<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
Hamilton Bancorp Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
(LOGO) HAMILTON BANCORP INC.
April 30, 1998
Dear Stockholder:
On behalf of the Board of Directors, I am pleased to extend to you an
invitation to attend the Annual Meeting of Stockholders of Hamilton Bancorp Inc.
to be held in Miami, Florida, on Friday, June 12, 1998, beginning at 9:30 a.m.,
Eastern Daylight Time.
The notice of meeting and proxy statement which appear on the following
pages contain information about matters which are to be considered at the
meeting. During the meeting we will also review operation results for the past
year and present other information concerning Hamilton Bancorp Inc. and its
subsidiary, Hamilton Bank, N.A. The meeting should be interesting and
informative, and we hope you will be able to attend.
In order to ensure that your shares are voted at the meeting, please
complete, date, sign and return the enclosed proxy in the enclosed postage-paid
envelope at your earliest convenience. Every stockholder's vote is important,
whether you own a few shares or many.
Sincerely yours,
Eduardo A. Masferrer
Chairman and Chief Executive Officer
3750 N.W. 87th Avenue, Miami, Florida 33178
<PAGE> 3
HAMILTON BANCORP INC.
3750 N.W. 87th Avenue, Miami, Florida 33178
NOTICE OF ANNUAL MEETING
TO BE HELD ON JUNE 12, 1998
April 30, 1998
The Annual Meeting of Stockholders (the "Meeting") of Hamilton Bancorp
Inc. (the "Corporation") will be held at the offices of the Corporation at 3750
N.W. 87th Avenue, Miami, Florida, on Friday, June 12, 1998 at 9:30 a.m., Eastern
Daylight Time, for the purpose of considering and acting on the following
matters:
1. a proposal to elect the six nominees named in the attached
proxy statement as directors of the Corporation, in each case
until their successors are duly elected and qualified;
2. a proposal to approve the Corporation's 1998 Executive
Incentive Compensation Plan; and
3. such other business as may properly come before the Meeting or
any adjournments thereof.
All holders of record of the Corporation's Common Stock on the books of
the Corporation at the close of business on April 20, 1998, are entitled to
notice of and to vote at the Meeting.
By Order of the Board of Directors.
J. Reid Bingham
Secretary
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, DATE
AND SIGN THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED POSTAGE-PAID
ENVELOPE TO ENSURE THAT YOUR SHARES ARE VOTED AT THE MEETING. YOUR VOTE IS
IMPORTANT, WHETHER YOU OWN A FEW SHARES OR MANY.
<PAGE> 4
HAMILTON BANCORP INC.
3750 N.W. 87th Avenue, Miami, Florida 33178
----------------------
PROXY STATEMENT
----------------------
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors of
Hamilton Bancorp Inc. (the "Corporation") in connection with the Annual Meeting
of Stockholders of the Corporation and any adjournments or postponements thereof
(the "Meeting") to be held at the offices of the Corporation at 3750 N.W. 87th
Avenue, Miami, Florida, on June 12, 1998, at 9:30 a.m., Eastern Daylight Time.
The accompanying form of proxy is for use at the Meeting if a stockholder does
not attend the Meeting in person or wishes to have his shares voted by proxy
even if he attends the Meeting. The proxy may be revoked by the person giving it
at any time before it is exercised, by such person (i) giving written notice of
such revocation to the Secretary of the Corporation, (ii) submitting a proxy
having a later date or (iii) appearing at the Meeting and electing to vote in
person. All shares represented by valid proxies received pursuant to this
solicitation and not revoked before they are exercised will be voted in the
manner specified thereon. If no specification is made, proxies will be voted in
favor of approval of Proposals 1 and 2 described below. This proxy statement and
the enclosed proxy and 1997 Annual Report to Stockholders (the "Annual Report")
are being first mailed to the Corporation's stockholders entitled to notice of
and to vote at the Meeting, on or about April 30, 1998. The Annual Report does
not constitute "soliciting material" and is not to be deemed "filed" with the
Securities and Exchange Commission (the "Commission").
The Corporation will bear the cost of preparing this proxy statement
and of soliciting proxies in the enclosed form. Proxies may be solicited by
employees of the Corporation and its subsidiaries, either personally, by letter
or by telephone. Such employees will not be specifically compensated for
soliciting such proxies.
VOTING SECURITIES AND PRINCIPAL HOLDERS
As of April 20, 1998 (the "Record Date"), the Corporation had
outstanding 9,942,437 shares of common stock, par value $.01 per share ("Common
Stock"). Each holder of Common Stock will have the right to one vote for each
share of such stock standing in such holder's name on the books of the
Corporation as of the close of business on the Record Date with respect to each
matter voted on at the Meeting. The Corporation is not aware of any stockholder
who was the beneficial owner of more than 5% of the outstanding shares of Common
Stock on the Record Date except for (i) Mr. Eduardo A. Masferrer who reports
beneficial ownership of 1,122,628 shares of Common Stock or 11.3% of the
outstanding shares of Common Stock and (ii) Provident Investment Counsel, Inc.
<PAGE> 5
which reported on a Schedule 13G filed with the Commission on February 10, 1998
that it beneficially owned at December 31, 1997 816,312 shares of Common Stock
or 8.2% of the outstanding shares of Common Stock.
The presence in person or by proxy of a majority of the shares of
Common Stock outstanding on the Record Date will constitute a quorum for
purposes of conducting business at the Meeting. For purposes of determining the
votes cast with respect to any matter presented for consideration at the Meeting
only those votes cast "FOR" or "AGAINST" are included. Abstentions and broker
non-votes (i.e., shares held by brokers on behalf of their customers, which may
not be voted on certain matters because the brokers have not received specific
voting instructions from their customers with respect to such matters) will be
counted solely for the purpose of determining whether a quorum is present.
PROPOSAL 1. ELECTION OF DIRECTORS
INFORMATION AS TO DIRECTORS AND EXECUTIVE OFFICERS
Directors of the Corporation will be elected by a plurality of the
votes, represented in person or by proxy, cast at the Annual Meeting. Shares
cannot be voted for a greater number of persons than the number of nominees
named herein. Should any nominee be unavailable for election by reason of death
or other unexpected occurrence, the enclosed proxy, to the extent permitted by
applicable law, may be voted with discretionary authority in connection with the
nomination by the Board of Directors and election of any substitute nominee. In
addition, the Board may reduce the number of directors to be elected at the
Meeting.
The Board of Directors recommends that the stockholders elect the six
(6) nominees for directors listed below as directors of the Corporation, in each
case until their successors are duly elected and qualified.
PROXIES, UNLESS INDICATED TO THE CONTRARY, WILL BE VOTED "FOR" THE
ELECTION OF THE SIX (6) NOMINEES NAMED BELOW, IN EACH CASE UNTIL THEIR
SUCCESSORS ARE DULY ELECTED AND QUALIFIED.
Listed below are the names of the six nominees to serve as directors,
together with their ages, their principal occupations during the past five
years, any other directorships they hold with companies having securities
registered under the Securities Exchange Act of 1934 (the "1934 Act") and the
years during which their current consecutive terms as directors of the
Corporation first commenced. As of such date, no director beneficially owned
more than 5% of the outstanding shares of Common Stock except for Mr. Masferrer
who reports beneficial ownership of 11.3% of the outstanding shares of Common
Stock. Also listed below are the other Executive Officers of the Corporation,
together with their ages, their principal occupations during the past five years
and any other directorships they hold with companies having securities
registered under the 1934 Act.
2
<PAGE> 6
DIRECTORS' NAME, AGE, PRINCIPAL OCCUPATION AND CERTAIN OTHER DIRECTORSHIPS
Eduardo A. Masferrer, age 49 Director Since 1988
MR. MASFERRER has served as the Corporation's Chairman of the Board
since 1988 and as its President and Chief Executive Officer since 1990.
Mr. Masferrer has also served as a director of Hamilton Bank, N.A. (the
"Bank") since his election in 1988, as Chief Executive Officer of the
Bank since 1990 and as President of the Bank from 1990 to 1997. Mr.
Masferrer is the husband of Ms. Maura A. Acosta.
Maura A. Acosta, age 48 Director Since 1997
MS. ACOSTA has served as an Executive Vice President of the Corporation
since 1997 and as First Vice President from 1993 to 1997. Ms. Acosta
has also served as an Executive Vice President of the Bank since 1993
and as a Senior Vice President of the Bank from 1988 to 1993. Ms.
Acosta is the wife of Mr. Eduardo A. Masferrer.
William Alexander, age 74 Director Since 1997
MR. ALEXANDER has served as a director and Vice Chairman of the Bank
since his election in 1988.
William Bickford, age 55 Director Since 1997
MR. BICKFORD is a civil engineer and, since prior to 1993, has served
as the President of Consulta, a construction and engineering firm
located in Guatemala, as the President of Tritech, a distributor of
industrial products in Central America and Mexico, and as the President
of Precon, a construction and engineering firm located in Guatemala.
Thomas F. Gaffney, age 65 Director Since 1997
MR. GAFFNEY currently serves as a director of various non-United States
corporations and investment funds. From prior to 1993 to 1995, Mr.
Gaffney served as the London general manager of Bankgesellshaft, Berlin
and Landesbank, Berlin.
Virgilio E. Sosa, Jr., age 41 Director Since 1997
MR. SOSA is an architect and, since prior to 1993, has served as the
President of Master Builders, Inc., a Panamanian construction company,
and as the President of IDG, Inc., a Panamanian real estate holding
company.
OTHER EXECUTIVE OFFICERS NAME, AGE, PRINCIPAL OCCUPATION AND CERTAIN OTHER
DIRECTORSHIPS
Juan Carlos Bernace, age 37
MR. BERNACE has served as an Executive Vice President of the
Corporation since 1997 and as President, Senior Lending Officer and a
Director of the Bank since November 1997, as Executive Vice President
of the Bank from 1996 to 1997 and as Senior Vice President-Manager of
Corporate Trade Finance of the Bank from 1993 to 1996. In
3
<PAGE> 7
addition to the foregoing, during the period from 1989 through 1993,
Mr. Bernace held various positions with the Bank, including that of
Vice President.
J. Reid Bingham, age 52
MR. BINGHAM has served as General Counsel and Secretary of the
Corporation and the Bank since 1996. Prior to joining the Corporation,
Mr. Bingham was a partner in the law firms of Concepcion, Sexton,
Bingham & Urdaneta from 1994 to 1996 and Kirkpatrick & Lockhart from
prior to 1993 to 1994.
Maria Ferrer-Diaz, age 34
MS. FERRER-DIAZ has served as Treasurer of the Corporation since 1995
and as Senior Vice President - Finance of the Corporation since 1997.
Ms. Diaz has also served as a Senior Vice President of the Bank since
1995 and as a Vice President of the Bank from 1993 to 1995.
Guillermo Gomez, age 39
MR. GOMEZ has served as Senior Vice President - Corporate Lending - of
the Bank since January 1998. From 1996 to 1998 Mr. Gomez was Senior
Vice President - Corporate and Private Lending and Cash Management at
City National Bank of Florida and from prior to 1993 to 1996 Team
Leader in Corporate Lending at Intercontinental Bank, Miami, Florida.
John M. R. Jacobs, age 48
MR. JACOBS has served as a Senior Vice President - Commodities/Banking
Relations of the Bank since January 1998 and as Vice President -
Commodities Group of the Bank from January 1997 to January 1998. From
prior to 1993 to 1997 Mr. Jacobs was Chief Financial Officer of Amerop
Sugar Corporation, a sugar trader.
Adolfo Martinez, age 47
MR. MARTINEZ has served as a Senior Vice President - Correspondent
Banking and Structuring and Syndications (formerly Capital Markets) of
the Bank since 1991. Prior to 1991 Mr. Martinez served as Vice
President and Head of Corporate Finance with the First National Bank of
Chicago's representative office in Mexico City.
Hector F. Ramirez, age 47
MR. RAMIREZ has served as a Senior Vice President - Structured Finance
of the Bank since March 1998 and as Vice President - Structured Finance
Group of the Bank from 1996 to March 1998. From 1994 to 1996 Mr.
Ramirez was Regional Manager for GE Capital Corp. and from prior to
1993 to 1994 Vice President and District Manager for Citibank, Florida.
Sergio Sotolongo, age 45
MR. SOTOLONGO has served as Senior Vice President-International Banking
Services
4
<PAGE> 8
of the Bank since 1996. From 1993 to 1996 Mr. Sotolongo served as a
Senior Vice President and Deputy Manager of the international division
of Popular Bank of South Florida.
John F. Stumpff, age 50
MR. STUMPFF has served as Senior Vice President-Administration of the
Bank since 1993. Prior to 1993 Mr. Stumpff served in the United States
Coast Guard, attaining the rank of Captain.
OWNERSHIP OF EQUITY SECURITIES
The following table sets forth information concerning the beneficial
ownership of the Common Stock of the Corporation as of March 15, 1998 by (i)
each director, (ii) each person known to the Corporation to be the beneficial
owner of more than 5% of its outstanding Common Stock, (iii) the Chief Executive
Officer and the other executive officers listed in the summary compensation
table and (iv) all directors and executive officers of the Corporation as a
group.
<TABLE>
<CAPTION>
Amount and Nature of Percentage of Outstanding
Name of Beneficial Owner Beneficial Ownership Shares Owned
- ------------------------ -------------------- ------------
<S> <C> <C>
Eduardo A. Masferrer.................... 1,122,628 (1) 11.3%
Maura A. Acosta......................... 66,937 (2) *
William Alexander ...................... 53,542 (3) *
William Bickford ....................... 324,019 (4) 3.3%
Thomas F. Gaffney ...................... 1,000 *
Virgilio E. Sosa, Jr. .................. 266,918 (5) 2.7%
Juan Carlos Bernace..................... 50,150 (6) *
Adolfo Martinez ........................ 16,250 (7) *
J. Reid Bingham......................... 25,800 (8) *
All Directors and executive officers
of the Corporation as a group,
including those listed above
(14 persons) 1,936,235 (9) 19.2%
Provident Investment Counsel, Inc.
300 N. Lake Ave.
Pasadena, CA 91101 816,312 (10) 8.2%
</TABLE>
- ------------------------
* Less than 1%
5
<PAGE> 9
(1) Includes (i) 17,687 shares of Common Stock held by Mr. Masferrer and
his wife, Maura A. Acosta, as joint tenants with rights of
survivorship, (ii) 48,750 shares of Common Stock issuable upon the
exercise of options granted to Mr. Masferrer under the 1993 Stock
Option Plan for Key Employees and Directors (the A1993 Plan") and (iii)
403,000 shares of Common Stock held in trusts established by Mr.
Masferrer for the benefit of Mr. Masferrer's and Ms. Acosta's children.
Mr. Masferrer disclaims beneficial interest in the 403,000 shares of
Common Stock held in foregoing trusts established by him, but is
reporting such shares in this proxy in an over abundance of caution
since the current trustee of the trusts is Mr. Masferrer's sister and
some of the beneficiaries of the trusts are minor children living in
Mr. Masferrer's household.
(2) Includes (i) 17,687 shares of Common Stock held by Ms. Acosta and her
husband, Eduardo A. Masferrer, as joint tenants with rights of
survivorship and (ii) 48,750 shares of Common Stock issuable upon the
exercise of options granted to Ms. Acosta under the 1993 Plan. Does not
include 1,104,941 shares of Common Stock reported as beneficially owned
by Eduardo A. Masferrer or 19,163 shares of Common Stock issuable upon
the exercise of options granted to Ms. Acosta under the 1993 Plan,
which options are not currently exercisable.
(3) Includes 48,750 shares of Common Stock issuable upon the exercise of
options granted to Mr. Alexander under the 1993 Plan.
(4) Represents 324,019 shares of Common Stock held by Iberoamerican
Financial Corporation, a Panamanian corporation, of which Mr. Bickford
is a significant shareholder.
(5) Includes 144,509 shares of Common Stock held by VES Ventures Inc., a
Panamanian corporation, of which Mr. Sosa is principal shareholder.
(6) Includes 48,750 shares of Common Stock issuable upon the exercise of
options granted to Mr. Bernace under the 1993 Plan. Does not include
48,396 shares of Common Stock issuable upon the exercise of options
granted to Mr. Bernace under the 1993 Plan, which options are not
currently exercisable.
(7) Represents 16,250 shares of Common Stock issuable upon the exercise of
options granted to Mr. Martinez under the 1993 Plan. Does not include
11,484 shares of Common Stock issuable upon the exercise of options
granted to Mr. Martinez under the 1993 Plan, which options are not
currently exercisable.
(8) Includes 19,500 shares of Common Stock issuable upon the exercise of
options granted to Mr. Bingham under the 1993 Plan. Does not include
12,253 shares of Common Stock issuable upon the exercise of options
granted to Mr. Bingham under the 1993 Plan, which options are not
currently exercisable.
(9) Includes an aggregate of 250,078 shares of Common Stock issuable upon
the exercise of
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<PAGE> 10
options granted under the 1993 Plan. Does not include an aggregate of
253,500 shares of Common Stock issuable upon the exercise of options
granted under the 1993 Plan, which options are not currently
exercisable. See footnotes (1) - (8) above.
(10) According to a Schedule 13G filed with the Commission on February 10,
1998 by Provident Investment Counsel, Inc., such entity beneficially
owned 816,312 shares of Common Stock as of December 31, 1997, had the
sole power to dispose of such shares, had the sole power to vote
760,112 of such shares and no power to vote 56,200 of such shares.
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES
AUDIT COMMITTEE. The Audit Committee of the Board of Directors held one
meeting in 1997. The principal responsibilities of the Committee are to ensure
that the Board of Directors receives objective information regarding policies,
procedures and activities of the Corporation with respect to auditing,
accounting, internal accounting controls, financial reporting, regulatory
matters and such other activities of the Corporation as may be directed by the
Board of Directors. The following directors are the current members of the Audit
Committee: Messrs. William Bickford, Thomas F. Gaffney and Virgilio E. Sosa, Jr.
COMPENSATION COMMITTEE. The Compensation Committee of the Board of
Directors held one meeting in 1997. The Compensation Committee is authorized,
among other things, to review and make recommendations to the Board of Directors
regarding employee compensation, to administer various employee benefit plans
and to monitor employment conditions and personnel policies. The following
directors are the current members of the Compensation Committee: Messrs. William
Bickford, Thomas F. Gaffney and Virgilio E. Sosa, Jr.
ATTENDANCE. The Board of Directors of the Corporation held eight
meetings in 1997. All of the directors attended at least 75% of the aggregate of
the meetings of the Board of Directors of the Corporation, and of the above
committees on which they served, during the period they were directors and
members of such committees in 1997.
EXECUTIVE COMPENSATION.
The following table sets forth the compensation paid by the
Corporation, for services rendered during the past year to the five most highly
compensated executive officers (the "Named Officers") of the Corporation and/or
the Bank.
7
<PAGE> 11
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION ------
-------------------
SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND SALARY BONUS COMPENSATION OPTIONS COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) ($) # ($)
------------------ ---- ------ ----- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Eduardo A. Masferrer............ 1997 705,400 798,058 9,500(1) -0- 4,400(2)
Chairman of the Board 1996 550,000 891,410 100,400(1) 48,750 2,375(2)
President and Chief 1995 395,000 755,891 81,100(1) -0- 2,055(2)
Executive Officer
Maura A. Acosta................. 1997 191,800 60,000 -(3) 19,163 4,400(2)
Executive Vice President 1996 160,000 46,000 -(3) 48,750 2,375(2)
1995 145,671 46,000 -(3) -0- 2,055(2)
Juan Carlos Bernace............. 1997 152,499 95,000 -(3) 48,396 4,400(2)
Executive Vice President 1996 125,000 46,000 -(3) 48,750 2,375(2)
1995 116,775 46,000 -(3) -0- 2,055(2)
Adolfo Martinez................. 1997 125,000 71,000 -(3) 11,484 2,771(2)
Senior Vice President of the 1996 115,000 12,000 -(3) 9,750 2,020(2)
Bank 1995 100,000 45,000 -(3) -0- 1,875(2)
J. Reid Bingham................. 1997 150,000 30,000 -(3) 12,253 1,688(2)
General Counsel and.......... 1996(4) 37,500 -0- -(3) 19,500 -0-
Secretary
</TABLE>
- ------------------------
(1) Represents Bank director fees paid to Mr. Masferrer during 1995, 1996 and
the first three months of 1997.
(2) Represents matching and additional contributions made by the Corporation
under its 401(k) plan.
(3) The aggregate amount of perquisites and other personal benefits provided to
such Named Officer is less than 10% of the total annual salary and bonus of
such officer.
(4) Mr. Bingham joined the Corporation on October 1, 1996.
DIRECTORS' COMPENSATION
The Directors of the Corporation, other than executive officers,
receive a quarterly retainer of $4,000 and a fee of $1,000 for each meeting of
the Board or committee attended in excess of regular quarterly meetings of the
Board and one meeting of each committee per year. The Corporation also
reimburses all directors of the Corporation for all travel-related expenses
incurred
8
<PAGE> 12
in connection with their activities as directors.
CORPORATION BONUS POLICY
Historically, the Corporation has distributed an aggregate percentage
of up to 11% (approximately 7% in 1997) of the Corporation's pre-tax net income,
after the deduction of loan loss provisions ("Available Pre-Tax Net Income"), to
its executive officers and other employees as bonuses. Five percent (5%) of the
Available Pre-Tax Net Income has historically been distributed to Eduardo A.
Masferrer, the Corporation's Chairman of the Board, President and Chief
Executive Officer, although in 1997 the amount was 3%. Up to 6% (4% in 1997) of
the Available Pre-Tax Net Income has historically been distributed to other
employees based upon and in accordance with the following criteria: (i) each
employee whose job performance was satisfactory or better, as determined by an
appropriate department head, has received a bonus equal to two weeks' salary,
(ii) each employee whose quarterly job performance is significantly above
average, as determined by an appropriate department head, has received an
additional bonus equal to one week's salary for each quarter in which such a
review is received and (iii) any remaining portion of the percentage is
distributed to those employees who have made superior contributions to the
Corporation during the year as determined by the Corporation's Personnel
Management Committee. The Corporation may also make an additional contribution
from the Available Pre-Tax Net Income to the 401(k) plan for its executive
officers and other employees on behalf of all participants in the 401(k) plan at
the end of the year ($.25 per participant in 1997). During the year ended
December 31, 1997, $1,860,000 of Available Pre-Tax Net Income was distributed
pursuant to the Corporation's bonus plan. In addition to the foregoing bonuses,
members of the Structuring and Syndications Department (formerly the Capital
Markets Department) may receive bonus compensation of up to 20% in the aggregate
of actual net fees and commissions received by the Department from its
syndication and placement activities ($71,000 in 1997).
CORPORATION STOCK OPTION PLAN
In December 1993, the Corporation adopted the 1993 Stock Option Plan
for Key Employees and Directors (the "1993 Plan"), pursuant to which 877,500
shares of Common Stock are currently reserved for issuance upon exercise of
options. The 1993 Plan is designed as a means to retain and motivate key
employees and directors. The Corporation's Compensation Committee, or in the
absence thereof, the Board of Directors, administers and interprets the 1993
Plan and is authorized to grant options thereunder to all eligible employees of
the Corporation, including executive officers and directors (whether or not they
are employees) of the Corporation or affiliated companies. Options granted under
the 1993 Plan are on such terms and at such prices as determined by the
Compensation Committee, except that the per share exercise price of incentive
stock options cannot be less than the fair market value of the Common Stock on
the date of grant. Each option is exercisable after the period or periods
specified in the option agreement, but no option may be exercisable after the
expiration of ten years from the date of grant. The 1993 Plan will terminate on
December 3, 2003, unless sooner terminated by the Corporation's Board of
Directors. Options granted to an individual who owns (or is deemed to own) at
least 10% of the total combined voting
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<PAGE> 13
power of all classes of stock of the Corporation or its subsidiary must have an
exercise price of at least 110% of the fair market value of the Common Stock on
the date of grant, and a term of no more than five years. The 1993 Plan also
authorizes the Corporation to make or guarantee loans to optionees to enable
them to exercise their options. Such loans must (i) provide for recourse to the
optionee, (ii) bear interest at a rate not less than the prime rate of interest,
and (iii) be secured by the shares of Common Stock purchased. The Board of
Directors has the authority to amend or terminate the 1993 Plan, provided that
no such amendment may impair the rights of the holder of any outstanding option
without the written consent of such holder, and provided further that certain
amendments of the 1993 Plan are subject to stockholder approval.
The following table sets forth certain information with respect to
options to purchase shares of Common Stock granted under the Corporation's 1993
Plan to the Named Officers during the year ended December 31, 1997, and
represents all options granted by the Corporation to such Named Officers for the
period. In accordance with rules of the Commission, the table also describes the
hypothetical gains that would exist for the respective options granted based on
assumed rates of annual compounded stock appreciation of 5% and 10% from the
date of grant to the end of the option term. These hypothetical gains are based
on assumed rates of appreciation and, therefore, the actual gains, if any, on
stock option exercises are dependent on the future performance of the Common
Stock, overall stock market conditions and the Named Officer's continued
employment with the Corporation. As a result, the amounts reflected in this
table may not necessarily be achieved.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM
----------------- ---------------
Number of
Securities % of Total Options
Underlying Granted to Exercise
Options Employees in Price Expiration
Name Granted (#) Fiscal Year ($/Sh) Date 5% 10%
- ---- ----------- ----------- ------ ---- -- ---
<S> <C> <C> <C> <C> <C> <C>
Eduardo A. Masferrer ...... -0- - - - - -
Maura A. Acosta ........... 19,163 9.9% $29.125 12/31/07 $351,000 $889,503
Juan Carlos Bernace........ 48,396 25.0% 29.125 12/31/07 $886,448 $2,246,433
Adolfo Martinez............ 11,484 5.9% 29.125 12/31/07 $210,347 $533,061
J. Reid Bingham............ 12,253 6.3% 29.125 12/31/07 $224,433 $568,757
</TABLE>
The following table shows information concerning the exercise of stock
options during fiscal year 1997 by each of the Named Officers and the fiscal
year-end value of their unexercised options.
10
<PAGE> 14
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT FY-END (#) AT FY-END ($)(1)
ACQUIRED VALUE --------------------- ----------------
ON REALIZED
NAME EXERCISE ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
------------------ --------- -------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Eduardo A. Masferrer........ -0- -0- -0- / 48,750 -0- / $1,419,844
Maura A. Acosta............. -0- -0- -0- / 67,913 -0- / $1,419,844
Juan Carlos Bernace......... -0- -0- -0- / 97,146 -0- / $1,419,844
Adolfo Martinez............. -0- -0- -0- / 27,734 -0- / $473,282
J. Reid Bingham............. -0- -0- -0- / 31,753 -0- / $567,938
</TABLE>
- ---------------
(1) Represents the difference between the closing price of the Corporation's
common stock on December 31, 1997 ($29.125) and the exercise price of the
options multiplied by the number of shares represented by such options.
401(k) PLAN
The Corporation maintains a 401(k) plan for its executive officers and
other employees. Under the terms of the 401(k) plan, for each dollar contributed
by an employee, the Corporation intends to contribute a discretionary amount on
behalf of the participant (the "Matching Contribution"). In addition, at the end
of the plan year, the Corporation may make an additional contribution from the
Available Pre-Tax Net Income bonus pool on behalf of all participants at the end
of the year ("Additional Contribution"). The amount that the Corporation
contributes to the 401(k) plan has historically varied from year to year. During
the year ended December 31, 1997, the Corporation made a $.25 Matching
Contribution and a $.25 Additional Contribution on behalf of each participant in
the aggregate amount of $128,000.
COMPENSATION COMMITTEE REPORT
The Compensation Committee is composed of Messrs. William Bickford,
Thomas F.
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<PAGE> 15
Gaffney and Virgilio E. Sosa, Jr. The three members of the Compensation
Committee are non-employee directors.
The Securities and Exchange Commission has adopted rules requiring
public companies to provide detailed information regarding compensation and
benefits provided to their chief executive officer and to the four most highly
compensated executive officers, other than the chief executive officer, whose
annual base salary and bonus compensation was in excess of $100,000.
COMPENSATION PHILOSOPHY
The Corporation's Executive Compensation Program is designed to be
closely linked to corporate performance and returns to stockholders. To this
end, the Corporation has developed an overall compensation strategy and specific
compensation plans that tie a very significant portion of executive compensation
to the Corporation's success in meeting specified performance goals and to
appreciation in the price of the Corporation's Common Stock. The overall
objectives of this strategy are to attract and retain the best possible
executive talent, to motivate these executives to achieve the goals inherent in
the Corporation's business strategy, to link executive and stockholder interests
and to provide a compensation package that recognizes individual contributions
as well as overall business results.
The Compensation Committee annually reviews the Corporation's results
and personal performance and compares stock price appreciation with executive
compensation levels. The Compensation Committee does not limit its compensation
comparison to the financial services industry because the Corporation competes
for executive talent both within and outside the banking industry. These annual
reviews permit an ongoing evaluation of the link between the Corporation's
executive compensation, its performance and the competitive market.
The key elements of the Corporation's executive compensation consists
of three components, each of which is intended to serve the overall compensation
philosophy: base salary, an annual bonus and an Executive Incentive Stock
Purchase Plan. The Compensation Committee's policies with respect to each of
these elements, including the basis for the compensation awarded to Mr.
Masferrer, the Corporation's Chairman, President and Chief Executive Officer,
are discussed below. In addition, while the elements of compensation described
below are considered separately, the Compensation Committee takes into account
the full compensation package afforded by the Corporation to each individual,
including pension benefits, insurance and other benefits, as well as the
programs described below.
BASE SALARY
Base salaries for executive officers are determined by evaluating the
responsibilities of the executive's position and the experience of the
individual, and by reference to the competitive marketplace for executive
talent, including a comparison to base salaries for comparable positions at
other companies.
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<PAGE> 16
Executives' base salaries are reviewed by the Compensation Committee on
an annual basis and adjustments are determined by (i) evaluating the performance
of the Corporation and each executive officer, (ii) considering changes in
responsibilities for executives, (iii) with respect to executive officers with
responsibility for a particular business unit, considering the unit's financial
results and (iv) considering increases in median pay levels for comparable
positions at other companies and salary increases granted to other employees of
the Corporation, aiming to implement similar increases to maintain a competitive
position.
The base salary for Mr. Masferrer in 1997 was $705,400 per year. This
salary reflected a 28.25% increase over Mr. Masferrer's salary for 1996 and
represented a merit increase for such period reflecting the 28.7% increased
growth and 21.3% increased profitability of the Corporation and an increase
reflecting his additional duties as Chairman and Chief Executive of a publicly
traded company.
ANNUAL BONUS
Pursuant to the Corporation's Annual Bonus Policy, executive officers
are eligible for an annual cash bonus based on their contribution to the
Corporation during the year. Historically the Corporation has distributed up to
11% (5% to Mr. Masferrer and 6% to other executive officers and employees) of
its pre-tax net income, after the deduction of loan loss provisions ("Available
Pre-Tax Net Income"), as bonuses to its executive officers and other employees.
In 1997 the Corporation distributed approximately seven percent (7%) of the
Available Pre-Tax Net Income, three percent (3%) to Mr. Masferrer and four
percent (4%) to other executive officers and employees. The distribution to
other executive officers and employees was made first as additional weeks'
salary based upon a formula relating to each employee's periodic job performance
evaluations, second as an additional contribution to the 401(k) plan for
executive officers and other employees and the balance to those employees,
including Executive Officers, who made superior contributions to the Corporation
during the year.
Under Section 162(m) of the Internal Revenue Code of 1986, as amended,
publicly traded corporations such as the Corporation are not permitted to deduct
compensation in excess of $1,000,000 paid to certain top executives, unless the
compensation qualifies as "performance-based compensation". The annual cash
bonus paid to Mr. Masferrer with respect to 1997 resulted in his compensation
exceeding $1,000,000, but was deductible as "performance based compensation".
For 1998 the Compensation Committee has set Mr. Masferrer's "performance based
compensation" bonus percentage at five percent (5%) of Available Pre-Tax Net
Income, although the Committee reserves the right to reduce this amount in its
discretion after year end results are known. It is expected that if compensation
paid to Mr. Masferrer with respect to 1998 exceeds $1,000,000, it will be
deductible as "performance based compensation".
STOCK OPTIONS
Under the Corporation's 1993 Plan, the Compensation Committee may grant
options to
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<PAGE> 17
purchase Common Stock at its then current market value. The Compensation
Committee sets guidelines for the number of such awards based on factors
including competitive compensation data, the importance of the executive's
position, incentive towards achievement of future long-term goals, corporate
performance and individual performance against objectives agreed upon between
each employee and his or her manager. The options granted in 1997 vest in thirds
twelve, eighteen and twenty-four months after the grant if the executive is then
employed with the Corporation.
CONCLUSION
Through the programs described above, a substantial portion of the
Corporation's executive compensation is linked directly to individual and
corporate performance and stock price appreciation. The Compensation Committee
intends to continue the policy of directly linking a significant portion of
executive compensation to corporate performance and stockholder returns.
COMPENSATION COMMITTEE
William Bickford
Thomas F. Gaffney
Virgilio E. Sosa, Jr.
CERTAIN TRANSACTIONS WITH MANAGEMENT
From time to time, the Bank makes loans and extends credit to certain
of the Corporation's and/or the Bank's officers and directors and to certain
companies affiliated with such persons. In the opinion of the Corporation, all
of such loans and extensions of credit were made in the ordinary course of
business, on substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable transactions with
other third parties. At December 31, 1997, an aggregate of $4.9 million of loans
and extensions of credit were outstanding to executive officers and directors of
the Corporation and/or the Bank and to companies affiliated with such persons.
PERFORMANCE GRAPH
Set forth below is a line graph comparing the cumulative total
stockholder return on the Corporation's Common Stock, based on the market price
of the Common Stock, with the cumulative total return of companies on the
Standard & Poor's 500 Stock Index and the NASDAQ Bank Index, for the period
commencing March 31, 1997 and ended December 31, 1997. Returns are based upon
the month-end to month-end price and assume dividends, if any, are reinvested.
The graph assumes $100 was invested on March 31, 1997 in Corporation's Common
Stock, the Standard & Poor's 500 Stock Index and the NASDAQ Bank Index.
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<PAGE> 18
PERFORMANCE GRAPH
Nasdaq
HABK S&P 500 Bank Index
03/31/97 100 100 100
04/30/97 111.6 106 102.2
05/30/97 124.6 112.4 108.6
06/30/97 155.1 117.5 116.4
07/31/97 142 126.8 125.3
08/29/97 146.4 119.7 124.3
09/30/97 159.4 126.3 137.2
10/31/97 176.8 122 137.9
11/28/97 163 127.7 143.5
12/31/97 168.8 129.9 157.2
PROPOSAL 2. APPROVAL OF THE CORPORATION'S 1998 EXECUTIVE INCENTIVE COMPENSATION
PLAN
BACKGROUND AND PURPOSE
The Board of Directors has adopted the Hamilton Bancorp Inc. 1998
Executive Incentive Compensation Plan (the "1998 Plan") and recommended that it
be submitted to the Corporation's stockholders for their approval at the Annual
Meeting. The terms of the 1998 Plan are the same as the Corporation's existing
1993 Stock Option Plan (the "1993 Plan") except the 1998 plan provides for
122,500 shares of Common Stock reserved for issuance upon exercise of options
and also provides for performance or annual incentive awards that may be settled
in cash, options or stock. The terms of the 1998 Plan provide for grants of
stock options and performance or annual incentive awards that may be settled in
cash, options or stock (collectively, "Awards"). The 1998 Plan does not
supersede the 1993 Plan. The effective date of the 1998 Plan is as of January 1,
1998 (the "Effective Date") if approved by stockholders. No Awards have been
made under the 1998 Plan as of the date of this Proxy Statement, except that the
Compensation Committee has set Mr. Eduardo A. Masferrer's 1998 "performance
based compensation" bonus percentage at five percent (5%) of the Corporations's
1998 pre-tax net income, after the deduction of loan loss provisions, subject to
approval of the 1998 Plan by the Corporation's stockholders at the Annual
Meeting.
Stockholder approval of the Plan is required (i) for purposes of
compliance with certain exclusions from the limitations of Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code"), which are further
described below, (ii) in order for the 1998 Plan to be eligible under the "plan
lender" exemption from the margin requirements of Regulation G promulgated under
the 1934 Act and (iii) by the rules of the NASDAQ National Market.
Although most of the Awards authorized under the 1998 Plan are similar
to those under the 1993 Plan, the Board determined to adopt an entirely new plan
in order to qualify annual incentive awards and other performance-based awards
for corporate tax deductions under Section 162(m) of the Code and to increase
the number of shares of Common Stock that may be subject to Awards.
The following is a summary of certain principal features of the 1998
Plan. This summary
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<PAGE> 19
is qualified in its entirety by reference to the complete text of the 1998 Plan,
which is attached to this Proxy Statement as Exhibit A. Stockholders are urged
to read the actual text of the 1998 Plan in its entirety.
SHARES AVAILABLE FOR AWARDS; ANNUAL PER-PERSON LIMITATIONS
Under the 1998 Plan, the total number of shares of Common Stock that
may be subject to the granting of options at any time during the term of the
Plan shall be equal to 122,500 shares, plus the number of shares with respect to
which options previously granted under the 1998 Plan terminate, expire or are
canceled without being exercised and the number of shares that are surrendered
in payment of the exercise price of any options or any tax withholding
requirements.
In addition, the 1998 Plan imposes individual limitations on the amount
of certain Awards, in part to comply with Code Section 162(m). Under these
limitations, during any fiscal year the number of options granted to any one
participant may not exceed 61,250 options, subject to adjustment in certain
circumstances. The maximum amount that may be paid out as an annual incentive
Award or other cash Award in any fiscal year to any one participant, and the
maximum amount that may be earned as a performance Award or other cash Award in
respect of a performance period by any one participant, is $5,000,000.
The Compensation Committee is authorized to adjust the limitations
applicable to the number of options that may be granted under the 1998 Plan or
to any participant and is authorized to adjust outstanding Options (including
adjustments to exercise prices of options and other affected terms of Options)
in the event that a dividend or other distribution (whether in cash, shares of
Common Stock or other property), recapitalization, forward or reverse split,
reorganization, merger, consolidation, spin-off, combination, repurchase, share
exchange or other similar corporate transaction or event affects the Common
Stock, so that an adjustment is appropriate in order to prevent dilution or
enlargement of the rights of participants. The Compensation Committee is also
authorized to adjust performance conditions and other terms of Awards in
response to these kinds of events or in response to changes in applicable laws,
regulations or accounting principles.
ELIGIBILITY
The persons eligible to receive Awards under the 1998 Plan are the
officers, directors and employees of the Corporation and its subsidiaries. An
employee on leave of absence may be considered as still in the employ of the
Corporation or a subsidiary for purposes of eligibility for participation in the
1998 Plan.
ADMINISTRATION
The 1998 Plan is to be administered by the Compensation Committee, each
member of which must be a "non-employee director" as defined under Rule 16b-3
under the 1934 Act and an "outside director" for purposes of Section 162(m) of
the Code. However, except as otherwise required to
16
<PAGE> 20
comply with Rule 16b-3 of the 1934 Act, or Section 162(m) of the Code, the Board
may exercise any power or authority granted to the Compensation Committee.
Subject to the terms of the 1998 Plan, the Compensation Committee or the Board
is authorized to select eligible persons to receive Awards, determine the type
and number of Awards to be granted and the number of shares of Common Stock to
which Options will relate, specify times at which Options will be exercisable or
settleable (including performance conditions that may be required as a condition
thereof), set other terms and conditions of Awards, prescribe forms of Award
agreements, interpret and specify rules and regulations relating to the 1998
Plan, and make all other determinations that may be necessary or advisable for
the administration of the 1998 Plan.
STOCK OPTIONS
The Compensation Committee or the Board is authorized to grant stock
options, including both incentive stock options ("ISO's"), which can result in
potentially favorable tax treatment to the participant, and non-qualified stock
options. The exercise price per share subject to an option are determined by the
Compensation Committee, but in the case of an ISO must not be less than the fair
market value of a share of Common Stock on the date of grant. For purposes of
the 1998 Plan, the term "fair market value" means the fair market value of
Common Stock, Awards or other property as determined by the Compensation
Committee or the Board or under procedures established by the Compensation
Committee or the Board. Unless otherwise determined by the Compensation
Committee or the Board, the fair market value of Common Stock as of any given
date shall be the closing sales price per share of Common Stock as reported on
the principal stock exchange or market on which Common Stock is traded on the
immediately preceding day or, if there are no sales on that day, then on the
last previous day on which a sale was reported. The maximum term of each option,
the times at which each option will be exercisable, and provisions requiring
forfeiture of unexercised options at or following termination of employment
generally are fixed by the Compensation Committee or the Board, except that no
option may have a term exceeding ten years. Unless further limited by the
Compensation Committee in any option grant, options may be exercised by the
payment of the exercise price in cash, by certified or official bank check or
money order, with shares owned by the participant for more than 6 months, by
authorization for the Corporation to withhold shares issuable upon exercise of
the option, by a cashless exercise program with a broker or by any combination
of the foregoing. The Compensation Committee in its sole discretion may accept a
personal check in full or partial payment of any shares.
PERFORMANCE AWARDS, INCLUDING ANNUAL INCENTIVE AWARDS
The right of a participant to exercise or receive a grant or settlement
of an Award, and the timing thereof, may be subject to such performance
conditions (including subjective individual goals) as may be specified by the
Compensation Committee or the Board. In addition, the 1998 Plan authorizes
specific annual incentive Awards, which represent a conditional right to receive
cash, shares of Common Stock or other Awards upon achievement of certain
preestablished performance goals and subjective individual goals during a
specified fiscal year. Performance Awards and annual incentive Awards granted to
persons whom the Compensation Committee expects will, for the year
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<PAGE> 21
in which a deduction arises, be "covered employees" (as defined below) will, if
and to the extent intended by the Compensation Committee, be subject to
provisions that should qualify such Awards as "performance-based compensation"
not subject to the limitation on tax deductibility by the Corporation under Code
Section 162(m). For purposes of Section 162(m), the term "covered employee"
means the Corporation's chief executive officer and each other person whose
compensation is required to be disclosed in the Corporation's filings with the
Commission by reason of that person being among the four highest compensated
officers of the Corporation as of the end of a taxable year. If and to the
extent required under Section 162(m) of the Code, any power or authority
relating to a performance Award or annual incentive Award intended to qualify
under Section 162(m) of the Code is to be exercised by the Compensation
Committee and not the Board.
Subject to the requirements of the 1998 Plan, the Compensation
Committee or the Board will determine performance Award and annual incentive
Award terms, including the required levels of performance with respect to
specified business criteria, the corresponding amounts payable upon achievement
of such levels of performance, termination and forfeiture provisions and the
form of settlement. In granting annual incentive or performance Awards, the
Compensation Committee or the Board may establish unfunded award "pools," the
amounts of which will be based upon the achievement of a performance goal or
goals based on one or more of certain business criteria described in the 1998
Plan (including, for example, total stockholder return, net income, pretax
earnings, EBITDA, earnings per share, and return on investment). During the
first 90 days of a fiscal year or performance period, the Compensation Committee
or the Board will determine who will potentially receive annual incentive or
performance Awards for that fiscal year or performance period, either out of the
pool or otherwise.
After the end of each fiscal year or performance period, the
Compensation Committee or the Board will determine (i) the amount of any pools
and the maximum amount of potential annual incentive or performance Awards
payable to each participant in the pools and (ii) the amount of any other
potential annual incentive or performance Awards payable to participants in the
1998 Plan. The Compensation Committee or the Board may, in its discretion,
determine that the amount payable as an annual incentive or performance Award
will be reduced from the amount of any potential Award.
OTHER TERMS OF AWARDS
Awards may be settled in the form of cash, shares of Common Stock or
other Awards, in the discretion of the Compensation Committee or the Board. The
Compensation Committee or the Board may condition any payment relating to an
Award on the withholding of taxes and may provide that a portion of any shares
of Common Stock or other property to be distributed will be withheld (or
previously acquired shares of Common Stock or other property be surrendered by
the participant) to satisfy withholding and other tax obligations. Awards
granted under the 1998 Plan generally may not be pledged or otherwise encumbered
and are not transferable except by will or by the laws of descent and
distribution, or to a designated beneficiary upon the participant's death,
except that the Compensation Committee or the Board may, in its discretion,
permit transfers for estate planning
18
<PAGE> 22
or other purposes subject to any applicable restrictions under Rule 16b-3.
ACCELERATION OF VESTING; CHANGE IN CONTROL
The Compensation Committee or the Board may, in its discretion,
accelerate the exercisability, the lapsing of restrictions or the expiration of
deferral or vesting periods of any Award, and such accelerated exercisability,
lapse, expiration and if so provided in the Award agreement, vesting shall occur
automatically in the case of a "change in control" of the Corporation, as
defined in the 1998 Plan. For purposes of the 1998 Plan, the term "change in
control" generally means approval by stockholders of any reorganization, merger
or consolidation or other transaction or series of transactions if persons who
were stockholders immediately prior to such reorganization, merger or
consolidation or other transaction do not, immediately thereafter, own more than
50% of the combined voting power of the reorganized, merged or consolidated
company's then outstanding, voting securities, or a liquidation or dissolution
of the Corporation or the sale of all or substantially all of the assets of the
Corporation (unless the reorganization, merger, consolidation or other corporate
transaction, liquidation, dissolution or sale is subsequently abandoned).
AMENDMENT AND TERMINATION
The Board of Directors may amend, alter, suspend, discontinue or
terminate the 1998 Plan or the Compensation Committee's authority to grant
Awards without further stockholder approval, except stockholder approval must be
obtained for any amendment or alteration if such approval is required by law or
regulation or under the rules of any stock exchange or quotation system on which
shares of Common Stock are then listed or quoted. Thus, stockholder approval may
not necessarily be required for every amendment to the 1998 Plan which might
increase the cost of the 1998 Plan or alter the eligibility of persons to
receive Awards. Unless earlier terminated by the Board, the 1998 Plan will
terminate on January 1, 2008.
SECURITIES ACT REGISTRATION
The Corporation intends to register the shares of Common Stock
available for Awards under the 1998 Plan pursuant to a Registration Statement on
Form S-8 filed with the Commission.
FEDERAL INCOME TAX CONSEQUENCES OF AWARDS OF OPTIONS
The following is a brief description of the federal income tax
consequences generally arising with respect to Awards of options under the 1998
Plan.
The grant of an option will create no tax consequences for the
participant or the Corporation. A participant will not have taxable income upon
exercising an ISO (except that the alternative minimum tax may apply). Upon
exercising an option other than an ISO, the participant must generally recognize
ordinary income equal to the difference between the exercise price and the fair
market value of the freely transferable and non-forfeitable shares of Common
Stock acquired on the
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<PAGE> 23
date of exercise.
Upon a disposition of shares of Common Stock acquired upon exercise of
an ISO before the end of the applicable ISO holding periods, the participant
must generally recognize ordinary income equal to the lesser of (i) the fair
market value of the shares of Common Stock at the date of exercise of the ISO
minus the exercise price, or (ii) the amount realized upon the disposition of
the ISO shares of Common Stock minus the exercise price. Otherwise, a
participant's disposition of shares of Common Stock acquired upon the exercise
of an option (including an ISO for which the ISO holding periods are met)
generally will result in short-term or long-term capital gain or loss measured
by the difference between the sale price and the participant's tax basis in such
shares of Common Stock (the tax basis generally being the exercise price plus
any amount previously recognized as ordinary income in connection with the
exercise of the option).
The Corporation generally will be entitled to a tax deduction equal to
the amount recognized as ordinary income by the participant in connection with
an option. The Corporation generally is not entitled to a tax deduction relating
to amounts that represent a capital gain to a participant. Accordingly, the
Corporation will not be entitled to any tax deduction with respect to an ISO if
the participant holds the shares of Common Stock for the ISO holding periods
prior to disposition of the shares.
The Omnibus Budget Reconciliation Act of 1993 added Section 162(m) to
the Code, which generally disallows a public company's tax deduction for
compensation to covered employees in excess of $1 million in any tax year
beginning on or after January 1, 1994. Compensation that qualifies as
"performance-based compensation" is excluded from the $1 million deductibility
cap, and therefore remains fully deductible by the company that pays it. As
discussed above, the Corporation intends that options and certain other Awards
granted to employees whom the Compensation Committee expects to be covered
employees at the time a deduction arises in connection with such Awards, qualify
as such "performance-based compensation," so that such Awards will not be
subject to the Section 162(m) deductibility cap of $1 million. Future changes in
Section 162(m) or the regulations thereunder may adversely affect the ability of
the Corporation to ensure that options or other Awards under the 1998 Plan will
qualify as "performance-based compensation" that is fully deductible by the
Corporation under Section 162(m).
The foregoing discussion, which is general in nature and is not
intended to be a complete description of the federal income tax consequences of
the 1998 Plan, is intended for the information of stockholders considering how
to vote at the Annual Meeting and not as tax guidance to participants in the
1998 Plan. This discussion does not address the effects of other federal taxes
or taxes imposed under state, local or foreign tax laws. Participants in the
1998 Plan should consult a tax advisor as to the tax consequences of
participation.
NEW PLAN BENEFITS. As described above, the selection of employees who
will receive awards under the 1998 Plan, if it is approved by the stockholders,
and the size and type of Awards will be determined by the Compensation Committee
in its discretion. Except as described below, no
20
<PAGE> 24
Awards have been made under the 1998 Plan, nor are any such Awards now
determinable. Accordingly it is not possible to predict the benefits or amounts
that will be received by, or allocated to, particular individuals or groups of
employees in 1998. As also indicated above, the Compensation Committee has set
Mr. Eduardo A. Masferrer's 1998 "performance based compensation" bonus
percentage at five percent (5%) of the Corporations's 1998 pre-tax net income,
after the deduction of loan loss provisions, subject to approval of the 1998
Plan by the Corporation's stockholders at the Annual Meeting. Accordingly, the
Dollar amount of such bonus is not determinable until the results for 1998 and
the final loan loss provisions are known.
REQUIRED VOTE. The affirmative vote of a majority of the shares of
Common Stock, represented in person or by proxy, cast at the Annual Meeting is
required to approve the 1998 Executive Incentive Compensation Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR APPROVAL OF THE
1998 EXECUTIVE INCENTIVE COMPENSATION PLAN.
PROXIES, UNLESS INDICATED TO THE CONTRARY, WILL BE VOTED "FOR" THE
APPROVAL OF THE 1998 EXECUTIVE INCENTIVE COMPENSATION PLAN.
APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors of the Corporation has reappointed Deloitte &
Touche as independent auditors to audit the financial statements of the
Corporation for the current fiscal year.
Representatives of Deloitte & Touche are expected to be present at the
Annual Meeting and will have the opportunity to make a statement if they desire
to do so and will be available to respond to appropriate questions.
STOCKHOLDERS PROPOSALS
Proposals of stockholders intended to be presented at the next annual
meeting of the Corporation, expected to be held in June 1999, must be in writing
and received by the Secretary of the Corporation at its main offices, 3750 N.W.
87 Avenue, Miami, Florida 33178, no later than January 1, 1999. If such proposal
or proposals are in compliance with applicable rules and regulations, they will
be included in the Corporation's proxy statement and form a proxy for that
meeting.
BY ORDER OF THE BOARD OF DIRECTORS
J. Reid Bingham
Secretary
21
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EXHIBIT A
HAMILTON BANCORP INC.
1998 EXECUTIVE INCENTIVE COMPENSATION PLAN
1. PURPOSE. The purpose of this Plan is to advance the interests of
Hamilton Bancorp Inc. (the "Company") by providing an additional incentive to
attract and retain qualified and competent persons who are key employees or
directors of the Company or its subsidiaries or affiliated entities, and upon
whose efforts and judgment the success of the Company is largely dependent.
2. DEFINITIONS. As used herein, the following terms shall have the
meaning indicated:
(a) "Affiliate" shall mean any corporation other than the Company that
is a member of an affiliated group of corporations, as defined in
Section 1504 (determined without regard to Section 1504(b)) of the
Internal Revenue Code, of which the Company is a member.
(b) "Annual Incentive Award"shall mean a conditional right granted to a
Participant under Section 13(c) hereof to receive a cash payment or
other Award, unless otherwise determined by the Committee, after the
end of a specified fiscal year.
(c) "Award"shall mean any Option, Performance Award or Annual Incentive
Award, together with any other right or interest granted to a
Participant under the Plan.
(d) "Board" shall mean the Board of Directors of the Company.
(e) "Committee" shall mean the compensation committee appointed by the
Board (as described in Section 14 hereof) or, if such a committee does
not exist, the Board.
(f) "Common Stock" shall mean the 1 cent par value Common Stock of the
Company.
(g) "Covered Employee" shall mean any individual who, on the last day
of the taxable year of the Company, is (i) the Chief Executive Officer
of the Company or is acting in such capacity (the "CEO"), (ii) among
the four highest compensated officers of the Company and its Affiliates
(other than the CEO), or (iii) otherwise considered to be a "Covered
Employee" within the meaning of Section 162(m) of the Internal Revenue
Code and the regulations promulgated thereunder.
(h) "Director" shall mean a member of the Board.
(i) "Eligible Person" means each Officer of the Company (as defined
under the Exchange Act) and other officers, directors and employees of
the Company or of any Subsidiary. An employee on leave of
<PAGE> 26
absence may be considered as still in the employ of the Company or a
Subsidiary for purposes of eligibility for participation in the Plan.
(j) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(k) "Fair Market Value" of a Share on any date of reference shall be
the "Closing Price" (as defined below) of the Common Stock on the
business day immediately preceding such date or, if there are no sales
on that date, then on the last previous day on which a sale was
reported, unless the Committee in its sole discretion shall determine
otherwise in a fair and uniform manner. For the purpose of determining
Fair Market Value, the "Closing Price" of the Common Stock on any
business day shall be (i) if the Common Stock is listed or admitted for
trading on any United States national securities exchange, or if actual
transactions are otherwise reported on a consolidated transaction
reporting system, the last reported sale price of Common Stock on such
exchange or reporting system, as reported in any newspaper of general
circulation, (ii) if the Common Stock is quoted on the National
Association of Securities Dealers Automated Quotations System
("Nasdaq"), or any similar system of automated dissemination of
quotations of securities prices in common use, the last reported sale
price of Common Stock for such day on such system, or (ii) if neither
clause (i) or (ii) is applicable, the mean between the high bid and low
asked quotations for the Common Stock as reported by the National
Quotation Bureau, Incorporated if at least two securities dealers have
inserted both bid and asked quotations for Common Stock on at least
five of the ten preceding days. If neither (i), (ii), or (iii) above is
applicable, then Fair Market Value shall be determined in good faith by
the Committee in a fair and uniform manner.
(l) "Incentive Stock Option" shall mean an incentive stock option as
defined in Section 422 of the Internal Revenue Code.
(m) "Internal Revenue Code" shall mean the Internal Revenue Code of
1986, as amended from time to time.
(n) "Non-Employee Director" shall refer to a Director who is not an
employee of the Company or any Subsidiary.
(o) "Non-Qualified Stock Option" shall mean an Option which is not an
Incentive Stock Option.
(p) "Officer" shall mean the Company's president, principal financial
officer, principal accounting officer and any other person who the
Company identifies as an executive officer.
(q) "Option" shall mean any option granted under this Plan.
(r) "Outside Director" shall mean a member of the Board who (i) is not
a current employee of the Company or any Affiliate; (ii) is not a
former employee of the Company or any Affiliate who receives
compensation for prior services (other than benefits under a tax-
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qualified retirement plan) during the taxable year; (iii) has not been
an officer of the Company or any Affiliate; (iv) does not receive
remuneration either directly or indirectly, in any capacity other than
as a director; and (v) satisfies any other conditions that shall from
time to time be required to qualify as an "outside director" under
Section 162(m) of the Internal Revenue Code and the regulations
thereunder and as a "Non-Employee Director" under Rule 16b-3
promulgated under the Exchange Act. For this purpose, "Remuneration"
shall have the meaning afforded that term pursuant to Treasury
Regulations issued under Section 162(m) of the Internal Revenue Code,
and shall exclude any de minimis remuneration excluded under those
Treasury Regulations.
(s) "Participant" shall mean a person to whom an Award is granted under
this Plan or any person who succeeds to the rights of such person under
this Plan by reason of the death of such person;
(t) "Performance Award" means a right, granted to a Eligible Person
under Section 13 hereof, to receive Awards based upon performance
criteria specified by the Committee or the Board.
(u) "Plan" shall mean this Executive Incentive Compensation Plan.
(v) "Share" shall mean a share of the Common Stock.
(w) "Subsidiary" shall mean any corporation (other than the Company) in
any unbroken chain of corporations beginning with the Company if, at
the time of the granting of the Option, each of the corporations other
than the last corporation in the unbroken chain owns stock possessing
50 percent or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.
3. SHARES AND OPTIONS. The Company may grant to Participants from time
to time Options to purchase an aggregate of up to One Hundred Twenty-two
Thousand Five Hundred (122,500) Shares from Shares held in the Company's
treasury or from authorized and unissued Shares. If any Option granted under the
Plan shall terminate, expire, or be canceled or surrendered as to any Shares,
new Options may thereafter be granted covering such Shares. An Option granted
hereunder shall be either an Incentive Stock Option or a Non-Qualified Stock
Option as determined by the Committee at the time of grant of such Option, and
shall clearly state, whether it is an Incentive Stock Option or Non-Qualified
Stock Option. All Options shall be granted within 10 years from the effective
date of this Plan.
4. DOLLAR LIMITATION. Options otherwise qualifying as Incentive Stock
Options hereunder will not be treated as Incentive Stock Options to the extent
that the aggregate fair market value (determined at the time the Option is
granted) of the Shares, with respect to which Options meeting the requirements
of Internal Revenue Code Section 422(b) are exercisable for the first time by
any individual during any calendar year (under all plans of the Company),
exceeds $100,000.
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5. CONDITIONS FOR GRANT OF OPTIONS
(a) Each Option shall be evidenced by an option agreement that may
contain any term deemed necessary or desirable by the Committee,
provided such terms are not inconsistent with this Plan or any
applicable law. Participants shall be those persons selected by the
Committee in its sole discretion. Any person who files with the
Committee, in a form satisfactory to the Committee, a written waiver of
eligibility to receive any Option under this Plan shall not be eligible
to receive any Option under this Plan for the duration of such waiver.
(b) In granting Options, the Committee may take into consideration the
contribution the person has made to the success of the Company and its
subsidiaries and such other factors as the Committee shall determine.
The Committee shall also have the authority to consult with and receive
recommendations from Officers and other personnel of the Company with
regard to these matters. The Committee may from time in granting
Options under the Plan prescribe such other terms and conditions
concerning such Options as it deems appropriate, including, without
limitation, (i) prescribing the date or dates on which the Option
becomes exercisable, (ii) providing that the Option rights accrue or
become exercisable in installments over a period of years, or upon the
attainment of stated goals or both, or (iii) if applicable, relating an
Option to the continued employment of the Participant for a specified
period of time, provided that such terms and conditions are not more
favorable to a Participant than those expressly permitted herein.
(c) If applicable, the Options granted to employees under this Plan
shall be in addition to regular salaries, pension, life insurance or
other benefits related to their employment or other relationship with
the Company. Neither the Plan nor any Option granted under the Plan
shall confer upon any person any right to employment or continuance of
employment by the Company.
(d) Notwithstanding any other provision of this Plan, and in addition
to any other requirements of this Plan, the aggregate number of Shares
with respect to which Options may be granted to any one Participant may
not exceed 61,250, subject to adjustment as provided in Section 10(a)
hereof.
(e) Notwithstanding any other provision of this Plan, and in addition
to any other requirements of this plan, Options may not be granted to a
Covered Employee unless the grant of such Option is authorized by, and
all of the terms of such Options are determined by, a Committee that is
appointed in accordance with Section 14 of this Plan and all of whose
members are Outside Directors.
(f) Incentive Stock Options may not be granted to any Non-Employee
Directors.
6. EXERCISE PRICE. The exercise price per Share of any Option shall be
any price
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determined by the Committee but shall not be less than the par value
per Share; provided, however, that in no event shall the exercise price
per Share of any Incentive Stock Option be less than the Fair Market
Value of the Shares underlying such Option on the date such Option is
granted.
7. EXERCISE OF OPTIONS.
(a) An Option shall be deemed exercised when (i) the Company has
received written notice of such exercise in accordance with the terms
of the Option (ii) full payment of the aggregate exercise price of the
Shares as to which the Option is exercised has been made and (iii)
arrangements that are satisfactory to the Committee, in its sole
discretion, have been made for the Participant's payment to the Company
of the amount that is necessary for the Company employing the
Participant to withhold in accordance with applicable Federal or state
tax withholding requirements.
(b) Unless further limited by the Committee in any Option, the option
price of any Shares purchased shall be paid (i) in cash, (ii) by
certified or official bank check, (iii) by money order, (iv) with
Shares owned by the Participant that have been owned by the Participant
for more than 6 months on the date of surrender or such other period as
may be required to avoid a charge to the Company's earnings for
financial accounting purposes, (v) by authorization for the Company to
withhold Shares issuable upon exercise of the Option, (vi) by
arrangement with a broker that is acceptable to the Committee where
payment of the Option price is made pursuant to an irrevocable
direction to the broker to deliver all or part of the proceeds from the
sale of the Option Shares to the Company in payment of the Option
price, or (vii) any combination of the foregoing. The Committee in its
sole discretion may accept a personal check in full or partial payment
of any Shares. If the exercise price is paid in whole or in part with
Shares, the value of the Shares surrendered shall be their Fair Market
Value on the date the Option is exercises. The Company in its sole
discretion may, on an individual basis or pursuant to a general program
established in connection with this Plan, and subject to applicable
law, lend money to a Participant, guarantee a loan to a Participant, or
otherwise assist a Participant to obtain the cash necessary to exercise
all or a portion of an Option granted hereunder or to pay any tax
liability of the Participant attributable to such exercise. If the
exercise price is paid in whole or part with Participant's promissory
note, such note shall (i) provide for full recourse to the maker, (ii)
be collateralized by the pledge of the Shares that the Participant
purchases upon exercise of such option, (iii) bear interest at a rate
no less than the prime rate of the Company's principal bank subsidiary
and (iv) contain such other terms as the Board in its sole discretion
shall reasonably require.
(c) No Participant shall be deemed to be a holder of any Shares subject
to an Option unless and until a stock certificate or certificates for
such Shares are issued to such person(s) under the terms of this Plan.
No adjustment shall be made for dividends (ordinary or extraordinary,
whether in cash, securities or other property) or distributions or
other rights for which the record date is prior to the date such stock
certificate is issued, except as expressly provided in Section 10
hereof.
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8. EXERCISABILITY OF OPTIONS. Any Option shall become exercisable in
such amounts, at such intervals and upon such terms as the Committee shall
provide in such Option, except as otherwise provided in this Section 8.
(a) The expiration date of an Option shall be determined by the
Committee at the time of grant, but in no event shall an Option be
exercisable after the expiration of 10 years from the date of grant of
the Option.
(b) Unless otherwise provided in any Option, each outstanding Option
shall become immediately fully exercisable:
(i) if there occurs any transaction (which shall include
a series of transactions occurring, within 60 days or
occurring pursuant to a plan), that has the result
that stockholders of the Company immediately before
such transaction cease to own at least fifty percent
(50%) of the voting stock of the Company or of any
entity that results from the participation of the
Company in a reorganization, consolidation, merger,
liquidation or any other form of corporate
transaction;
(ii) if the stockholders of the Company shall approve a
plan of merger, consolidation, reorganization,
liquidation or dissolution in which the Company does
not survive (unless the approved merger,
consolidation, reorganization, liquidation or
dissolution is subsequently abandoned); or
(iii) if the stockholders of the Company shall approve a
plan for the sale, lease, exchange or other
disposition of all or substantially all the property
and assets of the Company (unless such plan is
subsequently abandoned).
(c) The Committee may in its sole discretion accelerate the date on
which any Option may be exercised and may accelerate the vesting of any
Shares subject to any Option or previously acquired by the exercise of
any Option.
9. TERMINATION OF OPTION PERIOD.
(a) The unexercised portion of any Option granted to a Participant
shall automatically and without notice terminate and become null and
void at the time of the earliest to occur of the following:
(i) three months after the date on which the
Participant's employment with the Company or any
Subsidiary, or service as a Director or as a director
of any Subsidiary, is terminated or, in the case of a
Non-Qualified Stock Option and unless the Committee
shall otherwise determine in writing in its sole
discretion, the date on which the Participant's
employment with the Company
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or any Subsidiary, or service as a Director or as a
director of any Subsidiary, is terminated, in either
case for any reason other than by reason of (a)
Cause, which shall mean "Cause" under such
Participant's employment agreement, if any, and
which, solely for purposes of this Plan, also shall
mean the termination of the Participant's employment
or the removal of the Participant as a Director or as
a director of any Subsidiary by reason of the
Participant's willful misconduct or gross negligence,
(b) the Participant's mental or physical disability
(within the meaning of Internal Revenue Code Section
22(e)) as determined by a medical doctor satisfactory
to the Committee or (c) the Participant's death;
(ii) immediately upon the termination of the Participant's
employment with the Company or any Subsidiary, or
service as a Director or as a director of any
Subsidiary, for Cause;
(iii) twelve months after the date on which the
Participant's employment with the Company or any
Subsidiary, or service as a Director or as a director
of any Subsidiary, is terminated by reason of mental
or physical disability (within the meaning of
Internal Revenue Code Section 22(e)) as determined by
a medical doctor satisfactory to the Committee, or
(iv) (a) twelve months after the date of the Participant's
death or (b) three months after the date of the
Participant's death if such death shall occur during
the twelve month period specified in Subsection
9(a)(iii) hereof.
(b) The Committee in its sole discretion may by giving written notice
("cancellation notice") cancel, effective upon the date of the
consummation of any corporate transaction described in Subsections
8(b)(ii) or (iii) hereof, any Option that remains unexercised on such
date. Such cancellation notice shall be given a reasonable period of
time prior to the proposed date of such cancellation and may be given
either before or after approval of such corporate transaction.
10. ADJUSTMENT OF SHARES.
(a) If at any time while the Plan is in effect or unexercised Options
are outstanding, there shall be any increase or decrease in the number
of issued and outstanding Shares through the declaration of a stock
dividend or through any recapitalization resulting in a stock split-up,
combination or exchange of Shares, then and in such event:
(i) appropriate adjustment shall be made in the maximum
number of shares available for grant under the Plan,
so that the same percentage of the Company's issued
and outstanding Shares shall continue to be subject
to being so optioned; and
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(ii) appropriate adjustment shall be made in the number of
Shares and the exercise price per Share thereof then
subject to any outstanding Option, so that the same
percentage of the Company's issued and outstanding
Shares shall remain subject to purchase at the same
aggregate exercise price.
(b) Subject to the specific terms of any Option, the Committee may
change the terms of Options outstanding under this Plan, with respect
to the option price or the number of Shares subject to the Options, or
both, when, in the Committee's sole discretion, such adjustments become
appropriate by reason of a corporate transaction described in
Subsections 8(b)(ii) or (iii) hereof.
(c) Except as otherwise expressly provided herein, the issuance by the
Company of shares of its capital stock of any class, or securities
convertible into shares of capital stock of any class, either in
connection with direct sale or upon the exercise of rights or warrants
to subscribe thereof, or upon conversion of shares or obligations of
the Company convertible into such shares or other securities, shall not
affect, and no adjustment by reason thereof shall be made with respect
to the number of or exercise price of Shares then subject to
outstanding Options granted under the Plan.
(d) Without limiting the generality of the foregoing, the existence of
outstanding Options granted under the Plan shall not affect in any
manner the right or power of the Company to make, authorize or
consummate (i) any or all adjustments, recapitalizations,
reorganizations or other changes in the Company's capital structure or
its business; (ii) any merger or consolidation of the Company; (iii)
any issue by the Company of debt securities, or preferred or preference
stock that would rank above the Shares subject to outstanding Options;
(iv) the dissolution or liquidation of the Company; (v) any sale,
transfer or assignment of all or any part of the assets or business of
the Company; or (vi) any other corporate act or proceeding, whether of
a similar character or otherwise.
11. TRANSFERABILITY OF OPTIONS AND SHARES.
(a) No Incentive Stock Option, and unless the Committee's prior written
consent is obtained (which consent may be obtained at the time an
Option is granted) and the transaction does not violate the
requirements of Rule 16-B-3 promulgated under the Exchange Act no
Non-Qualified Stock Option, shall be subject to alienation, assignment,
pledge, charge or other transfer other than by the Participant by will
or the laws of descent and distribution, and any attempt to make any
such prohibited transfer shall be void. Each Option shall be
exercisable during the Participant's lifetime only by the Participant,
or in the case of a Non-Qualified Stock Option that has been assigned
or otherwise transferred with the Committee's prior written consent,
only by the assignee consented to by the Committee.
(b) Unless the Committee's prior written consent is obtained (which
consent may be obtained at the time an Option is granted) and the
transaction does not violate the
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requirements of Rule 16b-3 promulgated under the Exchange Act, no
Shares acquired by an Officer, as that term is defined under Rule
16b-3, of the Company or Director or a director of any Subsidiary
pursuant to the exercise of an Option may be sold, assigned, pledged or
otherwise transferred prior to the expiration of the six-month period
following the date on which the Option was granted.
12. ISSUANCE OF SHARES. As a condition of any sale or issuance of
Shares upon exercise of any Option, the Committee may require such agreements or
undertakings, if any, as the Committee may deem necessary or advisable to assure
compliance with any such law or regulation including, but not limited to, the
following:
(a) a representation and warranty by the Participant to the Company, at
the time any Option is exercised, that he is acquiring the Shares to be
issued to him for investment and not with a view to, or for sale in
connection with, the distribution of any such Shares; and
(b) a representation, warranty and/or agreement to be bound by any
legends that are, in the opinion of the Committee, necessary or
appropriate to comply with the provisions of any securities law deemed
by the Committee to be applicable to the issuance of the Shares and are
endorsed upon the Share certificates.
13. PERFORMANCE AND ANNUAL INCENTIVE AWARDS.
(a) Performance Conditions. The right of a Participant to exercise or
receive a grant or settlement of any Award, and the timing thereof, may
be subject to such performance conditions as may be specified by the
Committee or the Board. The Committee or the Board may use such
business criteria and other measures of performance as it may deem
appropriate in establishing any performance conditions, and may
exercise its discretion to reduce the amounts payable under any Award
subject to performance conditions, except as limited under Sections
13(b) and 13(c) hereof in the case of a Performance Award or Annual
Incentive Award intended to qualify under Code Section 162(m). If and
to the extent required under Code Section 162(m), any power or
authority relating to a Performance Award or Annual Incentive Award
intended to qualify under Code Section 162(m), shall be exercised by
the Committee and not the Board.
(b) Performance Awards Granted to Designated Covered Employees. If and
to the extent that the Committee determines that a Performance Award to
be granted to an Eligible Person who is designated by the Committee as
likely to be a Covered Employee should qualify as "performance-based
compensation" for purposes of Code Section 162(m), the grant, exercise
and/or settlement of such Performance Award shall be contingent upon
achievement of preestablished performance goals and other terms set
forth in this Section 13(b).
(i) Performance Goals Generally. The performance goals
for such Performance Awards shall consist of one or
more business criteria and a targeted level or
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levels of performance with respect to each of such
criteria, as specified by the Committee consistent
with this Section 13(b). Performance goals shall be
objective and shall otherwise meet the requirements
of Code Section 162(m) and regulations thereunder
including the requirement that the level or levels of
performance targeted by the Committee result in the
achievement of performance goals being "substantially
uncertain." The Committee may determine that such
Performance Awards shall be granted, exercised and/or
settled upon achievement of any one performance goal
or that two or more of the performance goals must be
achieved as a condition to grant, exercise and/or
settlement of such Performance Awards. Performance
goals may differ for Performance Awards granted to
any one Participant or to different Participants.
(ii) Business Criteria. One or more of the following
business criteria for the Company, on a consolidated
basis, and/or specified subsidiaries or business
units of the Company (except with respect to the
total stockholder return and earnings per share
criteria), shall be used exclusively by the Committee
in establishing performance goals for such
Performance Awards: (1) total stockholder return; (2)
such total stockholder return as compared to total
return (on a comparable basis) of a publicly
available index such as, but not limited to, the
Standard & Poor's 500 Stock Index or the S&P
Specialty Retailer Index; (3) net income; (4) pretax
earnings; (5) earnings before interest expense,
taxes, depreciation and amortization; (6) pretax
operating earnings after interest expense and before
bonuses, service fees, and extraordinary or special
items; (7) operating margin; (8) earnings per share;
(9) return on equity; (10) return on capital; (11)
return on investment; (12) operating earnings; (13)
working capital or inventory; and (14) ratio of debt
to stockholders' equity. One or more of the foregoing
business criteria shall also be exclusively used in
establishing performance goals for Annual Incentive
Awards granted to a Covered Employee under Section
13(c) hereof that are intended to qualify as
Aperformance-based compensation" under Code Section
162(m).
(iii) Performance Period; Timing For Establishing
Performance Goals. Achievement of performance goals
in respect of such Performance Awards shall be
measured over a performance period of up to ten
years, as specified by the Committee. Performance
goals shall be established not later than 90 days
after the beginning of any performance period
applicable to such Performance Awards, or at such
other date as may be required or permitted for
"performance-based compensation" under Code Section
162(m).
(iv) Performance Award Pool. The Committee may establish a
Performance Award pool, which shall be an unfunded
pool, for purposes of measuring
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Company performance in connection with Performance
Awards. The amount of such Performance Award pool
shall be based upon the achievement of a performance
goal or goals based on one or more of the business
criteria set forth in Section 13(b)(ii) hereof during
the given performance period, as specified by the
Committee in accordance with Section 13(b)(iii)
hereof. The Committee may specify the amount of the
Performance Award pool as a percentage of any of such
business criteria, a percentage thereof in excess of
a threshold amount, or as another amount which need
not bear a strictly mathematical relationship to such
business criteria.
(v) Settlement of Performance Awards; Other Terms.
Settlement of such Performance Awards shall be in
cash, Shares, other Awards or other property, in the
discretion of the Committee. The Committee may, in
its discretion, reduce the amount of a settlement
otherwise to be made in connection with such
Performance Awards. The Committee shall specify the
circumstances in which such Performance Awards shall
be paid or forfeited in the event of termination of
employment by the Participant prior to the end of a
performance period or settlement of Performance
Awards.
(c) Annual Incentive Awards Granted to Designated Covered Employees. If
and to the extent that the Committee determines that an Annual
Incentive Award to be granted to an Eligible Person who is designated
by the Committee as likely to be a Covered Employee should qualify as
"performance-based compensation" for purposes of Code Section 162(m),
the grant, exercise and/or settlement of such Annual Incentive Award
shall be contingent upon achievement of preestablished performance
goals and other terms set forth in this Section 13(c).
(i) Annual Incentive Award Pool. The Committee may
establish an Annual Incentive Award pool, which shall
be an unfunded pool, for purposes of measuring
Company performance in connection with Annual
Incentive Awards. The amount of such Annual Incentive
Award pool shall be based upon the achievement of a
performance goal or goals based on one or more of the
business criteria set forth in Section 13(b)(ii)
hereof during the given performance period, as
specified by the Committee in accordance with Section
13(b)(iii) hereof. The Committee may specify the
amount of the Annual Incentive Award pool as a
percentage of any such business criteria, a
percentage thereof in excess of a threshold amount,
or as another amount which need not bear a strictly
mathematical relationship to such business criteria.
(ii) Potential Annual Incentive Awards. Not later than the
end of the 90th day of each fiscal year, or at such
other date as may be required or permitted in the
case of Awards intended to be "performance-based
compensation" under
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Code Section 162(m), the Committee shall determine
the Eligible Persons who will potentially receive
Annual Incentive Awards, and the amounts potentially
payable thereunder, for that fiscal year, either out
of an Annual Incentive Award pool established by such
date under Section 13(c)(i) hereof or as individual
Annual Incentive Awards. In the case of individual
Annual Incentive Awards intended to qualify under
Code Section 162(m), the amount potentially payable
shall be based upon the achievement of a performance
goal or goals based on one or more of the business
criteria set forth in Section 13(b)(ii) hereof in the
given performance year, as specified by the
Committee; in other cases, such amount shall be based
on such criteria as shall be established by the
Committee.
(iii) Payout of Annual Incentive Awards. After the end of
each fiscal year, the Committee shall determine the
amount, if any, of (A) the Annual Incentive Award
pool, and the maximum amount of potential Annual
Incentive Award payable to each Participant in the
Annual Incentive Award pool, or (B) the amount of
potential Annual Incentive Award otherwise payable to
each Participant. The Committee may, in its
discretion, determine that the amount payable to any
Participant as an Annual Incentive Award shall be
reduced from the amount of his or her potential
Annual Incentive Award, including a determination to
make no Award whatsoever. The Committee shall specify
the circumstances in which an Annual Incentive Award
shall be paid or forfeited in the event of
termination of employment by the Participant prior to
the end of a fiscal year or settlement of such Annual
Incentive Award.
(d) Written Determinations. All determinations by the Committee as to
the establishment of performance goals, the amount of any Performance
Award pool or potential individual Performance Awards and as to the
achievement of performance goals relating to Performance Awards under
Section 13(b), and the amount of any Annual Incentive Award pool or
potential individual Annual Incentive Awards and the amount of final
Annual Incentive Awards under Section 13(c), shall be made in writing
in the case of any Award intended to qualify under Code Section 162(m).
The Committee may not delegate any responsibility relating to such
Performance Awards or Annual Incentive Awards if and to the extent
required to comply with Code Section 162(m).
(e) Maximum Performance Award and Annual Incentive Award. The maximum
amount that may be earned as an Annual Incentive Award or other cash
Award in any fiscal year by any one Participant, and the maximum amount
that may be earned as a Performance Award or other cash Award in
respect of a performance period by any one Participant, shall be
$5,000,000.
(f) Status of Section 13(b) and Section 13(c) Awards Under Code Section
162(m). It is the intent of the Company that Performance Awards and
Annual Incentive Awards under
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Section 13(b) and 13(c) hereof granted to persons who are designated by
the Committee as likely to be Covered Employees within the meaning of
Code Section 162(m) and regulations thereunder shall, if so designated
by the Committee, constitute "qualified performance-based compensation"
within the meaning of Code Section 162(m) and regulations thereunder.
Accordingly, the terms of Sections 13(b), (c), (d), (e) and (f),
including the definitions of Covered Employee and other terms used
therein, shall be interpreted in a manner consistent with Code Section
162(m) and regulations thereunder. The foregoing notwithstanding,
because the Committee cannot determine with certainty whether a given
Participant will be a Covered Employee with respect to a fiscal year
that has not yet been completed, the term Covered Employee as used
herein shall mean only a person designated by the Committee, at the
time of grant of Performance Awards or an Annual Incentive Award, as
likely to be a Covered Employee with respect to that fiscal year. If
any provision of the Plan or any agreement relating to such Performance
Awards or Annual Incentive Awards does not comply or is inconsistent
with the requirements of Code Section 162(m) or regulations thereunder,
such provision shall be construed or deemed amended to the extent
necessary to conform to such requirements.
14. ADMINISTRATION OF THE PLAN.
(a) The Plan shall be administered by the Committee, which shall
consist of not less than two Directors, each of whom shall be Outside
Directors. The Committee shall have all of the powers of the Board with
respect to the Plan. Any member of the Committee may be removed at any
time, with or without cause, by resolution of the Board and any vacancy
occurring in the membership of the Committee may be filled by
appointment of the Board.
(b) The Committee, from time to time, may adopt rules and regulations
for carrying out the purposes of the Plan. The Committee's
determinations and its interpretation and construction of any provision
of the Plan shall be final and conclusive.
(c) Any and all decisions or determinations of the Committee shall be
made either (i) by a majority vote of the members of the Committee at a
meeting or (ii) without a meeting by the unanimous written approval of
the members of the Committee.
(d) The Board may reserve to itself the power to grant Options to
employees or Directors of the Company or any Subsidiary who are not
Covered Employees. If and to the extent that the Board reserves such
powers, then all references herein to the Committee shall refer to the
Board with respect to the Options granted by the Board.
15. INCENTIVE OPTIONS FOR 10% STOCKHOLDERS. Notwithstanding any other
provisions of the Plan to the contrary, an Incentive Stock Option shall not be
granted to any person owning directly or indirectly (through attribution under
Section 424(d) of the Internal Revenue Code) at the date of grant, stock
possessing more than 10% of the total combined voting power of all classes of
stock of the Company (or of its subsidiary [as defined in Section 424 of the
Internal Revenue Code]
A-13
<PAGE> 38
at the date of grant) unless the option price of such Option is at least 110% of
the Fair Market Value of the Shares subject to such Option on the date the
Option is granted, and such Option by its terms is not exercisable after the
expiration of five years from the date such Option is granted.
16. INTERPRETATION
(a) The Plan shall be administered and interpreted so that all
Incentive Stock Options granted under the plan will qualify as
Incentive Stock Options under section 422 of the Internal Revenue Code.
If any provision of the Plan should be held invalid for the granting of
Incentive Stock Options or illegal for any reason, such determination
shall not affect the remaining provisions hereof, but instead the Plan
shall be construed and enforced as if such provision had never been
included in the Plan.
(b) This Plan shall be governed by the laws of the State of Florida.
(c) Headings contained in this Plan are for convenience only and shall
in no manner be construed as part of the Plan.
(d) Any reference to the masculine, feminine, or neuter gender shall be
a reference to such other gender as is appropriate.
(e) As it is the intent of the Company that the Plan comply in all
respects with Rule 16b-3 promulgated under the Exchange Act ("Rule
16b-3"), any ambiguities or inconsistencies in construction of the Plan
shall be interpreted to give effect to such intention, and if any
provision of the Plan is found not to be in compliance with Rule 16b-3,
such provision shall be deemed null and void to the extent required to
permit the Plan to comply with Rule 16b-3. The Board and the Committee
each may from time to time adopt rules and regulations under, and
amend, the Plan in furtherance of the intent of the foregoing.
17. AMENDMENT AND DISCONTINUATION OF THE PLAN. Either the Board or the
Committee may from time to time amend the Plan or any Option; provided, however,
that, except to the extent provided in Section 10, no such amendment may,
without approval by the stockholders of the Company, (a) materially increase the
benefits accruing to participants under the Plan, (b) materially increase the
number of securities which may be issued under the Plan, or (c) materially
modify the requirements as to eligibility for participation in the Plan; and
provided further, that, except to the extent provided in Section 9, no amendment
or suspension of the Plan or any Option issued hereunder shall substantially
impair any Option previously granted to any Participant without the consent of
such Participant.
18. EFFECTIVE DATE AND TERMINATION DATE. The effective date of the Plan
is as of January 1, 1998, provided that the stockholders of the Company have
approved the Plan on or before September 1, 1998, and the Plan shall terminate
on the 10th anniversary of the effective date.
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<PAGE> 39
APPENDIX B
PROXY
HAMILTON BANCORP INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY
The undersigned does hereby constitute and appoint EDUARDO A. MASFERRER, or
failing him, JUAN CARLOS BERNACE, or failing him, J. REID BINGHAM and each of
them with power of substitution to each, the proxies of the undersigned to vote
all shares of HAMILTON BANCORP INC. which the undersigned may be entitled to
vote at the Annual Meeting of its stockholders to be held on June 12, 1998, at
9:30 a.m., local time, and at any adjournment or adjournments thereof upon the
matters described in the accompanying Proxy Statement and upon any other
business that may properly come before the meeting or adjournment thereof. Said
proxies are directed to vote or to refrain from voting as checked below upon the
following matters, and otherwise in their discretion upon other matters in
connection with the following or otherwise as may properly come before the
meeting or any adjournment thereof.
(CONTINUED ON THE OTHER SIDE)
FOLD AND DETACH HERE
<TABLE>
<CAPTION>
<S> <C> <C>
PLEASE MARK YOUR CHOICE IN DARK INK PER THE EXAMPLE IN THE UPPER RIGHT HAND CORNER AND SIGN AND DATE BELOW.
PLEASE MARK
YOUR VOTES AS [X]
INDICATED IN
THIS EXAMPLE
1. ELECTION OF DIRECTORS: 2. APPROVAL OF 1998 EXECUTIVE INCENTIVE COMPENSATION PLAN.
VOTE FOR WITHHOLD
ALL (except FROM
as marked VOTING
to the contrary) FOR ALL
FOR AGAINST ABSTAIN
[ ] [ ] [ ] [ ] [ ]
To withhold a vote for any individual director, please
strike a line through the name below.
Maura A. Acosta Thomas F. Gaffney
William Alexander Eduardo A. Masferrer
William Bickford Virgilio E. Sosa, Jr.
(1) PLEASE DATE, SIGN EXACTLY AS YOUR NAME APPEARS,
AND RETURN THIS FORM IN THE ENCLOSED ENVELOPE.
(2) Your Shares will be voted according to your instructions.
If you do not indicate specific instructions in the spaces
provided above, but you properly sign the instruction card
the Trustee will vote your shares "FOR".
Signature________________________________________________________________________Date______________________________________________
</TABLE>
FOLD AND DETACH HERE
