
2.01 RETIREMENT BENEFIT. The Bank agrees that upon the
attainment of age sixty-two (62) it will pay to the Executive thirty percent
(30%) of the Executive's final monthly average base salary on a monthly basis to
the Executive during his lifetime for twenty (20) years; subject to the
conditions and limitations hereinafter set forth. Final monthly average base
salary shall be defined as the average of the highest three (3) of the last five
(5) Plan Years Base Salary. The date for the first payment is hereby established
as the first day of the month next following the latter of (1) attainment of age
sixty-two or (2) upon such later date as may be mutually agreed by the Executive
and the Bank. Plan Year shall mean the twelve month period which begins on the
effective date as provided in Section 1.01 and each anniversary thereof. The
term "Base Salary" shall mean the base salary, excluding bonuses, commissions,
fringe benefits and incentive compensation, paid by the Bank and any subsidiary
thereof to the Executive. It shall not be considered a condition to receipt of
the retirement benefits herein provided that the Executive may not continue to
be employed or be reemployed beyond age sixty-two.
2.02 RETIREMENT DEATH BENEFIT. The Bank agrees that if the
Executive shall have attained age sixty-two as provided in Section 2.01, but
shall die before receiving all payments under Section 2.01, it will continue to
make such payments to such individual or individuals as the Executive may have
designated in writing, filed with and receipt acknowledged by the Bank, until
the expiration of twenty (20) years from the date of the first payment under
this Agreement. In the absence of any effective designation of beneficiary, any
such amounts becoming due and payable upon the death of the Executive shall be
payable to his duly qualified executor, administrator, or personal
representative.
ARTICLE THREE
3.01 DEATH PRIOR TO BENEFIT PAYMENT INCEPTION. In the event
the Executive should die while employed by the Corporation and/or the Bank at
any time after the effective date of this Agreement, the Bank will pay thirty
percent (30%) of the Executive's final average monthly base salary for a period
of 240 months to such individual or individuals as the Executive may have
designated in writing, filed with and receipt acknowledged by the Bank. The said
monthly payments shall begin the first day of the month following the month of
the death of the Executive. In the absence of any effective designation of
beneficiary, any such amounts becoming due and payable upon the death of the
Executive shall be payable to his duly qualified executor, administrator, or
personal representative. ARTICLE FOUR
4.01 DISABILITY PRIOR TO RETIREMENT. In the event that the
Executive shall become permanently and totally disabled, as defined in this
Article, this Agreement shall continue subject to the limitations hereinafter
provided. If the Executive shall become disabled (as defined) during his
employment, but not necessarily as a result thereof, and should live to
otherwise qualify for benefits under Article Two, those benefits shall be
payable as if the Executive had remained in the employment of the Corporation
and/or the Bank during his disability. If the Executive should die after
becoming disabled but would otherwise have qualified for death benefits payable
under Articles Two or Three, those benefits shall be payable as if the Executive
had remained in the employment of the Corporation and/or the Bank during his
disability.
4.02 DEFINITION OF DISABILITY. "Disability" means that the
Executive has become permanently and totally disabled, mentally or physically,
such that his disability renders him unable to perform his duties in a manner
satisfactory to the Bank, and the Bank by a resolution adopted at any regular or
special meeting of its Board of Directors terminates the employment of the
Executive as a result of his disability. The Bank retains the right to have the
Executive examined medically at the Bank's expense to determine the extent of
his disability and the likelihood of his recovery.
<PAGE>
4.03 DISABILITY BENEFIT OPTION. If the Bank elects to make any
disability payments to the Executive which are not provided either by any
corporate or personal disability income insurance or any separate disability
salary continuation agreement, then the total payout of any subsequent benefits
under Article Two or Article Three shall be reduced to the extent of any
disability payments so made.
ARTICLE FIVE
5.01 VESTING. If the Executive voluntarily terminates his
employment prior to becoming entitled to receive benefits under Article Two, his
participation hereunder shall cease and he shall be entitled to a Deferred
Vested Benefit as set forth in this Article.
5.02 VESTED AMOUNT. The amount of Deferred Vested Benefit
shall equal the vested portion of the Executive's benefits under Article Two on
the date he terminates employment, such portion to be determined in accordance
with the table below:
YEARS SUBSEQUENT TO
BENEFIT EFFECTIVE DATE VESTED PORTION OF BENEFIT
0 20%
1 40%
2 60%
3 80%
4 or more 100%
Except as stated otherwise in this Agreement, the Deferred
Vested Benefit shall be payable at the time the Executive would have otherwise
been entitled to receive it if he had remained employed by the Bank until the
date at which he became entitled to receive the applicable benefits.
Notwithstanding the foregoing provisions of this Section 5.02,
the Executive shall be deemed to be and shall become 100% vested immediately
upon the occurrence of: (1) a merger or consolidation by virtue of which the
Corporation or the Bank shall not be the surviving entity; (2) the sale of
substantially all the assets of the Corporation or the Bank; or (3) the change
of control of the Corporation or the Bank such that any person (as defined in
Section 13(d)(3) and 14(d)(2) of the Securities Exchange Act of 1934, as
amended) becomes a beneficial owner, directly or indirectly, of securities
representing 25% or more of the combined voting power of the then outstanding
securities of either the Corporation or the Bank.
5.03 DISCHARGE FROM EMPLOYMENT FOR CAUSE. In the event that
the Executive's employment shall have been terminated for cause and the Board of
Directors of the Corporation or the Bank shall determine that the Executive
shall have engaged in "conduct inimical to the interest of the corporation" (as
herein defined), this Agreement may be terminated by resolution of the Board of
Directors, and in such event, all benefits and payments of any kind hereunder,
and all right or rights thereto, shall be terminated and canceled. "Conduct
inimical to the interest of the corporation" shall mean: actions engaged in by
the Executive which constitute the commission of a felony, the commission of
gross negligence resulting in significant damage to the Bank or its properties
or assets (including goodwill) or the commission of willful misconduct relating
to the affairs of the Bank.
5.04 OTHER TERMINATION OF SERVICE. The Corporation and/or the
Bank reserves the right to terminate the employment of the Executive at any
time. In the event that the employment of the Executive shall terminate, other
than by his disability, his death or his discharge for cause and the
determination of "conduct inimical to the interests of the corporation" pursuant
to Section 5.03, then the Executive or his legal representative shall have
ninety (90) days from the date of his termination of employment to file a
written notice with the Bank and electing the termination benefit defined in
Section 15.03. If the Executive does not make such election as described in this
section, this Agreement shall continue with the following limitations: the
Executive's final base salary for purposes of benefit payments shall be his base
salary on the date of termination of employment, so long as it shall not be less
than the Executive's average base salary as calculated pursuant to Section 2.01.
ARTICLE SIX
6.01 ALIENABILITY. Neither the Executive, his widow, nor any
other beneficiary under this Agreement shall have any power or right to
transfer, assign, anticipate, hypothecate, mortgage, commute, modify, or
otherwise encumber in advance any of the benefits payable hereunder, nor shall
any of said benefits be subject to seizure for the payment of any debts,
judgments, alimony or separate maintenance, owed by the Executive or his
beneficiary or any of them, or be transferable by operation of law in the event
of bankruptcy, insolvency, or otherwise. In the event the Executive or any
beneficiary attempts assignment, commutation, hypothecation, transfer, or
disposal of the benefit hereunder the Bank's liabilities shall forthwith cease
and terminate.
ARTICLE SEVEN
7.01 PARTICIPATION IN OTHER PLANS. Nothing contained in this
Agreement shall be construed to alter, abridge, amend, modify or in any manner
affect the rights and privileges of the Executive to participate in and be
covered by any pension, profit-sharing, group insurance, bonus or other employee
plans which the Bank or the Corporation may now or hereafter have.
ARTICLE EIGHT
8.01 PURCHASE OF ASSETS BY BANK. The Bank reserves the
absolute right at its sole and exclusive discretion either to purchase assets to
provide for the obligations of the Bank undertaken by this Agreement or to
refrain from the purchase of such assets, and to determine the extent, nature,
and method of any such purchases. Should the Bank elect to purchase assets to
provide for obligations under this Agreement, in whole or in part, the Bank
shall be the unrestricted owner of any assets acquired. The Bank reserves the
absolute right, in its sole discretion, to terminate any such funding program,
at any time, either in whole or in part. At no time shall the Executive be
deemed to have any right, title, or interest in or to any specified asset or
assets of the Bank.
8.02 RIGHTS AS UNSECURED CREDITOR. This Article shall not be
construed as giving the Executive or his beneficiary any greater rights than
those of any other unsecured creditor of the Bank.
ARTICLE NINE
9.01 REORGANIZATION. In the event that the Bank shall merge,
consolidate into or with another Bank, reorganize, or
<PAGE>
sell substantially all of its assets to another corporation, firm, or person,
such succeeding or continuing corporation, firm, or person shall assume and
discharge the obligations of the Bank under this Agreement. Upon the occurrence
of such event, the term "Bank" as used in this Agreement shall be deemed to
refer to such successor or survivor.
ARTICLE TEN
10.01 BENEFITS AND BURDENS. This Agreement shall be binding
upon and inure to the benefit of the Executive and his personal representatives
and the Bank, and any successor organization which shall succeed to
substantially all of its assets and business.
ARTICLE ELEVEN
11.01 COMMUNICATIONS. Any notice or communication required of
either party with respect to this Agreement shall be made in writing and may
either be delivered personally or sent by certified mail as follows:
If to the Bank: Republic Security Bank
4400 Congress Avenue
West Palm Beach, Florida 33407
If to the Executive: Roger Savage
c/o Republic Security Bank
4400 Congress Avenue
West Palm Beach, Florida 33407
Each party shall have the right by written notice to the other in the manner
provided herein to change the place to which any notice may be addressed.
ARTICLE TWELVE
12.01 NOT A CONTRACT OF EMPLOYMENT. This Agreement shall not
be deemed to constitute a contract of employment between the parties hereto, nor
shall any provision hereof restrict the right of the Bank or the Corporation to
discharge the Executive, either with or without cause, or restrict the right of
the Executive to terminate his employment.
ARTICLE THIRTEEN
13.01 CLAIMS PROCEDURE. In the event that benefits under this
Plan Agreement are not paid to the Executive (or his beneficiary in the case of
the Executive's death), and such person feels entitled to receive them, a claim
shall be made in writing to the Plan Administrator within sixty (60) days from
the date payments are claimed to have been due. Such claim shall be reviewed by
the Plan Administrator and the Bank. If the claim is denied, in full or in part,
the Plan Administrator shall provide a written notice within ninety (90) days
from receipt of the claim setting forth the specific reasons for denial,
specific reference to the provisions of this Agreement upon which the denial is
based, and any additional material or information necessary to perfect the claim
if any. Also, such written notice shall indicate the steps to be taken if a
review of the denial is desired.
13.02 REVIEW OF A CLAIM DENIAL. If a claim is denied and a
review of the denial is desired, the Executive (or his beneficiary in the case
of the Executive's death), shall notify the Plan Administrator in writing within
sixty (60) days (and a claim shall be deemed denied if the Plan Administrator
does not take any action within the aforesaid ninety (90) day period). In
requesting a review, the Executive or his beneficiary may review this Plan
Agreement or any documents relating to it and submit any written issues and
comments he or she may feel appropriate. In its sole discretion the Plan
Administrator shall then review the claim and provide a written decision within
sixty (60) days. This decision likewise shall state the specific reasons for the
decision and shall include reference to specific provisions of this Plan
Agreement on which the decision is based.
Upon exhausting the remedies available under this Article
Thirteen, the Executive or his beneficiary may wish to seek arbitration as
provided under Article Sixteen. For purposes of implementing this claim
procedure (but not for any other purpose), the Chief Financial Officer of the
Bank is hereby designated as the Named Fiduciary and Plan Administrator of this
Plan Agreement.
ARTICLE FOURTEEN
14.01 ADMINISTRATION. Any payment required to be made pursuant
to this Agreement to a person who is under a legal disability at the time such
payment is due may be made by the Bank to or for the benefit of such person in
such of the following ways as the Bank shall determine: (a) directly to the
person entitled to the payment; (b) to the legal representative of such person;
(c) to some near relative of such person to be used for latter's benefit; (d)
directly in payment of expenses of support, maintenance or education of such
person. Any such payment by the Bank shall, to the extent thereof, be a complete
discharge of any liability under this Agreement with respect to such payment.
The Bank shall not be required to see to the application by any third party of
any payments made pursuant to this paragraph.
14.02 MARITAL DEDUCTION. If the Executive designates his
spouse to receive payments to be made after his death, she shall have the right
to direct the Bank as to the distribution of the sums, if any, payable after his
death. The Executive's spouse has the right to direct that any such payments
which may be payable after her death be paid to such person or persons or to her
own estate as she appoints and directs by a written direction filed with the
Bank during her lifetime or by her last will and testament specifically
referring to this power of appointment. To the extent the Executive's spouse
does not effectively exercise the power of appointment, such sums shall upon her
death be distributed to her estate.
ARTICLE FIFTEEN
15.01 EVENTS OF DEFAULT. For purposes of this Agreement, the
words "Event of Default" shall mean:
(a) Nonpayment of any benefit provided herein when due;
(b) Adjudication of the Bank as a bankrupt or insolvent or
entry of an order, remaining unstayed by appeal or otherwise for forty-five (45)
days, appointing a receiver or trustee for the Bank, or for all or any of its
property or approving a petition seeking reorganization or other similar relief
<PAGE>
under the bankruptcy or other similar laws of the United States of America or
any state or any other competent jurisdiction, or the filing by the Bank of a
petition seeking any of the foregoing or consenting thereto, or the filing of a
petition to take advantage of any debtor's act, or making a general agreement
for the benefit of creditors, or admitting in writing its inability to pay its
debts as they mature; or
(c) dissolution or liquidation of the Bank.
The Executive shall be notified in writing within seven (7)
days of any occurrence described in Section 15.01(b), above.
15.02 LUMP SUM UPON DEATH. In the event of the death of the
Executive and at any time during which the Bank shall be obligated to make
payments constituting death benefits pursuant to either Section 2.02 or Section
3.01, the Bank shall have the right to elect to pay the balance of all benefits
to which the Executive's beneficiaries shall be entitled under this Agreement,
in an alternative manner by lump sum payment consisting of the present value of
all benefits then unpaid (computed at a rate of 8% interest). The Bank shall
make such election by notice to the beneficiaries and shall make payment in full
within thirty (30) days, in which event this Agreement shall terminate.
ARTICLE SIXTEEN
16.01 ARBITRATION. In the event of any dispute, controversy or
misunderstanding arising between the parties hereto, which may, directly or
indirectly concern or involve any of the terms, covenants or conditions hereof,
the parties agree that such controversy shall be settled by arbitration in the
city of West Palm Beach, Florida in accordance with the Rules of American
Arbitration Association. One arbitrator shall be named by each party involved in
the dispute and then an additional arbitrator shall be named by the arbitrators
so chosen. Judgment upon the award rendered by the arbitrators may be entered in
any court having jurisdiction thereof. The costs of the arbitration shall be
borne by the party or parties designated by the arbitrators.
16.02 SEVERABILITY. If any provision of this Agreement, or the
application thereof to any person or circumstance, shall for any reason and to
any extent be invalid or unenforceable, neither the remainder of this Agreement
nor the application of such provision to any other person or circumstance shall
be affected thereby, but rather the same shall be enforced to the greatest
extent permitted by law.
16.03 HEADINGS. The captioned headings used have been inserted
as a matter of convenience and shall not be considered or construed to in any
manner explain or otherwise affect the provisions herein contained.
16.04 INTEGRATED AGREEMENT. This Agreement represents the
entire, complete, and exclusive understanding of the parties hereto and reduces
to writing all oral negotiations and agreements of the parties and shall not be
changed, varied, or otherwise amended unless made in writing signed by each of
the parties hereto.
16.05 GOVERNING LAW. This Agreement shall be governed by the
laws of the State of Florida.
IN WITNESS WHEREOF, the parties hereto have entered into this
Agreement as of the date first above written.
EXECUTIVE:
---------------------------------
Roger Savage
REPUBLIC SECURITY BANK
By
------------------------------
Rudy E. Schupp,
President
EXHIBIT 10.13 AMENDED AND RESTATED STOCK APPRECIATION RIGHTS AGREEMENT
DATED AS OF JUNE 24, 1998 BY AND BETWEEN THE COMPANY AND
RUDY E. SCHUPP (FILED HEREWITH)
- -------------------------------------------------------------------------------
REPUBLIC SECURITY FINANCIAL CORPORATION
AMENDED AND RESTATED STOCK APPRECIATION RIGHTS AGREEMENT
This Agreement is made and entered into as of December 20,
1995 and, as amended, as of June 24, 1998, by and between RUDY E. SCHUPP
("Schupp") and REPUBLIC SECURITY FINANCIAL CORPORATION, a Florida corporation
(the "Corporation").
WHEREAS, the Board of Directors desires to provide Schupp
additional compensation in the form of long-term incentives so that he will be
motivated to remain in the long-term employ of the Corporation; and
WHEREAS, the Board of Directors desires that such incentives
be directly related to the performance of the Corporation's common stock and the
interests of its shareholders;
NOW, THEREFORE, in consideration of the premises, the parties
hereto hereby agree as follows:
1. AWARDS. As of December 20, 1995 (the "Effective Date"), the
Corporation hereby awards Schupp 500,000 stock appreciation rights ("SARs") in
two parts as follows: Part A -- 100,000 SARs and Part B -- 400,000 SARs.
2. VESTING. The SARs shall, except as provided herein, vest
and become immediately exercisable on January 1, 2003 (to the extent not
exercised prior to amendment of this Agreement on June 24, 1998).
Notwithstanding the foregoing, all SARs shall vest and become immediately
exercisable upon the occurrence of any one of the following events: (a) Schupp's
death or termination of employment for any reason, with or without cause, or (b)
the occurrence of a change of control of the Corporation. For purposes of this
Agreement, a "change of control" shall be deemed to have occurred when any
"person" (as used in Section 13(d) of the Securities Exchange Act of 1934),
directly or indirectly, becomes the "beneficial owner" (as defined in Rule 13d-3
under the Securities Exchange Act of 1934), of 50% or more of the Corporation's
common stock then outstanding.
3. SAR TERM. All of the unexercised SARs shall expire on
January 1, 2006. In no event shall any of the SARs awarded herein be exercisable
after January 1, 2006.
4. BASE VALUE. The SARs shall have the following Base Values:
Part A SARs at $5.75 per SAR and Part B SARs at $8.00 per SAR.
5. TERMINATION OF EMPLOYMENT. If Schupp's employment with the
Corporation terminates for any reason, with or without cause (a "Termination
Event"), any SARs which, on the occurrence of a Termination Event, are not
vested, shall vest and become immediately exercisable. After the occurrence of a
Termination Event, any SARs which have not been exercised shall automatically
terminate and be forfeited to the Corporation at the close of business on the
earliest to occur of the (i) March 31; (ii) June 30; (iii) September 30; or (iv)
December 31 next following the Termination Event (the "Quarter Closing Date").
6. EXERCISE. SARs, once vested, may be exercised by Schupp by
giving written notice of such exercise to the Corporation, at its principal
executive offices, attention: Secretary. Such notice shall specify the SARs to
be exercised. Upon exercise, the Corporation shall pay Schupp in cash the Net
Appreciation (defined below) within the later of (i) 60 days after exercise or
(ii) the Quarter Closing Date, less the amount equal to the federal, state,
local and other taxes required to be withheld by the Corporation with respect
thereto. The date of exercise shall be the date on which such notice is actually
received by the Corporation.
"Net Appreciation" for each SAR shall mean (i) the High Water
Mark of the common stock of the Corporation on the date of exercise less the
Base Value, if a Termination Event has occurred; or (ii) the Market Price of the
common stock of the Corporation on the date of exercise less the Base Value, if
no Termination Event has occurred. "High Water Mark" shall mean the highest
closing price reported in THE WALL STREET JOURNAL for the common stock for the
period commencing on January 1, 1997 and ending on the Quarter Closing Date.
"Market Price" shall mean the closing price as reported in THE WALL STREET
JOURNAL for the common stock for the trading day immediately preceding the date
of exercise.
7. ADDITIONAL PROVISIONS.
(a) Neither the SARs nor any of Schupp's rights or interests
therein shall be assignable or transferable by Schupp other than by will, the
laws of descent and distribution or a transfer to a trust approved by the Board
of Directors in its discretion. Except as expressly provided herein, SARs shall
be exercisable only by Schupp. No SARs may be pledged or encumbered in any way.
SARs shall immediately expire and terminate if they become transferred due to
execution, attachment or similar legal process.
(b) Nothing contained herein shall be construed as giving
Schupp any right to be retained in the employ of the Corporation, or interfere
in any way with the right of the Corporation to terminate the employment of
Schupp.
(c) In the event of any change in the outstanding number of
shares of common stock of the Corporation by reason of any stock dividend,
recapitalization, reorganization, merger, consolidation, split-up, combination
or exchange of shares, or any rights to purchase shares at a price substantially
below fair market value, or any similar change affecting the shares, the number
of SARs awarded hereunder, the Base Value and the High Water Mark shall be
appropriately adjusted consistent with such change to prevent dilution or
enlargement of the rights of the Schupp. In the event of a dispute as to any
such adjustment, the determination thereof by the Compensation Committee of the
Board of Directors of the Corporation shall be final and binding on the parties
hereto.
<PAGE>
(d) Schupp shall have no rights as a shareholder of the
Corporation with respect to any unexercised SARs.
(e) This Agreement shall be governed and interpreted in
accordance with the laws of the State of Florida and may be amended only by the
written agreement of both of the parties hereto.
IN WITNESS WHEREOF, the parties hereto have entered into this
agreement as of the date first above written.
REPUBLIC SECURITY FINANCIAL
CORPORATION
- ------------------------------ By:
Rudy E. Schupp ---------------------------------
Lennart E. Lindahl, Jr.
Vice Chairman
EXHIBIT 10.14 AMENDED AND RESTATED STOCK APPRECIATION RIGHTS AGREEMENT
DATED AS OF JUNE 24, 1998 BY AND BETWEEN THE COMPANY AND
RICHARD J. HASKINS (FILED HEREWITH)
- -------------------------------------------------------------------------------
REPUBLIC SECURITY FINANCIAL CORPORATION
AMENDED AND RESTATED STOCK APPRECIATION RIGHTS AGREEMENT
This Agreement is made and entered into as of December 20,
1995 and, as amended, as of June 24, 1998, by and between RICHARD J. HASKINS
("Haskins") and REPUBLIC SECURITY FINANCIAL CORPORATION, a Florida corporation
(the "Corporation").
WHEREAS, the Board of Directors desires to provide Haskins
additional compensation in the form of long-term incentives so that he will be
motivated to remain in the long-term employ of the Corporation; and
WHEREAS, the Board of Directors desires that such incentives
be directly related to the performance of the Corporation's common stock and the
interests of its shareholders;
NOW, THEREFORE, in consideration of the premises, the parties
hereto hereby agree as follows:
1. AWARDS. As of December 20, 1995 (the "Effective Date"), the
Corporation hereby awards Haskins 200,000 stock appreciation rights ("SARs") in
two parts as follows: Part A -- 50,000 SARs and Part B -- 150,000 SARs.
2. VESTING. The SARs shall, except as provided herein, vest
and become immediately exercisable on January 1, 2003 (to the extent not
exercised prior to amendment of this Agreement on June 24, 1998).
Notwithstanding the foregoing, all SARs shall vest and become immediately
exercisable upon the occurrence of any one of the following events: (a)
Haskins's death or termination of employment for any reason, with or without
cause, or (b) the occurrence of a change of control of the Corporation. For
purposes of this Agreement, a "change of control" shall be deemed to have
occurred when any "person" (as used in Section 13(d) of the Securities Exchange
Act of 1934), directly or indirectly, becomes the "beneficial owner" (as defined
in Rule 13d-3 under the Securities Exchange Act of 1934), of 50% or more of the
Corporation's common stock then outstanding.
3. SAR TERM. All of the unexercised SARs shall expire on
January 1, 2006. In no event shall any of the SARs awarded herein be exercisable
after January 1, 2006.
4. BASE VALUE. The SARs shall have the following Base Values:
Part A SARs at $5.75 per SAR and Part B SARs at $8.00 per SAR.
5. TERMINATION OF EMPLOYMENT. If Haskins's employment with the
Corporation terminates for any reason, with or without cause (a "Termination
Even"), any SARs which, on the occurrence of a Termination Event, are not
vested, shall vest and become immediately exercisable. After the occurrence of a
Termination Event, any SARs which have not been exercised shall automatically
terminate and be forfeited to the Corporation at the close of business on the
earliest to occur of the (i) March 31; (ii) June 30; (iii) September 30; or (iv)
December 31 next following the Termination Event (the "Quarter Closing Date").
6. EXERCISE. SARs, once vested, may be exercised by Haskins by
giving written notice of such exercise to the Corporation, at its principal
executive offices, attention: Secretary. Such notice shall specify the SARs to
be exercised. Upon exercise, the Corporation shall pay Haskins in cash the Net
Appreciation (defined below) within the later of (i) 60 days after exercise or
(ii) the Quarter Closing Date, less the amount equal to the federal, state,
local and other taxes required to be withheld by the Corporation with respect
thereto. The date of exercise shall be the date on which such notice is actually
received by the Corporation.
"Net Appreciation" for each SAR shall mean (i) the High Water
Mark of the common stock of the Corporation on the date of exercise less the
Base Value, if a Termination Event has occurred; or (ii) the Market Price of the
common stock of the Corporation on the date of exercise less the Base Value, if
no Termination Event has occurred. "High Water Mark" shall mean the highest
closing price reported in THE WALL STREET JOURNAL for the common stock for the
period commencing on January 1, 1997 and ending on the Quarter Closing Date.
"Market Price" shall mean the closing price as reported in THE WALL STREET
JOURNAL for the common stock for the trading day immediately preceding the date
of exercise.
7. ADDITIONAL PROVISIONS.
(a) Neither the SARs nor any of Haskins's rights or interests
therein shall be assignable or transferable by Haskins other than by will, the
laws of descent and distribution or a transfer to a trust approved by the Board
of Directors in its discretion. Except as expressly provided herein, SARs shall
be exercisable only by Haskins. No SARs may be pledged or encumbered in any way.
SARs shall immediately expire and terminate if they become transferred due to
execution, attachment or similar legal process.
(b) Nothing contained herein shall be construed as giving
Haskins any right to be retained in the employ of the Corporation, or interfere
in any way with the right of the Corporation to terminate the employment of
Haskins.
(c) In the event of any change in the outstanding number of
shares of common stock of the Corporation by reason of any stock dividend,
recapitalization, reorganization, merger, consolidation, split-up, combination
or exchange of shares, or any rights to purchase shares at a price substantially
below fair market value, or any similar change affecting the shares, the number
of SARs awarded hereunder, the Base Value and the High Water Mark shall be
appropriately adjusted consistent with such change to prevent dilution or
enlargement of the rights of the Haskins. In the event of a dispute as to any
such adjustment, the determination thereof by the Compensation Committee of the
Board of Directors of the Corporation shall be final and binding on the parties
hereto.
<PAGE>
(d) Haskins shall have no rights as a shareholder of the
Corporation with respect to any unexercised SARs.
(e) This Agreement shall be governed and interpreted in
accordance with the laws of the State of Florida and may be amended only by the
written agreement of both of the parties hereto.
IN WITNESS WHEREOF, the parties hereto have entered into this
agreement as of the date first above written.
REPUBLIC SECURITY FINANCIAL
CORPORATION
- ------------------------------ By:
Richard J. Haskins -----------------------------------
Lennart E. Lindahl, Jr.
Vice Chairman
EXHIBIT 10.15 FORM OF AMENDED AND RESTATED STOCK APPRECIATION RIGHTS
AGREEMENT DATED AS OF JUNE 24, 1998 BY AND BETWEEN THE COMPANY
AND EACH OF GEARL GORE, LENNART LINDAHL, JR., RICHARD RATHKE,
WILLIAM SPITZNAGEL, DR. BRUCE WIITA, AND WILLIAM WOLFSON
(FILED HEREWITH)
- -------------------------------------------------------------------------------
REPUBLIC SECURITY FINANCIAL CORPORATION
AMENDED AND RESTATED STOCK APPRECIATION RIGHTS AGREEMENT
This Agreement is made and entered into as of December 20,
1995 and, as amended, as of June 24, 1998, by and between _____________
("Grantee") and REPUBLIC SECURITY FINANCIAL CORPORATION, a Florida corporation
(the "Corporation").
WHEREAS, the Board of Directors has determined to compensate
the non-employee directors, in part, with long-term incentive compensation in
recognition of the directors' policy to manage the business and affairs of the
Corporation in the long-term interests of the shareholders; and
WHEREAS, in accordance therewith, the Board of Directors
desires that such compensation be directly related to the performance of the
Corporation's common stock;
NOW, THEREFORE, in consideration of the premises, the parties
hereto hereby agree as follows:
1. AWARDS. As of December 20, 1995 (the "Effective Date"), the
Corporation hereby awards Grantee 20,000 stock appreciation rights ("SARs") in
two parts as follows: Part A -- 10,000 SARs and Part B -- 10,000 SARs.
2. VESTING. The SARs shall, except as provided herein, vest
and become immediately exercisable on January 1, 2003 (to the extent not
exercised prior to amendment of this Agreement on June 24, 1998).
Notwithstanding the foregoing, all SARs shall vest and become immediately
exercisable upon the occurrence of any one of the following events: (a)
Grantee's death or termination of employment for any reason, with or without
cause, or (b) the occurrence of a change of control of the Corporation. For
purposes of this Agreement, a "change of control" shall be deemed to have
occurred when any "person" (as used in Section 13(d) of the Securities Exchange
Act of 1934), directly or indirectly, becomes the "beneficial owner" (as defined
in Rule 13d-3 under the Securities Exchange Act of 1934), of 50% or more of the
Corporation's common stock then outstanding.
3. SAR TERM. All of the unexercised SARs shall expire on
January 1, 2006. In no event shall any of the SARs awarded herein be exercisable
after January 1, 2006.
4. BASE VALUE. The SARs shall have the following Base Values:
Part A SARs at $5.75 per SAR and Part B SARs at $8.00 per SAR.
5. TERMINATION OF TERM AS DIRECTOR. If Grantee's term as a
director of the Corporation ends due to resignation, removal, failure to be
re-elected, or any other reason, with or without cause (a "Termination Event"),
any SARs which, on the occurrence of a Termination Event, are not vested, shall
vest and become immediately exercisable. After the occurrence of a Termination
Event, any SARs which have not been exercised shall automatically terminate and
be forfeited to the Corporation at the close of business on the earliest to
occur of the (i) March 31; (ii) June 30; (iii) September 30; or (iv) December 31
next following the Termination Event (the "Quarter Closing Date").
6. EXERCISE. SARs, once vested, may be exercised by Grantee by
giving written notice of such exercise to the Corporation, at its principal
executive offices, attention: Secretary. Such notice shall specify the SARs to
be exercised. Upon exercise, the Corporation shall pay Grantee in cash the Net
Appreciation (defined below) within the later of (i) 60 days after exercise or
(ii) the Quarter Closing Date, less the amount equal to the federal, state,
local and other taxes required to be withheld by the Corporation with respect
thereto. The date of exercise shall be the date on which such notice is actually
received by the Corporation.
"Net Appreciation" for each SAR shall mean (i) the High Water
Mark of the common stock of the Corporation on the date of exercise less the
Base Value, if a Termination Event has occurred; or (ii) the Market Price of the
common stock of the Corporation on the date of exercise less the Base Value, if
no Termination Event has occurred, "High Water Mark" shall mean the highest
closing price reported in THE WALL STREET JOURNAL for the common stock for the
period commencing on January 1, 1997 and ending on the Quarter Closing Date.
"Market Price" shall mean the closing price as reported in THE WALL STREET
JOURNAL for the common stock for the trading day immediately preceding the date
of exercise.
7. ADDITIONAL PROVISIONS.
(a) Neither the SARs nor any of Grantee's rights or interests
therein shall be assignable or transferable by Grantee other than by will, the
laws of descent and distribution or a transfer to a trust approved by the Board
of Directors in its discretion. Except as expressly provided herein, SARs shall
be exercisable only by Grantee. No SARs may be pledged or encumbered in any way.
SARs shall immediately expire and terminate if they become transferred due to
execution, attachment or similar legal process.
(b) In the event of any change in the outstanding number of
shares of common stock of the Corporation by reason of any stock dividend,
recapitalization, reorganization, merger, consolidation, split-up, combination
or exchange of shares, or any rights to purchase shares at a price substantially
below fair market value, or any similar change affecting the shares, the number
of SARs awarded hereunder, the Base Value and the High Water Mark shall be
appropriately adjusted consistent with such change to prevent dilution or
enlargement of the rights of the Grantee. In the event of a dispute as to any
such adjustment, the determination thereof by the Compensation Committee of the
Board of Directors of the Corporation shall be final and binding on the parties
hereto.
(c) Grantee shall have no rights as a shareholder of the
Corporation with respect to any unexercised SARs.
<PAGE>
(d) This Agreement shall be governed and interpreted in
accordance with the laws of the State of Florida and may be amended only by the
written agreement of both of the parties hereto.
IN WITNESS WHEREOF, the parties hereto have entered into this
agreement as of the date first above written.
REPUBLIC SECURITY FINANCIAL
CORPORATION
- ------------------------------- By:
Director -----------------------------------
Chairman of the Board
EXHIBIT 10.17 AMENDMENT NO. 1 TO THE REPUBLIC SECURITY FINANCIAL CORPORATION
1997 PERFORMANCE INCENTIVE PLAN, AS AMENDED (FILED HEREWITH)
- -------------------------------------------------------------------------------
REPUBLIC SECURITY FINANCIAL CORPORATION
1997 PERFORMANCE INCENTIVE PLAN
(ADOPTED JUNE 27, 1997, AMENDED AND RESTATED ON OCTOBER 27, 1998)
AMENDMENT NO. 1
1. SECTION 23 - Effective as of January 1, 1999, a new section 23 shall be added
to the Plan to read in its entirety as follows:
23. CHANGE OF CONTROL
(a) A Change of Control ("Change of Control") shall
be deemed to have occurred upon the happening of any of the following
events:
(i) approval by the stockholders of the Company of a
transaction that would result in the reorganization, merger or
consolidation of the Company with one or more other persons, other than
a transaction following which:
(A) at least 50.1% of the common stock or equity
ownership interests of the entity resulting from such
transaction are beneficially owned (within the meaning of Rule
13d-3 promulgated under the Exchange Act) in substantially the
same relative proportions by persons who, immediately prior to
such transaction, beneficially owned (within the meaning of
Rule 13d-3 promulgated under the Securities Exchange Act of
1934, as amended ("Exchange Act")) at least 50.1% of the
outstanding common stock or equity ownership interests in the
Company; and
At least 50.1% of the combined voting power of the
securities entitled to vote generally in the election of
directors of the entity resulting from such transaction are
beneficially owned (within the meaning of Rule 13d-3
promulgated under the Exchange Act) in substantially the same
relative proportions by persons who, immediately prior to such
transaction, beneficially owned (within the meaning of Rule
13d-3 promulgated under the Exchange Act) at least 50.1% of
the combined voting power of the securities entitled to vote
generally in the election of directors of the Company; and
No person, or persons acting in concert, beneficially own
(within he meaning of Rule 13d-3 promulgated under the
Exchange Act) 20% or more of the outstanding common stock or
equity ownership interests in, or 20% or more of the combined
voting power of the securities entitled to vote generally in
the election of directors of, the entity resulting from such
transaction; and
At least a majority of the members of the board of
directors of the entity resulting from such transaction are
individuals who were described in sections 23(a)(iv)(A) or (B)
as of January 1, 1999 and as of the date of execution of the
initial definitive agreement providing for such transaction
(or, if earlier, as of the date on which the Board of
Directors of the Company authorized such transaction).
(ii) the acquisition of all or substantially all of the assets
of the Company or beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of 20% or more of the
outstanding securities or of the combined voting power of the
outstanding securities of the Company entitled to vote generally in the
election of directors by any person or by any persons acting in
concert, or approval by the stockholders of the Company of any
transaction which would result in such an acquisition;
(iii) a complete liquidation or dissolution of the Company, or
approval by the stockholders of the Company of a plan for such
liquidation or dissolution; or
(iv) the occurrence of any event if, immediately following
such event, at least 50% of the members of the board of directors of
the Company do not belong to any of the following groups:
(A) individuals who were members of the Board
of the Company on January 1, 1999; or
(B) individuals who first became members of the
Board of the Company after January 1, 1999 either:
(I) upon election to serve as a member of
the Board of Directors of the Company by affirmative
vote of three-quarters of the members of such Board
of Directors, or of a nominating committee thereof,
in office at the time of such first election; or
(II) upon election by the stockholders of
the Company to serve as a member of the Board of
Directors of the Company, but only if nominated for
election by affirmative vote of three-quarters of the
members of the Board of Directors of the Company, or
of a nominating committee thereof, in office at the
time of such first nomination;
<PAGE>
PROVIDED, HOWEVER, that such individual's election or
nomination did not result from an actual or threatened
election contest (within the meaning of Rule 14a-11 of
Regulation 14A promulgated under the Exchange Act) or other
actual or threatened solicitation of proxies or consents
(within the meaning of Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act) other than by or on behalf
of the Board of the Company; or
(v) any event which would be described in section 23(a)(i),
(ii), (iii) or (iv) if the name "Republic Security Bank" were
substituted for the term "Company" therein.
In no event, however, shall a Change of Control be deemed to have
occurred as a result of any acquisition of securities or assets of the
Company, Republic Security Bank, or a subsidiary of either of them, by
the Company, Republic Security Bank, or a subsidiary of either of them,
or by any employee benefit plan maintained by any of them. For purposes
of this section 23(a), the term "person" shall have the meaning
assigned to it under sections 13(d)(3) or 14(d)(2) of the Exchange Act.
(b) Notwithstanding anything in the Plan to the contrary, upon
the occurrence of a Change of Control, unless the instrument
establishing the terms and conditions of a Grant expressly provides
otherwise: (i) all outstanding Grants which are Options or SARs shall
be immediately vested and exercisable without further condition; (ii)
all outstanding Grants which are Restricted Stock shall be immediately
vested and all future restrictions thereon shall be removed; (iii) all
Grants which are Phantom Stock shall be settled by delivery of shares
of Common Stock or a monetary payment made within three business days
after the occurrence of the Change of Control, with the amount of any
monetary payment determined by reference to the Fair Market Value of
Common Stock on the date of occurrence of the Change of Control; (iv)
all Grants which are Performance Units shall be settled by monetary
payment made within three business days after the occurrence of the
Change of Control (without proration to reflect settlement prior to the
end of the Performance Period), and the amount of such payment shall be
determined on the basis of the extent of achievement of the prescribed
Performance Goals, adjusted as the Committee in its discretion
determines to be appropriate to reflect the portion of the Performance
Period that has elapsed through the date of the Change of Control; and
(v) all Grants which are Performance Shares shall be settled by
delivery of Common Stock or monetary payment made within three business
days after the occurrence of the Change of Control (without proration
to reflect settlement prior to the end of the Performance Period), and
the amount of any monetary payment shall be determined on the basis of
the Fair Market Value of Common Stock on the date of occurrence of the
Change of Control and extent of achievement of the prescribed
Performance Goals, adjusted as the Committee in its discretion
determines to be appropriate to reflect the portion of the Performance
Period that has elapsed through the date of the Change f Control. To
the extent that a Change of Control occurs within three business days
of the end of a calendar year, the Company will use its best efforts to
make all payment and deliver all Shares required to be made and
delivered under this section 23 before the close of such calendar year.
2. SECTION 5(E)(IV). Effective as of January 1, 1999, Section 5(e)(iv) shall be
amended to add the words "Incentive Stock" before the word "Option" the first
time that the word "Option" appears in such section.
IN WITNESS WHEREOF, Republic Security Financial Corporation has caused
this instrument to be executed as of this ___ day of _________, 1999.
REPUBLIC SECURITY FINANCIAL CORPORATION
By:
------------------------------------
NAME:
TITLE:
EXHIBIT 10.19 FORM OF DIRECTORS RETIREMENT AGREEMENT BETWEEN REPUBLIC
SECURITY BANK AND EACH OF PAULA BERLINER, THOMAS F. CARNEY,
JOSEPH D. CESAROTTI, MARY ANNA FOWLER, H. GEARL GORE, EUGENE
W. HUGHES, THOMAS J. LANGAN, JR., LENNART E. LINDAHL, JR.,
MARY A. MCCARTY, CAROL R. OWEN, RICHARD C. RATHKE, WILLIAM F.
SPITZNAGEL, BRUCE E. WIITA AND WILLIAM WOLFSON (FILED
HEREWITH)
- -------------------------------------------------------------------------------
REPUBLIC SECURITY BANK
DIRECTOR RETIREMENT AGREEMENT
THIS AGREEMENT is made and entered into as of the__________, by and
between REPUBLIC SECURITY BANK, a Florida bank (the "Bank"), and
________________ (the "Director").
INTRODUCTION
To encourage the Director to remain a member of the Bank's Board of
Directors, the Bank is willing to provide retirement benefits to the Director
The Bank will pay the retirement benefits from its general assets according to
the terms of this Agreement.
AGREEMENT
The Director and the Bank agree as follows:
ARTICLE I
DEFINITIONS
1.1 DEFINITIONS. Whenever used in this Agreement, the following
words and phrases shall have the meanings specified:
1.1.1 "CHANGE OF CONTROL " means the occurrence of any of the
following: (1) the merger or consolidation by virtue of which RSFC or the Bank
shall not be the surviving entity; (2) the sale of substantially all the assets
of RSFC or the Bank; or (3) the change of control of RSFC or the Bank such that
any person (as defined in Section 13(d)(3) and 14(d)(2) of the Securities
Exchange Act of 1934, as amended) becomes a beneficial owner, directly or
indirectly, of securities representing 25% or more of the combined voting power
of the then outstanding securities of either RSFC or the Bank.
1.1.2 "CODE" means the Internal Revenue Code of l986, as
amended.
1.1.3 "DISABILITY" means the Director suffering a sickness,
accident or injury which, in the judgment of a physician satisfactory to the
Bank, prevents the Director from performing substantially all of the Director's
normal duties as a director of the Bank. As a condition to any disability
benefits hereunder, the Bank may require the Director to submit to such physical
or mental evaluations and tests as the Bank's Board of Directors deems
appropriate.
1.1.4 "EARLY RETIREMENT DATE" means the date of the Director's
Termination of Service when it occurs before the Normal Retirement Age.
1.1.5 "FINAL FEES" means the annual retainer and monthly board
of directors meeting fees (including committee meetings) which the Director
would have received from the Bank and RSFC in the year the Director terminates
service had the Director been employed for the entire calendar year. Committee
meeting fees shall be based on the number of meetings for such committee in the
preceding calendar year.
1.1.6 "NORMAL RETIREMENT AGE" means the Director's 65th
birthday.
1.1.7 "NORMAL RETIREMENT DATE" means the later of the Normal
Retirement Age or Termination of Service.
1.1.8 "PLAN YEAR" means the 12 month period beginning
_____________, and ending 12 consecutive months later. Plan Years shall be
counted beginning on ____________.
1.1.9 "PROJECTED RETIREMENT BENEFIT" means the benefit amount
that the Director would have been entitled to had the Director reached Normal
Retirement Age and the Final Fees increased at an annual rate of 8 % from the
date of this agreement.
1.1.10 "RSFC" means Republic Security Financial Corporation, a
Florida corporation, the holding company of the Bank.
1.1.11 "TERMINATION OF SERVICE" means the Director ceasing to
be a member of the Bank's Board of Directors for any reason whatsoever.
1.1.12 "YEARS OF SERVICE" means the total number of years that
the Director has served on the Bank's Board of Directors. The Director shall be
credited with one year of service for each calendar year in which the Director
served on the Board of Directors on the first and last day of the calendar year
except that: (i) for the Directors initial service year, the Director shall be
credited with a Year of Service as long as the Director is serving on the Board
of Director's the last day of the calendar year; and (ii) for the Directors last
year of service, the Director will be credited with a Year of Service if the
Director terminates service on or after the Normal Retirement Age.
<PAGE>
ARTICLE 2
LIFETIME BENEFITS
2.1 NORMAL RETIREMENT BENEFIT. Upon Termination of Service on
or after the Normal Retirement Age for reasons other than death, the Bank shall
pay to the Director the benefit described in this Section 2. 1.
2.1.1 AMOUNT OF BENEFIT. The annual benefit under this Section
2.1 shall be equal to the Final Fees multiplied by the lesser of (i)Years of
Service multiplied by 5% or (ii) 75%.
2.1.2 PAYMENT OF BENEFIT. The Bank shall pay the annual
benefit in 12 equal monthly installments payable on the first day of each month
commencing on the month immediately following the Normal Retirement Date and
continuing for 179 additional months. The Bank, in its sole and absolute
discretion, may pay the present value of the remaining annual installments in a
lump sum, at any time, using an 8% discount rate.
2.1.3 BENEFIT INCREASES. Commencing on the first anniversary
of the first benefit payment, and continuing on each subsequent anniversary, the
Bank's Board of Directors, in its sole discretion, may increase the benefit.
2.2 EARLY RETIREMENT BENEFIT. Upon Termination of Service
prior to the Normal Retirement Age for reasons other than death, Change of
Control -or Disability, the Bank shall pay to the Director the benefit described
in this Section 2.2.
2.2.1 AMOUNT OF BENEFIT. The annual benefit under this Section
2.2 is the annual benefit that would have been paid to the Director under
Section 2.1 as if the Director's Early Retirement Date were the Normal
Retirement Date except that such annual benefit amount shall be subject to the
following vesting schedule.
PLAN YEAR VESTED AMOUNT
1 20%
2 40%
3 60%
4 80%
5 100%
2.2.2 PAYMENT OF BENEFIT. The annual benefit shall be paid by
the Bank in 12 equal monthly installments payable on the first day of each month
commencing on the month following the Early Retirement Date and continuing for
179 additional months. The Bank, in its sole and absolute discretion, may pay
the present value of the remaining annual installments in a lump sum, at any
time, using an 8 % discount rate.
2.2.3 BENEFIT INCREASES. Benefit payments may be increased as
provided in Section 2.1.3.
2.3 DISABILITY BENEFIT. Upon a Disability prior to the Normal Retirement
Age, the Bank shall pay to the Director the benefit described in this Section
2.3 in lieu of all other lifetime benefits under this Article 2 and death
benefits under Article 3.
2.3.1 AMOUNT OF BENEFIT. The annual benefit under this Section
2.3 shall be calculated as 75% multiplied by the Final Fees in the calendar year
of the Director's Termination of Service.
2.3.2 PAYMENT OF BENEFIT. The Bank shall pay the benefit to the
Director on the first day of each month commencing with the month following the
Director's Termination of Service and continuing for 179 additional months. The
Bank, in its sole and absolute discretion, may pay the present value of the
remaining annual installments in a lump sum, at any time, using an 8 % discount
rate.
2.3.3 BENEFIT INCREASES. Benefit payments may be increased as
provided in Section 2.1.3.
2.4 CHANGE OF CONTROL BENEFIT. Upon a Change of Control, the Bank shall
pay the Director the benefit described in this Section 2.4 in lieu of any other
benefits under this Agreement.
2.4.1 AMOUNT OF BENEFIT. The annual benefit under this Section
2.4 shall be calculated as 75% multiplied by the Final Fees in the calendar year
of the Director's Termination of Service.
2.4.2 PAYMENT OF BENEFIT. The Bank shall pay the benefit to the
Director on the first day of each month commencing with the month following the
Director's Termination of Service and continuing for 179 additional months. The
Bank shall, at any time thereafter upon demand by the Director, pay the present
value of the remaining annual installments in a lump sum using an 8 % discount
rate.
ARTICLE 3
DEATH BENEFITS
3.1 DEATH DURING ACTIVE SERVICE. IF the Director dies while in the
active service of the Bank, the Bank shall pay to the Director's beneficiary the
benefit described in this Section 3. 1 in lieu of all other benefits under this
Agreement.
3.1.1 AMOUNT OF BENEFIT. The annual benefit under Section 3.1
shall be the Projected Retirement Benefit.
3.1.2 PAYMENT OF BENEFIT. The annual benefit shall be paid by
the Bank in 12 equal monthly installments payable on the first day of each month
commencing on the month following the Death of the Director and continuing for
179 additional months.
<PAGE>
3.1.3 BENEFIT INCREASES. Benefit payments shall be increased as
provided in Section 2. 1.3.
3.2 DEATH DURING BENEFIT PERIOD. If the Director dies after benefit
payments have commenced under this Agreement but before receiving all such
payments, the Bank shall pay the remaining benefits to the Director's
beneficiary at the same time and in the same manner they would have been paid to
the Director had the Director lived.
ARTICLE 4
BENEFICIARIES
4.1 BENEFICIARY DESIGNATIONS. The Director shall designate a beneficiary
by filing a written designation with the Bank. The Director may revoke or modify
the designation at any time by filing a new designation. However, designations
will only be effective if signed by the Director and accepted by the Bank during
the Director's lifetime. The Director's beneficiary designation shall be deemed
automatically revoked if the beneficiary predeceases the Director, or if the
Director names a spouse as beneficiary and the marriage is subsequently
dissolved. If the Director dies without a valid beneficiary designation, all
payments shall be made to the Director's surviving spouse, if any, and if none,
to the Director's surviving children and the descendants of any deceased child
by right of representation, and if no children or descendants survive, to the
Director's estate.
4.2 FACILITY OF PAYMENT. If a benefit is payable to a minor, to a person
declared incompetent, or to a person incapable of handling the disposition of
his or her property, the Bank may pay such benefit to the guardian, legal
representative or person having the care or custody of such minor, incompetent
person or incapable person. The Bank may require proof of incompetence, minority
or guardianship as it may deem appropriate prior to distribution of the benefit.
Such distribution shall completely discharge the Bank from all liability with
respect to such benefit.
ARTICLE 5
GENERAL LIMITATIONS
Notwithstanding any provision of this Agreement to the contrary, no
benefits shall be payable if the Director comments suicide within two years
after the date of this Agreement, or if the Director has made any material
misstatement of fact on any application for life insurance purchased by the
Bank.
ARTICLE 6
CLAIMS AND REVIEW PROCEDURES
6.1 CLAIMS PROCEDURE. The Bank shall notify the Director or the
Director's beneficiary in writing, within ninety (90) days of his or her written
application for benefits, of his or her eligibility or ineligibility for
benefits under the Agreement. If the Bank determines that the Director or the
Directors beneficiary is not eligible for benefits or full benefits, the notice
shall set forth (I) the specific reasons for such denial, (ii) a specific
reference to the provisions of the Agreement on which the denial is based, (iii)
a description of any additional information or material necessary for the
claimant to perfect his or her claim, and a description of why it is needed, and
(iv) an explanation of the Agreement's claims review procedure and other
appropriate information as to the steps to be taken if the Director or the
Director's beneficiary wishes to have the claim reviewed. If the Bank determines
that there are special circumstances requiring additional time to make a
decision, the Bank shall notify the Director or the Director's beneficiary of
the special circumstances and the date by which a decision is expected to be
made, and may extend the time for up to an additional 90-day period.
6.2 REVIEW PROCEDURE. If the Director or the Director's beneficiary is
determined by the Bank not to be eligible for benefits, or if the Director or
the Director's beneficiary believes that he or she is entitled to greater or
different benefits, the Director or the Director's beneficiary shall have the
opportunity to have such claim reviewed by the Bank by filing a petition for
review with the Bank within sixty (60) days after receipt of the notice issued
by the Bank. Said petition shall state the specific reasons which the Director
or the Directors beneficiary believes entitle him or her to benefits or to
greater or different benefits. Within sixty (60) days after receipt by the Bank
of the petition, the Bank shall afford the Director or the Director's
beneficiary (and counsel, if any) an opportunity to present his or her position
to the Bank orally or in writing, and the Director or the Director's beneficiary
(or counsel) shall have the right to review the pertinent documents. The Bank
shall notify the Director or the Director's beneficiary of its decision in
writing within the 60-day period, stating specifically the basis of its
decision, written in a manner calculated to be understood by the Director or the
Director's beneficiary and the specific provisions of the Agreement on which the
decision is based. If, because of the need for a hearing, the 60-day period is
not sufficient, the decision may be deferred for up to another 60-day period at
the election of the Bank, but notice of this deferral shall be given to the
Director or the Director's beneficiary.
ARTICLE 7
AMENDMENTS AND TERMINATION
This Agreement may be amended or terminated only by a written agreement
signed by the Bank and the Director.
ARTICLE 8
MISCELLANEOUS
8.1 BINDING EFFECT. This Agreement shall bind the Director and the
Bank, and their beneficiaries, survivors, executors, administrators and
transferees.
8.2 NO GUARANTEE OF EMPLOYMENT. This Agreement is not an employment
policy or contract. It does not give the Director the right to remain a director
of the Bank.
8.3 NON-TRANSFERABILITY. Benefits under this Agreement cannot be sold,
transferred, assigned, pledged, attached or encumbered in any manner.
8.4 TAX WITHHOLDING. The Bank shall withhold any taxes that are required
to be withheld from the benefits provided under this Agreement.
<PAGE>
8.5 APPLICABLE LAW. The Agreement and all rights hereunder shall be
governed by the laws of State of Florida.
8.6 UNFUNDED ARRANGEMENT. The Director and beneficiary are general
unsecured creditors of the Bank for the payment of benefits under this
Agreement. The benefits represent the mere promise by the Bank to pay such
benefits. The rights to benefits are not subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or
garnishment by creditors. Any insurance on the Directors life is a general asset
of the Bank to which the Director and beneficiary have no preferred or secured
claim.
8.7 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the Bank and the Director as to the subject matter hereof No rights are
granted to the Director by virtue of this Agreement other than those
specifically set forth herein.
8.8 ADMINISTRATION. The Bank shall have powers which are necessary to
administer this Agreement, including but not limited to:
8.8.1 Interpreting the provisions of the Agreement;
8.8.2 Establishing and revising the method of accounting for
the Agreement;
8.8.3 Maintaining a record of benefit payments; and
8.8.4 Establishing rules and prescribing any forms necessary or
desirable to administer this Agreement.
IN WITNESS WHEREOF, the Director and a duly authorized Bank officer have
signed this Agreement.
REPUBLIC SECURITY BANK
By:
------------------
Title:
------------------
DIRECTOR:
--------------------------
EXHIBIT 21 SUBSIDIARY INFORMATION
- -------------------------------------------------------------------------------
SUBSIDIARIES OF REGISTRANT
1. Republic Security Bank, a State Chartered Commercial Bank.
2. Republic Brokerage Corporation, a Florida corporation.
3. Republic Security Insurance Agency.
EXHIBIT 23 CONSENT OF ERNST & YOUNG LLP
- -------------------------------------------------------------------------------
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in the Registration
Statement (Form S-8 No. 333-02307) pertaining to the Employees' Stock Purchase
Plan, the Registration Statement (Form S-8 No. 333-33213) pertaining to the 1997
Performance Incentive Plan, the Registration Statement (Form S-8 No. 333- 33161)
pertaining to the Director and Officer Purchase Rights Plans and the
Registration Statement (Form S-3 No. 333-02303) of Republic Security Financial
Corporation and subsidiaries and in the related Prospectus of our report dated
February 16, 1998, except for the first and second paragraphs of Note 20 as to
which the dates are March 9, 1998 and March 19, 1998, respectively, with respect
to the consolidated financial statements of Republic Security Financial
Corporation and subsidiaries included in this Annual Report (Form 10-K) for the
year ended December 31, 1997.
Ernst & Young LLP
West Palm Beach, Florida
March 19, 1998
<TABLE> <S> <C>
<ARTICLE> 9
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<S> <C> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997 DEC-31-1996
<PERIOD-START> JAN-01-1998 JAN-01-1997 JAN-01-1996
<PERIOD-END> DEC-31-1998 DEC-31-1997 DEC-31-1996
<CASH> 46,575 81,990 0
<INT-BEARING-DEPOSITS> 114,471 154,279 0
<FED-FUNDS-SOLD> 1,120 7,665 0
<TRADING-ASSETS> 0 0 0
<INVESTMENTS-HELD-FOR-SALE> 722,913 397,558 0
<INVESTMENTS-CARRYING> 6,363 238,568 0
<INVESTMENTS-MARKET> 6,422 241,790 0
<LOANS> 2,001,343 1,900,336 0
<ALLOWANCE> 26,043 13,146 0
<TOTAL-ASSETS> 3,007,732 2,899,656 0
<DEPOSITS> 2,304,855 2,099,281 0
<SHORT-TERM> 171,144 323,389 0
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0 0 0
0 10,286 0
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<TOTAL-LIABILITIES-AND-EQUITY> 3,007,732 2,899,656 0
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<INTEREST-INVEST> 50,810 41,412 29,957
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<INTEREST-TOTAL> 204,656 194,114 174,871
<INTEREST-DEPOSIT> 92,637 86,603 76,231
<INTEREST-EXPENSE> 118,526 104,536 89,884
<INTEREST-INCOME-NET> 86,130 89,578 84,987
<LOAN-LOSSES> 22,794 5,048 16,724
<SECURITIES-GAINS> 3,139 1,524 688
<EXPENSE-OTHER> 103,306 84,289 76,326
<INCOME-PRETAX> (14,701) 18,681 11,518
<INCOME-PRE-EXTRAORDINARY> (14,701) 18,681 11,518
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